November 2021 - Dell'Oro Group

The concept of utilizing private cellular networks—also known as non-public networks (NPNs)—for the sole use of a private entity, such as an enterprise or government, is far from new. In fact, the industry has gone through various private enterprise hype cycles over the past decade. And while there are already thousands of commercial private networks in service across the globe, it would be a stretch to suggest the commercial private 5G RAN market has surprised on the upside from a revenue perspective. With activity on the rise, the time is right to review private wireless definitions, current market status, and progress towards the forecast.

What is Private Wireless?

One of the challenges with the private wireless concept is that it is not a specific technology but rather more of a broad term encompassing a wide range of technologies. Marketing departments will have some wiggle room, as the meaning of private wireless varies significantly across the ecosystem.

Some Wi-Fi suppliers, for example, believe they provide private wireless connectivity to enterprises. Smaller radio access network (RAN) suppliers without macro footprints typically associate private wireless with dedicated standalone connectivity for enterprises, while some of the more established macros RAN suppliers envision private wireless as encompassing a broader set of technologies, including both macro and small cell networks.

Suppliers focused on mission-critical and public safety networks see private LTE and NR combined with a new spectrum as an opportunity to upgrade existing private narrowband communications equipment. With the number of LoRa end nodes surpassing 0.2 B, LoRa base station suppliers believe they are dominating the private wireless IoT market.

The operators are also positioning the concept differently, with some focusing on the benefits with broader coverage, while others are capitalizing on some of the new local concepts.

While definitions or interpretations vary widely on the part of both suppliers and operators, there appears to be a greater consensus among customers.

For end-users, private wireless typically means consistent, reliable, and secure connectivity, not accessible by the public, to foster efficiency improvements. For industrial sites, private wireless typically means low latency and high reliability. It is less about the underlying technology, spectrum, or business model and more about solving the connectivity challenge. In other words, end-users don’t care what is under the hood.

From a Dell’Oro perspective, we consider private wireless as nearly synonymous with 3GPP’s vision for NPNs. According to 3GPP, NPNs are intended for the sole use of a private entity, such as an enterprise. NPNs can be deployed in a variety of configurations, utilizing both virtual and physical elements located either close to or far away from the site. NPNs might be offered as a network slice of a Public Land Mobile Network (PLMN), be hosted by a PLMN, or be deployed as completely standalone networks.

From an end-user perspective, private wireless is also a broader term, generally including not just the RAN but also transport, mobile core network (MCN), Multi-Access Edge Computing (MEC), and corresponding services.

Private Wireless RAN and Core Configurations

There is no one-size-fits-all when it comes to private wireless. We are likely looking at hundreds of deployment options available when we consider all the possible RAN, Core, and MEC technology, architectures, business, and spectrum models.

At a high level, there are two main private wireless deployment configurations, Shared (between public and private) and Not Shared:

The shared configuration, also known as Public Network Integrated-NPN (PNI-NPN), shares the resources between the private and public networks.
Not Shared, also known as Standalone NPN (SNPN), reflects dedicated on-premises RAN and core resources. No network functions are shared with the Public Land Mobile Network (PLMN).

Market Status

Preliminary 3Q21 estimates suggest the high-level trends remain unchanged with MBB and FWA dominating the 5G capex while private RAN revenues remain small —leading RAN vendors are reporting that private 5G revenues are still negligible relative to the overall public and private 5G RAN market.

Meanwhile, private wireless activity using both macro and local base stations is rising:

Huawei estimates there are now around 10 K 5G B2B projects globally and the supplier is engaged in thousands of trials focusing on various 5G private use cases.
Ericsson is currently involved in hundreds of private wireless customer engagements, including pilots with time-critical use cases.
Even though Nokia’s enterprise business declined year-over-year in 3Q21, Nokia’s private wireless segment continued to gain momentum in the quarter–Nokia now has 380+ private wireless customers.
ZTE has developed more than 500 cooperative partners in 15 industries, including industrial engineering, transportation, and energy. They have jointly explored 86 innovative 5G application scenarios and successfully carried out more than 60 demonstration projects worldwide supporting multiple 5G IoT use cases.
Federated Wireless, one of the leading CBRS SAS providers, is working on hundreds of CBRS-based private wireless trials in multiple vertical domains, including warehouse logistics, agriculture, distance learning, and retail applications.

Market Opportunity and Forecast

One of the more compelling aspects with private wireless is that we are talking about new revenue streams, incremental to the existing telco capex. More importantly, the TAM is large, approaching $10–20 B when we include Non-Industrial, Industrial, and Public Safety driven applications.

At the same time, it is important to separate the TAM from the forecast. Here at the Dell’Oro Group, we continue to believe that it will take some time for enterprises to fully conceptualize the value of 5G relative to Wi-Fi. And as much as we want 5G to be as easy to deploy and manage as Wi-Fi, the reality is that we are not yet there.

Still, the uptick in the activity adds confidence the industry is moving in the right direction. And although LTE is dominating the private wireless market today, private 5G NR revenues remain on track to surpass $1 B by 2025.

To learn more about Dell’Oro Group Private Wireless advanced market research, please click here for more information.

The Nvidia GTC Fall 2021 virtual event I attended last week highlighted some exciting developments in the field of AI and machine learning, most notably, in new applications for the metaverse. A metaverse is a digital universe created by the convergence of the real world and a virtual world abstracted from virtual reality, augmented reality, and other 3D visual projections.

Several leading Cloud service providers recently laid out their visions of the metaverse. Facebook, which changed its name to Meta to align its focus on the metaverse, envisions people working, traveling, and socializing in virtual worlds. Microsoft already offers holograms and mixed-reality on its Microsoft Mesh platform and announced plans to bring holograms and virtual avatars to Microsoft Teams next year. Tencent recently shared its metaverse plan to leverage its strengths in multiplayer gaming on its social media platform.

In order to recreate an accurate virtual representation of the real world, massive amounts of AI training data would need to be acquired, captured, and processed. This would stretch the limits of the compute infrastructure. During GTC, Nvidia highlighted various solutions in three areas that could help pave the way for the proliferation of the metaverse in the near future:

Compute Architecture: During the Q&A session, I asked Nvidia CEO Jensen Huang how the data center would need to evolve to meet the needs of the metaverse. Jensen emphasized that computer vision and graphics and physics simulation would need to converge in a coherent architecture and be scaled out to millions of people. In a sense, this would be a new type of computer, a fusion of various disciplines with the data center as the new unit of computing. In my view, such an architecture would be composed of a large cluster of accelerated servers with multiple GPUs within a network of tightly coupled, general-purpose servers. The servers would run applications and store massive amounts of data. Memory coherent interfaces, such as CXL, NVLink, or their future iterations, offered on x86- and ARM-based platforms, would enable memory sharing across racks and pods. These interfaces would also improve connectivity between CPUs and GPUs, reducing system bottlenecks.
Network Architecture: As the unit of computing continues to scale, new network architectures will need to be developed. During GTC, Nvidia introduced Quantum-2, a networking solution composed of a 400 Gbps InfiniBand and a Bluefield-3 DPU (data processing unit) Smart NIC. This combination will enable high-throughput, low-latency networking in a dense and tightly coupled cluster scaling up to one million nodes needed for metaverse applications. 400 Gbps is the fastest server access speed available today. It could double to 800 Gbps in several years. The ARM processor in the Bluefield DPU could directly access the network interface, bypassing the CPU and benefiting time-sensitive AI workloads. Furthermore, we can expect that these scaled-out computing clusters would be shared across multiple users. With a Smart NIC, such as the Bluefield DPU, layer isolation could be provided among users, thereby enhancing security.
Omniverse: The compute and network infrastructure could only be effectively utilized with a solid software development platform and ecosystem in place. Nvidia’s Omniverse provides the platform to enable developers and enterprises to create and connect virtual worlds for various use cases. During GTC, Jensen described how the Omniverse could be applied to build a digital twin in an automotive factory with the manufacturing process simulated and optimized by AI. This twin would later serve as the blueprint for the physical construct. The range of potential applications ranged from education to healthcare, retail, and beyond.

We are still in the initial developmental stages of the metaverse; the technology build-blocks and ecosystem are still coming together. Furthermore, as we have seen recently with certain social media platforms and the gaming industry, new regulations could emerge to reset the boundaries between the real and virtual worlds. Nevertheless, I believe that the metaverse has the potential to unlock new use cases for both consumers and enterprises and drive investments in data center infrastructure in the Cloud and Enterprise. To access the full Data Center Capex report, please contact us at dgsales@delloro.com.

Last week’s 2021 OCP (Open Compute Project) Global Summit marked its tenth anniversary. Fittingly, the vendor and partnership announcements were significant.

Meta (formerly known as Facebook) once again dominated the show’s headlines with product, architecture, and partnership announcements that will have a far-reaching impact on switch vendors and component suppliers. As the fourth-largest cloud service provider (SP), Meta accounts for a significant portion of total network and IT spend. Thus, the supplier ecosystem always pays close attention to upcoming changes in Meta’s data center architecture or procurement strategy.

Meta continues co-development efforts with Arista with the minipack 2 chassis design

Historically, Meta has mostly used white-box vendors in its Top of Rack (ToR) applications, running Meta’s home-grown Network Operating System (NOS) called the FBOSS, whereas in the leaf, spine, and data center Interconnect (DCI) layers, this cloud SP has mostly deployed Arista’s switches with Arista’ EOS. There has been, however, a recent concern that this relationship is in decline, as Meta’s spending with Arista has been weak in recent quarters. Some thought that white-box suppliers are muscling in on Arista’s share. However, based on multiple industry checks, we, at Dell’Oro Group, thought the softness in Meta’s contribution to Arista’s revenue was due to an interim pause in Meta’s data center capex spend.

Arista is expected to ship its recently announced 7388X5 switch to Meta in 2H21. This chassis is compliant with the minipack2 design and will support both Meta’s FBOSS and Arista’s EOS. We expect that Meta will run mostly the latter.

Meta partners with Cisco on Wedge400C for Top of Rack applications

In December 2019, Cisco announced its entry into the routing and switching merchant silicon market by allowing its latest Silicon One chips to be consumed both internally, in Cisco’s systems like Cisco 8000, and externally by customers who want to use the chip to build their own systems. The goal of this development is to help win a new footprint at the major cloud SPs, where Cisco has been losing share to white-box switch vendors. For some time, Cisco has alluded to its strong, early traction at the hyperscalers with its Silicon One chips. Yet this was the first major public announcement highlighting the new switch chip footprint at one of the top-four Cloud SPs—Meta.

Silicon diversity at large Cloud SPs networks has been a theme over the past few years, fueled by the need to put pressure on Broadcom, which has dominated the merchant silicon space to date. The increased number of viable merchant silicon suppliers—such as Cisco and Marvell/Innovium—along with industry-wide supply constraints—have further accelerated this trend.

The new Wedge400C switch is expected to be deployed in the ToR layer at Meta’s data center network, using Cisco’s Silicon One chips inside a white-box switch supplied mostly by Celestica and running Meta’s FBOSS.

How big is this opportunity for Cisco and what does it mean?

Based on our estimates as well as industry checks, we estimate the size of this opportunity will represent only less than $50 M in 2022. This move, however, will be very strategic for the firm, as we expect Cisco to penetrate other data center network tiers (leaf, spine, and DCI), where we anticipate expansion will accelerate when Meta starts to adopt some form of co-packaged optics. When this occurs, it will be crucial to dual-source network chips as well as optics. Optics represents a much greater opportunity for Cisco because it accounts for more than half of the networking spend at 200 Gbps speeds and higher.

For more details, insights on cloud service providers’ data center network design, and the list of suppliers, please contact us at dgsales@delloro.com

According to many operators around the world with cable, DSL, and fibre broadband networks, upstream peak traffic growth throughout 2020 increased more than 50 percent, while downstream peak traffic growth increased 30 percent… Although the world is gradually returning to normal, with teleworkers moving slowly back into their offices, there is simply no turning back now for broadband subscribers who either upgraded or switched to an FTTH service.

Huawei recently held its annual MBBF Forum. Although the capacity and revenue-related challenges are typically part of the main agenda, energy efficiency and green energy were also front and center at this year’s event. Below we will share five RAN related observations including

1) Healthy customer participation

2) Connectivity is a profitable business

3) Plenty of room left with the sub 6 GHz spectrum

4) FWA is accelerating

5) Private 5G wireless revenues remain small but activity is on the rise

Healthy Customer Participation

The MBBF is a customer-driven event. With operators in countries that comprise nearly two-thirds of global GDP reassessing their Huawei RAN reliance, one could assume that operator participation would be significantly impacted. Though we are not keeping track of all the carriers that speak on a yearly basis at this event, our first impression was that operator participation remained healthy, including speakers from China Telecom, China Unicom, Dialog, DNA, Du, Entel, Elisa, Etisalat, Globe Telecom, Hellenic Telecommunications, Orange, Sunrise, Vodafone, Zain, and Zong.

Connectivity is Not Boring

While there is no shortage of operators that have tried to move beyond connectivity into other areas to improve investor returns, operators are also slowly coming to terms with the fact that connectivity is a profitable business with upside potential.

More importantly, this new post-pandemic normal combined with the improved revenue growth trends during 1H21 and the fact that the ability to differentiate these connectivity offerings will only improve as the requirements evolve and connectivity spreads to verticals form the basis for the renewed connectivity enthusiasm. Or to quote Etisalat – it is not always about beyond connectivity, maybe it is time to focus more on smart connectivity.

It is worth noting that the projected revenue growth between 2020 and 2021 is partly reflecting lighter comparisons and changing behaviors as a result of the response to the pandemic. Some of the behavioral changes will be short-lived, however, the uncertainty surrounding non-transitory behavioral adjustments is contributing to the renewed optimism.

The Importance of the Sub-6 GHz Spectrum

Data traffic continues to grow at an unabated pace. Huawei now estimates that the average user will consume 600 GB per month by 2030, implying total monthly mobile data consumption will approach 5 ZB per month. Regardless of whether we are talking 1 or 5 ZBs, the spectrum is a scarce resource. We simply need to optimize the spectral efficiencies with all the various 5G deployments to dimension the network for another potential 20x to 100x of growth between 2020 and 2030. And ideally, this would be done without growing the carbon footprint.

Balancing investments and the experience for all of the various 5G networks while keeping in mind that marketing is typically done on speed but the network is dimensioned for capacity will remain a challenge for the operators. The industry appears to be fairly aligned when it comes to selecting the antenna & transceiver configurations for upper mid-band Massive MIMO and sub-1 GHz deployments, however, there is still some uncertainty with the 2 GHz NR roadmap.

Huawei envisions the 8T8R radios can play an important role for the 2 GHz FDD bands. With gains of 2.3-2.8x relative to the 2T2R LTE baseline, 8T8R systems will make up some of the losses with DSS and provide a solid base layer foundation.

The challenges with FDD-based Massive MIMO in the 2 GHz spectrum are well known. In addition to the relative efficiency gap between FDD and TDD as a result of leveraging channel reciprocity in TDD systems, FDD-based solutions typically also operate in a lower spectrum band, increasing the physical size of the antennas. Still, Huawei continued to signal some optimism about the FDD Massive MIMO opportunity. And perhaps more importantly, this is not just a vision anymore – Huawei has already deployed more than 10 K FDD based Massive MIMO AAUs. Granted shipments remain small relative to TDD Massive MIMO. Still, the ascent is steeper than expected.

Huawei did not spend a lot of time talking about the 6 GHz opportunity during this event, though it was discussed extensively at the HAS 2021 event. Some of the European operators did reiterate that the 6 GHz (upper band) will play an important part with future 5G deployments, validating the message we have communicated for some time, namely that 6 GHz Massive MIMO deployments could result in another major 5G deployment cycle.

Not surprisingly, external challenges are not impacting Huawei’s ability to innovate and introduce new solutions/enhancements to its sub 6 GHz portfolio. This is not the right setting to list all of the enhancements but a few stood out. During the event, Huawei announced enhancements to its 8T8R portfolio leveraging its new “Hertz” antenna platform, resulting in improved capacity, simplified form factors, and high energy efficiency.

Huawei’s Massive MIMO MetaAAU expands the number of antenna arrays from 192 to 384, resulting in roughly 3 dB of additional coverage with the 64T64R configuration.

Also, Huawei announced a 32T32R Massive MIMO AAU (240W) weighing only 10 kg, or roughly 2 kg less than Ericsson’s recently announced 12 kg Massive MIMO radio.

FWA is Accelerating

With around ~500 operators globally offering LTE or 5G NR FWA and around 65 of these using 5G (GSMA), FWA was an important topic at the event. Three points that stood out was related to prices, the 5G ramp, and the long-term roadmap.

First, it was somewhat surprising to see how quickly 5G CPE prices are declining – Huawei expects 5G CPEs will approach the sub $150 range by 2022 (Tozed Kangwei is targeting $100 5G CPEs in 2022).

Next, 5G FWA connections are firming up. Huawei estimates the 5G FWA installed base is around 2 M, excluding North America, reflecting healthy activity in the MEA region.

With FWA adoption improving, it is important to keep in mind that the technology will make sense in some cases but it still just one piece of the larger broadband toolkit. Operators are still trying to figure out how to best balance the capacity requirements and the overall profitability over the near-term and long-term for the various FWA segments including the underserved, relatively served, and well-served markets.

One of the key questions with FWA is not only about the near-term potential, but also the role the technology will play overtime as fiber footprints improve.

Dialog has relied heavily on FWA technologies to improve broadband penetration across Sri Lanka. But what was really interesting was that this operator see FWA as a stepping stone and an important part of the planning for more accurate FTTX deployments – 5G FWA will help them identify broadband sites and over time improve the utilization of FTTx.

For more info about the FWA CPE LTE, 5G mmWave, and 5G Sub-6GHz markets, please see our Broadband Access Report. And for more information about how FWA is boosting the RAN market, please click here to read the article.

Private Wireless Activity is Improving

The broader trends remain fairly unchanged. MBB/FWA continues to drive the lion’s share of the overall 5G capex while private 5G investments remain small and the more upbeat near-term and long-term projections still hold, underpinned by five core drivers: (1) more countries are exploring how to allocate spectrum for private applications, (2) advances in technology are improving the business case by driving down the price, introducing more flexibility, as well as simplifying the way that private wireless is installed, operated, and managed, (3) enterprise awareness about the benefits of using cellular is improving, (4) public cloud providers are more actively seeking to partner with communication service providers (CSPs), and (5) new use cases are emerging that require cellular quality of service (QoS).

And although private 5G investments remain negligible, Huawei’s MBBF event bolstered the narrative that the industry is moving in the right direction. The IoT ecosystem is improving, operators are working with partners to develop 5G use cases, enterprises are interested to explore how 5G could help them, and private 5G activity is on the rise using both dedicated base stations and slices on the public mobile network – Huawei estimates there are now around 10k 5G B2B projects around the world, with roughly half of these located in China.

Vodafone, one of the leading IoT connectivity providers with around ~130 M connections, spent a good amount of time discussing its private 5G/IoT progress across a broad set of use cases including power networks, refineries, vehicle production, and real time communication between vehicles, to name a few.

In short, there is no shortage of opportunities in the mobile infrastructure segment. And as always, the event was a good reminder that the RAN field remains competitive. Open RAN provides an improved entry point. At the same time, this architecture does not change the underlying supply and demand challenges and the asymmetry between data traffic and revenue growth. At the end of the day, operators need to optimize TCO/energy consumption/spectral efficiency and work with suppliers that can help them tackle new opportunities while also supporting existing legacy networks.