IEEE ComSoc Technology Blog

By Michael Howard, senior research director and advisor, carrier networks, IHS Markit

Highlights:

• IHS Markit’s operator respondents say that 100GE will make up 38 percent of their 10/40/100GE port purchases during 2018—more than two times that of 2016
• 70 percent of operators surveyed are deploying packet-optical transport systems (P-OTS) or plan to do so by 2018
• 70 percent of respondents plan to deploy central office re-architected as a data center (CORD) in their smart central offices (COs)

IHS Markit Analysis:

Our routing, network functions virtualization (NFV) and packet-optical study covers hot and emerging topics in the carrier Ethernet, routing and switching space, with a focus on the IP edge—the area where architectural changes are occurring closer to the customer. The survey looks at operator deployment plans and strategies, deployment locations, router bypass, port mix, expected price per port, and more.

What’s clear from this latest survey is that telecom is moving to 100G now. Sixteen percent of the 10/40/100GE router ports our survey participants purchased in 2016 were 100GE on average, and these service providers expect their 100GE port purchases to more than double to 38 percent in 2018.

In 2017, almost all operator respondents (88 to 96 percent) expect to be paying “10GE parity” or less in three main areas of their networks. “Parity” means that a 100GE port is priced at ten times the price of a 10GE port.

P-OTS remains an integral part of carrier network architecture. Seventy percent of respondents are deploying P-OTS or plan to do so by 2018. Between 2016 and 2018, the percentage of nodes with P-OTS is anticipated to grow six-fold in core/long haul and almost double in access, aggregation, metro core and regional. We believe these plans will keep a damper on router sales. And despite much industry talk, respondents have little current demand for a multi-layer data/transport control plane.

95 percent of operators surveyed are using or planning to use smart COs by deploying servers and storage in selected COs to create mini data centers to offer cloud services and to use them as the NFV infrastructure on which to run virtual network functions (VNFs).

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For this year’s survey we added questions about CORD. CORD combines NFV and software-defined networking (SDN) software to improve elasticity and bring data center economics and cloud agility to the telco CO. Seventy percent of respondents plan to deploy CORD in their smart COs—30 percent by the end of 2017 and an additional 40 percent in 2018 or later.

Routing, NFV and Packet-Optical Survey Synopsis:

The 25-page 2016 IHS Markit routing, NFV, and packet-optical strategies survey is based on interviews with router/CES purchase decision-makers at 20 global service providers that control 36 percent of worldwide telecom capex and a third of revenue. The survey provides insights into plans for moving router functions from physical routers to software vRouters and VNFs; 100GE adoption and use of IPoDWDM; router and CES protocols; planned uses of vRouters; plans to deploy P-OTS versus routers; and metro architectural changes and deployment of CORD in smart COs.

For information about purchasing this report, contact the sales department at IHS Markit in the Americas at (844) 301-7334 or[email protected]; in Europe, Middle East and Africa (EMEA) at +44 1344 328 300 or [email protected]; or Asia-Pacific (APAC) at +604 291 3600 or [email protected]

by FBR Media & Telecom Staff

Summary

We see 2017 as the year when telecom and media sing “kumbaya.” We see the regulatory stance under the Trump Administration as supportive of M&A, causing investors to increasingly discount the possibility of more combinations. We see this becoming a meaningful, investable, multiyear theme for the group—helpful for potential targets, and possibly threatening for those left single.

■ TMT outlook: kumbaya. We see AT&T’s (T) acquisition of Time Warner (TWX) closing and setting a template for future deals. While investors have reasonably pushed back on the merits of content/pipe combinations by citing a dearth of synergy at CMCSA/NBCU, they forget synergies were constrained by regulations that we see going away in a Republican FCC. So we see potential for cable companies to gain more freedom to use their own backhaul facilities to favor in-house 5G services, driving more cable/wireless mergers. We also see wireless/wired operators gaining freedom to favor in-house content, with such things as 0-based data service and performance advantaged private nets, or by charging rivals more for data access/performance. That should drive more telecom/content mergers, like T/TWX and Sky/Fox, helpful for big content brands that could be seen as in the cross-hairs for the next big deal, such as CBS. Internet video services unattached to a physical plant, like NFLX, Google/YouTube, and AMZN Prime Video, could face new competitive hurdles. The environment also seems poised for a loosening of constraints on local media combinations, which could spark more duopoly-driven asset swaps by TV station owners or expansion of national TV station footprints by broadcast nets, helpful for TV station equities like TGNA.

■ Media & leisure outlook: fundamentals improving. The entire media group would benefit from what seems to be the most likely tax reform, as outlined in our report published on December 16. We see the currently modest pressure on affiliate fees potentially easing slightly, driven by cord-cutting moving toward “app-shaving.” We see income-challenged millennial cohorts migrating away from dropping pay TV altogether and toward embracing the new, low cost virtual bundles, like DirecTV Now. TV advertising will have to comp recurring lifts in 2016 from political and Olympics but should benefit from a stronger economy. Normal weather would be positive for theme parks after a tough summer 2016. Regional ski resorts also have easy comps versus a historically bad season in the Northeast/Midwest last year.

■ Telecom services outlook. We increase our view on the telecom services sector from Underweight to Overweight for 2017 driven by potential valuation upside from regulatory relief, tax reform, and M&A activity under a Republican Administration. We see higher likelihood of an Sprint/T-Mobile combination but less likelihood of a wireless acquisition by a cable company in the near term as their in-house services can be disruptive to wireless valuations ahead of a deal. A politically influenced DOJ may be necessary given the extensive public record justifying four nationwide wireless providers and a limited economic versus legal admin skill set. The ongoing broadcast incentive auction will likely wrap up in early 2017, with final proceeds likely much lower than expectations as the industry continues the shift to higher bands, leveraging a lower-cost, software-centric technology cycle, which we believe will drive up spectrum reuse and drive down valuations for high-band spectrum. We expect a capex investment shift from efficiency-driven automation to edge security and analytics engines that evaluate unstructured data from the device to the application server. Legacy capex trends will again be ugly as telecom network returns on incremental capital investment remain negative, which is driving a change in investment strategy across the industry.

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Will cable enter the wireless space in the near term?

The combination of an intensely competitive wireless environment, negative incremental returns on invested capital, and organic disruption from cable companies to the wireless sector should discourage a near-term wireless acquisition by cable companies, in our view. However, we believe cable will gain greater leverage over the wireless sector over time, and a wireless asset or partnership is likely in the medium to longer term to augment delivery of profitable content to customers beyond their footprints. In the short term, we think cable companies prefer to better understand their impact on the wireless business model. Ahead of an acquisition, we think they will focus on testing the disruptive capabilities of their in-home and in-building assets as they incorporate LTE on commodity spectrum bands into their hardware. In the meantime, Verizon and AT&T continue to diversify away from a fiercely competitive wireless access market into content and are positioning their respective companies to manage the next wave of wireless network usage by pivoting to a lower-cost dark fiber–rich distributed compute platform. We expect additional M&A activity in both content and dark fiber in 2017. Sprint’s firmer footing suggests there is potential to make another attempt at a merger with T-Mobile US. We believe a second merger attempt could pass regulatory muster under a business-friendly Republican-led Administration.

Will a rollback of regulatory restraints under the new Trump Administration spark more M&A over time?

We believe so. Trump’s early FCC brain trust is populated by free market enthusiasts who seem diametrically opposed to the Obama Administration’s embrace of constraints like net neutrality and the threat of Title II–backed rate regulation. To us, this suggests that wireless and cable companies will gain new freedoms to leverage their investments in wired, wireless, and content assets for their own benefit. We see this favoring more mergers of wireless companies with those owning physical plants, such as cable companies, and more mergers of wireless and cable companies with content companies.

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Editor’s Note: We strongly disagree with many points made above by FBR, especially related to M&A, which we feel is incredibly destructive to the telecom industry, results in less competition and higher prices for consumers and concentrates too much power in the acquiring company, e.g. AT&T if they take over Time Warner.

According to a January 5th Bloomberg article:

Donald Trump remains opposed to the megamerger between AT&T Inc. and Time Warner Inc. because he believes it would concentrate too much power in the media industry, according to people close to the president-elect, who has been publicly silent about the transaction for months.

Trump told a friend in the last few weeks that he still considers the merger to be a bad deal, said one of the people, who asked not to be identified because the conversation was private. Trump’s chief strategist, Steve Bannon, is also opposed to the deal, another person said.

It remains unclear whether Trump would try to influence the regulatory review of the merger, either by pushing officials to impose conditions or to block the deal entirely. The transaction, which would combine the biggest U.S. pay-TV and internet provider with one of the largest creators of TV programming, will be reviewed by the Justice Department and possibly by the Federal Communications Commission.

Trump, who takes office Jan. 20, has nominated Senator Jeff Sessions, an Alabama Republican, to lead the Justice Department, and hasn’t named a successor to departing FCC Chairman Tom Wheeler.

In October, before the election, Trump said his administration wouldn’t approve the merger, saying, “It’s too much concentration of power in the hands of too few.” He cited the deal as “an example of the power structure I’m fighting.”

AT&T hopes to begin using “5G”-based millimeter wave spectrum technology to wirelessly deliver its “DIRECTV Now” (Internet TV) service to homes.   The company has achieved speeds of 14 gigabits per second in lab tests with several partners that include Intel, Ericsson and Qualcomm.  AT&T’s goal is to see how millimeter wave “last mile” technology handles high volume video traffic.

AT&T’s John Donovan says the mega carrier plans to offer commercial point-to-point “5G” next year (2018), which is two years before ITU-R completes the first round of true 5G standards.  Nonetheless, AT&T says its mobile 5G service should be commercially available in 2019, according to Mr. Donovan who has led AT&T’s network upgrades over the past nine years from 2G to 3G to 4G.   He now says 5G will have a bigger impact by enabling things like driverless cars, live maps and virtual reality.

“Five G is a bigger thing than I have ever been involved in my career because it opens up whole new worlds,” he said.

To read more:

http://www.prnewswire.com/news-releases/att-details-5g-evolution-300385196.html

https://www.bloomberg.com/news/articles/2017-01-04/at-t-to-test-5g-wireless-for-delivery-of-directv-now-to-homes

https://www.engadget.com/2017/01/04/atandt-to-conduct-5g-streaming-tests-with-directv-now/

By Michael Howard, senior research director and advisor, carrier networks, IHS Markit

Highlights:

• Among IHS Markit’s service provider respondents, Cisco, Juniper, Huawei and Nokia form a top tier separated by a wide margin from other router and switch vendors
• Cisco was the top-scoring company in edge/core router and Carrier Ethernet Switch (CES) leadership
• All four vendors—Cisco, Juniper, Huawei and Nokia—were named by respondents as leaders in next-generation routing technologies such as 100GE, vRouter and IP data center interconnect (DCI)

IHS Markit Analysis:

The IHS Markit router and switch vendor leadership survey measures service provider attitudes toward and perceptions of edge router, core router and CES manufacturers. The 20 responding operators to our study control 36 percent of worldwide telecom capex and one-third of revenue.

In the 2016 study, Cisco was at the top of respondent edge/core router and CES manufacturer leadership scores. Cisco—along with Juniper, Huawei and Nokia (including Alcatel-Lucent)—form a top tier clearly separated by a wide margin from the other manufacturers. Together, these four manufacturers account for about 86 percent of worldwide revenue market share for routers and CES.

Cisco, Juniper, Huawei and Nokia were the leaders in all five of the carriers’ top manufacturer selection criteria: price-to-performance ratio, product reliability, service and support, technology innovation and product roadmap. There was a big gap between these four and their competitors, with the sole exception being price-to-performance ratio.

Looking at the individual manufacturer selection criteria, when it comes to product reliability and service and support, Nokia was tops among respondents, followed by Cisco and Juniper. For technology innovation and product roadmap, Cisco and Nokia were numbers one and two, respectively. And for price-to-performance ratio, the Chinese vendors led with Huawei at number one and ZTE at number two.

Cisco, Juniper, Huawei and Nokia also led in other measures including unaided awareness, familiarity (or aided awareness), and equipment installed and under evaluation. The vendors likewise ranked at the top when survey respondents named leaders in next-gen routing technologies including 100GE, vRouter and IP DCI.

Router and Switch Survey Synopsis:

The 15-page 2016 IHS Markit switch and router vendor leadership survey sheds light on how global service providers select router and CES manufacturers, whose equipment they have installed and will evaluate for future purchases, and which manufacturers they consider to be leaders in key manufacturer selection criteria. The study features operator ratings of 11 vendors (Brocade, Cisco, Coriant, ECI, Ericsson, Fujitsu, Huawei, Juniper, NEC, Nokia [including Alcatel-Lucent] and ZTE) on 9 criteria.

For information about purchasing this report, contact the sales department at IHS Markit in the Americas at (844) 301-7334 or[email protected]; in Europe, Middle East and Africa (EMEA) at +44 1344 328 300 or [email protected]; or Asia-Pacific (APAC) at +604 291 3600 or [email protected]

Several networking startups, most of which are actually software companies, launched products claiming to transform networking with SD-WAN, SD-Security, wireless networking with machine learning, guest WiFi services, and various new twists on network virtualization and virtualized routers.  Many of these startups are focused on the SD-WAN market, which IDC forecasts will reach $6 billion by 2020.

The new age networking companies included: Barefoot Networks, 128 Technology, Apstra, Cloud4Wi, Mist Systems, CloudGenix, and SnapRoute. In November, Forward Networks launched out of stealth using formal verification to model network behavior and help prevent outages.

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We believe that Barefoot Networks, headed up by South African Martin Izzard, is the most promising of the bunch and very well funded.  The company announced it’s programmable switch platform in June – touting it as the world’s fastest and most programmable series of switches. Barefoot’s Tofino switch chip can fit inside hardware devices to direct the flow of data traffic across networks, and the company plans to advance SDN though its software suite of tools for programming Tofino. The startup also built a programming language, P4 — Programming Protocol-Independent Packet Processors – to allow developers to differentiate their networks and solutions.

In November, Chinese web goliaths Alibaba and Tencent led a $23 million funding round for Barefoot. Since it emerged from stealth in June, the company has raised more than $150 million, backed by venerable and respected companies like Hewlett Packard Enterprise, Google and Goldman Sachs.

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Viptela is a four year old startup that specializes in network virtualization and SD-WAN.  90% of Viptela’s customers are hosted on Amazon Web Services. The others are giant enterprises that use its services in their own data centers.  The company recently named Praveen Akkiraju as CEO. More details at: http://www.bizjournals.com/sanjose/news/2017/01/12/cisco-veteran-takes-reins-at-san-jose-competitor.html

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Conclusion:

The startups boast impressive leadership and funding, but we believe very few, if any, will actually survive and gain critical market mass to challenge incumbent network equipment companies left, e.g. Nokia, Ericsson, Huawei, Cisco, ZTE, Ciena, etc.

Overview:

We strongly believe that cloud computing has and will continue to have more impact than any other IT trend.  Conversely, we think there’s a tremendous gap between the hype surrounding many new technologies/movements and their profit making potential.  The hyped technologies include, but are not limited to “5G”, Internet of Things (IoT), Open Networking/SDN/SD-WAN/NFV, Virtual Reality, etc.

Cloud computing changes the networking industry in the following ways:

1.  The branch and spoke topology of private WANs and IP VPNs has been based on branch offices connecting to the centralized corporate computing data center (via IP VPNs, private lines, Ethernet virtual private lines, etc).  That’s now giving way to branch offices accessing cloud computing resources via a variety of networking schemes that we’ve discussed in several previous articles (one we especially like is AT&Ts Netbond).
2. The volume of networking equipment sold for enterprise/private networks is decreasing due to the flat to declining growth of premises data centers which are remotely accessed via switch/routers.  Many of the mega cloud providers, like Google and Facebook, design their own switch/routers for use in their mega data centers.  Other cloud players, like Microsoft, continue to buy switch/routers from legacy vendors (e.g. Cisco, Juniper and Arista Networks).
3. Large backbone networks used to be designed and deployed ONLY by government agencies (like NSA, NSF, European Commission, etc) and global telcos with huge footprints.  Those telcos include AT&T, NTT, BT, Verizon, Level 3, Deutsche Telekom, Telefonica, etc.  Their backbone networks will not grow as fast in the future as none of those companies are large cloud computing or storage service providers.  Even the US government is moving from premises based to cloud computing services, which decreases the need for government agency private networking.
4. The big cloud players (Amazon, Google, Microsoft, Facebook, Alibaba, Tencent, etc) are constructing and adding on to their wide are backbone networks which inter-connects their mega data centers. For example, Amazon has recently completed deployment of a  8,700-mile undersea cable, which is part of its A.W.S. global network.  Microsoft and Facebook are also building a large undersea cable network called MARIA.
5. The control and analytics for the IoT are likely to be built on cloud platforms, such as AWS IoT.   These are managed cloud platforms that lets connected devices easily and securely interact with cloud applications and other devices. AWS IoT can support billions of devices and trillions of messages, and can process and route those messages to AWS endpoints and to other devices reliably and securely.
6. When standardized and certified “5G” service finally arrives (sometime in 2021 or later), we believe that remote user access to the cloud will be a very valid use case for IoT real time control/analytics and other applications that require low latency to/from wireless endpoint and the cloud.

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NY Times article (Dec 26, 2016): Why the Computing Cloud Will Keep Growing and Growing, by QUENTIN HARDY

Jeff Bezos of Amazon, along with a couple of his rivals, may eventually control much of the $1 trillion global market for business computers and software.

That is because Amazon Web Services, his big-business computing division, is starting to affect more than just the world of computer servers, data storage and networking at the core of computing. Increasingly, it is also entangled with mobile phones, sensors and all sorts of other devices in the so-called Internet of Things.

It’s the same story at Microsoft Azure and Google Cloud Platform, the other two big cloud companies. Start-ups and giant corporations rent the core resources, along with related software, instead of owning and running their own machines.

What’s next? As innovations like artificial intelligence and connected devices become popular, customers are putting cloud components in mobile computing, home games and email marketing campaigns. In other words, the big clouds aim to be everywhere.

“When has Amazon ever thought about anything other than world domination?” said Lydia Leong, who follows cloud computing at Gartner. Not content to be in big centralized data centers, she said, “they want to be at the edges, whether that is a customer’s own computers or the Internet of Things.”

This aim for domination was clear at Amazon’s big customer conference, called Re:Invent, which was held in Las Vegas this month. About 32,000 people went to the fourth annual event.

In one talk at the conference, an Amazon Web Services executive showed off the company’s 8,700-mile undersea cable, part of an A.W.S. global network that each day adds computing power equal to that inside a Fortune 500 corporation, and spoke about this expansion. He talked about crushing the costs of servers and networking, most likely sad news for old tech giants that make those things, like Dell and Cisco.

In a nice bit of showmanship during the main keynote, Andy Jassy, the head of A.W.S., appeared onstage with an 18-wheel truck carrying a device that could suck 100 petabytes of data out of a customer’s computers and put it in the Amazon cloud. That is equal to two billion filing cabinets of paper, which a surprising number of companies now possess in digital form, thanks to things like video and sensors.

Put that together with some software Mr. Jassy talked about that would be on chips made by Intel but capable of gaining access to the A.W.S. cloud, and you get the picture: There isn’t a part of computing Amazon doesn’t want to touch.

It is easy to see why this matters to Amazon. In the third quarter, A.W.S. had revenue of $13 billion a year, growing at 55 percent annually. A.W.S. was 10 percent of Amazon’s revenue, but more than 100 percent of the company’s operating income. Amazon’s international retail business lost money, and United States retail sales are nowhere near as profitable.

Amazon says it is hardly moving away from a core business of providing large-scale computing, but rather finding more ways to sell stuff related to it by moving to edge devices.

“We see it less as a move from one to the other, and more of an extension,” an Amazon spokeswoman, Mary Camarata, wrote in an email Saturday. “We have an enormous number of customers excited about leveraging the capabilities.”

Amazon is not alone in this business, and the competition is getting more intense. A.W.S. now has 81 services, including ways to work on home video games. Microsoft’s 67 services include Internet of Things “hubs” and email marketing campaigns. Google has 53, including ways to deploy mobile software globally and steer performance with data analysis. Comparisons of services are difficult, as one company’s service may encompass two or three offered by another.

Machine learning — a method for computers to gain knowledge without being programmed with that information — is front and center for Alphabet’s Google, said Urs Hölzle, the head of technical infrastructure at Google Compute. Google has recently shown off its own global network of submarine cables, along with local devices like cloud-connected office whiteboards. Over the next year, Mr. Hölzle said, Google will open about one new Compute facility a month.

Building out across the globe, with sometimes $1 billion or more in a facility, is critical in some cases to meet local data regulations. Equally, the big cloud companies all want to be as close to customers and their devices as possible.

“Global proximity is a huge advantage,” said Corey Sanders, the director of program management at Azure. “This is a way to transform your business, including the way devices on the edge act.”

There are profound consequences from the scale and ambition of this trend. Given their size, wealth and technical expertise, the big cloud companies are likely to build cheaper designs and demand lower prices for everything in computing. Who is to say they don’t affect the devices themselves?

That is starting to dawn on the rest of the industry. On the first day of Re:Invent, Mr. Jassy had a private lunch with about 10 venture capitalists. It is an annual affair, where he indicates where A.W.S. is going, and they figure out how to make money from it.

“He wasn’t explicit, but if you were hoping to invest in storage, computing — anything below applications — you are hosed,” said Dharmesh Thakker, a partner at Battery Ventures, who attended the lunch. “Andy is smart and approachable, but reading between the lines, I’m not sure this is good for the V.C. ecosystem.”

AT&T Inc. has asked permission from the Federal Communications Commission (FCC), to shut down the 13 legacy TDM (Time-division multiplexing) services of its wholly owned subsidiary – Southwestern Bell Telephone Company.  The decision to terminate the services stems from lack of demand.  Southwestern Bell Telephone Company operates in Arkansas, Kansas, Missouri, Oklahoma, Texas and parts of Illinois.

“AT&T currently has no customers that subscribe to these service options and has not had any requests seeking these service options in the previous two years,” AT&T said in its FCC filing.  The service is expected to shut down effective Feb 28, 2017, subject to FCC approval.

The services to be shut down include Telegraph Bridging Four-Wire Capability, Voice-grade Active Telemetry and Alarm Bridging Split Band Capability. Telegraph Bridging Four-Wire Capability offers bridging functions on a telegraph grade circuit that connect three or more customer-designated building in a multipoint arrangement. Voice-grade Active Telemetry and Alarm Bridging Split Band Capability is a Telemetry and Alarm bridging network which divides the voice band into two portions, one for each direction of transmission.

TDM service discontinuation has become a growing trend in the wireline segment of the telecom industry. Telecom service providers are moving toward IP-based networks as an increasing number of enterprise customers are opting for IP-enabled cloud services.

AT&T earlier requested the FCC for permission to discontinue a series of legacy services including collect calling, person-to-person calling, bill to third party, Busy Line Verification, Busy Line Interruption and International Directory Assistance in Jun 2016.

Besides AT&T, national telecom carriers like Sprint and Verizon Communications have opted for similar service discontinuation. Verizon seek the FCC’s nod to stop providing postpaid calling card and personal 800 services while Sprint asked to discontinue long-distance voice services. Level 3 Communications  has sought permission from the FCC to discontinue its legacy voice services based on outdated TDM (time division multiplexing) technology.

http://www.nasdaq.com/article/att-seeks-fcc-approval-to-discontinue-13-legacy-services-cm725015

The NFV Interoperability Testing Initiative, meant to address network functions virtualization deployments, has been established by mainstream network equipment vendors – Cisco Systems, Ericsson, Huawei Technologies and Nokia.

“The general guiding principles for NFV-ITI are openness, fairness, reasonableness and nondiscriminatory treatment,” the organization noted in a statement. “All relevant NFV vendors are welcome to join this initiative by ratifying the NFV-ITI MoU.”

OPNFV recently unveiled its Colorado platform release, which includes updates targeted at accelerating the development of NFV applications and services by enhancing security, IPv6 support, service function chaining, testing VPN capabilities and support for multiple hardware architectures. The organization noted the updates followed collaboration with upstream communities and are integrated into the “automated install/deploy/testing framework.”

OPNFV also highlighted increased collaboration across ecosystems via working groups focused on management and operation; infrastructure; security and testing, with five “committers-at-large” members elected to the OPNFV Technical Steering Committee “to enhance the meritocratic nature of the project.”

A Technology Business Research (TBR) report from earlier this year found some early adopter telecom operators were moving forward with limited commercial launches of NFV and software-defined networking technologies despite continuing questions around the lack of NFV and SDN standards. According to TBR’s “NFV/SDN Telecom Market Landscape” report for the first quarter, these early launches are “leveraging a mix of vendor solutions and internal resources ahead of industry adopted standards,” with cost reduction and service agility seen as key drivers for initial deployments. TBR noted for carriers like AT&T, NFV and SDN are viewed as “critical for long-term survival.”

“Early adopters pursue differing approaches to build NFV and SDN solutions,” the report notes. “One approach is to build an end-to-end NFV stack leveraging products from several vendors. These deployments require tested, interoperable components to ensure carrier-grade delivery. Adding further complexity, operators must decide which vendor, if any, integrates the stack.”

References:

http://www.rcrwireless.com/20161220/network-function-virtualization-nfv/nokia-cisco-ericsson-and-huawei-partner-on-nfv-interoperability-tag2

https://globenewswire.com/news-release/2016/12/20/899094/0/en/Industry-partners-commit-to-NFV-interoperability-testing-initiative.html

http://www.fiercetelecom.com/telecom/cisco-ericsson-huawei-and-nokia-create-joint-nfv-interoperability-testing-initiative

https://www.opnfv.org/

By Richard Webb, research director, mobile backhaul and small cells, IHS Markit

Highlights:

• The outdoor small cell backhaul market accelerated in 2016, with revenue growing more than 200 percent year-over-year
• Just over $5 billion will be spent globally on outdoor small cell backhaul equipment from 2016 to 2020
• By 2020, deployments of outdoor small cell backhaul connections are projected to approach nearly 700,000 

IHS Analysis:

The small cell backhaul market is still in experimentation mode and has been since early trials commenced in 2013. Market growth started to look more meaningful this year—with revenue up 233 percent year-over-year, albeit from a very modest base—but we anticipate the market to really kick into higher gear in 2018.

IHS Markit is forecasting that a cumulative $5.1 billion will be spent worldwide on outdoor small cell backhaul equipment between 2016 and 2020, driven by an increasing number of mostly modest-scale projects to augment 3G and Long Term Evolution (LTE) capacity in urban areas and to provide mobile coverage in rural markets. The compound annual growth rate (CAGR) for the five-year period is 78 percent.

It’s worth noting that the $5.1 billion for outdoor small cells is in addition to the nearly $43 billion that’s being spent on macrocell backhaul equipment during the same five-year period.

Deployments of outdoor small cell backhaul connections are expected to grow to 109,000 in 2016, up from 35,000 in 2015. And by 2020, deployments are projected to reach 693,000—for a total installed base of around 1.9 million.

Wireless microwave makes up nearly 60 percent of small cell backhaul gear revenue today, climbing to over 80 percent in 2020 led by E band millimeter.

Geographically, small cell deployments generally reflect the regional share of the overall mobile infrastructure market. By 2020, the regional breakdown for small cell backhaul equipment will be: Asia Pacific (48 percent), Europe, the Middle East and Africa (27 percent), the Caribbean and Latin America (14 percent) and North America (11 percent).

Small Cell Report Synopsis:

The IHS Markit biannual small cell mobile backhaul equipment report tracks equipment used for transporting traffic from outdoor small cell sites, such as those attached to light poles, utility poles, and the sides and tops of buildings. It provides worldwide and regional market size, forecasts through 2020, analysis and trends for equipment, connections and cell sites by type. The report covers equipment including digital subscriber line (DSL) modems and digital subscriber line access multiplexers (DSLAMs); Ethernet over copper and fiber; <6GHz microwave; point-to-point (P2P) microwave; point-to-multipoint (P2MP) microwave; and licensed and unlicensed millimeter wave.

For information about purchasing this report, contact the sales department at IHS Markit in the Americas at (844) 301-7334 or [email protected]; in Europe, Middle East and Africa (EMEA) at +44 1344 328 300 or [email protected]; or Asia-Pacific (APAC) at +604 291 3600 or [email protected]

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Separately, a report “Mobile and Wireless Backhaul Market – by Equipment (Microwave, Millimeter Wave, Sub 6 GHZ, Test and Measurement), by Services (Network, System Integration, Professional) – Worldwide Market Forecasts and Analysis to 2015 – 2020″, the market is estimated to grow from USD 17.85 Billion in 2015 to USD 33.15 Billion by 2020, at an estimated compound annual growth rate (CAGR) of 13.18% from 2015 to 2020.

The growing need to remain connected and increasing adaption rate of 3G and 4G (Long-Term Evolution) networks has enhanced the market of mobile and wireless backhaul. Increasing usage of smart phones and tablets has increased the mobile data traffic and this has fueled the market for a fast and reliable connectivity. Technical advancements such as small cells, has to quench the high bandwidth needs.

Growing mobile data traffic is spurring the market of mobile and wireless backhaul

Nowadays, spectrum band has been increased to up to 42GHz owing to the need for faster connectivity. Also, the introduction of 5G is offering great opportunity for mobile and wireless backhaul market. Popularity of data exhaustive such as video on demand, online streaming and video connectivity is continually growing and driving the mobile traffic data. The installation of small cells enables the network operators to offload the mobile data on the unlicensed spectrum using Wi-Fi, hence reducing the congestion on the macro-cells and licensed spectrum.

The microwave equipment segment is estimated to account for majority of the total mobile and wireless backhaul market in 2015, but is slowly losing its market share because of the increasing adoption of millimeter wave equipment. The major trends seen in the service market are the increasing use of system integration services by end user to effectively deploy mobile and wireless backhaul solutions and the easy integration of these solutions with the existing ones.

The North America region is expected to contribute the maximum market share to the overall mobile and wireless backhaul market

North America will witness the highest market share in 2015, and will continue to dominate the globe during the forecast period. The mobile and wireless backhaul markets in Asia-Pacific (APAC), Middle East and Africa (MEA), and Latin America are expected to witness substantial growth, as large enterprises as well as SMBs are yet to adopt the solutions. Major enterprises in these emerging economies are expected to increase investments in mobile and wireless backhaul solutions, due to the huge demand for managing aging infrastructure and assets.

The major vendors in the mobile and wireless backhaul market include Alcatel Lucent, Cisco Systems, Ericsson, Huawei Technologies, Broadcom Corporation, Brocade Communications Systems, Fujitsu, Nokia Networks, Tellabs, and ZTE Corporation. A detailed analysis on key industry players is done to provide key insights about their businesses, products and services, key strategies, and recent developments associated with the mobile and wireless backhaul market.

The mobile and wireless backhaul market has been segmented into equipment, services, and regions. The equipment is further segmented into Microwave, Millimeter wave, Sub 6 GHz, and Test and Measurement. The service types are Network services, System Integration, and Professional Services. Furthermore, the report classifies the market according to the regions of North America, Europe, APAC, MEA, and Latin America.

More on MarketsandMarkets Wireless Backhaul report:

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Bottom Line:

In a new research note, Moody’s Investor Services stated that the overall U.S. telecom industry has not kept pace with cable companies (cablecos or MSOs) in terms of broadband deployments and speeds.

“Except for Verizon’s FiOS footprint, the US telecom industry has under-invested in broadband,” said Mark Stodden, VP and senior credit officer for Moody’s Investor Service. “Market share gains of cable operators (MSO’s) will persist given the capital required to catch up,” he added.

Stodden concluded that “wireline revenues will continue eroding as cable operators gain broadband share.”

Fierce Telecom  also reported Moody’s research on telcos under-investing in broadband.

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Telcos Lose While MSO’s Gain Broadband Subscribers:

In 3Q-2016, the top telcos collectively lost about 150,000 subscribers, widening the loss of about 145,000 they saw in the same period a year ago.

Leichtman Research Group (LRG) reported in a press release that the fourteen largest cable and telephone providers in the US — representing about 95% of the market — acquired about 625,000 net additional high-speed Internet subscribers in 3Q 2016. These top broadband providers now account for 92.5 million subscribers — with top cable companies having 57.8 million broadband subscribers, and top phone companies having 34.7 million subscribers.   Among the individual telcos tracked by LRG for the Q3 study, only Verizon (24,000) and Cincinnati Bell (3,100) came away with net sub additions in the period.

Other broadband findings for the quarter include:

• Overall, broadband additions in 3Q 2016 were 99% of those in 3Q 2015
• The top cable companies added about 775,000 subscribers in 3Q 2016 — 99% of the net additions for the top cable companies in 3Q 2015
• The top phone companies lost about 150,000 broadband subscribers in 3Q 2016 — similar to the loss of about 145,000 in 3Q 2015
  • Telco providers have had net broadband losses in five of the past six quarters
• In the first three quarters of 2016, cable companies (MSOs) added about 2,440,000 broadband subscribers, while Telcos lost about 475,000 subscribers

“While major providers now account for nearly 92.5 million broadband subscribers in the US, the broadband market continues to expand with top cable providers driving the growth,” said Bruce Leichtman, president and principal analyst for LRG, in a statement. “Over the past year, cable companies added more than 3.5 million broadband subscribers, accounting for 118% of the 2.995 million net broadband additions.”

Telco CAPEX Declined in 2015:

USTelecom, the champion of the traditional telcos, revealed in its annual broadband investment research report that broadband provider network capital expenditures (capex) declined nearly $1 billion in 2015 to $76 billion.

US Telecom wrote in its report that wireline broadband investment “remains critical to modernizing the nation’s network infrastructure and maintaining strong international leadership.”

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AT&T’s GigaPower:

AT&T maintains it’s continuing to invest in next-generation broadband networks under the company’s GigaPower brand. Earlier this week, AT&T announced that it has reached 46 markets with its 1 Gbps FTTH service.  AT&T plans to expand GigaPower in parts of 23 more areas – at least 67 metros in total.

Image Courtesy of AT&T

Deepening its FTTH footprint continues to be a priority for AT&T.  However, it’s unclear how broad the coverage is  in these markets and what the take rate for true high speed Internet and TV will be.

AT&T says on its GigaPower website:  “With internet speeds 20x faster than the average cable customer, you can download 25 songs in 1 second or your favorite 90-minute HD movie in less than 34 seconds.”

The latest AT&T GigaPower map is here.

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