MNOs choices in 5G; Slash costs or die

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The term 5G has been hyped and hyped for the past few years and the hype is set to continue, but it is only now, as we approach a clear definition of how 5G will actually be installed that we can see it is a very different beast from previous generations of cellular technology.

Technology research company Rethink has been in constant contact with mobile network operators (MNOs) and many have confidentially shared their plans for implementing 5G with them, and from this the company has constructed a report.

One of the key findings is the following:  There will be no sudden wash of generous contracts which stimulate equipment vendors and their share price

In fact operators are looking to spend about half of what they spent on 4G roll out during the early years of 5G.

This report analyses the objectives, timelines and barriers which MNOs see to implementing 5G strategies in the period to 2025, based on a survey of over 100 senior executives within Tier 1 and Tier 2 operating companies, combined with in-depth interviews with a selection of those executives, and with key vendors, standards and open source organisations, and R&D efforts in this field.

The key theme that runs through this report is that 5G will follow a very different pattern to that of 3G and 4G in terms of architecture and regional patterns. It will not be a capex windfall for the vendors – operators will prioritize coexistence with 4G and architecture to prolong the life of existing investments.

There will be heavier reliance on outsourcing and on open platforms to reduce cost and transfer cost further than ever from capex into opex. Operators will spread their investment over a decade and will look to spend as little as half the capex on 5G roll-out that they did on 4G.

The reason behind all of this are the new network architectures operators will embrace such as virtualised RAN and hyper-densification, as well as Massive MIMO antenna arrays, all of which will be used in 4G before 5G arrives. When 5G comes it will push those few operators who have not gone down this route, into these new architectures.

One or two high profile operators plan to upgrade their Macro base stations first with 5G, because they see 5G as a medium term replacement for 4G. But most will use the new radios to densify selectively while keeping their 4G investment alive, as well as embracing WiFi more aggressively.

Despite the headlines generated by a few early adopters, most operators are struggling to find a business case for investing in wide-scale 5G, and will not make significant investments until the business models becomes clear.

Rethink also believes that as the 5G era begins, it will be characterised by a greater diversity of operators. This will be enabled by several trends, such as:

The emergence of shared and dynamic spectrum for 5G

  • The emergence of self-contained, virtualized local RAN and core
  • Flexible, on-demand wholesale platforms supported by network slicing

For the first time, a new cellular standard will not be the preserve of just existing MNOs. Rethink expects to see heavy industry pressure to accelerate work on 5G-Unlicensed and on multi-operator technologies which enable a wider range of service providers. The speed with which the industry responds will also help decide the role of WiFi in 5G.

Many MNOs will only invest heavily in 5G where that will reduce total cost of delivering services and data;

  • reduce total cost of delivering services and data
  • fill gaps in capacity or coverage cost-effectively
  • support new revenue streams which would not be well addressed by 4G, such as low latency use cases or flexible wholesale platforms enabled by network slicing.
  • enable the MNO to penetrate a new market or geography, or gain significant first mover advantage in existing ones.

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