Chinese operators are moving quickly to the next phase of residential fiber deployments by extending fiber inside homes and into individual rooms through a unique combination of a centralized ONT (Optical Network Terminal) and subtended ONT access points designed to ensure advertised speeds with the option of wired and Wi-Fi connections in each room of a home. The net result of this surge in FTTR deployments has been a steady increase in FTTR-optimized ONT shipments.
Through the first half of 2023, more than 6M FTTR ONT units have been purchased by the three major operators. To provide some perspective, this total is less than 20% of the total ONT shipments in China in that same time frame. However, that growth has come in just a little over a year and a half, which signals the strategic importance of the application to the operators. Further, that growth comes from just a handful of major regional branches of China Mobile and China Unicom. China Telecom is just now getting underway with FTTR, having set forth its plan to purchase 500K FTTR ONTs earlier this year.
The three operators are expected to rapidly expand the availability of FTTR services and packages throughout the rest of this year and into 2024, as the application is viewed as a critical driver of four overarching business goals for their fixed broadband business units:
Increasing ARPU (Average Revenue Per User)
Reducing subscriber churn
Reducing energy consumption in the home and throughout the network
Reducing service and support costs by improving the quality of service
From Gigabit Cities to Gigabit Homes
Back in 2013, the Chinese Government set an ambitious goal of delivering gigabit speeds to 400M households in China’s largest cities by 2020. The project reach approximately 200M homes before the COVID-19 pandemic delayed further expansion. In 2021, the Government re-issued its objectives and set a goal of achieving the 400M home goal by the end of 2023. At this point, it is believed the total number of gigabit homes is nearing that 400M mark, as over 100 cities have now been designated as Gigabit Cities.
Historically, though, operators delivered fiber to the floor of a building and then connected each apartment via DSL or Ethernet or dropped fiber to a single ONT or ONT gateway inside the home. To expand Wi-Fi coverage in the home, subscribers could either purchase their own access points or could use those supplied by the operator. Nevertheless, in very densely-populated cities, subscribers often ran into channel contention issues, reducing the throughput of their Wi-Fi connections and reducing the overall quality of service, particularly during peak hours.
These challenges became more acute during the pandemic when cities and buildings were locked down and service provider technicians could not access residences to diagnose and troubleshoot Wi-Fi and other connectivity issues. So, even in China’s showcase Gigabit Cities, subscribers were getting far slower speeds than what was being touted by their service providers.
To solve these issues, the three major operators realized that the only way they could guarantee consistent throughput throughout the home was to extend fiber to each room. The most economical way to do this was to use the same architecture as their PON access networks, but just on a smaller scale, using a passive splitter in front of the primary ONT gateway. From there, the operators worked with domestic equipment manufacturers and cabling and component suppliers to develop solutions that would allow technicians to easily install flat fiber or fiber electric composite cables to each room, depending on whether the ONT access point required an external power supply.
Flat fiber installation tools were developed that allowed a technician to run fiber along baseboards, doors, and window frames, minimizing the obtrusiveness as much as possible. Additionally, software tools were developed to allow the technician to quickly determine the shortest route and quickest installation approach before commencing the work. The net result is that the average installation time is reported to be around 30 minutes or less.
Even before the technician arrives, the upfront work of determining demarcation between building owners and the service provider is completed, so that the FTTR service can be marketed throughout the building and installations can be scheduled and completed as quickly as possible.
Up-Front Costs, Long-Term Benefits
In a competitive environment like China, where broadband ARPU tends to be low and fairly static, FTTR has turned out to be a source of new revenue for the operators, as well as a way to get subscribers to commit to longer-term contracts. Subscribers can choose to pay 2000 RMB (US$277) up-front to cover the costs of the installation, as well as the additional ONTs, or they can commit to a multi-year contract, paying 30-40 RMB (US$4-$5) per month for a minimum of 2-3 years. Historically, broadband service contracts were limited to one year. Because of the additional labor and equipment costs associated with FTTR, operators were allowed to extend the contracts. With the additional costs of the ONTs bundled in, the operators have anecdotally said that the ARPU uplift for FTTR is around 30%. With mobile ARPUs getting squeezed, FTTR is seen as a way to recoup some of those lost margins while also ensuring improved QoS.
Speaking of QoS, the operators have reported that the combination of FTTR plus Wi-Fi 6 improves overall speeds by up to 80% over previous-generation Wi-Fi 5 access points. Much of the gain is in the improved rates and reach of Wi-Fi 6. But using fiber as a backhaul technology from the local access point to the primary ONT gateway also helps to improve speeds and reduce latency by up to 30%. More importantly, operators know that each home will have full Wi-Fi coverage, rather than assuming the subscriber has correctly placed the access points to eliminate dead zones. That helps to reduce support and troubleshooting calls.
Finally, from an environmental perspective, the use of passive splitters and components in the home offsets the increased number of powered ONT access points. But these units are also more power-efficient than previous generations of access points. When combined with the reduced power needs of PON access networks, in general, the FTTR architecture is a net reduction in carbon footprint.
Global Opportunities
Nearly all FTTR deployments have occurred in China, though there are already signs of international expansion in Hong Kong, UAE, and Brazil. Certainly, countries with high fiber penetration combined with a high percentage of MDU-based residences are the low-hanging fruit for FTTR. This is why we expect to see increased FTTR activity in markets such as Hong Kong, Singapore, the UAE, and Korea over the next two years.
In addition to high fiber penetration, regulations clearly defining the demarcation between building owners and service providers must be in place, as well as updates to building codes that clarify approved installation methods for flat fiber and best practices for fiber maintenance. In countries with low fiber penetration, these standards have yet been developed due to the need has not been there. Or in countries with FTTH deployments, standards, and demarcations have been defined for a single drop point to the customer’s residence—simply updating architectures that have been in place for decades with twisted pair and coaxial cable.
Time will tell whether an increase in fiber ISPs’ results in those ISPs differentiating their service with an FTTR offering. ISPS may offer FTTR as a premium service. At this point, however, all eyes are fixed on Wi-Fi 7 gateways and access points as the cure-all for spotty coverage and capacity issues.
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Growing interest among operators to use PON technologies to offer enterprise customers an alternative to traditional Ethernet services is increasing 25GS-PON-capable OLT ports being deployed into service provider networks. Because of the increase in total 25GS-ready ports, as well as the consensus that a growing percentage of those ports will be used to deliver enterprise and leased line services, we have increased our forecasts for 25GS-PON equipment revenue (both OLT ports and ONTs).
In our most recent forecast, published in July, we increased cumulative 25GS-PON equipment revenue between 2022 and 2025 from $315M to $588M worldwide, with the majority of revenue coming from the North American and Western European markets. While that increase is significant by itself, it’s important to bear in mind that cumulative XGS-PON equipment spent during that same period will easily push $7.7B. But XGS-PON will be the dominant technology across residential FTTH networks, whereas 25G-PON will be used strategically by operators for high-end residential services, enterprises, campus environments, access network aggregation, and wholesale connections.
Through the end of 1Q23, a total of 550K 25Gbps-Capable OLT ports have been delivered to the market, largely via combo cards and optics that can support 2.5Gbps GPON, XGS-PON, and 25GS-PON from the same hardware and using the same ODN. If we assume that an average of 100-200K 25GS-capable OLT ports are purchased by service providers every quarter, by the end of 2023, there will be >1M 25GS-capable OLT ports. Continuing that incremental increase through 2025 yields over 2 million 25GS-capable OLT ports purchased by service providers. Further, let’s assume that a low single-digit percentage of those total ports are turned up to deliver enterprise services. The potential net result is anywhere from 500k-700k OLT ports in service delivering enterprise, wholesale, and mobile transport services.
That is the relatively modest strategy behind 25GS-PON: To finally expand the applicability of PON technologies beyond residential networks. Though it has been discussed by vendors and operators for years, we are finally seeing that many operators have earmarked PON as a network-flattening technology across their residential, enterprise, mobile transport, and wholesale networks. Though there certainly have been instances of operators using GPON for mobile backhaul and business-class Internet access, those use cases have been relatively limited. The combination of XGS-PON and 25GS-PON is really the first to give operators the flexibility they require to be able to address many customers and applications across the shared infrastructure. While some operators envision sharing an ODN across these use cases, others prefer to separate their ODNs because of concerns around security and significantly different SLAs. Nevertheless, PON technologies beyond XGS-PON are already central components of a larger discussion around simplifying access and edge network connectivity.
Though the ITU has determined that single channel 50G PON as defined in its G.hsp.50pmd specification is the next generation technology it will move forward with, the increasing use cases for PON combined with those use case requirements for additional speeds beyond what XGS-PON can provide have opened the door for 25GS PON as a potentially important tool in operators’ toolboxes. The current strength in fiber buildouts and the need to address new use cases today has resulted in a list of operators who simply can’t wait for 50G PON to be fully standardized, tested, and productized. As such, other industry standards group, including the Broadband Forum, are working with 25GS-PON and looking at developing testing and interoperability standards for the technology.
While standards bodies have traditionally defined which technologies get adopted and when there are certainly cases where operators have placed their thumbs on the scales in favor of a preferred option. These choices don’t generally go against what the standards bodies recommend or are working towards. Instead, they satisfy a more immediate internal requirement that doesn’t mesh with the proposed standardization, certification, and product availability timeline defined by the standards bodies and participating equipment suppliers.
Larger operators, including AT&T, BT Openreach, Comcast, and Deutsche Telekom, have also become far more comfortable over the last few years defining standards and pushing them through other industry organizations, such as ONF and the Broadband Forum. These operators know they have the scale, market potential, and, most importantly, internal technology and product development engineering teams to drive standards and thereby influence the product roadmaps of their incumbent equipment suppliers.
And that’s what appears to be happening with 25GS-PON. The growing list of service providers taking part in the 25GS-PON MSA has a general consensus around their PON technology choices: Use GPON and XGS-PON today for the bulk of your residential FTTH deployments, and then add in 25GS-PON using the same equipment and ODN where it makes strategic sense.
This strategy is no different from other access technology strategies and deployment models seen in the past. From ADSL to ADSL2+, VDSL to G.fast, and GPON to XGS-PON, broadband access networks are in a constant state of upgrade. It just so happens that they are now being extended to support other use cases and other end customers. The PON market, as well, has always been one offering different technology options to suit each operator’s unique use case requirements and competitive dynamics. That flexibility is proving to be particularly beneficial in today’s hypercompetitive broadband environment, in which each operator might have a different starting point when it comes to fiber deployments, but likely has similar goals when it comes to subscriber acquisition and revenue generation. In this environment, many operators have clearly said that they simply can’t wait on a promising technology when they need to establish their market presence today. And so, the vendor ecosystem has responded again with options that can steer them down a path to success.
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As analysts, we are increasingly asked to speculate on how Artificial Intelligence will impact various segments of enterprise and service provider networks. My colleague, Stefan Pongratz, began our collective responses to these requests with anexcellent piece on how AI will impact mobile RAN investments.
For my piece on how AI will impact broadband networks, I thought I would start by posing the question to ChatGPT, the generative AI platform, to see what it would suggest as AI’s impact on broadband networks and services. My specific query was “How will artificial intelligence impact broadband networks and services?” Here are the verbatim results:
Artificial Intelligence (AI) is poised to have a significant impact on broadband networks and services in several ways. Some of the key impacts include:
Network Optimization: AI can be used to optimize the performance of broadband networks by analyzing data in real-time and making adjustments to network configurations. This can lead to better utilization of network resources, reduced congestion, and improved overall network efficiency.
Predictive Maintenance: AI-powered analytics can help predict potential network failures or issues before they happen. By analyzing data from various network components, AI can identify patterns that indicate impending problems, allowing for proactive maintenance and reducing downtime.
Enhanced Customer Service: AI can be employed in customer service applications to provide personalized support, answer customer queries, and troubleshoot common issues. AI chatbots can handle a significant portion of customer interactions, improving response times and overall customer satisfaction.
Quality of Service (QoS) Improvement: AI can monitor network performance and prioritize certain types of traffic based on user demands. This can ensure that critical services, such as video conferencing or online gaming receive higher priority and a better quality of service.
Network Security: AI can play a crucial role in identifying and mitigating cybersecurity threats on broadband networks. By analyzing vast amounts of network data, AI can detect unusual patterns, potential attacks, and vulnerabilities, helping to enhance network security.
Network Traffic Management: AI can optimize network traffic routing, especially in scenarios with dynamic traffic patterns. It can analyze real-time data to redirect traffic through the most efficient paths, reducing latency and improving user experience.
Content Optimization: AI can analyze user behavior and preferences to personalize content delivery. By understanding individual preferences, AI can recommend content, advertisements, and services that are more likely to resonate with specific users.
Network Planning and Expansion: AI can assist in planning and expanding broadband networks by analyzing demographic and usage data. This can help service providers determine where to invest in network infrastructure, ensuring that resources are allocated efficiently.
Resource Allocation: AI can help allocate network resources based on demand and usage patterns, dynamically adjusting bandwidth to accommodate peak periods and preventing network congestion.
Network Virtualization: AI can be utilized in software-defined networking (SDN) and network function virtualization (NFV) to optimize the allocation of virtual resources, making networks more flexible, scalable, and cost-effective.
While AI offers numerous benefits to broadband networks and services, it also presents challenges, such as ensuring data privacy, addressing ethical concerns, and maintaining transparency in decision-making algorithms. As AI continues to evolve, its impact on broadband networks and services is likely to become even more profound.
This might be dangerous to say, but I couldn’t have said it any better myself. All of the network impacts ChatGPT identified are definitely aligned with what we hear from broadband service providers around the world. This is especially true when it comes to proactive network and infrastructure management.
We are already seeing a small, but growing list of operators using machine learning tools as a first step in improving the overall reliability of their broadband access networks. Comprehensive, active monitoring of fiber broadband networks and optical assets has generally been reserved for long-haul and metro Ethernet networks. But for broadband access networks, fiber monitoring has generally been limited to identifying physical fiber cuts or bends and then rolling a truck so a technician can use a handheld OTDR or PON power meter to determine the location of the physical issues. Broadband network operators have always struggled with balancing cost and reliability, which is why they have typically relied on reactive toolsets as opposed to proactive ones.
But with the increased investment levels and long-term strategic significance of fiber broadband networks for both enterprise and residential applications, service providers are increasingly introducing machine learning and AI platforms to help them anticipate and correct network issues before they are impactful. Self-healing broadband networks are the goal.
Beyond ChatGPT’s fairly astute responses, there are also other impacts that AI will have on broadband network spending and services:
AI will Result in Additional Subsidies to Expand Broadband Accessibility and Affordability
COVID-19 was the first of a two-part wave of governments understanding the need for their citizens to have access to broadband and, in many cases, subsidizing the expansion of broadband networks to reach previously unserved locations as well as subsidizing the affordability of those services to learn, work, and engage in commerce from home.
AI—particularly generative AI—is the second part of that wave that will keep governments investing in the broadband networks and services of the future. Somewhat lost amidst all the speculation of how transformative generative AI will be to GDP, as well as how individuals even interact with the Internet and each other, is the fact that no government and no service provider, for that matter, wants to be known as the entity that left its citizens or its subscribers behind.
Therefore, we expect legislators in many countries will push for additional investments to be made to expand the availability and affordability of broadband services. Along those lines, AI tools will prove very useful in the critical task of mapping and identifying locations and communities that lack necessary broadband speeds. In the US, for example, AI tools are being used throughout the BEAD (Broadband Equity Access and Deployment) process to get the most accurate determination of broadband availability at the census block level to start. Ultimately, these datasets can be further parsed so that availability and performance can be determined at a per-street level. The goal, of course, is to ensure that the capital is used as efficiently as possible to eliminate broadband deserts. But AI tools will eventually help governments and service providers determine where their speeds and service levels might not be evolving quickly enough to support the needs of their communities and ensure that a broadband divide doesn’t become an AI divide.
The combination of AI and the Metaverse will Drive Increasing Traffic Requirements
The metaverse is often cited as a reason why service providers need to deploy fiber networks despite today’s applications and content generally not taxing those connections. Though the metaverse will ultimately have an impact on broadband service requirements in both enterprise and residential networks, it is the combination of generative AI and the metaverse that will really be a catalyst for speed growth and continued latency and reliability improvements.
In gaming, VR, and AR applications, the combination of generative AI and the metaverse will dramatically improve how users interact with their environments. The ability to use natural language to create new worlds or to navigate those worlds while also being able to request statistics about those environments in real-time will result in a whole new universe of content creators, and game and application designers. Their ability to successfully create and interact with their 3D and immersive environments will depend largely on their connectivity.
Obviously, the data centers running the real-time engines powering these immersive environments will experience the biggest demand. But there is expected to be some distribution of processing at the device level and at the edge of networks, which means that broadband capacity and throughput will also have to scale up based on users’ requirements.
The impact of using natural language to search, shop, and interact online, as well as to control in-home or in-building IoT sensors, for example, will have a significant impact on overall traffic growth. Where online searches used to be fairly-static requests for particular URLs, using natural language to make similar requests, while a convenience for users, requires significantly more language model processing and broadband connections that can support high downstream and upstream speeds.
And it goes without saying that securing these interactions will be critical, which will also introduce additional bandwidth requirements as well as SLAs and service tiers that match subscribers’ levels of risk tolerance.
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The US broadband market has certainly become the most dynamic in the world. For decades, cable operators dominated net new subscriber growth, added millions of new homes passed annually, and compiled a dominant position in the market with a penetration rate of 65% or more. Even during the pandemic, cable operators saw their net subscriber additions per quarter accelerate, as they were able to poach dissatisfied DSL customers and attract first-time subscribers with the help of the FCC’s Affordable Connectivity Program.
But just as cable operators had reached their peak of subscriber growth, the rapid expansion of 5G-based fixed wireless access services put an end to cable’s quarterly gains. Now, the largest US cable operators are dealing with flat to modest net subscriber growth on a quarterly basis, with some quarters showing net subscriber declines. As a result, cable operator CEOs have started to change their tune slightly, moving away from calling fixed wireless an “inferior technology” to acknowledging its impact in creating a “high churn environment.”
But cable operator executives still continue to downplay the long-term impact that 5G FWA will have on their addressable share of broadband subscribers. They will claim that the pull-forward of broadband net subscriber additions during the pandemic combined with the general slowdown in new housing starts and moves—the typical drivers of subscriber growth—is the reason for the poor quarterly performance in new subscriber additions. They will continue to argue that 5G fixed wireless just doesn’t measure up to current DOCSIS service tiers—let alone any of the upgrades they are making through their mid- and high-split activities.
And yet both T-Mobile and Verizon continue to add FWA subscribers (both residential and small business) at a furious clip, with T-Mobile emphasizing that 51% of its fixed wireless customers come from cable operators. Verizon just announced the net addition of 384K FWA subscribers in 2Q23, pushing the company’s total subscriber base to 2.26M. Consumer FWA additions were 251K, while business additions were 133K. T-Mobile is expected to post even stronger subscriber gains in the second quarter, even as its FWA subscriber base in 1Q23 reached 3.2M through a net increase of 523K subscribers.
T-Mobile has a stated goal of serving 7-8 million subscribers by the end of 2025, while Verizon has a goal of serving between 4-5 million subscribers by the end of 2025. Collectively, that’s a potential subscriber base of anywhere from 11-13M subscribers. Those numbers don’t include the entry of AT&T in the 5G FWA market via its Internet Air service, which could net anywhere from 1.5-2M subscribers by the end of 2025, according to our estimates. Unlike T-Mobile and Verizon, which are offering their FWA services nationwide, AT&T’s service is aimed at retaining current DSL customers who are located in areas that will not be offered a fiber alternative as part of the company’s 30M-location fiber buildout. According to our estimates, that leaves an addressable market of approximately 13-15M locations. Though our take rate estimates are relatively low for the service, it is possible that AT&T could expand the reach of Internet Air if the service shows early signs of success at securing new subscribers and keeping churn rates low.
In total by 2025, the three major mobile operators could have a combined FWA subscriber base of nearly 15M, with a good percentage of those having shifted over from cable. And this only represents the potential subscriber drain caused by FWA. By 2025, fiber overbuilders will have dramatically increased their footprint with a product that is certainly going to have better take rates than any flavor of DSL offered over the last two decades. Suddenly, that 65% share of broadband subscribers in the US looks like it is poised to potentially drop well below 60% by 2025.
Cable operators will point to capacity issues as a major impediment to further FWA growth beyond the stated subscriber goals. But with the operators ready to unleash more C-band spectrum and likely to use that spectrum to harvest additional FWA subscribers, the short-term pain for cable operators doesn’t look like it is going to disappear.
And let’s not forget that if capacity does become an issue in certain markets, then both AT&T and Verizon can offer fiber as an alternative to ensure they don’t lose subscribers. From this perspective, T-Mobile is a bit of a wildcard. However, we believe T-Mobile will advance a strategy of partnering with open-access fiber network providers to offer a residential fiber service in markets where FWA capacity might be constrained.
Weathering the Storm
Cable operators aren’t standing still, of course. They are increasing the bandwidth and mix of service tiers through a combination of band splits and spectrum improvements in their access networks. They are improving the reliability and signal quality of their networks through DAA deployments. Compared with fiber overbuilds, these are relatively inexpensive upgrades that will pay dividends down the road.
But in the short term, the two most important tools cable operators have to combat subscriber churn are price-competitive fixed-mobile bundles and RDOF- and BEAD-subsidized rural and edge-out projects. The subsidized projects, which major cable operators like Charter have already used to expand their homes passed footprint and will continue to use through 2025, will be a major source of annual homes passed, especially in a market where new home construction through the first half of 2023 remains lower than in 2022. These subsidized buildouts are in markets that are expected to have very high penetration rates and a guaranteed return on investment. Additionally, while the number of passings for the subsidized buildouts is well-defined, there are likely to be thousands of what are known as “synergy passings,” where locations outside the subsidized census blocks can also be addressed and captured.
On the fixed-mobile bundle side, the large cable operators have consistently added a disproportionate share of new mobile subscribers over the last few quarters and are also seeing the penetration rates among their broadband subscriber base increase. This mobile growth certainly provides a counter to FWA growth. But all things being equal, the major cable operators would rather have those broadband subscribers back.
The push and pull of subscribers isn’t expected to slow down anytime soon. Certainly, with inflation continuing to put pressure on household budgets, consumers are going to be focused on keeping their communications costs low and looking for value wherever they can find it. That means we are returning to an environment where subscribers take advantage of introductory pricing on services only to switch providers to extend that introductory pricing once the initial offer expires. That shifting and its expected downward pressure on residential ARPU will likely be countered by increasing ARPUs at some providers as they move existing DSL customers to fiber or, in the case of cable operators, move customers to multi-gigabit tiers.
The US broadband market is definitely in for a wild ride over the next few years as the competitive landscape changes across many markets. The net result is certain to be shifts in market share and ebbs and flows in net subscriber additions depending on consumer sentiment. One thing that will remain constant is that value and reliability will remain key components of any subscription decision. The providers that deliver on that consistently will ultimately be the winners.
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In our second blog on 5G Advanced, we outline the paths to 5G, and ultimately to 5G Advanced, regarding the 5G Core. We summarize the added functionality and refinements of the 5G Core in Releases 18 and 19 of the 3GPP standards. Finally, we review some of the implications and expected trends that 5G Advanced will enable. The heart of new monetization opportunities for Mobile Network Operators (MNOs) resides in the capability of the 5G Core to allow new use cases, some of which may still need to be imagined.
The Path to 5G Standalone (5G SA)
As shown in Figure 1, the path from 4G to 5G can take several routes—from the simplest to the most challenging implementation—including:
Dynamic Spectrum Sharing (DSS)—allowing 5G to run on 4G radio access networks (RAN)
5G Non-Standalone (NSA)—allowing Dual Connectivity (DC) between 4G eNB radios and 5G New Radios (NR); NSA utilizes the 4G Evolved Packet Core (EPC)
5G Standalone (SA)—which utilizes only 5G components
The 5G SA network essential components include:
5G NRs in a single configuration with or without Carrier Aggregation (CA)
5G NRs in a DC configuration
5G Core
Worldwide, 786 Mobile Network Operators (MNOs) have launched public 4G SA eMBB services, and about 200 of these have commercially deployed 5G NSA eMMB services (Source: GSA, April 2023). As of June 2023, Dell'Oro Group counts 43 MNOs implementing 5G SA eMMB networks (Figure 2).
5G Core
5G SA is the most challenging path for migrating to 5G. To walk this path, MNOs must transform their legacy LTE networks with EPC—which may have Physical Network Functions (PNFs) or Virtual Network Functions (VNFs) with a reference point architecture—to 5G SA networks with the 5G Core. The 5G Core embodies a modern cloud Service Based Architecture (SBA) with container-based Cloud-Native Network Functions (CNFs) that can operate on virtual or bare metal servers (Figure 3).
To take advantage of the promise of 5G, MNOs and Enterprises must deploy 5G SA, with its modern 5G Core cloud architecture, so they can enable new services and use cases that are not necessarily available in 4G and 5G NSA networks. There are two primary requirements needed to facilitate new enterprise use cases: networks that are (1) private and, at the same time, (2) deterministic with low latency.
Figure 4 illustrates how MNOs can meet the needs of enterprises with Mobile Private Networks (MPNs) with the 5G SA network architecture.The lowest cost 5G MPN for an on-premises enterprise network is via an MNO-provided 5G Dedicated MPN (a.k.a., Public Network Integrated NPN (PNI-NPN)) with an MNO partner. A unique Data Network Name (DNN) for the on-premises RAN ensures network privacy. An on-premises Multi-Access Edge Computing (MEC) node, which includes the compute and storage for the enterprise use cases, provides low latency and data sovereignty. For enterprises that require off-campus geographic coverage, the 5G Shared MPN (a.k.a., PNI-NPN) offered by an MNO can meet the requirement for a private connection via the Network Slicing Selection Function (NSSF) for the RAN and Public MEC node.
Over 10,000 MNO-provided MPNs have been implemented in China for various enterprises and institutions, with very few MNO-provided MPNs implemented outside China. Thanks to the broad implementation of Public Multi-Access Edge Computing (MEC) nodes by China's MNOs, enterprises with geographic coverage requirements can now run low-latency applications for real-time and near real-time communications via the MNO-provided 5G Shared MPN. In addition, many Chines enterprises worked with China's MNOs, placing Private MEC nodes on-premises at their physical locations; this enabled low-latency applications on campus via an MNO-provided 5G Dedicated MPN. In China, over 50 industries have now implemented low-latency applications in an MNO-provided 5G MPN environment.
In addition, over 800 enterprises in China have multiple campuses with 5G connectivity. Therefore, they leverage the 5G Wide Area Network (WAN), which enables high throughput Virtual Private Networks (VPNs) operating through the MPN intranet (MPN-VPN). Conventional VPNs must be routed through third-party servers to connect to the Internet; this lowers the downlink speeds and adds latency to the connection. In contrast, the downlink rate of MPN-VPNs is three times higher, and MPN-VPNs also have a 50% lower latency advantage for content traveling within the MNO's intranet. The 5G Core offers the important advantage of enabling the 5G WAN with a mesh architecture of the distributed User Plane Functions (UPFs).
The most straightforward way to meet the requirements for high throughput and low latency is for enterprises to build and operate 5G Standalone MPNs (a.k.a., Standalone Non-Public Networks (SNPN)). But, building and operating 5G SA MPN requires more capex and management know-how than an MNO-provided 5G MPN. For enterprises that lack the management know-how, outsourcing the construction and operation of their networks will increase their costs (Figure 5).According to GSA's May 2023 Private Mobile Networks report, there are 275 Enterprise-owned 5G MPNs worldwide, and 230 Enterprise-owned 4G + 5G MPNs worldwide, totaling 505 Enterprise-owned 5G MPNs. However, most of these are Proof-of-Concept (PoC) or field trials. They are located primarily outside of China.
The rollout of 5G SA networks has been slow. 5G NSA and 5G SA were both standardized in 2018. In 2019, 5G NSA networks began rolling out, followed by 5G SA networks in 2020. As noted, there are over 200 5G NSA networks today, and just over 40 5G SA networks. Except for the MNOs in China, Shared and Dedicated MPNs by MNOs that include the new 5G features, like network slicing and MEC, have been slower to roll out. Also, enterprises’ 5G Standalone MPNs have yet to progress to the volumes as predicted several years ago. Indeed, the industry seems to be stuck in limbo, with enterprises repeating the same two- and three-year Proof of Concepts (PoC) for many of their applications. In other words, we have not yet seen the coming to fruition of:
Industry forecasts of data growth are almost exponential, with no end in sight, driven by video. On the consumer side, streaming video and cloud gaming will be the drivers, and on the business side, applications enabled with Computer Vision will drive growth. Computer Vision is considered a "killer application" use case enabler, because of the many capabilities it has when coupled with the right AI/ML data analytics. Figure 6 lists top industrial use cases enabled by Computer Vision high-performance Artificial Intelligence of Things (AIoT) devices.
Eventually PoCs and trials will be completed, and Enterprises will start implementing these solutions. Some argue that 2023 will be a breakthrough year, during which more MNOs will launch 5G SA eMMB networks.
5G Advanced
Looking ahead to what comes next? 5G Advanced will emerge on the horizon, and it will enable vital new applications for the 5G Core. The 3GPP standards body defines 5G Advanced as Releases 18 and 19. No 3GPP specification will be 100% correct at inception. As lab, PoC, and field trials occur, the industry learns which refinements are necessary, and specifications are updated accordingly. Below is a list of advancements and new capabilities that are being defined and developed for Release 18 per 3GPP:
XR (Extended Reality) and media services
Edge Computing Phase 2
System Support for AI/ML-based Services
Enablers for Network Automation for 5G Phase 3
Enhanced support of Non-Public Networks Phase 2
Network Slicing Phase 3
5GC Location Services Phase 3
5G multicast-broadcast services Phase 2
Satellite access Phase 2
5G System with Satellite Backhaul
5G Timing Resiliency and Time Sensitive Communications (TSC) and URLLC enhancements
Extensions to the TSC Framework to support Deterministic Networking (DetNet)
Evolution of IMS multimedia telephony service to SBA
Personal IoT Networks
Access Traffic Steering, Switching, and Splitting (ATSSS) support in the 5G system architecture Phase 3
Proximity-based Services (ProSe) in 5GS Phase 2
User Plane Function (UPF) enhancements for Exposure and SBA
Generic group management, exposure, and communication enhancements
5G UE Policy Phase 2
Uncrewed Aerial System (UAS), Uncrewed Aerial Vehicle (UAV), and Urban Air Mobility (UAM) Phase 2
System Enabler for Service Function Chaining
Seamless UE context recovery
Multimedia Priority Service (MPS) when access to EPC/5GC is WLAN
3GPP's latest release is Release 18.1. The process will take us to the end of 2023 before Release 18 is frozen. Thus, we expect that more refinements and updates to the standards specifications included in Release 18 will be forthcoming.
Per 3GPP, early Release 19 studies include:
Network of Service Robots with Ambient Intelligence
Energy Efficiency as service criteria
Upper layer traffic steering, switching, and split over dual 3GPP access
Uncrewed Aerial Vehicles (Phase 3)
Satellite Access (Phase 3)
Roaming value added services
AI/ML Model Transfer (Phase 2)
Integrated Sensing and Communication
Ambient power-enabled Internet of Things
Localized Mobile Metaverse Services
Network Sharing Aspects
Future Railway Mobile Communication Systems (Phase 5)
Supporting Railway Smart Station Services
3GPP will publish the explicit content of Release 19 in September 2023.
What trends can we foresee? While nobody's crystal ball is perfect, some trends that we anticipate, other than the Computer Vision AI/ML discussed above, include:
Spatial Vision Technology
Spatial Vision Technology (a.k.a. naked-eye 3D) has caught the public's attention on massive new digital 3D billboards worldwide, like one in New York City, shown in Figure 7. Spatial Vision Technology provides an immersive 3D experience with the naked eye without needing VR glasses.
This concept has been around for almost a decade without achieving much commercial success. Still, with the advent of 5G and its high data throughput and low latency capability, new players are emerging to move this technology to the smartphone. It has already begun to emerge on laptop PCs, with the launch of two new laptops with 3D OLED screens from ASUS at CES 2023 in Las Vegas. These ASUS laptops may be the first to introduce naked-eye 3D on an OLED screen versus on an LED screen. Regarding a format that comes closer to a smartphone form factor, ZTE introduced a tablet with a 3D screen at MWC Barcelona 2023.
With any new display technology, such as HD, 4K, and 8K, generating new content can become a problem. In 2022, Huawei launched technology to convert 2D content to naked-eye 3D content, thus creating the required 3D content.
As naked-eye 3D technology takes off, processing that migrates network traffic from terminal rendering to cloud rendering will increase 3-fold to 10-fold.
IMS Core SBA
Integrating the IMS Core into the 5G Core SBA will upgrade voice and video calling with new immersive capabilities, like Spatial Vision Technology. The IMS Core SBA introduces Data Channel Media Function (DCMT) and Multimedia Resource Function (MRF). Applications envisioned are real-time voice translations from one language to another (as Hollywood depicted in the Star Trek TV series with the "communicator" in the 1960s); visualized voice calling; and intelligent processing of media. The intelligent processing of media, such as audio streams and video streams during calls, means that new calls can realize the functions of changing backgrounds and avatars, and audio streams can be converted into subtitles. These new functions, once added to the IMS Core, will enable a much richer user experience with three-channel communication capability (audio, voice, interaction) and native AI real-time media processing.
IoT enhancements
Though Reduced Capacity (RedCap) radios are not a 5G Core technology per se, they will reduce the cost and complexity of implementing IoT devices in a 5G SA network, thus enabling more use cases that the 5G Core will have to manage. One example noted in Figure 6 above is Artificial Intelligence of Things (AIoT); enterprises will use more AIoT devices with the introduction of RedCap-enabled AIoT devices.
A Personal IoT Network (PIN) is a configured and managed group of PIN Element(s) (PINE) that can communicate with each other directly, communicate with each other via PIN Element(s) with Gateway Capability (PEGC), or use a PEGC to communicate with devices or servers that are outside the PIN via the 5G network. A PIN includes at least one PEGC and is managed by PIN Element(s) with Management Capability (PEMC). The PIN can also have a PIN Application Server with an AF functionality. The PEMC and PEGC communicate with the PIN Application Server at the application layer over the user plane. With these self-managing PINs, PINs will move the industry toward the Massive Internet of Things (MIoT) (Figure 8).
Integrated Sensing and Communications (ISAC) will enable ubiquitous IoT. New sensing capabilities beyond today's position sensing capability will be improved in 5G Advanced and will be further refined in 6G. Figure 9 categorizes use cases into four functional categories across different applications/industries.
High-accuracy localization and tracking
Simultaneous imaging, mapping, and localization
Augmented human sensing
Gesture and activity recognition
Optimized UPFs
As 5G LANS are implemented, and different use cases are implemented within the same 5G LAN, the necessity for optimized UPFs arises. For Spatial Vision Technology and XR communications, a high-performance UPF will be required for a 10-fold increase in network traffic. For URLLC applications like Time Sensitive Networking (TSN), a special UPF will be necessary to handle higher concurrency connections and reliable and redundant backup without downtime. In addition, optimized UPFs are required for both media applications and MPN-VPNs.
Artificial Intelligence/Machine Learning (AI/ML) Data Analytics
AI/ML are the engines behind the Data Analytics required to automate real-time and near real-time decision-making based on raw data from IoT sensors and devices. In the case of the 5G Core, the data will be generated by events coming from all of the network functions of Network Analytics provided by the Network Data Analytics Function (NWDAF). The sheer volume of data that may need to be analyzed—on the scale of petabytes—could never be handled manually. MNOs will need to adopt a mix of analytic approaches for consumer and industrial enterprise use cases based on data types, workloads, and the business problems that users are trying to solve. There are three categories of Analytics:
Descriptive Analytics answers questions about what happened in the past
Diagnostic Analytics offers insights into why those events happened
Real-time Analytics (On-demand Analytics or Streaming Analytics) includes:
Predictive Analytics analyzes current and historical data to provide insights into what might happen in the future
Prescriptive Analytics suggests actions an organization could take based on those predictions
Cognitive Analytics automates or augments human decisions
Examples of which use cases employ which kind of analytics include: 5G Network Analytics via MWDAF using Predictive Analytics, and Digital Twin modeling using Prescriptive Analytics.
Generative AI
Generative AI refers to a category of artificial intelligence (AI) algorithms that generate new outputs based on the data on which they have been trained. Unlike traditional AI systems that are designed to recognize patterns and make predictions, generative AI creates new content in the form of images, text, audio, and more.
Generative AI uses a type of deep learning called generative adversarial networks (GANs) to create new content. A GAN consists of two neural networks: a generator that creates new data and a discriminator that evaluates the data. The generator and discriminator work together, with the generator improving its outputs based on the feedback it receives from the discriminator until it generates content that is indistinguishable from real data.
Generative AI has a wide range of applications, including:
Images: Generative AI can create new images based on existing ones, such as creating a new portrait based on a person’s face or a new landscape based on existing scenery
Text: Generative AI can be used to write news articles, poetry, and even scripts; it can also be used to translate text from one language to another
Audio: Generative AI can generate new music tracks, sound effects, and even voice acting
This section on generative AI was created using a language model AI trained by OpenAI. The AI was trained on a large dataset of text and was able to generate a new article based on the prompt given. In simple terms, the AI was fed information about what to write about and then generated the article based on that information.
Generative AI is a powerful tool that has the potential to revolutionize several industries. With its ability to create new content based on existing data, generative AI has the potential to change the way we create and consume content in the future
Whether it is creating new content with AI/ML or analyzing data with AI/ML, more compute power will be required, and if this compute power must meet certain latency requirements, AI/ML could drive up the demand for more edge computing or MEC.
Summary
While some believe that 5G SA and, subsequently, the 5G Core market and its associated applications, are developing slowly, we should remind ourselves that it is only the beginning of year 4 of a typical 10-year journey for a specific standard like 3G and 4G. 5G will have a journey similar to that experienced by 3G and 4G; namely, it will take about ten years before moving on to 6G. Because of the revolutionary move to a cloud-native service-based architecture, it may take a little longer for 5G to achieve the momentum that many anticipate. The good news is that 5G works. The lab, PoC, and field trials may take a little longer due to the nature of the technology and new use cases, but the technology is there. The 3GPP standards body has had a great vision, but it will take some time to bring it to commercial reality.
