Back in April, I wrote about the widening gap between the demand for new FTTH network buildouts and connections and the ability of equipment vendors to supply those network buildouts as well as the ability for network operators to find the necessary labor to complete those buildouts.

This discrepancy between supply and demand is in danger of increasing further based on pending and proposed funding and subsidization initiatives, which could total up to $16B in 2022, then gradually declining to $12B in 2025 as programs are phased out.

Adding more fuel to the fire has been the announcements in recent weeks by operators making strategic decisions to prioritize the expansion of their FTTH network buildouts to pass more homes in a shorter amount of time. In just the last three weeks, here is a quick summary of public announcements made by operators all planning to expand the reach of their fiber broadband services:

• AT&T announced that it was planning to more than double its fiber footprint to 30 million customer locations by the end of 2025 after it spun off its WarnerMedia unit in a combination with Discovery.
• Alaska’s GCI Communications announced that it will deliver 2Gig speeds to 77% of Alaskans in 2022 and that it will also provide 10Gig speeds in the next five years.
• TDS Telecom detailed plans to add more than 300k fiber locations by 2024, with 150k of those coming in 2021 alone
• Windstream revealed its plan to hire 1,000 new workers beginning in the fourth quarter of 2021 to support its five-year, $2B fiber expansion project, which would expand gigabit fiber services to 2 million locations by 2025.

These announcements follow others made in 2020, including Consolidated Communications detailing its plan to add 1.6 million new fiber passings in five years, with 300k of those being added in 2021.

Of course, these public announcements are a mere sampling of the substantial investments being made in FTTH network expansions throughout the United States both in 2021 and throughout the next five years. RDOF (Rural Digital Opportunity Fund), CARES (Coronavirus Aid Relief and Economic Security Act) and ARPA (American Rescue Plan Act) funds will go to further subsidize additional fiber projects in rural and underserved areas, as state legislatures prioritize the expansion of fiber broadband in the wake of the COVID-19 pandemic which highlighted the absolute for connectivity throughout their communities.

The concern for operators now suddenly ready to ditch their aging copper infrastructure and finally compete with cable operators who now hold a near-monopoly on fixed broadband subscribers is that supply chain and labor shortages will extend their fiber buildouts well beyond their announced target dates. Already, we are hearing anecdotally about the difficulty in hiring skilled workers in the fields of professional services and installation, as well as growing lead times for fiber, conduit, and ONTs. Also, equipment vendor backlogs are increasing at a rapid clip, as the gap between customer orders and finished goods they can ship for revenue widens.

The net result is that many of these fiber projects will take considerably longer to complete than the five-year deadlines the operators have set for themselves. Given some of the latest signals on inflation in the US, that might not be such a bad thing. Infrastructure projects such as these tend to ensure a sustained source of job creation over the course of multiple years, as opposed to a direct stimulus investment.

Even if project completion dates are pushed out due to supply chain and labor shortages, one possible outcome of this extensive and sustained fiber push is a similar switch to more fiber deployments by US cable operators. Though the larger operators have already signaled their intention to continue using HFC DOCSIS as their primary residential technology, with DOCSIS 4.0 as the next step that will get them to near-symmetric, multi-gigabit speeds, other smaller operators are moving more towards fiber. These operators talk about the fact that moving to a passive architecture in the outside plant and away from powered amplifiers helps them from an opex perspective.

DOCSIS 4.0 already represents a fork in the road, with operators having a choice between Extended Spectrum DOCSIS and Full-Duplex DOCSIS. But, if the competition from fiber providers ramps up faster than the availability of DOCSIS 4.0 equipment, there could be another fork in the road for multi-system operators (MSOs): A future based on DOCSIS or one on fiber. We have heard anecdotally that, where fiber providers have entered a broadband market previously dominated by a cable operator and have successfully stolen away a high percentage of broadband customers, the MSO has been forced to quickly do a node split to boost speeds. That will work in some systems and with certain subscriber bases, but it will fall short, especially when service is marketed as “True Fiber” and the other as just “Fiber-Like.”

Open RAN investments surged in the first quarter of 2021. Preliminary estimates suggest total Open RAN revenues – including O-RAN and OpenRAN compatible macro and small cells radios plus baseband hardware and software – increased around five-fold year-over-year. The uptake is uneven. In this blog, we will discuss four Open RAN related key takeaways with the 1Q21 quarter including 1) The Asia Pacific (APAC) region is driving the market, 2) Macro is dominating but small cell adoption is improving, 3) The Open RAN Massive MIMO landscape is evolving, and 4) Short-term outlook remains favorable.

The operators in the APAC region are largely behind the surge, underpinned by a fairly synchronized migration from proprietary RAN towards Open RAN in Japan. In addition to Rakuten, which now has some 50 K radios up and running, other Japanese operators are increasingly optimistic about O-RAN and the role open interfaces will play with more advanced radio deployments.

 

 

Not surprisingly, macro deployments are dominating the Open RAN revenue mix both globally and in APAC, reflecting the state of the overall RAN market and the current focus by operators deploying Open RAN. This is also consistent with our own projections and the recently released Open RAN Technical Priorities Summary by the larger European telcos, suggesting Macro RAN is the primary target for the operators.

At the same time, Open RAN small cell activity is on the rise. Helping to drive this acceleration is faster growth with millimeter wave (mmWave) deployments in Japan, with multiple operators now embracing the benefits of combining the higher spectrum with the sub 6 GHz bands.

The traditional top 5 RAN vendors (Huawei, Ericsson, Nokia, ZTE, and Samsung) are dominating the $10 B+ Massive MIMO RAN market, however, Open RAN proponents remain optimistic the recent uptick in O-RAN related announcements will eventually lead to an improved supplier landscape. Predicated on the assumption that the shift towards wider bandwidths will be a catalyst for 5G SA, the asynchronous availability of the upper mid-band spectrum offers a window of opportunity for new entrants.

In other words, even if the Massive MIMO market is relatively mature and highly concentrated, it is not too late for suppliers with weaker RAN shares to use O-RAN combined with SA to enter this segment. And the number of suppliers that want to seize on this opportunity to bolster growth is increasing with multiple smaller non-top 5 RAN suppliers – including Airspan, Fujitsu, Mavenir, and NEC – announcing the availability or upcoming GA of O-RAN Massive MIMO antenna systems. And with the silicon providers also ramping up investments to accelerate the shift towards advanced Open RAN radios, we do expect this non-top 5 supplier O-RAN Massive MIMO list to evolve over time.

Since more operators are suggesting performance parity with “traditional systems” is expected, new Massive MIMO entrants know what they need to deliver in terms of IBW, weight, size, TRX configurations, power consumption, and spectral efficiency. In other words, the bar is high and it will continue to rise. So no one is under the impression this will be a trivial task. But at the same time, the Open RAN community has received the message loud and clear – broader Open RAN adoption is to some degree hinging on the success of Massive MIMO.

With the strong showing in the first quarter, we are adjusting the short-term outlook upward and now project total Open RAN revenues to nearly double in 2021. And while we are not revising the long-term Massive MIMO Open RAN projections at this time, we will of course continue to monitor the situation closely to better understand how the growing ORAN ecosystem will impact the overall vendor dynamics.

For more information about the Open RAN and Virtualized RAN forecast and assumptions, please visit our Open RAN page or please email us at dgmedia@delloro.com or dgsales@delloro.com.

 

Huawei recently held its annual analyst event. Even though we were not able to attend in person, it was an informative event. Below we will discuss some of the RAN-related takeaways touching on 6 GHz and general FDD trends.

6 GHz

Current sub 6 GHz 5G NR deployments utilizing both the FDD bands and the upper mid-band will go a long way in addressing continued data traffic growth. At the same time, the upside is limited and will likely not be enough to meet the capacity demands of the next decade, and as a result, both suppliers and operators are assessing their capacity roadmaps. Operators have three basic tools at their disposal to manage traffic growth including leveraging more efficient technologies, deploying more cells, and using more spectrum. So in addition to increasing the reliance on small cells, operators will from a licensed spectrum perspective have three high-level options once the upper mid-band has been exhausted including maximizing efficiency with the FDD spectrum (using 8T8R and/or Massive MIMO), deploying millimeter wave (mmWave) systems, and using the upcoming 6 GHz spectrum.

Given the lack of tools in the toolkit and the overlap on the demand side, operators and regulators typically converge towards similar approaches when it comes to balancing ROI and spectral efficiency. It is not a coincidence that operators increasingly rely on 4T4R radios to build the LTE base layer with FDD networks or that 64T64R became the de-facto configuration for operators with larger swaths of upper mid-band assets.

Yet for some reason, there is not much consensus when it comes to optimizing the use of the 6 GHz spectrum (5.925-7.125 GHz). China appears to favor licensed 5G for the entire 6 GHz spectrum, while the FCC and MSIT have made the decision to make the entire 1200 MHz of spectrum in the 6 GHz available for unlicensed use. Other countries/regions and the GSMA are considering a more balanced approach between the unlicensed and licensed spectrum, allocating possibly up to half or 600 MHz for licensed use. According to a GSMA survey, 90% of MNO’s responses placed the 6425-7125 MHz as a high priority for IMT.

To be fair, it is not trivial. On the one hand, Wi-Fi is a major success story and it remains the de-facto indoor connectivity technology for enterprises and consumers. And the unlicensed spectrum is increasingly congested. Meanwhile, mobile data traffic continues to grow at an unabated pace and there are few signs that traffic growth will slow enough to obviate the need for a more valuable spectrum.

Huawei is a strong proponent of using a more balanced approach with the 6 GHz spectrum. And during HAS2021, Huawei shared some preliminary and rather insightful findings from early tests that could prove to be extremely valuable for other countries that have not finalized their 6 GHz plans.

Huawei estimates that the 6 GHz spectrum could deliver 10x of incremental capacity relative to the C-band with similar coverage using higher-order MIMO and more antenna arrays. In other words, preliminary findings suggest technology advancements can compensate for the 9 dB delta between 3.5 and 6 GHz and ultimately enable operators to reuse a significant portion of the existing macro grid without compromising coverage.

And it is more than a PowerPoint. Initial tests using 5 macro sites in Hangzhou support the premise that the 6 GHz spectrum can achieve similar coverage as the C-band. Huawei has been working on prototypes and 6 GHz trials will be conducted in China during 1H21 to verify coverage, capacity, and coexistence interference. Field tests for the 6425-7125 MHz spectrum will also be conducted in Russia during 2H21.

These developments could turn out to be a game-changer not just for the operators but also for the suppliers because it would create another major macro 5G wave with potentially millions of advanced Massive MIMO systems deployed after the 64T64R and 32T32R upper mid-band rollout phase.

The initial 6 GHz Massive MIMO prototype is fairly large now, however, Huawei remains optimistic that the form factor will improve. Keeping in mind that Huawei and Ericsson now offer TDD Massive MIMO products in the 20 kg range, down from ~40 kg in just a few years, we don’t have too many reasons to doubt this assumption. Commercial products and deployments could be a reality by the 2023-2025 time frame, aligned with the WRC-23 6 GHz IMT identification.

In other words, the technology progress remains on track. Unfortunately, there is still some risk that the decisions made by some countries to allocate all of the 6 GHz spectrum for unlicensed use could impact the momentum and the ecosystem. More countries will finalize their 6 GHz plans in 2021. Hopefully, these preliminary findings will help regulators make data-driven decisions and ultimately optimize the use of the 6 GHz spectrum for both outdoor and indoor environments.

FDD Improvements

In addition to the potential upside with the upper mid-band and the 6 GHz spectrum, operators will continue to improve the efficiency with the FDD spectrum. Upgrading the sub 1 GHz sites to 4T4R will help to improve the experience by ~80%. Furthermore, Huawei estimates operators can squeeze another ~1.7x of capacity by upgrading the 2 GHz base layer from 4T4R to 8T8R. This combined with FDD Massive MIMO (~3x to 5x relative to 2T2R) will provide the carriers with a solid near-term and long-term FDD capacity roadmap for the sub 1 GHz and 2 GHz spectrum.

Huawei’s FDD portfolio and roadmap align well with its vision for this spectrum. It is also consistent with our projections. We still believe it is unlikely that FDD Massive MIMO will become the base layer and instead anticipate these will be deployed in hotspots along with an upgraded base layer. Though of course, it is worth reminding everyone that the consensus three to four years ago was that TDD Massive MIMO would only make sense in hotspots.

In short, some of the keys RAN takeaways from Huawei’s 2021 HAS event are consistent with the message that we have communicated for some time, namely that the overall 5G RAN capex cycle will be longer and steeper than the 4G cycle, underpinned by multiple asynchronous 5G waves including: (1) sub 1 GHz NR; (2) upper mid-band Massive MIMO; (3) 2 GHz 4T4R; (4) 8T8R and FDD Massive MIMO; (5) 6 GHz NR; and (6) mmWave.

FTTH Deployments Could be Slowed By Supply Chain Issues

“If you build it, they will come” has been the guiding mantra for network operators for decades now, especially when it comes to their broadband access networks, which have seen accelerated subscriber growth over the last year and consistently contribute margins ranging from 55-70%.

 

As I recently pointed out in another blog, the global trend for building out new broadband networks is to do so with fiber, as the importance of premium residential broadband connections was made abundantly clear during the lockdowns of the COVID-19 pandemic.

The emphasis on fiber broadband shows no signs of slowing

Building networks and doing so with fiber has made the path clearer for operators and regulators alike. Twin national goals of bridging the digital divide and getting all citizens connected along with the desire to provide gigabit speeds to everyone have merged and are driving a renewed cycle of subsidization and investment in broadband access networks and equipment, especially in the US.

In the US, the aggregate amount of loans, grants, and other subsidies that has already been approved to connect rural, unserved and underserved communities will nearly double current subsidy levels to over $8B per year. These funds include the $9.23B approved through phase 1 of the RDOF (Rural Digital Opportunity Fund) auction, $125M through the $2.2T CARES (Coronavirus Aid Relief and Economic Security Act) legislation passed in March, 2020, a potential $7.5B through the CAA (Consolidated Appropriations Act) passed in December 2020, as well as additional funds eligible for broadband projects through the ARPA (American Rescue Plan Act) passed in March 2021.

 

Government subsidies to expand fiber connectivity, particularly in the US, will reach historical heights soon

These funds don’t even include proposed legislation which includes $15B in the American Broadband Buildout Act, $94B in the AAIA (Accessible, Affordable Internet for All Act), $109B in the LIFT (Leading Infrastructure for Tomorrow’s America Act), and $100B in the American Jobs Plan.

Combined, the amount of money available via legislation that has already been passed along with proposed legislation could push total subsidies available for broadband network buildouts to over $16B in 2022, declining gradually to $12B in 2025 as programs are phased out. That represents a 4x increase in the amount of money intended to bridge the digital divide and connect millions of American homes with reliable broadband Internet.

Of course, these projects aren’t going to be completed overnight. In fact, recent history with the American Recovery and Reinvestment Act of 2009, which earmarked $7.2B for broadband expansion and improvement, as well as the Connect America Fund (CAF and CAF II), shows that these projects, from approval to funding to deployment can take years. Many of the programs (RDOF is one) allocate money over the course of 10 years.

We can debate the vehicles for funding the rollout and expansion of broadband networks, but we can’t debate the merits. There is no question that there is a significant percentage of the US household population that remains unserved (roughly 22-25M homes) along with a millions more homes that are classified as underserved. Combined, those households could range from 35M-40M. If we assume that operators add roughly 2.7-3.2M new broadband subscribers annually, then the 10-year timeline to connect everyone and provide respectable broadband speeds and service seems particularly aggressive.

 

Though there is clear demand, shortages in components and labor will delay the full achievement of connectivity goals

Despite all the funding options and demand from network operators, equipment suppliers, and subscribers alike, the bigger problem in the short-term isn’t one of demand, but of supply. Instead of “if you build it, they will come” supply chain and labor market constraints might prevent operators from building it in the first place.

Shortages in semiconductors and other vital components, including capacitors and flash memory, have been well-documented, impacting not only networking equipment, but also consumer electronics, automobiles, and other industrial equipment. Meanwhile, demand for fiber cables, conduit, and other ODN infrastructure has pushed lead times for these components to anywhere from 12-18 months. Lead times for OLTs and other active equipment used in FTTH deployments have remained fairly stable despite the disruptions, but have been sneaking up recently as demand has increased, particularly from larger operators who have major strategic initiatives in place to accelerate their home passings.

 

Delays will open the doors for wider usage of alternative technologies, including fixed wireless and satellite

Delays and higher costs to ship finished goods from overseas could also slow FTTH network rollouts, though the bigger challenge there will be managing the higher costs to ship goods.

Finally, the biggest impediment to getting fiber networks rolled out within a realistic time frame is likely to be a lack of trained workers in the fields of professional services and installation. Nearly all job functions are likely to be short-handed, given the potential demand coming from subsidized projects: Network engineers, surveyors, fiber technicians, all the way to individuals handling permitting and right of way applications both for operators and individual municipalities. Many of these functions require specialized training through community colleges and trade schools. In other words, the workers can’t be added fast enough to be able to match the demand expected from ongoing and potential fiber projects.

The net result is that fiber broadband deployments in rural and underserved communities are likely going to take considerably longer to complete, potentially pushing the goal of connectivity out past 10 years. Potential—and arguably necessary—changes to how the FCC and individual states map and classify broadband services will also slow down the process by likely increasing the total number of homes classified as unserved or underserved. For example, individual states have completed their own mapping exercises and found unserved and underserved totals being 2x-3x what the FCC has reported via its own maps.

These exercises lead us to our conclusion that total unserved and underserved homes in the US are likely closer to 40M. Even this number could be conservative. But until the FCC or states conduct a revised process of mapping, the totals will likely be less than that 40M estimate.

In upcoming blogs, I will explore in more detail the implications not only for fiber broadband deployments and equipment providers, but also for fixed wireless providers and emerging satellite broadband players, such as Starlink. With so much money on the table, along with a commitment across the board to finally bridge the digital divide, driven largely by the recent pandemic, I expect there to be an ongoing push-and-pull between legislators, network operators, and the industry lobbying groups representing them (e.g. WISPA, Fiber Broadband Association) to either expedite rollouts in the name of achieving goals faster or slowing rollouts to make sure they are done right the first time. There has already been considerable debate regarding the inclusion of fixed wireless solutions and whether they will truly be able to provide the gigabit speeds and services legislators are requesting or whether those speeds take a backseat to the primary goal of getting everyone connected.

New technology improves E-Band reach and performance

After attending Huawei’s 2021 virtual analyst summit, I started to wonder whether my forecast for E-band shipments was wrong.

Over the past decade, E-band has been steadily growing out of its early-era use as a technology for simple Ethernet bridges on a campus into the wider and more sophisticated world of mobile backhaul. In our market study at Dell’Oro Group, we estimate that E-band radio shipments that took place over a decade ago were used solely for enterprise campus interconnects, but now, about 80 percent of new E-band radios are purchased with the intent to use it for mobile backhaul. Of course, this change was not a coincidence; it was very much driven by the rising level of mobile broadband speeds enabled with 4G mobile radios that increased the requirements for mobile backhaul capacity.

Furthermore, because of the increasing capacity requirements, operators needed a better solution for when fiber was not available. So for wireless backhaul, the question was whether to continue using traditional microwave bands that are designed for up to 500 Mbps of link capacity or future proof with E-band designed for 20 Gbps links (using XPIC). In many cases, the decision seemed to favor future-proofing with E-band, especially in regions where spectrum license fees for E-band was low. Looking back five years, while the shipment volume of traditional microwave systems declined at an average annual rate of 5 percent, the shipment volume of E-band radios increased at an annual rate of 24 percent (Figure 1).

I do not think this trend will stop here. Rather, I think it will only grow as 5G mobile radio installations continue and backhaul capacity requirements increase further. There have already been very successful deployments of E-band radios for 5G backhaul in places like Saudi Arabia by major operators Saudi Telecom Company and Zain, strengthening the applicability of E-band technology for 5G backhaul. Hence in the January 2021 Microwave Transmission Five-Year forecast report, we projected E-Band radio shipments to grow at a 27 percent compounded annual growth rate (CAGR) and comprise nearly 30 percent of all microwave point-to-point radio shipments by 2025 (Figure 2). But can it be higher?

In developing the five-year forecast, I already considered that 5G will require a much higher backhaul capacity that will favor a single E-band radio over multiple bands of traditional microwave links, especially when considering the cost of equipment, spectrum license fees, and operational expenses such as tower lease and power. I even, to a degree, accounted for smaller antennas that will benefit its use in urban areas, empowering operators to install E-band radios in a smaller form factor that can be closer to street level thereby easing the use of wireless backhaul for cell site densification initiatives. However, I always considered E-Band to be limited by a couple of its technical features (restrictions): span lengths below 2 kilometers and higher rain fade. So, what happens if these two features that are inherent in E-band radios can be overcome?

“How many more cell sites can use E-band radios if span lengths are increased to 5 kilometers or if E-band link availability can be increased in geographic areas with high rain fall?”

Those were some of the questions floating through my mind as Huawei presented a longer reach E-band solution that included a higher power E-band radio and larger active antenna with intelligent beam tracking (IBT) technology to ensure site-to-site alignment. (Note: one issue with a very small beam angle and longer span is that the microwave radio alignment can be easily disturbed by high winds and temperature if the microwave radio is not mounted on a very stable structure. Hence, active alignment widens the mounting options and number of deployable sites). Also, another dimension that adds to the greater usability of E-band is that with better radio performance, the link availability can be increased in short spans. Therefore, E-Band radios that were often not used when link spans exceeded 2 kilometers or when locations had historically high rain fall can now be considered.

While I have always had a positive outlook for E-band, claiming it to be the highest growth segment in the point-to-point Microwave Transmission market for many years to come, it is nearly impossible for me to not increase my optimism for this market when we consider the recent technology innovations that reinforce the future of E-band and further expand its market applicability:

• Multiband systems that carry both traditional bands and millimeter bands over a single antenna, reducing footprint and increasing performance
• Higher powered radios to extend reach and improve link availability
• New small form factor antennas for urban densification
• Larger antennas for use in longer reach applications
• Active antennas for alignment to improve performance

In summary, E-band systems have come a long way from only providing short building-to-building links on a campus as the technology matured. As such, E-band has already proven it can meet the higher capacity and lower latency requirements of 5G mobile radios, and we believe the opportunity for E-band will only go in one direction from here—up and to the right—with new technologies that improve its reach and performance.