Tier 1 wireless carriers’ 2Q16 financial results showed aggregate capital expenditures (capex) growing 11 percent sequentially from 1Q16 but at lower levels, down 14 percent, compared to spending in 2Q15.
The good news is that the Tier 1s maintained their guidance for full-year capex. AT&T was the outlier suggesting its 2016e capex is trending towards the “low end of the range” without specifying a number.
The Tier 1s, collectively, are planning network investments totaling $26.9 billion in 2016e. That figure is down 11 percent from the $30.2 billion these national carriers spent in 2015. The Tier 1 carriers account for an estimated 96 percent to the total public wireless carrier capex in the United States.
Yet capital spending remains heavily concentrated. Verizon leads the pack with $11 billion or 41 percent of the Tier 1s’ total. Followed by AT&T at 31 percent of the total.
The lion’s share of the investment, more than 60 percent, is applied to radio access network (RAN) infrastructure – macrocells, small cells and DAS. All carriers still are spending on macrocell upgrades and expansions to 4G LTE coverage and capacity in multiple frequency bands. Network densification is accelerating, however, with a shift in spending toward indoor and outdoor small cells, and in-building DAS deployments.
The Tier 1s spent $12.9 billion or 48 percent of their aggregate 2016e budget through mid-year. The $6.8 billion in 2Q16 was up 11 percent sequentially from $6.1 billion in 1Q16 but down 14 percent compared to $7.9 billion in 2Q15.
Capex among Tier 1s should ramp steadily through the balance of the year, even at reduced levels from 2015. We expect 3Q16 spending to stay flat with 2Q, then uptick by 8 percent to $7.2 billion in 4Q16 as the Tier 1s round out their full-year budgets.
The lower but steady spending is little conciliation for wireless equipment vendors and professional service providers for the current year, at least. Nonetheless, accelerated infrastructure spending through year-end, mainly to meet unrelenting mobile data demand, bodes well for continued network expansion into 2017 and beyond.
John Celentano is a principal in Skyline Marketing Group, which provides technology marketing & sales strategy advisory in advanced communications services, and wireless, telecom, data networking infrastructure markets. Additionally, support is provided for internal positions in market analysis, business development, strategic planning, strategic marketing, product management, product marketing, sales operations.
For more information, go to https://www.linkedin.com/in/john-celentano-4822692
With the race to 5G officially on, two U.S. carriers, AT&T and Sprint, this week proudly announced their first achievements in this new frontier of wireless connectivity. Verizon Wireless is field testing at 28 GHz, but has not reported results, and T-Mobile plans trials in the second half of 2016 in the 28 GHz band, as well.
“Each of these trials is looking at better understanding the new techniques and possibilities of 5G and learning from them,” said Chris Pearson, president, 5G Americas. “All the major nationwide carriers have laid out their plans for 5G testing, each being a little different.”
AT&T reached speeds above 10 gigabits per second in early 5G tests with Ericsson, and it is now working with Nokia to expand its 5G lab trial work into system and software architecture in Middletown, New Jersey, Atlanta and San Ramon, California.
“We’ve seen great results in our 5G lab trials,” said Tom Keathley, senior vice president – wireless network architecture and design, AT&T. “Nokia is joining to help us test millimeter wave, which we expect to play a key role in 5G development and deployment.” The OEM is supplying test equipment for a variety of 5G technology building blocks and features.
In addition to reaching multi-gigabit speeds, the carrier’s initial 5G lab trials also simulate
real-world environment conditions, such as data spikes similar to a concert or football game.
Sprint Gets its Kicks with 5G
The other major announcement this week was Sprint’s demonstration of 5G at the 2016 Copa América Centenario tournament in Santa Clara, California.
The system used 73 GHz millimeter wavelength spectrum to deliver peak download speeds of more than 2 Gbps, which the soccer fans used to stream 4K high-def video and to view live streaming virtual reality from VideoStitch with low-millisecond latency.
Additionally, the system used beam switching, a method of tracking the device, selecting the best antennas, and sending their signals to targeted locations.
Can the 3GPP Standards Process Keep Up?
In the past it has been pretty easy for OEMs to develop their own proprietary technology, creating an alphabet soup past of acronyms. But it appears that the unity found in LTE continues to be the rule.
“All of the carriers are looking to contributed to the standards process what they learn,” Pearson. “As long as we don’t get ahead of ourselves and promise things to customers before the ecosystem is built, the tests and trials are very much a help to the carriers as they provide input to our association and the 3GPP standards process.”
AT&T said it is structuring its 5G trials to contribute to the international 5G standards development so it easily become compliant commercial deployments once standards are set by 3GPP.
“The work coming out of AT&T Labs will pave the way toward future international 5G standards and allow us to deliver these fast 5G speeds and network performance,” Heathley said. “We expect 3GPP will likely complete the first phase of standards-setting process in 2018.”
On the other side of the water, Belgium is getting on board with 5G as the country’s telecom minister has authorized their Institute for Postal Services and Telecommunications to find spectrum that could be temporarily allocated to mobile operators and research centers looking to carry out 5G trials. According to reports, the regulator is currently working with Ericsson to analyze the most suitable bands for 5G technology.
“There are a lot of tests and trials being performed around the world, including Europe and the Asia/Pacific region. A lot of governments are working closely with these carriers. But I think the North American region is in fine shape in terms of 5G development and the timing of the technology trials,” Pearson said.
For those of you longing for the go-go days of Project VIP, this may not be it. But in the next five years, AT&T will grow its smalls by up to 90 percent, while macrocells will increase by 10 percent, Krish Prabhu, president, AT&T Labs, and chief technology officer, AT&T, told an audience at the Cohen and Company’s Technology, Media & Telecom Conference, June 2, in New York.
“As we go to enhanced mobile with more bandwidth to the device, small cells will be a key element in the architecture,” he said. “We are looking at it pretty aggressively depending on the market and where small cells make sense.”
AT&T’s spend will shift based on demand, whether it is small cells, new spectrum, new antenna technology, carrier aggregation or sophisticated modulation such as 256 QAM, according to Prabhu.
“The wireless network enhancement never stops, whether it is enhanced mobile broadband or low-latency services for autonomous cars, the wireless network needs to continue to evolve,” he said.
With mobile 5G still many years away, the majority of pre-standard 5G deployments will be in fixed-wireless, according to Prabhu. Besides, he noted the 28 GHz band is only currently allowed by the FCC for fixed wireless use today. AT&T currently serves rural areas with fixed LTE wireless and does not own any 28 GHz, 38 GHz and 39 GHz spectrum but will be in the market for it in the future.
Before 5G-type speeds will be introduced — pre-standard, millimeter-wave, fixed-wireless technology must be proven out and the marketplace economics model must make sense.
“Most of what you will see over the next few years will be fixed wireless applications,” he said. “The question is whether market economics will create the demand for the 5G millimeter wave service, which will provide gigabit-type throughput.”
5G fixed wireless has been helped by advances in smart antenna technology, such as massive MIMO and beamforming and beam steering, and smart receivers, according to Prabhu.
“Massive MIMO works very well at higher frequencies, because the wavelengths are so small you can tap into a lot of antenna elements,” he said. “There is the belief some of the early impediments in field propagation can be overcome with smarter receivers that can reconstruct the signal that has been degraded. Time will tell if the technology is there and there is market demand.”
Unlicensed spectrum, carrier aggregation and millimeter wave frequencies will all play well together in small technology, Prabhu said.
“Unlicensed spectrum has power limitations, and millimeter wave propagation gets very bad after several hundred meters, so they both must be close to the user,” he said. “People are talking about using carrier aggregating to combine unlicensed spectrum with licensed spectrum to get more bandwidth.”
At this year’s Kentucky Derby, AT&T set a record for peak data usage of more than 815 Gigabytes in a single hour thanks to a DAS engineered by Mobilitie. During last year’s peak hour at the Run for the Roses, 474 Gigabytes crossed AT&T’s network.
Data usage on AT&T’s venue-specific wireless network at Churchill Downs, COWs (Cells on Wheels) and nearby cell sites used for the Kentucky Derby was more than 6.7 Terabytes, which is a 31 percent increase in data usage compared to last year. Data traffic from both Friday’s Kentucky Oaks and Saturday’s Kentucky Derby races, which had a collective 290,000 attendees, came in at 11.4 Terabytes.
The DAS system installed by Mobilitie for the 142nd running of the Kentucky Derby at Churchill Downs is one of the largest venue systems, with more than 290 antennas and more than one million feet of fiber optic cable.
AT&T and Mobilitie upgraded the antenna system at the venue this year, adding more than 50 percent more LTE capacity to the existing wireless network at the venue for AT&T customers. It was the fourth year in a row that improvement have been made.
April 28, 2016 — Both Verizon and AT&T are talking 5G this month. Verizon says the have “ambitious plans” to commercialize 5G. in fact, they want to be the first company to roll out 5G. Interestingly, Verizon sees the first case for 5G to be the replacement of fixed wireless.
That is rather interesting. According to Verizon CFO Fran Shammo, 5G is not a replacement technology.
“This is not a capital intense overlay of the 4G network,” he said during the latest earnings call. “It is really all about high-speed video delivery over a wireless network in a very efficient way.” I guess they plan to do that with fixed wireless from what I am able to assess.
That is even more interesting. Granted video, and the rest of the multimedia streaming platforms will be a large part of the data tsunami that 5G is supposed to handle, but claiming that 5G is simply video is, IMHO, a bit of tunnel vision.
I am not sure why that is so important to Verizon. Sure, it is a potential market but fixed wireless isn’t something new and certainly not a major component of 5G. Most of 5G will be densification and that will require implementation of next-generation technologies like SDN and NFV, and multiple HetNet components, and a lot of small cells. Does Verizon see replacing wireline broadband with fixed wireless as a primary focus for 5G, or is this just their test bed scenario? Let’s hope it is just to test the technology waters.
I know the big four are looking at video as the next great opportunity for carriers, but I’m pretty sure that 5G is not just about high-speed video delivery.
AT&T, is on the fixed wireless bandwagon as well, but they explain it as the platform to find out how mm wave technology works, and their test bed is fixed wireless. But they don’t make any brash statements about 5G as Verizon does.
A 5G Marketing Ploy?
There is some concern in the 5G ecosystem that leap-frogging to become the first player with “5G” technology will blur the real vision of 5G. For example, South Korean operators intend to launch some form of 5G technology for the Winter Olympics in February 2018. However, first official release of a 5G standard isn’t expected until mid-2018.
That leads to speculation that just adding a few new features to 4G, in the next year or two, as part of 3GPP Release 13 and 14, will cause some “creative” marketing executives to prematurely dub such progress as 5G.
Contrary to Verizon’s seeing video as the primary driver for 5G, some see gaming as the next killer market, according to Newzoo BV. The researchers say that mobile games will generate almost $37 billion in revenue this year, even though most of them are free downloads. That works because the game developers make money through advertising and through selling in-game goods and add-ons that that enable players to do more inside the game.
In the long run, I believe that mobile gaming will far outpace video in the 5G landscape. The big question here will be latency. Video can be buffered, games are real time and they are not very forgiving if the network bogs down. Here too, small cells, SDN, and NFV will play a key role in the 5G network model.