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.

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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:

1. The shared configuration, also known as Public Network Integrated-NPN (PNI-NPN), shares the resources between the private and public networks.
2. 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.

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

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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.

We’ve just wrapped up the 1H21 reporting period for Dell’Oro Group’s enterprise network equipment programs, which include campus switches, enterprise data center switches, enterprise routers, network security, and Wireless LAN. Enterprises include businesses of all sizes as well as government, education, and research entities. The equipment tracked in these programs can be used for wired or wireless data communication in private and secure networks.

 

1H21 Market Performance

The overall Enterprise Network Equipment market was up 10% year-over-year (Y/Y) in 1H21. The growth was linear across the first and second quarters (up 10% and 11% Y/Y, respectively). Furthermore, the overall Enterprise Network Equipment market was able to exceed its 2019 pre-pandemic revenue level for the first half of the year.

 

The 1H21 growth was broad-based across all segments. Campus switching contributed about 30% of the increase in spending in the first half, followed by Network Security and WLAN at about 25%, each. Even the physical appliances segment of the Network Security market was able to turn the corner and go back to growth in 1H21. This broad-based recovery is encouraging given that last year was characterized by a significant decline in spending on hardware products, specifically campus switches, data center switches, access routers, physical firewalls, and Wireless Access Points (APs). In the meantime, 2020 spending on software and subscription-based products: SD-WAN and virtual and SaaS security, and the licenses portion of the WLAN segment, increased.

We attribute the 1H21 recovery to the following:

• Improving macro-economic conditions and business confidence
• Strong government stimulus around the world
• Pent-up demand from verticals that have been hit hard by the pandemic such as the hospitality and retail sectors
• Network upgrade activities in preparation for the back-to-work event planned for the second half of the year.

Despite the robust revenue growth recorded in the market in 1H21, major vendors reported that revenue would have been even stronger if they had not experienced supply constraints. In other words, demand outpaced supply. Although the gap between supply and demand impacted the different sectors within enterprise networking, it appears that the issues were more acute on the higher volume WLAN APs, where unit shipments declined Y/Y and Q/Q for some US-based manufacturers during a seasonally strong quarter.

 

1H21 Vendor Landscape

The analysis contained in these reports suggests the ranking and share of the top 10 vendors remain relatively stable, with the top two vendors, Cisco and Huawei, comprising nearly 50% of the Enterprise Network Equipment market in 1H21. We would like to note, however, that Cisco lost some shares between 1H20 and 1H21, while Palo Alto Networks, H3C and Arista, gained one point of revenue share, each.

 

2021 Market Outlook

Even with the unusual uncertainty surrounding the economy, the supply chains, and the pandemic, the Dell’Oro analyst team remains optimistic about the second half – the overall enterprise network equipment market is projected to advance 5% to 10% for the full-year 2021. However, we are expecting a slowdown in the second half, compared to the first half as supply constraints seem to be worsening which may hinder market performance.

 

Dell’Oro Group Enterprise Network Equipment research programs consist of the following: Campus switches, Enterprise Data Center Switches, SD-WAN & Enterprise Routers, Network Security, and Wireless LAN.

We just wrapped up the 1H21 reporting period for all the Telecommunications Infrastructure programs covered at Dell’Oro Group, including Broadband Access, Microwave & Optical Transport, Mobile Core & Radio Access Network (RAN), SP Router & Switch. The data contained in these reports suggest that the positive trends that characterized the broader telecom equipment market extended into the second quarter, even if the pace of the growth slowed somewhat between the first and the second quarter.

Preliminary estimates suggest the overall telecom equipment market advanced 10% year-over-year (Y/Y) during 1H21 and 5% Y/Y in the quarter, down from 16% Y/Y in the first quarter. The growth in the first half was primarily driven by strong demand for both wireless and wireline equipment, lighter comparisons, and the weaker US Dollar (USD). Helping to explain the Y/Y growth deceleration between 1Q and 2Q is slower growth in China.

The analysis contained in these reports suggests the collective global share of the leading suppliers remained relatively stable between 2020 and 1H21, with the top seven vendors comprising around ~81% of the total market. Within the mix, we estimate Huawei and Nokia lost some ground between 2020 and 1H21 while Cisco, Ericson, Samsung, and ZTE recorded minor share gains over the same period.

Additional key takeaways from the 1H21 reporting period include:

• Following the Y/Y decline in 1Q20, our analysis suggests the overall telecom equipment market recorded a fifth consecutive quarter of growth in the second quarter.
• The improved market sentiment in the first half was relatively broad-based, underpinned by single-digit growth in SP Routers and double-digit advancements in Broadband Access, Microwave Transport, Mobile Core Networks, and RAN.
• Aggregate 2Q21 revenues were in line with expectations, however, within the programs both Broadband Access and Microwave Transport were surprised on the upside while Optical Transport and SP Routers came in below expectations.
• From a regional perspective, China underperformed in the quarter, impacting the demand for both wireless and wireline-related infrastructure.
• Ongoing efforts by the US government to curb the rise of Huawei are starting to show in the numbers outside of China, not just for RAN but in other areas as well.
• Though Huawei is not able to procure custom ASICs for its telecom products, the supplier is assuring the analyst community its current inventory levels is not a concern over the near term for its infrastructure business.
• The majority of the vendors have through proactive measures been able to navigate the ongoing supply chain shortages and minimize the infrastructure impact. At the same time, the supply constraints appear more pronounced with higher volume residential and enterprise products including CPE and WLAN endpoints.
• Even with the unusual uncertainty surrounding the economy, the supply chains, and the pandemic, the Dell’Oro analyst team remains optimistic about the second half – the overall telecom equipment market is projected to advance 5% to 10% for the full-year 2021, unchanged from last quarter.

 Dell’Oro Group telecommunication infrastructure research programs consist of the following: Broadband Access, Microwave Transmission & Mobile Backhaul, Mobile Core Networks, Mobile Radio Access Network, Optical Transport, and Service Provider (SP) Router & Switch.