A few days ago, AT&T chief executive Randall Stephenson said that China is not beating the United States on 5G — yet. According to Stephenson, Chinese 5G networks remain in trial stages, he said at an event hosted by the Economic Club of Washington, D.C. This, perhaps, to allay the hand-wringing from the Trump administration, and policymakers, about America’s ability to compete with China in the 5G space.
However, a few days before that, China announced that The Hongqiao Railway Station in Shanghai China, one of Asia’s biggest traffic hubs, has launched a 5G network using Huawei’s 5G digital indoor system that will allow passengers to experience data speeds, up to, 100 times faster compared to LTE. Hmmm… we must not be reading the same news bytes or drinking the same Kool-Aid.
There is some interesting reading in all of this.
AT&T claims to have 5G up and running in dozen markets. However, it seems like an empty claim without phones. To be fair, China does not have any phones either. So, will the winner of the 5G race be the one who has phones first? That could be another one of the many bogus claims to have won the 5G race.
Essentially, without handsets, systems are just taking up space, here, there, anywhere. Stephenson claiming we are ahead, behind, even, whatever, is really just smack talk against China.
What makes all of this even worse is AT&T’s claims to have been the first in 5G late last year. It was a hollow victory, if it was a victory at all. As well, they tried to pass off some chicanery in 4G as 5G (5GE and 5G+). At this point, I have a hard time believing anything they say as being other than embellishment. This latest statement by Stephenson takes even more credibility away.
Why does this matter? Because this is one of the big problems facing the wireless industry, today, and why so many consumers are unaffected by 5G. Misstatements, embellishments, ignorant statements, or even outright lies make it that much harder to buy into the technology and its benefits. A chief executive should know better.
There are warning signs about all this that are beginning to bubble up. However, it seems that the companies on the edge of wireless do not believe the signs or are just pushing ahead for fear of losing momentum. Lately, there has been noise around companies taking a hard look at their outlays for 5G in light of some of the economic data that has surfaced.
For example, while only one segment of 5G, smartphones are seeing some serious speedbumps, relatively speaking. 2018 saw, for the first time, negative growth in smartphones. Granted, the percentage was small, but the implications are huge. As well, the introduction of the over $1000 phones did not receive the warm welcome that was predicted.
There are other signs, as well. Sluggish government action to provide the necessary framework to advance 5G as quickly as some deem necessary, particularly at the local levels where permits are often slow in coming.
Then there is the indoor deployment segment. Carriers and others still have no real methodology to deploy indoor 5G networks that can meet the needs of users in crowded, high-density areas where thousands of people, simultaneously, want to use the network.
Sports venues have provided some data for such environments but that may, or may not, play forward to 5G networks without hiccups. The theory is there, but the use cases have yet to be implemented. Moreover, as one knows, all too well, there is that adage, which says anything that can go wrong, will.
Next, take the U.S.’s stance on Huawei. It has failed in its attempts to derail Huawei, worldwide. Just today, across the Atlantic, Andrus Ansip, European Commissioner for Digital Single Market, is suggesting the Commission resist an outright ban across the bloc.
For the United States, this is pretty much the worst-case scenario. Our political influence and economic power has been undermined and the United States’ belief in its own influence has clearly been over-estimated. That is just another nail in the U.S. Huawei-ban coffin.
Whether we like it or not, Huawei is the leading company producing the necessary 5G network components. The U.S. government’s ban does not bode well for unimpeded 5G progress here, even with other vendors stepping in to fill the void.
Since nobody else is on board with the Huawei ban, they are all moving forward without being hamstrung, widening the 5G gap between the United States and the rest of the world. I have discussed the Huawei situation in past missives so I will not go into it here.
Now, circling back to the types of statements made by industry leaders. The fact is that 5G is far from a done deal, anywhere. There are chinks in the armor. It is fraught with trials and tribulations – some technical, some economic, some political, some geographic, some financial, some perceived, and some imagined. Pile on top of that the huge pool of embellishment, almost truths, wishful thinking, Kool-Aid drinking, and the cold, hard truth is that we have a long hard road ahead before we can breathe a sigh of relief and 5G hits its stride.
Statements like those by Stephenson are, IMHO, just embarrassing.
In the wake of purchasing DirecTV, AT&T executives told an analyst conference, Aug. 11, in Dallas about the carrier’s plans to integrate its nationwide TV and mobility service and broadband footprint through a software-defined network.
The big question AT&T is addressing is how its network can handle, logistically and economically, the increase in data that is required by video. The network has already withstood an increase of 100,000 percent in data between 2007 and 2014, a year in which mobile video traffic doubled.
“We think it is very important because in a world of video this industry cannot cost-effectively deliver the capacity without fundamentally rethinking the core network architecture,” said Randall Stephenson, AT&T chairman and CEO. The underlying platform that will make it all possible is a software-defined network, he said.
Battling Moore’s Law
John Donovan, senior executive VP AT&T technology and operations, noted later in the conference that Moore’s Law cannot be applied to networking, at least not in the current paradigm.
“The cost curves of computing, silicon, storage, the deployments, software development – have all decreased exponentially,” he said. “The cost of network has only decreased at a linear pace. And with exploding demand, that isn’t a fast enough trajectory.”
AT&T plans to virtualize and control 75 percent of its network by 2020, using cloud infrastructure in a software-defined architecture. The foundation, 5 percent of the network, will be completed by the end of 2015. Software-based architecture brings scale, flexibility and cost efficiency, Donovan said.
“Industry growth projections expect 10X growth in demand. In order to deliver a reliable, cost-effective, leading edge network, we need to become a software company,” Donovan said.
The carrier has already introduced a software-defined network product, Network on Demand, which allows business customers to provision their own networks, adjusting bandwidth as needed to handle video and other applications that require only network data bursts. Available in 100 markets at this time, the SDN product is driving up to 95 percent improvement in provisioning cycle times.
November 20, 2014 — AT&T’s reduction in capital expenses guidance for 2015 was the result of completing several projects, including Project Velocity IP, AT&T’s Chairman and CEO, Randall Stephenson told the Wells Fargo Technology, Media & Telecom Conference on Nov. 12 in New York.
Project VIP has required a historic investment for four years now, Stephenson said. Capex, which spiked at $21 billion for the last two years, will slow to $18 billion in the coming year.
“I am not sure you could find a four-year string where a company has invested more in United States than we have during that period of time. It’s been a $20-plus billion a year effort, plus spectrum acquisition, plus fueling investments, acquisition to improve our footprint,” he said.
AT&T accomplished several things during that time. It built out its LTE network to reach its goal of 300 million POPs, deployed a lot of small cells, ran fiber to 650,000 businesses and increased Internet speeds to 57 million homes.
Considering the spike in the last four years, Stephenson said it was only natural for capex to come down, noting that $18 billion is the industry norm of 15 times run rate.
Regulatory Uncertainty May Pull Capex Down Further
Stephenson’s remarks came in the wake of President Obama’s remarks that the FCC should reclassify the Internet as a Utility under Title II of the Telecommunications Act. He said that if regulatory uncertainty surrounds the Internet could cause the carrier to reduce its capex even further.
“And while the rules probably are not going to change in the two to three year timeframe, we are now starting infrastructure projects that we don’t have any clarity or line of sight in terms of what rules those will be governed under,” Stephenson said. “So you are doing multi-billion investments and you really have no clarity in terms of how those investments will be regulated.
That can have no effect other than to cause one to pause.”
Jess L. Lubert, Senior Analyst, Wells Fargo, said that AT&T’s comments cloud the carrier’s capex picture, raising questions concerning recent guidance offered by communication equipment suppliers.
Not just AT&T was spooked by the President’s comments. Verizon and Frontier Communications both noted how much capital they have risked in building out their networks, according to Jennifer Fritzsche, Wells Fargo senior analyst.
“Lots and lots of talk about goings on in Washington, D.C., Fritzsche said. “The most controversial commentary came from AT&T, which noted that spending related to its fiber push out (GigaPower) may have to ‘pause’ until some clarity on this Title II is seen.” She added that other companies argued that a free and open Internet would boost capital investment in the long run.
Despite lower capex forecasts, spending on towers will continue, with all four carriers declaring a need for more capacity, according Fritzsche.
“We continue to believe the U.S. environment is a very good one for towers right now,” she said. “While none of the carriers would speak to the spectrum auctions because of the ongoing AWS-3 auctions, we continue to believe this will be a catalyst for the sector.”
J. Sharpe Smith is the editor of AGL Link and AGL Small Cell Link newsletters.
Quotes from Stephenson are courtesy of Seeking Alpha.