Dell’Oro: Abysmal revenue results continue: Ethernet Campus Switch and Worldwide Telecom Equipment + Telco Convergence Moves to Counter Cable Broadband
Dell’Oro Group recently reported that:
1. 2Q 2024 worldwide Ethernet Campus Switch revenues contracted year-over-year for the third quarter in a row. Ethernet campus switch sales hit an all-time high in 2Q 2023 and a year later, vendors are suffering in comparison.
“We expect another year-over-year contraction in sales next quarter, in 3Q 2024,” said Siân Morgan, Research Director at Dell’Oro Group. “However, the outlook is improving, and the Ethernet Campus Switch market is expected to return to growth in 4Q 2024.”
“While the economy in China remains soft, Huawei grew year-over-year campus switch revenues across the rest of Asia Pacific and CALA. Over half of Huawei’s campus switch sales were generated outside China,” added Morgan.
Additional highlights from the 2Q 2024 Ethernet Switch–Campus Report:
- The contraction in Ethernet campus switch sales was broad-based across both modular and fixed form factors, all verticals and regions.
- Sales to North America fell the most of any macro-economic region.
- Cisco grew campus switch revenues on a quarter-over-quarter basis, for the first time in a year.
The Dell’Oro Group’s Ethernet Switch–Campus Quarterly Report offers a detailed view of Ethernet switches built and optimized for deployment outside the data center, to connect users and things to the Local Area Networks. The report contains in-depth market and vendor-level information on manufacturers’ revenue, ports shipped, and average selling prices for both Modular and Fixed, and Fixed Managed and Unmanaged Ethernet Switches (100 Mbps, 1/2.5/5/10/25/40/50/100/400 Gbps), Power-over-Ethernet, plus regional breakouts as well as split by customer size (Enterprise vs. SMB) and vertical segments. To purchase these reports, please contact us by email at [email protected].
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2. Preliminary findings indicate that worldwide telecom equipment revenues across the six telecom programs tracked at Dell’Oro Group—Broadband Access, Microwave & Optical Transport, Mobile Core Network (MCN), Radio Access Network (RAN), and SP Router & Switch—declined 16% year-over-year (Y/Y) in 2Q24, recording a fourth consecutive quarter of double-digit contractions. Helping to explain the abysmal results are excess inventory, weaker demand in China, challenging 5G comparisons, and elevated uncertainty.
Regional output deceleration was broad-based in the second quarter of 2024, reflecting slower revenue growth on a Y/Y basis in all regions, including North America, EMEA, Asia Pacific, and CALA (Caribbean and Latin America). Varied momentum in activity in the first half was particularly significant in China – the total telecom equipment market in China stumbled in the second quarter, declining 17% Y/Y.
The downward pressure was not confined to a specific technology, and initial readings show that all six telecom programs declined in the second quarter. In addition to the wireless programs (RAN and MCN), which are still impacted by slower 5G deployments, spending on Service Provider Routers fell by a third in 2Q24.
Supplier rankings were mostly unchanged. The top 7 suppliers in 1H24 accounted for 80% of the worldwide telecom equipment market and included Huawei, Nokia, Ericsson, ZTE, Cisco, Ciena, and Samsung. Huawei and ZTE combined gained nearly 3 percentage points of share between 2023 and 1H24.
Supplier positions differ slightly when we exclude the Chinese market. Despite the ongoing efforts by the U.S. government to curb Huawei’s rise, Huawei is still well positioned in the broader telecom equipment market, excluding China, which is up roughly two percentage points relative to 2019 levels.
- Even with the second half of 2024 expected to account for 54% of full-year revenues, market conditions are expected to remain challenging in 2024.
- The Dell’Oro analyst team collectively forecasts global telecom equipment revenues to contract 8 to 10% in 2024, even worse than the 4% decline in 2023.
3. U.S. Telcos Betting on Convergence and Scale To End Cable’s Broadband Reign
U.S. telcos have been very active the past two weeks with deals and partnerships.
- Verizon announced a $20B deal to acquire Frontier Communications and push the combined entity to a fiber footprint of 25 million homes and a fixed wireless footprint of approximately 60 million homes.
- AT&T announced partnerships with four open access network providers to help it expand the reach of its fiber services outside its existing wireline footprint. AT&T will serve as an ISP in these markets, delivering both residential and enterprise services via these partnerships. AT&T is on track to pass a minimum of 30 million homes with fiber by 2025 in its own footprint, as well as an additional 1.5 million homes through its Gigapower joint venture with BlackRock.
- AT&T has also quietly increased the availability of its Internet Air FWA (Fixed Wireless Access) services to over 130 markets, as It potentially positions the service to move beyond just a means of capturing existing DSL subscribers.
These deals follow on the heels of T-Mobile’s proposed acquisition of Lumos Networks, which is slated to pass 3.5 million homes with fiber by the end of 2028. Under the terms of the deal, Lumos will transition to a wholesale model with T-Mobile as the anchor ISP. This is exactly the type of arrangement T-Mobile has established with some of its other infrastructure partners. However, with its partial ownership of Lumos, T-Mobile can presumably generate better returns and healthier margins from its broadband service offerings. The joint venture also is consistent with T-Mobile’s goal of expanding its market presence and footprint without expending a significant amount of capital. In fact, if you take the $1.4B that T-Mobile will ultimately invest in Lumos as it increases its homes passed from 320K to 3.5M by the end of 2028, T-Mobile’s cost per home passed ends up being somewhat less than $500.
That $500 per home passed figure could be even lower should Lumos continue to secure additional American Rescue Plan Act (ARPA) Capital Project Fund grants as well as a portion of the $3.6 B in aggregate BEAD (Broadband Equity, Access, and Development) funding across North Carolina, South Carolina, and Virginia.
The primary reason for T-Mobile’s push into both direct fiber network ownership and partnerships with open access fiber providers is that the operator has over 1 million customers on a waiting list for its fixed wireless service. These customers can’t be served because they are in markets where T-Mobile does not have enough 5G capacity to serve them. As T-Mobile expands the reach of its fiber offering, it can not only provide service to these customers but also existing FWA subscribers. Once an FWA subscriber switches to T-Mobile Fiber, that opens the spectrum for additional FWA subscribers.
US telcos are moving quickly to expand the reach of their fiber, fixed wireless, and ISP services to complement their nationwide mobile networks because they smell blood among the largest cable operators. Telcos are disrupting the broadband market faster and more efficiently right now—a disruption that could very well be amplified by Federal and State subsidies.
With the rollout of 5G networks having had little impact on the profitability of mobile services, fixed wireless has emerged as the most successful use case for mobile network operators (MNOs) can monetize their excess 5G capacity. FWA’s timing couldn’t have been better, with inflation having increased from 2021 on, pushing subscribers to seek out more affordable—but still high quality—broadband service offerings. FWA hit the market providing a powerful combination of affordability, speed, and availability.
The success of FWA combined with overall fiber network expansions has given telcos a potent tool for not only the convergence of mobile and fixed broadband services but also the emergence of these services being offered on an almost nationwide basis. It’s pretty simple math. If you can offer a product or service to a larger number of end customers, the higher the likelihood of continued net subscriber additions, all other things being equal.
Even in markets where there is overlap between fixed wireless and that MNO’s own (or marketed) fiber broadband services, there isn’t really a danger of cannibalization, because the two services will very likely address very different subscribers. As the telcos’ ARPU (average revenue per unit) results have shown, subscribers are willing to pay more for fiber-based connectivity. In 2Q24, for example, AT&T announced that its fiber broadband ARPU is $69 and that the mix shift of its subscribers to fiber has pushed overall broadband ARPU up to $66.17, representing a 6% increase from 2Q23.
Meanwhile, in the second quarter, T-Mobile reported an ARPA figure of $142.54, which was up from $138.94 in 2Q23. Partially fueling that increase was an increase in the number of customers per account, due largely to the adoption of FWA services. Remember, T-Mobile prices and treats its FWA offering as an additional line of service, making it very simple to add to an existing T-Mobile account.
With a starting price point of $50 and typical download speeds ranging from 33-182 Mbps and upload speeds of 6-23 Mbps, T-Mobile is clearly targeting the low-mid cable broadband tiers—and having a great deal of success in converting those subscribers.
Going forward, the 1-2 punch of FWA and fiber will allow the largest telcos to have substantially larger broadband footprints than their cable competitors. Combine that with growing ISP relationships with open access providers and these telcos can expand their footprint and potential customer base further. And by expanding further, we don’t just mean total number of homes passed, but also businesses, enterprises, MDUs (multi-dwelling units), and data centers. Fiber footprint is as much about total route miles as it is about total passings. And those total route miles are, once again, increasing in value, after a prolonged slump.
For cable operators to successfully respond, consolidation likely has to be back on the table. The name of the game in the US right now is how to expand the addressable market of subscribers or risk being limited to existing geographic serving areas. Beyond that, continuing to focus on the aggressive bundling of converged services, which certainly has paid dividends in the form of new mobile subscribers.
Beyond that, being able to get to market quickly in new serving areas will be critical. In this time of frenzied buildouts and expansions, the importance of the first mover advantage can not be overstated.
The push and pull of broadband and wireless subscribers isn’t expected to slow down anytime soon. Certainly, with inflation continuing to put pressure on household budgets, consumers are going to be focused on keeping their communications costs low and looking for value wherever they can find it. That means we are returning to an environment where subscribers take advantage of introductory pricing on services only to switch providers to extend that introductory pricing once the initial offer expires. That shifting and its expected downward pressure on residential ARPU will likely be countered by increasing ARPUs at some providers as they move existing DSL customers to fiber or, in the case of cable operators, move customers to multi-gigabit tiers.
The US broadband market is definitely in for a wild ride over the next few years as the competitive landscape changes across many markets. The net result is certain to be shifts in market share and ebbs and flows in net subscriber additions depending on consumer sentiment. One thing that will remain constant is that value and reliability will remain key components of any subscription decision. The providers that deliver on that consistently will ultimately be the winners.
References:
Ethernet Campus Switch Revenues Plunge by 30 Percent in 2Q 2024, According to Dell’Oro Group
US Telcos Betting on Convergence and Scale To End Cable’s Broadband Reign
Dell’Oro: Private RAN revenue declines slightly, but still doing relatively better than public RAN and WLAN markets
Dell’Oro: Campus Ethernet Switch Revenues dropped 23% YoY in 1Q-2024
Dell’Oro: RAN revenues declined sharply in 2023 and will remain challenging in 2024; top 8 RAN vendors own the market
Dell’Oro: Broadband Equipment Spending to exceed $120B from 2022 to 2027
Dell’Oro: RAN Market to Decline 1% CAGR; Mobile Core Network growth reduced to 1% CAGR
Dell’Oro: Optical Transport market to hit $17B by 2027; Lumen Technologies 400G wavelength market
Dell’Oro: Private RAN revenue declines slightly, but still doing relatively better than public RAN and WLAN markets
Dell’Oro Group reports that Private Wireless Radio Access Network (RAN) revenue growth slowed slightly in the second quarter on a year-over-year basis relative to the ~40 percent increase in 2023. Still, the tapering is in line with expectations and private wireless is performing significantly better on a relative basis than both public RAN and enterprise WLAN. [However, it’s a much smaller market.]
“With public MBB investments slowing, the expectations with new growth opportunities such as Fixed Wireless Access and private wireless are rising,” said Stefan Pongratz, Vice President at Dell’Oro Group. “The results in the quarter and the trends over the past year validate this message that we have communicated now for some time, namely that the enterprise is a very large and mostly untapped opportunity. The market will continue to grow faster than both public RAN and enterprise WLAN, but because of the lower starting point, it will take some time before enterprise RAN revenues are large enough to stabilize public MBB swings,” continued Pongratz.
Additional highlights from the September 2024 Private Wireless Report:
- Contract activity is slowing but the quality of the contracts is improving and increasingly includes larger, multi-site, and even multi-country agreements.
- Regional activity is mostly stable. The three largest regions in 1H24 from a revenue perspective include China, North America, and EMEA.
- Vendor rankings did not change in 1H24. The evolving scope of private wireless taken together with the fact that the $20 B+ enterprise RAN opportunity remains largely untapped is spurring interest from a broad array of participants across the ecosystem. Still, the traditional RAN suppliers are currently well-positioned in this initial phase.
- Top 3 Private Wireless RAN suppliers in 1H24 are Huawei, Nokia, and Ericsson.
- Top 3 Private Wireless RAN suppliers in 1H24 excluding China are Nokia, Ericsson, and Samsung.
- Projections are mostly unchanged. Private wireless RAN revenues are projected to grow at a 21 percent CAGR over the next five years, while public RAN revenues are set to decline at a 3 percent CAGR over the same time period.
Dell’Oro Group’s Private Wireless Advanced Research Report includes both quarterly vendors share data and a 5-year forecast for Private Wireless RAN by RF Output Power, technology, spectrum, and region. To purchase this report, please contact us at [email protected].
Dell’Oro Group is a market research firm that specializes in strategic competitive analysis in the telecommunications, security, enterprise networks, and data center markets. Our firm provides in-depth quantitative data and qualitative analysis to facilitate critical, fact-based business decisions. For more information, contact Dell’Oro Group at +1.650.622.9400 or visit https://www.delloro.com.
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Ericsson and Nokia – Private Wireless Network Initiatives:
- Last week, Ericsson shared details of its enterprise 5G strategy, formulated after its 2020 Cradlepoint acquisition which provides both private 5G and neutral host solutions. “Ericsson’s strategic and comprehensive approach to evolving its private networking portfolio is addressing the growing demand for secure, high-performance connectivity in enterprises,” the vendor quoted Pablo Tomasi, Principal Analyst for Private Networks and Enterprise 5G at Omdia, as saying in its strategy announcement. “Ericsson’s ability to meet customers where they are in their 5G journey with a unified experience will be critical in helping the market scale and enabling enterprises leveraging 5G to transform in a meaningful way,” Tomasi added.
- Nokia has made myriad private networking deal announcements in the past couple of years and recently revealed the results of a market study it commissioned that paints the sector in a very positive light. Early adopters have been scaling up deployments, adding new locations for example, and the vast majority of those surveyed – 93%, to be exact – claimed to have generated a return on investment within a year; almost a quarter did so in just one month. That’s a strong message and one designed to help drive the market forwards.
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References:
Private Wireless RAN Revenues up 24 percent in 2Q 2024, According to Dell’Oro Group
https://www.telecoms.com/telecoms-infrastructure/private-ran-revenues-continue-to-grow-amid-vendor-push
Dell’Oro: RAN market still declining with Huawei, Ericsson, Nokia, ZTE and Samsung top vendors
Highlights of Dell’Oro’s 5-year RAN forecast
Dell’Oro: 2023 global telecom equipment revenues declined 5% YoY; Huawei increases its #1 position
Dell’Oro & Omdia: Global RAN market declined in 2023 and again in 2024
Dell’Oro: Private 5G ecosystem is evolving; vRAN gaining momentum; skepticism increasing
HPE Aruba Launches “Cloud Native” Private 5G Network with 4G/5G Small Cell Radios
SNS Telecom & IT: Private 5G Network market annual spending will be $3.5 Billion by 2027
Ericsson and Vodafone enable Irish rugby team to use Private 5G SA network for 2023 Rugby World Cup
Wipro and Cisco Launch Managed Private 5G Network-as-a-Service Solution
Japan to support telecom infrastructure in South Pacific using Open RAN technology
Japan’s government and private sector will offer support for telecommunications infrastructure in Pacific island countries, starting with a data center and telecom project in Palau, in an effort to improve the security of vital networks connecting Asia and North America. The initiative will be led by Japan’s Ministry of Internal Affairs and Communications and is expected to include telecom company NTT Group, internet service provider Internet Initiative Japan and other companies. It aims to increase Japan’s participation in the South Pacific, a region crisscrossed with undersea communications cables linking East Asia, the U.S., Australia and Southeast Asia. Funding will come from the ministry’s international cooperation budget. Several billion yen (1 billion yen equals $7.1 million) in public-private investment is expected to be mobilized over the first two years.
The infrastructure improvements will use Open Radio Access network (RAN) technology, which Japan has sought to promote as a low-cost way of building wireless networks from components made by different manufacturers.
Japan, the U.S., and Australia — which, along with India, make up the security dialogue known as the Quad — all support improving communications security in Pacific island countries. These island countries are reliant on equipment from Chinese telecom company Huawei Technologies for their land-based networks. The U.S. and others say Huawei has ties to the Chinese military and poses a security risk. Western officials have raised concerns about the potential for eavesdropping on communications and other activities. Huawei denies such accusations.
Quad members have agreed to support the modernization of Palau’s telecommunications infrastructure. Japan’s communications ministry will start putting this initiative to work as early as fiscal 2025, which begins in April. It will then seek to expand aid in fiscal 2026 to other countries in the region. Tuvalu and the Marshall Islands — two of the dwindling number of countries to maintain formal diplomatic relations with Taiwan — are likely to be candidates for such support. The effort will also seek to train cybersecurity personnel. Island countries with understaffed cybersecurity capabilities are seen as a potential vulnerability that can be exploited to launch attacks against Japan, experts say.
Tuvalu-an island country roughly halfway between Australia and Hawaii-is expected to be a candidate to receive Japanese support for telecommunications infrastructure. © Reuters
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China has worked to extend its influence in the South Pacific. In recent years, the Solomon Islands, Kiribati and Nauru have all cut diplomatic ties with Taiwan in favor of relations with Beijing. The Solomon Islands also formed a security agreement with China. Including Palau, only three countries in the region still maintain diplomatic relations with Taiwan.
Telecommunications infrastructure is becoming increasingly important for island countries in their own right.
“A stable network connecting a country with the rest of the world is essential for receiving remittances from migrant workers. Better telecommunications infrastructure is of great significance in improving ties between countries,” said Motohiro Tsuchiya, a professor at the Keio University Graduate School of Media and Governance in Japan.
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References:
https://market.us/report/open-ran-market/
https://www.o-ran.org/otics/japan-otic
https://www.lowyinstitute.org/the-interpreter/japan-s-5g-ambitions-quad
NTT advert in WSJ: Why O-RAN Will Change Everything; AT&T selects Ericsson for its O-RAN
NTT DOCOMO OREX brand offers a pre-integrated solution for Open RAN
Cloud Hosting- A Deep Dive into a Rapidly Growing Market
By Paribhasha Tiwari, Market Analyst and Content Curator
What is Cloud Hosting?
Cloud hosting is a type of web hosting that uses a network of virtual servers to host websites, applications, or data. Unlike traditional hosting, which relies on a single server, cloud hosting spreads the load across multiple interconnected servers, ensuring better scalability, reliability, and performance.
As digital transformation continues to accelerate across the globe, the Cloud Hosting Market is emerging as a key enabler of business agility, scalability, and innovation. Whether its large enterprises seeking to optimize their IT infrastructure or startups aiming to minimize overhead, cloud hosting has become the go-to solution. With the market poised for substantial growth, driven by the demands of modern business environments, this post will explore the factors fueling the expansion of cloud hosting, the challenges that must be navigated, and the future trends shaping this dynamic industry.
The Growth of Cloud Hosting- A Market Overview:
The global cloud hosting market has experienced tremendous growth over the past decade, becoming one of the most critical components of the broader cloud services ecosystem. According to market research, the cloud hosting market was valued at $60 billion in 2021 and is projected to reach over $100 billion by 2026, reflecting a CAGR of 18% during the forecast period. This growth can be attributed to several factors, including the increasing adoption of digital services, the rise of e-commerce, and the surge in remote working practices following the COVID-19 pandemic.
The transition from on-premises infrastructure to cloud-based hosting solutions offers businesses greater flexibility in scaling their operations. Unlike traditional hosting services, where companies are locked into a fixed amount of server capacity, cloud hosting allows for on-demand resource allocation, ensuring businesses only pay for what they use. This model provides substantial cost savings, particularly for industries with fluctuating traffic and demand, such as retail, media, and financial services.
Why Businesses are Migrating to Cloud Hosting Solutions?
Cloud hosting’s advantages extend far beyond cost savings. Companies today are looking for more than just affordable IT infrastructure—they need reliability, performance, and scalability. These three elements have made cloud hosting the preferred choice for businesses of all sizes. Here’s why-
- Scalability and Flexibility– The most compelling reason businesses are moving to the cloud is the ability to scale IT resources dynamically. Whether it’s handling a sudden spike in website traffic or expanding business operations globally, cloud hosting allows enterprises to scale resources up or down based on real-time needs. This elasticity ensures businesses remain agile and responsive to market conditions without worrying about over-provisioning or underutilization of hardware.
- Cost Efficiency– Cloud hosting significantly reduces the capital expenditure (CapEx) associated with setting up and maintaining physical servers. Instead of investing in costly infrastructure, businesses can convert these expenses to operational expenditures (OpEx) by paying only for the computing power they need. This is especially beneficial for startups and small-to-medium enterprises (SMEs) that need to manage their budgets tightly while still accessing world-class hosting services.
- Performance and Uptime– Leading cloud hosting providers guarantee uptime of 99.99% or higher, thanks to their globally distributed data centers and redundant systems. Downtime can be catastrophic, especially for e-commerce platforms, fintech companies, and digital service providers where revenue and customer satisfaction are directly tied to system availability. With cloud hosting, businesses can rely on seamless performance, even during peak demand periods.
- Disaster Recovery and Business Continuity– Another critical advantage of cloud hosting is the ability to integrate disaster recovery (DR) strategies into the hosting plan. In traditional hosting, implementing a comprehensive DR plan is complex and costly. Cloud hosting, however, offers built-in DR features like data backups, redundancy, and geo-replication, ensuring businesses can recover swiftly from any unplanned outage or data loss event.
Survey of Cloud Network Access Alternatives- Wireless and Wireline Solutions:
The growing adoption of cloud hosting has raised an important question for businesses- How should they connect to the cloud? Network access plays a critical role in determining the performance, reliability, and cost-efficiency of cloud hosting services. As businesses weigh their options, they typically consider two main types of cloud access solutions- wireline (fixed-line) and wireless alternatives.
- Wireline Access– Traditionally, businesses have relied on fixed-line connections, such as fiber-optic, DSL, or Ethernet, for cloud access. These wireline solutions provide stable, high-bandwidth connections and are often favored by enterprises with high-performance computing needs or large volumes of data traffic. Fiber-optic connections, in particular, offer ultra-high speeds and low latency, making them ideal for industries like finance, healthcare, and media, where data-intensive operations are critical.
- Advantages of Wireline Access– Wireline access is known for its reliability and low-latency performance, making it an excellent choice for mission-critical applications that require real-time data processing. Additionally, wireline connections tend to offer better security and dedicated bandwidth, reducing the risk of network congestion.
- Challenges of Wireline Access– The main downside to wireline solutions is the lack of mobility and flexibility. Fixed-line connections are geographically limited, which can pose challenges for businesses with distributed workforces or operations in remote areas.
- Wireless Access– As cloud technology evolves, wireless access solutions, particularly through 4G LTE, 5G, and Wi-Fi 6, are becoming increasingly popular. Wireless cloud access is particularly appealing for businesses with remote or mobile operations, where flexibility and mobility are critical. The advent of 5G has been a game-changer, offering near fiber-optic speeds, reduced latency, and massive device connectivity—all of which are crucial for sectors like logistics, manufacturing, and retail.
- Advantages of Wireless Access– Wireless solutions enable businesses to connect to the cloud from virtually anywhere, without the need for fixed infrastructure. This is particularly beneficial for businesses with multiple locations or a high degree of mobility. Wireless connections, particularly with 5G and Wi-Fi 6, provide speeds and performance that rival many traditional wireline solutions, making wireless access a viable alternative for many use cases.
- Challenges of Wireless Access– Despite its flexibility, wireless cloud access can be more prone to latency and security concerns compared to wireline solutions. While advances in 5G and Wi-Fi technology are helping to mitigate these issues, businesses must carefully assess their wireless infrastructure to ensure performance and security standards are met.
Security and Compliance- Addressing Concerns in the Cloud:
For many businesses, security remains a primary concern when moving to the cloud. Despite the growing adoption of cloud services, there are lingering worries about data breaches, hacking attempts, and regulatory compliance. However, cloud hosting providers have significantly improved their security protocols, and many offer industry-leading security measures that far surpass traditional on-premises hosting.
- Advanced Encryption– Data is often stored in encrypted formats, both at rest and in transit, ensuring that unauthorized users cannot access sensitive information. Leading cloud providers offer 256-bit encryption standards, along with secure key management systems to further bolster security.
- Compliance with Regulatory Standards– Cloud hosting platforms comply with major regulatory standards, including GDPR, HIPAA, SOC 2, and ISO 27001 certifications. This compliance ensures that businesses operating in regulated industries such as healthcare, finance, and retail can meet legal requirements without having to manage their own data compliance infrastructure.
- Multi-factor Authentication (MFA) and Identity Management– Cloud providers also implement stringent access controls, using technologies like MFA, identity and access management (IAM) systems, and biometric authentication to safeguard user data.
Challenges Facing the Cloud Hosting Market:
Despite its numerous benefits, the cloud hosting sector still faces challenges that need to be addressed for continued growth-
- Latency and Regional Data Centers– One of the key challenges is latency, particularly for businesses with a global customer base. To ensure minimal latency, cloud hosting providers need to offer data centers in geographically diverse locations. However, regions with limited data center infrastructure, such as parts of Africa and Latin America, may still face connectivity and latency issues.
- Data Sovereignty and Privacy– Another challenge is navigating data sovereignty laws, which dictate that certain types of data must be stored within specific geographical regions. Businesses operating across borders must ensure compliance with local data regulations, which may complicate cloud hosting strategies.
- Vendor Lock-In– Vendor lock-in occurs when a business becomes too dependent on a single cloud hosting provider, limiting its flexibility to switch providers or adopt new technologies. While many cloud providers offer tools to mitigate lock-in, businesses must carefully plan their cloud strategy to avoid over-reliance on a single vendor.
What’s Next for Cloud Hosting- Key Emerging Trends:
As the market continues to grow, several trends are emerging that will shape its future trajectory-
- Hybrid and Multi-Cloud Strategies– Businesses are increasingly adopting hybrid and multi-cloud strategies, combining public and private cloud environments to optimize cost, performance, and security. Hybrid cloud allows companies to store sensitive data in a private cloud while taking advantage of the scalability of the public cloud for less sensitive workloads.
- Edge Computing– With the rise of Internet of Things (IoT) devices and the need for low-latency computing, edge computing is becoming a critical component of cloud hosting. By bringing computing resources closer to the data source, edge computing reduces latency, enhances real-time processing, and improves the overall performance of IoT applications.
- AI and Automation in Cloud Hosting– Artificial Intelligence (AI) and automation are transforming cloud hosting services. AI-powered cloud infrastructure can optimize resource allocation, predict maintenance needs, and enhance cybersecurity. Automation tools are also helping businesses manage their cloud environments more efficiently, reducing the need for manual intervention.
Conclusion- Making the Most of Cloud Hosting:
The cloud hosting industry is not just growing, it is evolving to meet the complex demands of modern businesses. With its scalable, secure, and cost-effective infrastructure, cloud hosting offers unparalleled opportunities for companies to innovate and stay competitive in an increasingly digital world. By understanding the benefits, challenges, and future trends, businesses can make informed decisions to maximize the potential of their cloud hosting strategies and drive long-term growth.
Author: Paribhasha Tiwari, Market Analyst and Content Curator
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References:
What is Cloud Hosting? Benefits and Risks
https://aws.amazon.com/what-is/cloud-hosting/
IDC: Public Cloud services spending to hit $1.35 trillion in 2027
https://www.forbes.com/advisor/business/software/best-cloud-hosting/
AI adoption to accelerate growth in the $215 billion Data Center market
Market Overview:
Data Centers are a $215bn global market that grew 18% annually between 2018-2023. AI adoption is expected to accelerate data center growth as AI chips require 3-4x more electrical power versus traditional central processing units (CPUs).
AI adoption is poised to accelerate this growth meaningfully over coming years. BofA‘s US Semis analyst, Vivek Arya, forecasts the AI chip market to reach ~$200bn in 2027, up from $44bn in 2023. This has positive implications for the broader data center industry.
AI workloads are bandwidth-intensive, connecting hundreds of processors with gigabits of throughput. As these AI models grow, the number of GPUs required to process them grows, requiring larger networks to interconnect the GPUs. See Network Equipment market below.
The electrical and thermal equipment within a data center is sized for maximum load to ensure reliability and uptime. For electrical and thermal equipment manufacturers, AI adoption drives faster growth in data center power loads. AI chips require 3-4x more electrical power versus traditional CPUs (Central Processing Units).
BofA estimates data center capex was $215bn globally in 2023. The majority of this spend is for compute servers, networking and storage ($160bn) with data center infrastructure being an important, but smaller, piece ($55bn). For perspective, data center capex represented ~1% of global fixed capital formation, which includes all private & public sector spending on equipment and structures.
Networking Equipment Market:
BofA estimates a $20bn market size for Data Center networking equipment. Cisco is the market share leader, with an estimated 28% market share.
- Ethernet switches which communicate within the data center via local area networks. Typically, each rack would have a networking switch.
- Routers handle traffic between buildings, typically using internet protocol (IP). Some cloud service providers use “white box“ networking switches (e.g., manufactured by third parties, such as Taiwanese ODMs, to their specifications).
Data center speeds are in a state of constant growth. The industry has moved from 40G speeds to 100G speeds, and those are quickly giving way to 400G speeds. Yet even 400G speeds won’t be fast enough to support some emerging applications which may require 800G and 1.6TB data center speeds.
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Data Centers are also a bright spot for the construction industry. BofA notes that construction spending for data centers is approaching $30bn (vs $2bn in 2014) and accounts for nearly 21% of data center capex. At 4% of private construction spending (vs 2% five years ago), the data center category has surpassed retail, and could be a partial offset in a construction downturn.
Source: BofA Global Research
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References:
https://www.belden.com/blogs/smart-building/faster-data-center-speeds-depend-on-fiber-innovation#
Proposed solutions to high energy consumption of Generative AI LLMs: optimized hardware, new algorithms, green data centers
Nvidia enters Data Center Ethernet market with its Spectrum-X networking platform
Co-Packaged Optics to play an important role in data center switches
EdgeCore Digital Infrastructure and Zayo bring fiber connectivity to Santa Clara data center
Deutsche Telekom with AWS and VMware demonstrate a global enterprise network for seamless connectivity across geographically distributed data centers
New venture to sell Network Application Programming Interfaces (APIs) on a global scale
Overview:
Some of the world’s largest telecom operators, including América Móvil, AT&T, Bharti Airtel, Deutsche Telekom, Orange, Reliance Jio, Singtel, Telefonica, Telstra, T-Mobile, Verizon and Vodafone, together with network gear maker Ericsson (the largest shareholder) are announcing a new venture to combine and sell network Application Programming Interfaces (APIs) on a global scale to spur innovation in digital services. Network APIs are the way to easily access, use and pay for network capabilities. The venture will drive implementation and access to common APIs from multiple telecom service providers to a broader ecosystem of developer platforms. All the APIs on offer will be based on CAMARA – the open source API project led by the GSMA and the Linux Foundation.
Modern mobile networks have advanced and intelligent capabilities, which have historically been inaccessible to developers. Additionally, it has been impractical for developers to integrate the different capabilities of hundreds of individual telecom operators. The newly formed company will combine network APIs globally, with a vision that new applications will work anywhere and on any network, making it easier and quicker for developers to innovate.
Easily accessible advanced network capabilities will open up the next frontier in app development and empower developers to create new use cases across many sectors. These could include anti-fraud verification for financial transactions and the ability to check device status so streaming providers can dynamically adjust video quality.
The newly formed company will provide network APIs to a broad ecosystem of developer platforms, including hyperscalers (HCPs), Communications Platform as a Service (CPaaS) providers, System Integrators (SIs) and Independent Software Vendors (ISVs), based on existing industry-wide CAMARA APIs (the open-source project driven by the GSMA and the Linux Foundation). Vonage and Google Cloud will partner with the new company, providing access to their ecosystems of millions of developers as well as their partners. The new venture shareholders will bring funding and important assets, including Ericsson’s platform and network expertise, global telecom operator relationships, knowledge of the developer community and each telecom operator’s network APIs, expertise and marketing.
Ericsson-owned Vonage and Google Cloud have already agreed to partner with the new venture, providing access to their respective ecosystems of millions of developers as well as their partners.
“We have a common concern that we’ve made it difficult for developers to program on wireless networks,” said Niklas Heuveldop, CEO of Vonage, stressing that this initiative is all about removing any friction and roadblocks that may be preventing developers taking full advantage of the programmable networks opportunity. He added that, for Vonage, this means a smaller piece of a bigger network API pie.
Closing of the transaction is expected early 2025, subject to regulatory approvals and other customary conditions. Upon closing, Ericsson will hold 50% of the equity in the venture while the telecom providers will hold 50% in total. Built on a deep understanding of developer and enterprise needs and in keeping with the industry-body GSMA Open Gateway principles, the new venture’s platform and partner ecosystem will remain open and non-discriminatory to maximize value creation across the industry.
Comment and Analysis:
Much has already been made of the industry’s decision to open up and (attempt) to monetize network APIs. Optimistic estimates, like the one proffered by McKinsey, claim that network APIs represent a $300 billion opportunity for telcos between now and the end of the decade. However, some like Kearney, have warned that all will be for naught without proper industry coordination and collaboration to drive software developer uptake.
“Today’s announcement is an important step in that direction by addressing one of the major challenges for developers seeking to engage with mobile operators – sector fragmentation,” said Kester Mann, director of consumer and connectivity at CCS Insight. “In the past, the telecom industry – with many competing players each deploying different strategies for their specific regions – has struggled to present a united and coherent front.” Despite their dubious track record, Mann reckons this particular venture stands a better chance of success than most, thanks to the urgent need for operators to earn a return on 5G, and due to the involvement of major technology partners in the form of Google and Ericsson. “There should be fresh optimism that the new company unveiled will enjoy more success than previous failed ventures,” he added.
While open network APIs will work on compatible hardware from any vendor – whether it’s Nokia or Ericsson or Huawei – this new venture represents an opportunity for Ericsson to play a central role in the emerging ecosystem.
Quotes from the partners:
América Móvil
Daniel Hajj, Chief Executive Officer, AMX: “We are very excited to join Ericsson and other key players in our industry in this innovative global platform initiative that will benefit the digital ecosystem as a whole. New API solutions will establish exciting value-added offerings to our customers on the top of our networks’ infrastructure.”
AT&T
Jeremy Legg, Chief Technology Officer, AT&T: “At AT&T, we’ve been creating API tools to empower developers for well over a decade. Now, with a broad-based, interoperable API platform, we’re giving innovators a new global toolbox where the world’s best app developers can create exciting user experiences at scale. This high-performance mobile ecosystem will usher in a new era of greater possibility for customers and mobile users around the world.”
Bharti Airtel
Gopal Vittal, Managing Director and CEO, Bharti Airtel: “Today marks a defining moment as the industry comes together to form a unified platform that will allow more developers and businesses to utilize our networks and explore API opportunities through open gateway principles. This move will enhance network monetization opportunities. Airtel is delighted to partner in this initiative that will help enable the telecom sector to drive growth and innovation across the ecosystem.”
Deutsche Telekom
Tim Höttges, CEO of Deutsche Telekom: “The new company accelerates our leading work with MagentaBusiness APIs to expose our network capabilities for customers and developers. We believe that this company will open up new monetization opportunities for the industry. We encourage and look forward to more telecom operators joining us to expand and develop this ecosystem.”
Ericsson
Börje Ekholm, President and CEO, Ericsson: “Today is a defining moment for the industry and milestone in our strategy to open up the network for increased monetization opportunities. A global platform built on Ericsson’s deep technical capabilities and with a comprehensive ecosystem, that provides millions of developers with a single connection, will enable the telecom industry to invest deeper into the network API opportunity, driving growth and innovation for everyone.”
Orange
Christel Heydemann, Chief Executive Officer, Orange: “This is a critical first step in our innovation journey to fully harness the power of our networks at scale, providing secure access to new on-demand network services and advanced network capabilities. By delivering a common and simple set of network APIs for developers globally, we can unleash this network value for businesses, large and small. This is a definitive gamechanger for businesses, opening up the possibility of a new wave of digital services.”
Reliance Jio
Mathew Oommen, President, Reliance Jio: “We spearheaded the transformation of both mobile and fixed home broadband by delivering affordable, high-quality broadband to everyone, across India. As we rapidly adopt an AI and API-driven technology ecosystem—by collaborating with global leaders, Jio is thrilled to offer a suite of innovative and transformative APIs to enterprises and developers worldwide. Together, we are not just building networks; we are laying the foundation for a smarter, more connected, and inclusive world in the AI era.”
Singtel
Mr Yuen Kuan Moon, Group Chief Executive Officer, Singtel: “This unified platform and global eco-system will enable even more developers and businesses to leverage 5G quality networks to exploit API opportunities using GSMA’s open gateway principles. We look forward to helping even more enterprises and organizations in Asia to use network API solutions to drive growth and innovation through this timely collaboration.”
Telefonica
José María Álvarez-Pallete, Chairman & CEO of Telefónica: “This collaboration will drive the GSMA Open Gateway initiative and provide customers with a consistent set of Camara APIs. Our belief is that this industry movement, which will be open to all networks, can set the stage for unprecedented innovation and value creation for the sector, by unlocking the potential of network capabilities.”
Telstra
Vicki Brady, CEO of Telstra: “This is a groundbreaking initiative for our industry. This new global venture will create an ecosystem that provides developers, partners and customers with access to programmable, advanced network capabilities that will unleash a new wave of innovation in digital services and further unlocks the benefits of our 5G network. We’ve been making good progress locally with Ericsson and other partners, and we look forward to further accelerating digital transformation for our Australian customers and bringing value and simplicity to application developers around the world.”
T-Mobile
Ulf Ewaldsson, President of Technology, T-Mobile: “At T-Mobile, we’ve always been laser focused on championing change across the industry to create the best customer experiences, while fueling growth and innovation across the entire wireless ecosystem. That level of transformation takes unprecedented collaboration and expertise. We are excited about the possibilities this venture will create for developers and wireless customers around the world.”
Verizon
Joe Russo, EVP & President, Global Network and Technology of Verizon: “The depth and value of the services and data insights accessible through Verizon’s renowned 5G network are practically boundless. Verizon has been at the forefront of developing various network APIs to assist developers in enhancing customer security, reducing pain points in customer interactions, and enabling the creation of novel experiences. This exciting collaboration with global partners will broaden the availability of these services and accelerate adoption of APIs worldwide.”
Vodafone
Margherita Della Valle, Vodafone Group Chief Executive, said: “Network APIs are reshaping our industry. This pioneering partnership will enable businesses and developers to use the collective strength of our global networks to develop applications that drive growth, create jobs, and improve public services. Just as 4G and smartphones made apps integral to our everyday life, the power of our 5G network will stimulate the next wave of digital services.”
Google Cloud
Thomas Kurian, CEO of Google Cloud: “We understand the power of an open platform and ecosystem in driving innovation. We are proud to participate in this important partnership in the telco industry to create value for our global customers via network APIs – and ultimately deliver on the promise of the public cloud.”
Vonage
Niklas Heuveldop, CEO Vonage: “This groundbreaking, open industry collaboration effectively removes the single largest barrier for developers to leverage mobile networks to their full potential. Developers across the world’s leading developer platforms will benefit from accessing advanced network capabilities in partner networks globally through common APIs, accelerating the digital transformation of businesses and the public sector. As one of the leading developer platforms, we look forward to engaging our developer community as we grow the network API business.”
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References:
Telefónica and Nokia partner to boost use of 5G SA network APIs
Analysts: Telco CAPEX crash looks to continue: mobile core network, RAN, and optical all expected to decline
Analysys Mason Open Network Index: survey of 50 tier 1 network operators
Ericsson expects continuing network equipment sales challenges in 2024
Nvidia enters Data Center Ethernet market with its Spectrum-X networking platform
Nvidia is planning a big push into the Data Center Ethernet market. CFO Colette Kress said the Spectrum-X Ethernet-based networking solution it launched in May 2023 is “well on track to begin a multi-billion-dollar product line within a year.” The Spectrum-X platform includes: Ethernet switches, optics, cables and network interface cards (NICs). Nvidia already has a multi-billion-dollar play in this space in the form of its Ethernet NIC product. Kress said during Nvidia’s earnings call that “hundreds of customers have already adopted the platform.” And that Nvidia plans to “launch new Spectrum-X products every year to support demand for scaling compute clusters from tens of thousands of GPUs today to millions of DPUs in the near future.”
- With Spectrum-X, Nvidia will be competing with Arista, Cisco, and Juniper at the system level along with “bare metal switches” from Taiwanese ODMs running DriveNets network cloud software.
- With respect to high performance Ethernet switching silicon, Nvidia competitors include Broadcom, Marvell, Microchip, and Cisco (which uses Silicon One internally and also sells it on the merchant semiconductor market).
Image by Midjourney for Fierce Network
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In November 2023, Nvidia said it would work with Dell Technologies, Hewlett Packard Enterprise and Lenovo to incorporate Spectrum-X capabilities into their compute servers. Nvidia is now targeting tier-2 cloud service providers and enterprise customers looking for bundled solutions.
Dell’Oro Group VP Sameh Boujelbene told Fierce Network that “Nvidia is positioning Spectrum-X for AI back-end network deployments as an alternative fabric to InfiniBand. While InfiniBand currently dominates AI back-end networks with over 80% market share, Ethernet switches optimized for AI deployments have been gaining ground very quickly.” Boujelbene added Nvidia’s success with Spectrum-X thus far has largely been driven “by one major 100,000-GPU cluster, along with several smaller deployments by Cloud Service Providers.” By 2028, Boujelbene said Dell’Oro expects Ethernet switches to surpass InfiniBand for AI in the back-end network market, with revenues exceeding $10 billion.
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In a recent IEEE Techblog post we wrote:
While InfiniBand currently has the edge in the data center networking market, but several factors point to increased Ethernet adoption for AI clusters in the future. Recent innovations are addressing Ethernet’s shortcomings compared to InfiniBand:
- Lossless Ethernet technologies
- RDMA over Converged Ethernet (RoCE)
- Ultra Ethernet Consortium’s AI-focused specifications
Some real-world tests have shown Ethernet offering up to 10% improvement in job completion performance across all packet sizes compared to InfiniBand in complex AI training tasks. By 2028, it’s estimated that: 1] 45% of generative AI workloads will run on Ethernet (up from <20% now) and 2] 30% will run on InfiniBand (up from <20% now).
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References:
https://www.fierce-network.com/cloud/data-center-ethernet-nvidias-next-multi-billion-dollar-business
https://www.nvidia.com/en-us/networking/spectrumx/
Will AI clusters be interconnected via Infiniband or Ethernet: NVIDIA doesn’t care, but Broadcom sure does!
Data Center Networking Market to grow at a CAGR of 6.22% during 2022-2027 to reach $35.6 billion by 2027
LightCounting: Optical Ethernet Transceiver sales will increase by 40% in 2024
FCC: More competition for Starlink; freeing up spectrum for satellite broadband service
More Competition for Starlink Needed:
FCC chairwoman Jessica Rosenworcel said Wednesday that she wants to see more competition for SpaceX‘s internet satellite constellation Starlink. Starlink (owned by SpaceX, which provides launch services) controls nearly two thirds of all active satellites and has launched about 7,000 satellites since 2018. Rosenworcel said at a conference Wednesday that Starlink has “almost two-thirds of the satellites that are in space right now and has a very high portion of (satellite)) internet traffic… Our economy doesn’t benefit from monopolies. So we’ve got to invite many more space actors in, many more companies that can develop constellations and innovations in space.”
Starlink competitors include:
OneWeb is a solid alternative to Starlink’s satellite internet service by offering similar capabilities and coverage. The company plans to launch a constellation of approximately 650 satellites to provide seamless broadband connectivity to users worldwide, including remote and underserved areas. By operating in low-earth orbits (LEO), OneWeb’s satellites can offer low latency and high-speed internet access, suitable for a wide range of commercial, residential, and governmental applications. OneWeb’s satellites will be deployed in polar orbit, allowing them to cover even the Earth’s most remote regions. This global coverage makes OneWeb an attractive option for users who require internet connectivity in areas where traditional terrestrial infrastructure is limited or unavailable.
Viasat has a fleet of satellites in geostationary orbit, allowing it to provide internet services to customers in remote and rural areas. This coverage is essential for customers living in areas with limited terrestrial internet options. In addition to its satellite coverage, Viasat also offers competitive internet speeds. The company’s satellite technology allows fast and reliable internet connections, making it a viable alternative to traditional wired internet providers. This is especially beneficial for customers who require high-speed internet for activities such as streaming, online gaming, or remote work.
Telesat offers a wide range of satellite services tailored to different industries and applications. Telesat’s satellite fleet includes geostationary satellites, low-earth orbit (LEO) satellites, and high-throughput satellites (HTS), allowing it to deliver high-speed internet connectivity, broadcast services, and backhaul solutions to customers in remote and underserved areas. Telesat has extensive coverage and capacity in terms of satellite internet services. They have a strong presence in North America, South America, Europe, the Middle East, and Africa, making their services accessible to millions of users.
Telstra’s extensive network infrastructure and coverage make it a strong competitor to Starlink. The company operates a vast network of undersea cables, satellites, and terrestrial infrastructure, which enables it to provide reliable and high-speed connectivity across Australia and beyond. Telstra also has a solid customer base and brand recognition in the telecommunications industry, which gives it a competitive advantage. One of the critical business challenges that Telstra poses to Starlink is its established presence and dominance in the Australian market. Telstra has a significant market share and customer base in Australia, which gives it a strong foothold in the telecommunications industry. This makes it more difficult for Starlink to penetrate the market and attract customers away from Telstra. In addition, Telstra’s network coverage and infrastructure in remote and rural areas of Australia are competitive advantages.
Project Kuiper is backed by Amazon’s vast resources and infrastructure. Amazon’s deep pockets and logistics and cloud services expertise give Project Kuiper a decisive advantage in deploying and scaling its satellite network. By providing affordable and accessible broadband services, Project Kuiper intends to empower individuals, businesses, and communities with the opportunities and resources that come with internet access. With a constellation of low-earth orbit (LEO) satellites, Project Kuiper plans to deliver high-speed internet connectivity to areas with limited traditional terrestrial infrastructure.
Hughes Network System has a strong foothold in the market, particularly in rural areas with limited terrestrial broadband options. The company’s HughesNet service utilizes geostationary satellites to provide internet connectivity, offering up to 100 Mbps for downloads.
Inmarsat offers a range of satellite-based communication solutions that cater to its customers’ diverse needs. One key area where Inmarsat differentiates itself is its focus on mission-critical applications. The company’s satellite network is designed to provide uninterrupted and reliable connectivity, even in the most remote and challenging environments. Inmarsat’s portfolio includes services such as voice and data communications, machine-to-machine connectivity, and Internet of Things (IoT) solutions. The company’s satellite network covers most of the Earth’s surface, ensuring its customers can stay connected wherever they are.
Freeing Up Spectrum to Support Satellite Broadband Service:
At the FCC’s September 26th Open Commission Meeting, the Commission will consider a Report and Order that will provide 1300 megahertz of spectrum in the 17 GHz band for non-geostationary satellite orbit (NGSO) space stations in the fixed-satellite service (FSS) while also protecting incumbent operations. The Order provides a more cohesive global framework for FSS operators and maximizes the efficient use of the 17 GHz band spectrum. (IB Docket No. 22-273).
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References:
https://www.fcc.gov/september-2024-open-commission-meeting
https://businessmodelanalyst.com/starlink-competitors/
SpaceX launches first set of Starlink satellites with direct-to-cell capabilities
Starlink Direct to Cell service (via Entel) is coming to Chile and Peru be end of 2024
SpaceX has majority of all satellites in orbit; Starlink achieves cash-flow breakeven
Starlink’s Direct to Cell service for existing LTE phones “wherever you can see the sky”
Amazon launches first Project Kuiper satellites in direct competition with SpaceX/Starlink
Rakuten Symphony exec: “5G is a failure; breaking the bank; to the extent 6G may not be affordable”
In a Linkedin post, Rakuten Symphony CMO Geoff Hollingworth says 5G has been a failure, that it will never achieve ubiquitous coverage and it’s time for the mobile industry to invest in customers rather than networks:
5G is a failure. We build technology to deliver a promise, the promise made was commercial. If that promise is not delivered then it has failed. If that promise is delivered but the cost of delivery is prohibitively expensive versus the return, then that technology is a failure. Currently the promise has not been delivered and there is no line of sight to delivery.
I do not believe the market is going to deliver on this promise further down the road, the networks do not work this way. 5G will never have ubiquitous coverage, and this is getting worse. We can get closer to ubiquitous coverage as a network of networks but then all the complexity embedded in 5G for advanced management of the network is a cost. There is never only one “G” in a market, there tend to be at least 3 at any moment. Each G takes time to retire, from a customer, device, and ROI point of view. APIs cannot get deployed universally and by the the time networks are universal the next G is starting to be rolled out. We are still waiting for “real 5G” but even when it shows what will it translate to commercially? Will it arrive before something labeled “6G” is starting to roll out?
“The current cost for 5G is breaking the bank, to the extent where 6G might not be affordable. None of this is good for an industry that is supposedly powering the global GDP and defining the future state of all countries.”
Of course, we agree as we’ve been pounding the table since the 3GPP Release 15 pre-standard version of 5GNR was introduced in 2018. The “real 5G” must include standardized 5G SA core network, URLLC that meets ITU-R M.2410 performance requirements and harmonized frequencies.
“We are already repeating the narrative into 6G with the same concept of ubiquitous coverage mindset. We are not segmenting for actual coverage and actual market reality when comparing to cost, time, and need,” Hollingworth warns. “We must embrace that there are other better ways to solve for coverage, depending [on] the use case and the coverage type required. We have less of a coverage problem and more of a seamless access problem, as one moves from indoor to outdoor city to outdoor suburb to rural.”
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Future Network Trends -AI native and cloud native operations:
To see future network needs, there is a need to understand future AI software design patterns. We now see these appearing and they are different from what we have seen before.
- They depend on large data streams where the data and interpretation has time sensitivity.
- Compute is distributing to where the data is rather than bringing the data to where the compute is.
- This forces distribution of models and software to where the data and compute is, and overhead must be kept to a minimum and automation must be maximized to be cost effective.
- There is need for rapid iteration and continuous fine tuning of the models and algorithms as more data is analyzed and performance improves.
The first applications with these design requirements are the 5G++ network architected functions. The test of the industry is whether the software can be adopted with true AI native, cloud native operations or whether they will be deployed traditionally. If we succeed in deploying a true hyperscale operation for our own software we can take our tooling and knowledge, and expand it to support any application and service.
Now there are many networks that devices can connect to, and 80% of the time traffic does not travel through cellular networks at all. In markets with high fiber penetration Wi-Fi connectivity and latency has higher performance than cellular, especially indoors, where higher frequency spectrum no longer travels inside buildings, especially those with reflective sustainability materials.
We previously solved as if cellular was the only way to solve all the problems. We must embrace that there are other better ways to solve for coverage, depending the use case and the coverage type required. We have less of a coverage problem and more of a seamless access problem, as one moves from indoor to outdoor city to outdoor suburb to rural.
References:
https://www.linkedin.com/pulse/cost-delusion-promise-reality-geoff-hollingworth-vt4xe/
https://www.itu.int/pub/R-REP-M.2410
https://www.lightreading.com/6g/jumping-off-the-g-train
Verizon to buy Frontier Communications
Wall Street Journal reported today that Verizon is on the verge of buying Frontier Communications for as much as $7 billion in a deal that would bolster the company’s fiber network to compete with rivals notably AT&T. With a market value of over $7 billion, Dallas, TX based Frontier provides broadband (mostly fiber optic) connections to about three million locations across 25 states. Frontier is in the midst of upgrading its legacy copper landline network to cutting-edge fiber. Rising interest rates sparked fears among investors, however, that the business would run out of cash and not be able to raise more before completing those upgrades. Frontier has a 25-state footprint and serves largely rural areas. It reported sales of $5.8 billion in 2023, with about 52% of total revenue from activities related to its fiber-optic products and bills itself as “largest pure-play fiber internet company in the US.”
An all-cash deal between the two companies could be announced as soon as Thursday, a person familiar with the negotiations told Bloomberg.
Fiber M&A has heated up as telecom companies and financial firms pour capital into neighborhoods that lack high-speed broadband or offer only one internet provider, usually from a cable-TV company. New fiber-optic construction is expensive and time-consuming, making existing broadband providers attractive takeover targets.
Verizon, with a market valuation of around $175 billion, will be under pressure from shareholders to justify any big purchase after the company paid more than $45 billion to secure C-band 5G wireless spectrum licenses and spent billions more to use them. Executives have said they are focused on trimming the telecom giant’s leverage to put it on a firmer financial footing.
Verizon, the top cellphone carrier by subscribers, has faced increased pressure from competitors and from cable-TV companies that offer discounted wireless service backed by Verizon’s own cellular network. Faced with slowing wireless revenue growth and an expensive dividend, Verizon has invested in expanding its home-internet footprint. It has both 5G fixed wireless access (FWA) and its Fios-branded fiber to the premises network.
T-Mobile is the only major U.S. cellphone carrier that lacks a large landline business. Since its 2020 takeover of rival carrier Sprint, the company has focused on 5G dominance and succeeded in growing its cellphone business faster than rivals. That network has also linked millions of customers to its fixed 5G broadband service, which offers cablelike service over the air. T-Mobile’s strategy has shifted in recent months, however, as the company dabbles in partnerships and wholesale leasing agreements with companies that build fiber lines to homes and businesses. The wireless “un-carrier” in July agreed to spend about $4.9 billion through a joint venture with private-equity giant KKR to buy Metronet, a Midwestern broadband provider.
Photo Credit: Jeenah Moon/Bloomberg News
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A deal for Frontier would be a round trip of sorts for some of the network infrastructure that Frontier bought from Verizon in 2016 for $10.54 billion in cash. Frontier later filed for Chapter 11 bankruptcy in April 2020 as it burned through cash and was burdened by a heavy debt load. It emerged as a leaner business in 2021 with about $11 billion less debt and focused on building a next-generation fiber optic network.
Frontier’s biggest investors today include private-equity firms Ares Management and Cerberus Capital Management. The company drew the attention of activist Jana Partners last year, which built a stake in the business. Jana delivered a letter to Frontier’s board late last year asking the company to take steps immediately to help reverse its sinking share price, including a possible outright sale.
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AT&T has focused on expanding its fiber network since spinning off its WarnerMedia assets in 2022 to Warner Brothers Discovery. AT&T has 27.8 million fiber homes/businesses passed, growing at ~2.4 million per year, plus more locations passed via its Gigapower joint venture. AT&T’s fiber internet business is expected to contribute to an increase in consumer broadband and wireline revenue. AT&T expects broadband revenue to increase by at least 7% in 2024, which is more than double the rate of growth for wireless service revenue. In contrast, Verizon only has about 18 million fiber locations, growing at about 500,000 per year.
Other recent deals in the fiber transport market sector include the $3.1 billion acquisition, including debt, of fiber provider Consolidated Communications in late 2023 by Searchlight Capital Partners and British Columbia Investment Management.
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It’s All About Convergence (fiber based home internet combined with mobile service):
Speaking at a Bank of America investors conference today, Verizon’s CEO for the Consumer Group Sowmyanarayan Sampath said when Verizon bundles Fios with wireless, it sees a 50% reduction in mobile churn and a 40% reduction in broadband churn. He said they don’t see the same benefits with FWA. Sampath was scheduled to speak at the Mobile Future Forward conference tomorrow, but he canceled at the last minute, which may be a sign that this deal for Frontier is imminent.
The analysts at New Street Research led by Jonathan Chaplin said Verizon’s rationale for the purchase is “convergence baby.” They wrote, wrote, “Verizon seemed complacent. No longer.” Indeed, Verizon CEO Hans Vestberg was challenged on the company’s second quarter 2024 earnings call by analysts who questioned whether Verizon had a big enough fiber footprint to compete in the future. The New Street analysts said Sampath’s comments today “marked a shift in rhetoric from: ‘convergence is important, but we can do it with FWA.”
The analysts at New Street wrote today, “We have been arguing for a couple of years that all the fiber assets would eventually be rolled up into the three big national carriers (AT&T, Verizon, T-Mobile). We always knew that if one carrier started the process, others would have to follow swiftly because there are three wireless carriers and only one fiber asset in every market with a fiber asset.”
Other potential fiber companies that the big three national carriers might be eyeing include Google Fiber, Windstream, Stealth Communications and TDS Telecom.
After its annual summer conference in August in Boulder, Colorado, the analysts at TD Cowen, led by Michael Elias, said there was a lot of conversation about the wireline-wireless “convergence” frenzy. “We believe convergence is a race to the bottom, but if one player is going in with a slight advantage (AT&T), the others must reluctantly follow,” wrote TD Cowen. In the mid-term they speculated that T-Mobile might look at fiber roll-ups with Ziply or Lumen (formerly or other regional players.
References:
https://www.wsj.com/business/deals/verizon-nearing-deal-for-frontier-communications-9e402bb4
https://www.fierce-network.com/broadband/verizon-rumored-buy-frontier-its-convergence-game
https://finance.yahoo.com/news/verizon-talks-buy-frontier-communications-180419091.html
https://videos.frontier.com/detail/videos/internet/video/6322692427112/why-fiber