This blog post is the fourth in a series covering:
- Network impacts and operator actions resulting from COVID-19
- The long-term impacts on networks as our work-from-home culture grows
- Operators’ financial health and need to focus on network resiliency
- The advantages of network sharing as operators adapt to these changes
- New techniques in network sharing to better address challenges
This blog has three parts. Today’s post – part two – covers networking sharing trends. The previous post examined 5G cost optimizers and the following post will look at competition and collaboration in the 5G era.
In part one of this blog, we discussed 5G cost optimizers. As these diverse technology innovations and network deployment strategies emerge and create cost acceleration and/or optimization opportunities, network partnership stands to play a role in making 5G economics viable. In this post, we will take a look at these trends.
To Share or Not to Share…That Is the Question
In the previous decade, the telecommunication industry witnessed a surge of network sharing agreements announcements. This was especially the case in Europe. In 2019, additional sharing announcements were made in Belgium, Germany, Italy, Latvia, Lithuania, Poland, Spain, and the UK by all the major industry players, including Deutsche Telekom, Orange, Telecom Italia, Telefonica, Vodafone, and Tele2. Some of these announcements were modifications to existing arrangements to include 5G or new sharing agreements that encompassed 5G from the start.
Network sharing trends are not new; however, increased costs associated with the planning of 5G networks and the fact that the majority of the traffic still happens on LTE have created a stronger impetus for collaboration among players in the industry.
A Brutal Catalyst
UK-based wireless advisory firm, Real Wireless, captured the trend well in their February 2020 blog post titled A problem shared… “Change – especially in the mobile industry – almost always requires some kind of brutal catalyst. The 2008 financial crash and its aftermath was an important driver for many MNOs to divest physical assets to improve balance sheets and reduce opex. It might well be that the pressure to deliver expensive 5G networks proves to be another factor that pushes the culture of sharing further into the mainstream.” Little did the advisory firm know that the pandemic would add gravitas to this “brutal catalyst” by sending the world into an economic crisis of a magnitude that has not been experienced before.
5G Chicken and Egg?
Despite the “brutal catalyst” looming on the horizon, over the past months, it has been established that the initial 5G chicken-and-egg conundrum – large upfront CapEx spending to buildout and stay ahead in the race for 5G juxtaposed with lagging 5G revenues for still-developing use cases and business models – can be cracked by employing Dynamic Spectrum Sharing (DSS).
This technology is low-hanging fruit and usually undertaken in conjunction with costly mmWave-based 5G deployments because of the required network density. DSS is a base station software solution that allows MNOs to operate LTE and 5G NR in the same spectrum at the same time by using the LTE network as an anchor. It is being employed by MNOs with mid-band frequency LTE networks to dynamically allocate part of that spectrum to run non-standalone (NSA) 5G. DSS translates into only modest throughput increases; however, one downside is that it reduces the net capacity of the shared frequency by 10-20% (as reported in the RCR Wireless webinar titled Dynamic spectrum sharing: Driving 5G to scale). The advantage is that DSS enables MNOs to announce some 5G deployments for marketing and competitive purposes and achieve enough coverage to incentivize customers to upgrade to 5G plans and devices.
T-Mobile USA (as well as MNOs with similar spectrum positions) has been understandably less gung ho about DSS because it licensed $8B worth of 600MHz spectrum in the 2017 incentive auction (and recently leased even more of the same spectrum) and just vacated the 2.5GHz spectrum it acquired from Sprint. These frequencies are part of T-Mobile’s "layer cake" 5G deployment approach. T-Mobile has indicated it will eventually employ DSS, but it is in no hurry.
Unfortunately, MNOs will not be able to leverage DSS on an LTE anchor network to bring about many of the unique networks features that enable the more compelling 5G/Industry 4.0 use cases: end-to-end network slicing, ultra-low latency, and massive IoT. For these features, standalone (SA) 5G with a dedicated 5G core network will be required. MNOs will need to invest heavily to build the full, densified 5G network and create solutions that enable enterprises to make these use cases a reality. As BCG pointed out “for telcos, this means that many 5G-enabled business models—particularly in the B2B space—are some years out. Yet most operators don’t have the luxury of waiting until all the technological elements are ready. The reason goes beyond the usual worry about what the competition is doing.” With 5G revenue models and non-handset user equipment still to be developed and an uncertain 5G ROI, this challenge might require some MNOs to consider network sharing to improve the economic equation.
In the next post we will delve into the opportunities and challenges of competition and collaboration in the 5G era.