The Optical Transport market has continuously evolved, giving consumers around the world one of the most precious assets—fast, affordable bandwidth. Whether it is 5G, home broadband, cloud services, or videos of cats, the one technology that enables the existence of these services is optical. So, it is no wonder that the one equipment that service providers (telecom, cable, cloud, etc.) need to continuously invest in and purchase is Optical Transport gear. Luckily for these buyers, market demand has grown at a rate fast enough for optical system and component manufacturers to continuously invest their R&D money towards developing better optical technology that transports more bits at an even better cost. What if this changes in the future?

Consider this: every generation of optical technology costs more to develop. Meanwhile, Shannon’s limit is around the corner, and fewer optical companies generate enough profit to maintain this pace of innovation. I won’t address this long-term concern here, but considering this, I have listed a few trends to watch in 2020.

• Selective vertical integration will continue. System houses such as Ciena, Huawei, and Infinera will continue to invest in developing key component technologies to ensure they capture a significant share of the optical systems market and reduce the bill-of-materials (BOM) on highly advanced coherent line cards. When Cisco closes its acquisition of Acacia, the number of Optical Transport vendors that in-source high-end components (coherent DSP, TIA, drivers, and modulators) will increase. In 3Q19, these four vendors had approximately 60 percent share of the WDM market. If we also consider vendors that have in-house coherent DSPs, this share jumps to 70 percent and could potentially increase if additional vendors decide to “make” rather than “buy.”
• Coherent 800 Gbps-capable line cards will enter the market. We know of three vendors—Ciena, Huawei, and Infinera—that will launch 800 Gbps-capable line cards by the end of 2020. Ciena will be first to market, closely followed by Infinera, and then Huawei. These new line cards will use the latest optical components (90+ Gbaud, photonic integration) and most powerful coherent DSPs with probabilistic constellation shaping that will bring the wavelength performance to near Shannon’s limit.
• A faster shift away from 100 Gbps wavelengths to 200 Gbps and 400 Gbps wavelengths. The use of 200 Gbps wavelengths has already been rising to maintain a steady price-per-bit decline. With the availability of 800 Gbps-capable line cards, the market will increasingly deploy 400 Gbps wavelengths this year. That is, with 800 Gbps-capability, a line card can be employed at 400 Gbps across longer span lengths, making long haul 400 Gbps at an economical price point a reality.
• Coherent 400 Gbps in a pluggable form factor is here. There is no denying that coherent optics will shrink into a pluggable form factor. Both Inphi and NeoPhotonics have announced tests and trials of 400G ZR in QSFP-DD and OSFP form factors as well as a 400G ZR+ version in a CFP2-DCO. It is still a little early in the year, but we believe systems using these pluggable 400 Gbps modules will enter the market by the end of 2020. However, significant sales volume may not occur until 1H21.
• Adoption of IPoDWDM will increase. IPoDWDM isn’t a new concept. It has been available for over a decade, and Cisco has done quite well (relatively speaking) selling IPoDWDM systems. However, this architectural approach never really obtained wide-spread adoption. We think one of the many reasons behind this is that the target market was on core routers stationed in the long-haul network. A better opportunity for IPoDWDM, as evidenced by Inphi’s sales of ColorZ to Microsoft, lies in selling IPoDWDM in metro access applications such as data center interconnect. Therefore, with 400G ZR in a QSFP-DD form factor, we should see a wider adoption of IPoDWDM in metro applications such as data center interconnect and distributed access architecture (DAA).
• System vendors will move into the components market. This may be a more “why not?” situation. If a system vendor develops a component, why not make it available for others to buy, since selling any components will help offset the company’s R&D costs? Also, at the end of the day, it is a good hedge against IPoDWDM. If you don’t win the system business, why not try to win the optical components portion?

Each of these listed trends are by no means revolutionary. In fact, each has been in the making for many years to sustain one goal—fast, affordable bandwidth.

At the end of each year, I like to reflect on the key trends that I believe will drive the products, purchasing, and messaging in the year ahead. I review the past year’s meeting notes and marvel, once again, at my good fortune in speaking frequently with intelligent people. Then, I try to read between the lines to figure out if anything I learned in those meetings foreshadows what’s to come.

I then balance my insights and predictions with the noise from CES as it opens a new year of trade shows. With my inbox full of new product announcements, I can’t help but wonder if products showcased at CES will set the tone for the rest of the year. Will the latest WiFi router, gaming console, and series of IoT devices be the next game changers?  Or will they fall flat like so many other consumer products?

This year, I believe that one of the biggest trends we will see is a fundamental shift in how consumers and service providers think about home networking. A confluence of technologies reaching the market at the same time will have a positive impact on the capabilities and management of home networks, including:

• • WiFi 6: For many years, 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 holistic view of wireless technology that encompasses improvements in speed and range as well as 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 remote, zero-touch provisioning of devices and services as well as 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. This means that a huge chunk of unused spectrum will become available 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 the provision of seamless handoffs to mobile devices in homes and offices where their networks might have had difficulty penetrating walls and treated windows. There has been much discussion about the pending boom in AR (Augmented Reality) and VR (Virtual Reality) applications for a number of years. With the availability of the 6GHz spectrum, those applications can be delivered, in theory, without fear of latency due to channel contention. 6GHz will provide fourteen additional 80MHz channels and seven 160MHz channels. These will be needed for the intense, high-bandwidth applications.
  • Simplified Control: If you were to compare the user interfaces (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 more positive evolution. But 2020 will see even greater transformation in an effort to give subscribers total and intuitive control over their broadband subscriptions. Voice control of broadband services is one of the areas that we expect will see the most growth. 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 – and just before the end of last year – Amazon announced Alexa-enabled voice control of its eero routers as well as those from ARRIS/Commscope, Asus, Belkin, Netgear, and TP-LINK. The feature is called Alexa WiFi Access. We expect to see this service integrated across a wider range of devices during the year, including integration into service provider-supplied gateways, particularly those from U.S. cable operators.

These technology developments, coupled with the ratcheting up of competition between service providers and consumer electronics companies for home network dominance, will allow consumers to have substantially better control of their WiFi networks in 2020.

Fast-Tracking DOCSIS 4.0, DAA, and 10Gbps

It seems like just yesterday when details emerged surrounding DOCSIS 4.0, which combines two next-generation technology options for cable operators — Extended Spectrum DOCSIS (ESD) and Full Duplex DOCSIS (FDX) — into a single standard with the aim of delivering 10Gbps services to all customers. CableLabs started drafting the specifications last year. Just this week, the company confirmed that the draft version will become available in the first half of 2020.

At the same time, cable operators are expected to launch their first 10Gbps services this year. However, these deployments are not expected to be tied to the DOCSIS 4.0 specification. Instead, they will rely on 10G EPON from remote OLTs located in traditional optical node housings. While focused on Full Duplex DOCSIS to support the mass market delivery of 10Gbps services to existing residential customers, Comcast is also sprinkling in 10G EPON in greenfield deployments, particularly in regions where it competes with fiber-based ISPs. Other cable operators are following a similar path. But instead of Full Duplex DOCSIS, they will rely on ESD. In both cases, outside plant spectrum will be increased to 1.8GHz.

Regardless of which DOCSIS 4.0 technology path a cable operator decides to follow, a precursor to these deployments will be the rollout of distributed access networks. With the DOCSIS 4.0 standard establishing a clear path forward, cable operators can now move ahead with their remote PHY and remote MACPHY deployments to solve immediate headend space and power consumption issues. At the same time, they can feel confident that any DOCSIS 4.0 technology decision they make will start them on the path toward 10Gbps services.

In 2020, we expect cable operators to ramp up their spending on upstream channel capacity in an effort to improve the subscriber experience with services such as online gaming, as well as reducing the time it takes to upload videos to the cloud. A number of operators have already moved to, or are in the process of moving to, mid-split architectures as they pull fiber deeper into their networks. Mid-split architectures allow cable operators to increase upstream capacity from 5-42MHz to 85MHz, providing a theoretical maximum of around 300Mbps of upstream bandwidth. Like DAA, moving to mid-split is another step on the path toward DOCSIS 4.0. With the implementation of 1.8GHz of spectrum, mid-split will allow an upstream path to span up to 684MHz, a nearly 10x improvement over today’s prevailing upstream rates. More importantly, the move to 1.8GHz will allow operators to flexibly operate on six different upstream path splits, resulting in multi-gigabit services.

Other Trends to Watch

In addition to these trends, we expect to see a significant jump in virtualized access platform deployments. The second half of 2019 saw a major ramp in virtual CCAP deployments. Once again, this growth was largely driven by Comcast, as it continues to expand its R-PHY deployments. We expect this trend to continue both within Comcast and among its peers, particularly Cox Communications and Videotron in Canada.

Outside of cable, we expect to see AT&T make headway in its virtual OLT rollout using XGS-PON. In September, the operator said that it expected to have 100% of its core network traffic controlled by SDN. This was step one in its long-term CORD vision. Access platforms, such as OLTs, will receive the virtualization focus in step two. Though we don’t expect to see any pure white box OLTs in AT&T’s production network in 2020, we do expect to see announcements of SDN control of a good portion of the operator’s access network by the end of the year.

With the 5G mobile broadband ramp accelerating at a much faster pace than expected, and 5G NR comprising a double-digit share of the overall 1Q19 to 3Q19 RAN, the time is right to discuss some of the key 5G projections for 2020.

1) 5G RAN+Core Infrastructure Market to More than Double

5G NR continues to accelerate at an extraordinary pace, much faster than expected four or five years ago or even just six or three months ago, underpinned by large-scale deployments in China, Korea, and the US.

These trends are expected to extend into 2020. The upside in 5G NR will be more than enough to offset declining LTE investments, propelling the overall RAN (2G-5G) market for a third consecutive year of healthy growth.

2) Early Adopters to Embrace 5G SA

The path toward 5G has become more straight forward since the 2Q19 quarter with only two options now—Option 3 which is 5G NSA, utilizing the EPC, and Option 2 which is 5G SA utilizing the 5G Core.

As we move into 2020, we will see the emergence of the first 5G Standalone (5G SA) networks. We expect service providers in China, Korea, the Middle East, and the U.S. to launch 5G SA sometime in 2020.

3) More than 100 Million Transceivers

The Massive MIMO business case has changed rather significantly over the past two to three years with the technology now considered to be a foundational building block for mid-band NR deployments. We recently revised the 2020 Massive MIMO outlook upward, driven by surging year-to-date shipments and improved market sentiment for 2020. The overall 5G NR transceiver installed base – Massive MIMO plus Non-Massive MIMO for sub 6 GHz and Millimeter (mmW) macros and small cells – is projected to eclipse 0.1 B by 2020.

4) Dynamic Spectrum Sharing Takes Off

The attitude towards spectrum sharing is on the upswing, with both suppliers and operators discussing their spectrum sharing roadmaps. In addition to the spectral efficiency gains of 15% to 20%, operators are considering the benefits from a marketing perspective. Operators also see the extended 5G NR coverage with a lower band spectrum as a key enabler for 5G SA and network slicing. The technology is expected to play a pivotal role in upgrading existing low-band LTE sites to NR in the year 2020.

5) 5G NR Indoor Small Cell Market to Surpass LTE

With more data points suggesting the beamforming gains with Massive MIMO radios delivering comparable outdoor coverage in the C-band relative to 2 GHz LTE deployments, preliminary data from the field also suggests indoor performance will be a challenge and operators are already migrating the indoor capex from 4G to 5G. These trends are expected to intensify in 2020.

6) Millimeter Wave (mmW) to Approach 10% of 5G NR Small Cell Installed Base

Even though deploying 5G NR in the mid-band using the existing macro grid will deliver the best ROI for some time for operators seeking to optimize cost per GB and average speeds, 5G NR mmW shipments and revenues increased substantially in the third quarter of 2019, with the overall mmW NR market trending ahead of expectations.

We recently adjusted our near-term mmW outlook upward to take into consideration the state of the market and improved visibility about the underlying fundamentals in Japan, Korea, and the U.S.

7) 5G MBB to Account for More than 99% of the 5G NR Market

We remain optimistic about the IoT upside for Industrial IoT/Industry 4.0, reflecting a confluence of factors including 1) Suppliers are reporting healthy traction with the vertical segments; 2) More countries are exploring how to allocate spectrum for verticals; 3) Ecosystem of industrial devices is proliferating rapidly; 4) New use cases that require cellular QoS are starting to emerge.

At the same time, the LTE platform is expected to suffice for the majority of the near-term vertical requirements implying it is unlikely 5G NR IoT related capex will move above the noise in 2020.

8) Virtual RAN 5G NR Revenues to Exceed Open RAN 5G NR Revenues

There are multiple ongoing efforts driven both by operators and suppliers with the primary objective of realizing a more flexible architecture that will optimize TCO for both the known and unknown use cases while at the same time improving the ability for the service providers to differentiate their services.

Given the current state of these tracks with the incumbents investing more in virtual solutions and the readiness of Open RAN initiatives for existing 5G MBB deployments, we envision Non-Open RAN Virtual 5G NR revenues will be greater than Open RAN (virtual RAN with open interfaces) 5G NR revenues in 2020.

9) 5G NR RAN Revenue HHI to Increase > 100 Points

Total RAN HHI has been fairly stable over the past three years, reflecting a competitive dynamic that remains fierce, moderately concentrated, and relatively stable. Initial readings suggest the 5G NR HHI for the 4Q18 to 3Q19 period is trending below the 2018 overall RAN HHI; however, we expect the 5G NR HHI to increase in 2020.

10) 5G NR Subscriptions to Approach 200 Million

Preliminary estimates suggest the shift from LTE to NR is roughly two to three years faster than the 3G to 4G migration from a RAN infrastructure and subscription adoption perspective.

The end-user ecosystem is developing at a rapid pace with multiple chipsets, devices, and phones supporting both NSA and SA for the low-, mid-, and mmW- spectrum now commercially available. While TDD has dominated mid-band and mmW deployments to date, FDD-based 5G NR phones became a reality in 2H19 and will proliferate in 2020.

End-user device adoption is projected to accelerate rapidly in 2020, with 5G NR approaching 0.2 B subscriptions, bolstered by healthy NR subscriber adoption in China, Korea, and the U.S.

For more information about our 5G, Mobile RAN, and Mobile Core Network programs, please visit our website or please contact dgsales@delloro.com.

Whether spurred by the looming rollouts of 5G services or the continued attrition of video subscribers and revenue, fixed broadband technologies, services, and business strategies have changed. Whereas operators were once focused on driving scale across multiple areas of their business, in many cases, the focus currently is firmly squared on fixed broadband. And why not? For most North American operators, service margins for residential fixed broadband hover between 60-70%, while video margins have seen steady declines of approximately 15% over the last five years, pushing average margins below 15%, in some cases.

Scaling broadband services, however, is tricky because achieving scale involves any combination of bandwidth, network platforms, CPE, test and measurement equipment, as well as personnel to support both the upgrades and ongoing maintenance. These challenges are faced by all broadband service providers and are certainly not limited to cable or telco operators alone.

Shared challenges, as well as the standards and technologies to overcome them, is a big reason why I decided to combine my perspectives on the recent Cable-Tec Expo and Broadband World Forum shows into a single article. Because no matter where you look, the almost universal focus for all broadband service providers for addressing their scaling challenges is through virtualization. The topic occupied most of my discussions at both events and will only grow as we progress through 2020 and beyond.

Cable’s Clear Use Case for Virtualization

Cable operators are intimately familiar with the challenges of scaling their broadband networks to support downstream bandwidth consumption CAGRs still hovering in the 25-35% range. To deliver more bandwidth, MSOs traditionally have had to split their optical nodes to reduce service group sizes. Each node split, however, requires more passive and active equipment, including splitters, combiners, receivers, and transmitters. More importantly for opex is the need to increase the number of hardware-based CCAP platforms to support the additional bandwidth and service groups. The net result is a significant increase in space and power requirements in both headend and hub sites, as well as additional complexity in fiber cabling requirements.

With the ultimate goal of delivering multi-gigabit services to subscribers, this traditional model of adding hardware to enable a consistent increase in overall bandwidth is simply unsustainable, especially when cable operators are also trying to reduce their real estate footprint by reducing total headend and secondary hub site facilities.

Obviously, Comcast has taken a lead role in pushing virtualization and it provided an informative overview of its progress. For me, there were three key benefits Comcast either explicitly or implicitly communicated during the event about their virtualization efforts:

1. Even if Comcast moves away from its plan of delivering full-duplex (symmetric 10 Gbps) services in a node + zero environment, a virtualized CCAP core gives them the ability to scale at their own pace and at any location. Servers could still be located in existing headends or primary hub sites, or they could be deployed in centralized data centers. With workload balancing across their CCAP core servers, there are effectively no restrictions on where Comcast can grow its capacity.
2. The virtual CCAP core almost eliminates the extended maintenance windows often required for software and firmware upgrades of traditional CCAP platforms. With increasing restrictions on service downtimes, operators frequently push those limits when they have complex upgrades to complete across their entire CCAP footprint. The virtual CCAP core takes those software and firmware upgrades and makes them microservices, allowing them to be digested and completed without complete reboots of the platform. That results in almost minimal downtime for subscribers. Even if there is downtime, it can be isolated to a service group size of 250 homes or less (and declining,) as opposed to the potential 100k to 250k subscribers that are traditionally impacted when a CCAP chassis goes down.
3. Comcast fully believes that other cable operators can benefit from their virtual CCAP core architecture, and they intend to license it just as they have done with their X1 video platform. There are, of course, questions around just how that licensing model might work and how revenue might be distributed between Comcast and Harmonic, its vCCAP partner. But it’s clear that Comcast is leaving the door wide open to profiting from its software development work. Obviously, this could have negative impacts on the traditional CCAP vendors, as the size of their addressable market shrinks. However, only a few operators have thus far licensed Comcast’s X1 platform, and it stands to reason that an even smaller number would want to entrust the most important service in their portfolio to the operator.

Really, Comcast’s progress on virtualization is just the beginning. Yes, it satisfies a short-term requirement to be able to scale to support consistent increases in fixed broadband speeds. But the longer-term potential for supporting edge computing and processing for more complex IoT and 5G backhaul applications also requires this transition away from dedicated hardware platforms.

Multi-Vendor, Multi-Service Requirements Drive Telcos’ Virtualization Efforts

Multi-service support, which is still on the horizon for most cable operators, is a reality today for a number of operators who are moving forward with the virtualization of their access networks. That reality has been reflected in increasing discussions and focuses on VOLTHA (Virtual OLT Hardware Abstraction,) currently for XGS-PON deployments, but with an eye towards G.fast deployments, as well.

VOLTHA is a well-known, open-source standard, at this point, designed to simplify traditional PON architectures by abstracting PON-related elements such as OMCI and GEM, and allowing an SDN controller to treat each PON OLT as a programmable switch, independent of any vendor’s hardware.

Whereas cable operators are virtualizing currently to scale for more bandwidth, for telcos, that is just one piece of the puzzle. They are virtualizing to scale for bandwidth, certainly, but also for 4G and 5G backhaul, and enterprise PON and WiFi backhaul. In addition, telco operators are also looking to more easily manage multi-vendor and multi-technology environments, where physical layer technologies, such as G.fast and GPON are all managed in a similar manner from a central location. In such cases, the elements associated with each physical layer technology are abstracted, allowing for easy migration from one technology to the next, as well as a unified management and troubleshooting plan across all technologies.

During Broadband World Forum, discussions centered on actual deployments of virtualized, software-defined access networks were plentiful. This was a significant change from previous years when the technologies were still relegated to lab environments. Beyond an increase in the maturity of the technologies, the focus on virtualization has come about partially because of how service providers are either deploying or accessing fiber assets. In a growing number of cases, service providers are leasing fiber to fill in service area gaps, or they are partnering with other operators to share the costs of deploying fiber. In these cases, where service providers have equipment on their own fiber, on leased fiber lines, or even leased access to the fiber owner’s OLTs, virtualized infrastructure simplifies the management of these network elements by abstracting the specific PON elements of multiple vendors and enabling their provisioning and management from a single, centralized controller.

For many years, multi-vendor access network deployments were a stated goal of major network operators. However, very few ever became reality, due to unique management complexities associated with each vendor’s implementation. Virtualization finally makes this a reality by essentially treating each active network element as an equal node. One node could be an OLT, another could be a DSLAM or G.fast DPU, while another could be a fixed wireless access point. All can be provided by different vendors, while still being managed centrally by a software controller.

Though multi-vendor, multi-service environments remain the exception rather than the rule, the progress being made to make these a reality through virtualization will continue to ramp up through 2020 and beyond. We should expect to see some novel business models emerge next year, especially in the areas of open access networks, where ISPs virtually lease access through network slicing. These models are already emerging in Europe and Latin America, and we expect them to expand in these two regions next year.