With 5G and the overall RAN market coming in a lot faster for the full-year 2020 relative to the projections we outlined a year ago, the time is right to review our 2020 projections and discuss the 2021 outlook.

2020 Predictions Are Mixed

First when it comes to the accuracy regarding the 2020 predictions we outlined a year ago, the results are mixed. Preliminary findings suggest that we correctly identified the high level trajectory for both 5G and RAN. But at the same time, we underestimated how fast some of the 5G developments are moving. Below is a quick summary of some of these predictions:

Forecast	Status
RAN market to advance 4% in 2020	RAN market is growing at the fastest pace since 2011, spurring upward revisions
Early adopters to embrace 5G SA	Revenues for the 5G Core market are expected to approach $1 B for 2020
More than 100 M transceiver	Total transceiver shipments remain on track to approach the 0.1 B to 0.2 B range
5G NR indoor small cell market to surpass LTE	5G NR pico revenues are on track to comprise more than half of total pico capex
Millimeter wave (mmW) to approach 10% of 5G NR small cell installed base	This is falling short, partly because of strong sub 6 GH small cell NR uptake
Forecast: 5G NR subscriptions to approach 200 M	5G subs will approach 0.2 B to 0.3 B in 2020 (Ericsson Mobility Report)

 

Total RAN Market to Advance in 2021

As we discussed in the 3Q20 RAN report, we are projecting the overall RAN market to advance for a fourth consecutive year in 2021. While we are fully aware that the RAN market has only recorded a 4-year+ growth streak once in the 20 years we have tracked the mobile infrastructure market, we recently adjusted the near-term outlook upward, reflecting improved outlooks in multiple regions resulting in a more favorable outlook both including and excluding China.

We have adjusted the near-term outlook upward in the North America region to reflect the improved market sentiment and higher baseline. Low-band activity is expected to remain elevated while mid-band activity is projected to improve, with T-Mobile moving ahead at full throttle and C-Band deployments picking up pace in 2H21, though the timing of the C-band availability remains uncertain.

5G RAN and Core Revenues to Top $20 B in 2021

Total 5G RAN and core revenues are accelerating at a faster pace in 2020 than originally expected, reflecting not only the stronger than expected upside in China but also positive developments in North America and Europe. These trends are expected to extend into 2021, underpinned by elevated 5G capex levels in the advanced MBB markets including China and North America and improving market sentiment in slower to adopt MBB markets.

Within the 5G mix, the ascent will be uneven with 5G core capex growing at a faster pace than NR revenues, solidifying the message we have communicated for some time, namely that the 5G Core/5G RAN ratio will trend below historical core/RAN averages in the initial 5G wave and then gradually improve as operators start embracing 5G SA.

Massive MIMO Investments to Surpass $10 B

For a technology that was initially viewed as being mostly a fit for hotspot scenarios, Massive MIMO has come a long way, accelerating at a much broader and faster pace than initially expected. Preliminary estimates suggest Massive MIMO RAN investments remain on track to surpass $10 B for the full-year 2020, up nearly 20-fold in just two years. And even as the focus NR coverage is expanding beyond the urban areas, the technology is projected to play a pivotal role in 2021, not just in high traffic areas.

Small Cells to Account for 10% to 20% of Total RAN

The global growth outlook for small cells – including sub 6 GHz and mmWave – remains favorable, underpinning projections the technology will play an increasingly important role supporting the overall RAN network as operators and enterprises navigate new technologies, spectrum bands, and use cases.

Small cell RAN revenues are projected to approach 10% to 20% of the overall RAN market in 2021. Within the small cell mix, Sub 6 GHz capex is expected to characterize the lion share of the investments, driven partly by the reduced gap between macro and small cell radios associated with upper mid-band deployments.

mmWave Shipments to Surpass 0.1 M

Preliminary 3Q20 findings suggest 5G NR mmWave RAN revenues more than doubled year-over-year for the 1Q20-3Q20 period. Helping to explain this output acceleration is the improved activity in both the US and Japan.

And while outdoor mmWave deployments have surprised on the upside, indoor mmWave have disappointed partly because the viability of the indoor mmWave market remains uncertain. With products coming to market and service providers ramping up trial activity, we remain hopeful commercial indoor mmWave deployments will become more meaningful in 2021.

Open RAN to Account for 1% to 2% of Total RAN Market in 2021

Open RAN and Virtual RAN continues to gain momentum, bolstered by Ericsson now formalizing its support with its Cloud-RAN announcement. The uptake remains mixed between the various Open RAN segments, as noted with our 3Q20 Open RAN update. These trends are expected to extend into 2021, with adoption accelerating in some RAN settings while the uptake remains weak in other RAN segments.

FWA RAN Revenues to Surpass $1 B

Preliminary estimates suggest the demand for Fixed Wireless Access (FWA), including both the mobile network and dedicated fixed deployments, continued to accelerate in the third quarter of 2020, with FWA related RAN investments on pace to advance at a double-digit pace in 2020. With more than half of the operators now offering some form of FWA and the number of service providers offering FWA on the rise (GSA, Ericsson Mobility Report), the outlook for FWA RAN remains favorable, adding confidence FWA will comprise a growing share of the overall RAN capex in 2021.

Broadband Spotlight Will Continue to Shine in 2021

At the close of each year, we analysts like to simultaneously look forward and look backward, reviewing the predictions we got right or wrong from the previous year and then putting forth our best bets for which technology trends will define our coverage areas in the coming year.

I just re-read my post from last year, which was full of optimism for WiFi 6, mesh networking, and zero-touch provisioning for home networking, as well as XGS-PON, mid-, and high-split upgrade projects on the infrastructure side of things. While most of those predictions came true, the context surrounding them could not have been any more unexpected.

In the world of broadband access and home networking, the COVID-19 pandemic has changed everything. Before the pandemic, fixed broadband network traffic was growing annually at a pretty predictable clip. But with the transition to teleworking and virtual education combined with a significant increase in video traffic related to streaming and online gaming, overall traffic and bandwidth surged by anywhere from 50-150% in just a matter of weeks. More importantly, the surge wasn’t just limited to peak busy-hour traffic. It extended throughout the entire day, putting a strain even on oversubscribed networks that forced network operators to reach quickly into their toolboxes to accommodate the consistent demand.

Cable operators responded to the increased traffic demands by segmenting their existing nodes and pulling forward mid- and high-split upgrade projects to increase upstream bandwidth. Those efforts will continue in 2021, resulting in continued increases in upstream channel license purchases. In particular, cable operators are expected to ramp up their purchases of OFDM-A licenses (Orthogonal Frequency-Division Multiple Access) for their DOCSIS 3.1 networks. OFDMA improves spectral efficiencies for upstream traffic, providing significantly more upstream bandwidth for subscribers without necessarily having to move to a full high-split architecture.

Sticking with cable, 2021 will see a steady increase in operators adopting distributed access architectures (DAA), including both remote PHY and remote MACPHY products. As operators continue to look across their existing node base, they are going to run into situations where they have already segmented their nodes as much as they can. These nodes are the first ones that will be swapped out with DAA nodes or augmented by R-PHY shelves in order to continue to meet growing capacity demands among those service groups. Those R-PHY deployments will also result in a corresponding increase in vCCAP server and license purchases this coming year.

2021 will also see an increase in the deployment of vCCAP platforms for cap and grow applications not directly tied to DAA deployments. There are plenty of projects underway with multiple vendors to cap investments in traditional CCAP platforms to either reduce headend rack space or power consumption or, more practically, because operators have maxed out the switch fabric or line card capacity of their current platforms.

Fiber Expansion Will Continue

The switch from copper to fiber among the world’s largest telcos really became clear in 2020. That trend will accelerate in 2021, in particular, because of the investments made this year in new optical line terminal (OLT) ports. Operators throughout North America, EMEA, and CALA switched more of their capex towards expanding their fiber networks than sustaining their DSL networks. This was clear at Telmex, BT OpenReach, and others. Major projects at Deutsche Telekom, Orange, Proximus, and elsewhere will drive not only more fiber expansion but 10 Gbps deployments using XGS-PON.

Fiber access networks are on the verge of a major tipping point, driven by the simultaneous catalysts of the shift to next-generation fiber technology and the shift to openness, disaggregation, and automation. The world’s largest broadband providers are quickly realizing that the need for increased throughput is matched by the need for a highly-scalable network that can respond quickly to the changing requirements of the service provider, their subscribers, and their vendor and application partners. The need to provision and deliver new services in a matter of hours, as opposed to weeks or months, holds just as much priority as the ability to deliver up to 10Gbps of PON capacity. Although service providers might have completely different business drivers for the move to open, programmable networks, there is no question that the combination of data center architectural principles and 10G PON technology is fueling a forthcoming wave of next-generation fiber network upgrades.

The service providers that adopt the combination of 10Gbps PON and openness will be best prepared to accomplish three major goals:

1. Deliver the advanced, 10Gbps capacity, and multi-gigabit services subscribers will expect and require using a cloud-native infrastructure that treats bandwidth and the delivered applications as workflows;
2. Anticipate and whether rapid increases in traffic demand with a highly-targeted and elastic infrastructure that can be activated without a forklift upgrade;
3. Develop an access network infrastructure that can process multiple workloads beyond broadband access, including hosted services that can be offered on a wholesale basis, as well as fixed-mobile convergence applications.

WiFi 6 Will Dominate the Home Networking Market

One of the biggest trends we will be talking about is a fundamental shift in how consumers and service providers think about home networking. There is a confluence of technologies all reaching the market at the same time that will positively impact the capabilities and management of home networks:

• WiFi 6: For many years now, the evolution of WiFi has been focused on improving two key technical attributes: speed and range. WiFi 6, however, is the first iteration to take a more holistic view of wireless technology that encompasses not only improvements in speed and range, but also network intelligence, analytics, and power efficiency. WiFi 6 also has the capacity to dramatically improve how service providers will be able to provision, manage, troubleshoot, and analyze their in-home networking services. It provides options for the remote, zero-touch provisioning of devices and services, as well as the automatic adjustment of WiFi channels to ensure peak performance
• 6GHz Spectrum and WiFi 6E: With so many new connected devices competing for available channels and bandwidth on both the 2.4GHz and 5GHz frequency bands, the WiFi Alliance is introducing WiFi 6E, which uses the unlicensed 6GHz band. In 2020, we expect that many countries will provide access to the 6GHz band, which will mean a huge chunk of unused spectrum for the growing number of residential and enterprise WiFi devices. More importantly for cellular operators rolling out 5G networks, the 6GHz spectrum band will allow them to provide seamless handoffs to mobile devices in homes and offices where their networks might have difficulty penetrating walls and treated windows. There has been much discussion around the pending boom in AR (Augmented Reality) and VR (Virtual Reality) applications for a number of years now. With the availability of the 6GHz spectrum, those applications can in theory be delivered without fear of latency due to channel contention. 6GHz will provide 14 additional 80MHz channels and 7 160MHz channels which will be needed for these intense, high-bandwidth applications.
• Simplified Control: If you were to compare the UIs of home gateways and routers from just two years ago to those available today, you’d be hard-pressed to find an area that has seen a more positive evolution. But 2020 will see even more transformation in an effort to give subscribers total and intuitive control over their broadband subscriptions. One of the areas we expect to see the most growth is in voice control of broadband services. Google’s Nest WiFi mesh systems now include voice control and allow users to verbally turn on a guest network, reboot the system, and initiate parental controls and speed tests. Quietly before the end of 2019, Amazon announced Alexa-enabled voice control of its own eero routers, as well as those from ARRIS/Commscope, Asus, Belkin, Netgear, and TP-LINK. The feature is called Alexa WiFi Access and we expect to see this service integrated across a wider range of devices throughout the year, including being integrated into service provider-supplied gateways, particularly from US cable operators.

These technology developments, coupled with a ratcheting up of the competition between service providers and consumer electronics companies for home network dominance will result in consumers receiving substantially better control of their own WiFi networks in 2021.

Originally, I anticipated that the Microwave Transmission market would enter a multi-year growth phase beginning in 2020 driven by the rollout of 5G. Instead, however, the market is on pace to decline 5 percent in the year due to precautions put in place to reduce the spread of COVID-19, slowing down the start of 5G in some countries and making it increasingly difficult to deliver and install microwave equipment in many others. Then in 3Q20, when many countries lifted their lockdowns or eased travel restrictions, the demand for Microwave Transmission equipment grew 7 percent year-over-year, recovering some of the lost market revenue in 1H20. We think this positive momentum will continue through the remainder of this year and the next. So, while the start of 2020 was painful and the middle of 2020 difficult, the end of 2020 brings some hope for a better 2021.

Of course, there will be a number of head winds in 2021—the biggest ones being additional lockdowns to control the spread of COVID-19 and the slow economic recovery. Both of these will negatively influence the revenue and confidence of mobile operators in spending capital on equipment.

That all said, we believe that COVID-19 has taught the world the critical importance of network connectivity. Whether it is fixed broadband or mobile broadband, there will be a need for “more”—more connections and more bandwidth. Therefore, while COVID-19 may have caused delays in starting new 5G roll outs in 2020, we find it difficult to believe there will be additional delays in 2021 since 5G is a crucial technology for the future.

Hence, we predict that the Microwave Transmission market will return to growth in 2021 (one year later than we had originally predicted). We believe 5G and preparation for 5G mobile radio installations will create a growing demand for Microwave equipment in 2021 and project the market to grow at a low single digit percentage rate. Furthermore, we think this is just the beginning of a multi-year growth cycle.

Since 5G will require more backhaul capacity, we expect the demand for E-band microwave systems (capable of up to 20 Gbps transmission) will accelerate, increasing more than 30 percent next year. While sales of E-band has been escalating for many years, largely driven by its use in Eastern European countries, we think that next year the level of interest and number of deployments will geographically widen across many other regions of the world.

Also, we think multiband systems and links combining E-band with at least one carrier frequency below 30 GHz will grow in importance. Demand for multiband systems using a mix of millimeter wave and lower microwave frequencies has already started in 2020, but we think usage will widen in 2021 along with 5G backhaul deployments. Not only will this solution provide more capacity per link, but it will also increase the link resiliency and performance with the same outdoor footprint (keeping tower lease costs unchanged). Therefore, we cannot help but think that the adoption of multiband links will be more mainstream than niche in the coming year.

Although we have a positive outlook for 2021, we do think the market will be more volatile. This is not to say that the demand for Microwave Transmission equipment will swing up and down quarter-to-quarter (which it might), but rather that the level of uncertainty in 2021 is still very high. And that while we are hopeful the worst of the pandemic is behind us and the COVID-19 vaccine will be widely distributed next year, it is still difficult for us to discern what will happen because when it comes to this pandemic (the first in my history of doing market research) we simply do not know what we do not know.

Open and Virtual RAN continues to gain momentum, bolstered by Ericsson now formalizing its support with its Cloud-RAN announcement. The uptake remains mixed. In this blog we will discuss three key takeaways for the 3Q20 quarter including:

1) The primary objective of Open RAN is to address market concentration and vendor lock-in;

2) Open RAN revenues are trending ahead of schedule;

3) Not all Open RAN is disruptive.

First, when it comes to the broader movement behind Open RAN, the leading drivers have not changed since we published the Open RAN Forecast this August. Addressing vendor lock-in and market concentration remain the leading drivers behind the Open RAN movement. Initial readings suggest that the overall RAN market concentration levels as measured by the Herfindahl-Hirschman Index (HHI) increased around 10% between 2010 and 1Q20-3Q20, underpinning projections that these trends will not reverse anytime soon with the current RAN model.

Preliminary estimates suggest Open RAN revenues – including radio, baseband, and software – are coming in at a slightly faster pace than initially expected, reflecting positive developments in the Asia Pacific region. We have adjusted the 2020 outlook upward from ~$0.2 B to ~$0.3 B.

Even though we are in the middle of updating the long-term projections, at this point we just want to clarify that the stronger than expected short-term acceleration does not necessarily translate to faster or slower brownfield adoption beyond 2020.

The results are mixed. While Dish is running into delays in the US market, Rakuten is moving forward at a rapid pace in Japan deploying a variety of both sub 6 GHz and mmWave RAN systems. In addition, some of the Japanese suppliers are reporting that the lion share of their radio shipments are already O-RAN compatible.

The last point we want to make is that not all Open RAN is the same. There is no shortage of ways to segment the Open RAN market – at a highly simplified level, we envision there at least 14 ways to think of the Open RAN opportunity. And while revenue remains a fundamental metric to determine the overall market adoption, it will be particularly interesting to pay attention to the RAN supplier segmentation. This will be important to assess if Open RAN is also disruptive. Because at the end of the day, Open RAN will likely not be considered a complete success story even if Open RAN comprises 100% of the total RAN market but the HHI is still hovering around 2500.

So on the one hand, we estimate total Open RAN revenues are tracking ahead of schedule. On the other hand, the lion share of any “security” related RAN swaps are still going to the traditional RAN players, suggesting the technology for basic radio systems remains on track but the smaller players also need to ramp up investments rapidly to get ready for prime time and secure larger brownfield wins.

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