MWC2015 Wrap-up Notes

MWCIf there’s a single theme to sum up this year’s MWC, it is the acquisitions that were announced. A number were announced and many are yet to be announced: NXP’s acquisition of Freescale ($11.8 bllion), HP of Aruba, Mitel of Mavenir, CommAgility of MIMOON are but a few examples. Consolidation is a natural outcome for an industry that transcends communications to offer multiple services including but not limited to entertainment, education, and financial services. So in a clear trend, we find more focus this year on how to enable mobile network operators (MNOs) generate more revenue as opposed to a focus on performance which is characteristics of past years. This represents a new level of maturity in a number of products and solutions that initially were brought upon as a mean to enhance performance but since have morphed into tools to generate revenue. It is also an acknowledgement that the status quo for MNOs characterized by eroding margins (EBITDA margins have dipped below 40% down from low 50% range a few years ago) has to change whereby data services are better monetized.

Additionally, a few other themes come through loud and clear at this year’s event. Convergence, virtualization and immersion are key words. None is really new, with convergence and virtualization being hyped in the past. But together, they are charting a path to redefine telecommunications. As for immersion, the focus towards consumer experience requires greater integration, compatibility and interoperability that is lacking still, but when it happens, it will provide the consumer with an ‘immersive’ experience and MNOs a tool to better monetize data services.

With this foreground, we lunge into some of the highlights and attractions:

Market disruption with Wi-Fi aggregation: Neither small cells nor carrier Wi-Fi has seen the expected traction to date. But now operators can leverage Wi-Fi for a secondary downlink channel to boosts throughput. This solution was demonstrated by a number of vendor including Qualcomm, Alcatel-Lucent and Intel. Small cell vendors watch out! The business case for small cells is predicated on demand for scarce capacity. Wi-Fi aggregation un-taps large swaths of unlicensed spectrum using already deployed Wi-Fi access nodes through software upgrade. This is powerful and threats to stunt the small cell market by relegating it to a mainly coverage solution as residential femto cells are. This is a highly disruptive proposition.

5G Hype machine ramps up. What was just an acronym last year is now exhibited in simulated demos by some of the large infrastructure vendors such as Ericsson, Qualcomm, and Intel and operators such as KT. Companies are putting their versions of what 5G is and is not, and alliances are being formed (e.g. SKT and Nokia). The process of standardization awaits the industry to define what it wants from 5G and there’s no shortage of opinions. Spectrum is yet to be defined, but will be on the agenda for WRC-15 later this year. As for requirements, the general consensus is on the need for scalability and power efficiency in addition to capacity which is not the sole driver. This is bound to force changes that will reverse some architectural decisions implemented in LTE to take advantage of technologies such as NFV and SDN. Nevertheless, from our vantage point in 2015 we ask: how will operators justify building 5G when OTTs continue to erode the margins of MNOs? And, what are the use cases that will generate the revenue streams that will pay for the massive investment 5G requires?

Mobile Edge Compute makes an entrance. MEC is perhaps the way operators will leverage to generate additional revenues from data services. Placing applications closer to the user is an old idea, but now it has a formal name and activity effort to enable it in a structured way through the recently formed ETSI SIG dedicated to MEC. Intel, Nokia, Huawei, Alcatel-Lucent, NTT Docomo and many others are supportive and active in realizing this objective, of course by leveraging general purpose processors that can be flashed with specific applications suitable for the context of the market or area of deployment.

License Assisted Access taking shape. LAA made an entry with a few demonstrations by several of the major vendors. LAA enables operating a secondary LTE in the 5 GHz license exempt band. This provides performance boost in capacity when demand is greater than what the primary LTE channel operating over licensed spectrum can provide. LAA is emerging as a technology for small cells especially in market like the US where FCC rules allow its implementation. The technology has been favored some players like Verizon while others such as AT&T and Cisco had reservations. This emerging technology promises tighter integration with LTE than Wi-Fi aggregation which leverages more favorable commercial context due to the large number of deployed Wi-Fi access nodes.

Cloud RAN advances. Goodbye small cells and hello Cloud RAN! Over the last few years, operators experimented with small cells and came across myriad of problems that are difficult to resolve. The main issue if the high capex and opex for small cells as well as performance problems. Cloud RAN offers a way to reduce capex and opex and provide enhanced performance. While this is too good to be true for many operators without their own fiber assets, those who do own fiber cannot ignore the benefits. It’s no surprise then that ALU, Intel, China Mobile and Telefonica teamed up is a demo of Cloud RAN in addition to other demos by a few other vendors. We see other players getting in on the act this year, like silicon vendor Cavium with highly scalable processing to enable a form of Cloud RAN that also enables mobile-edge compute features. One thing for sure: vendors now have a much clearer idea on how they will implement Cloud RAN.

IoT taking confusion. The Internet of Things was at the peak of the hype cycle in 2014, so it can only be downhill from now, right? Absolutely not! We are clearly at the early stages of IoT 2.0. This was evident by the presence of IT solution and service companies looking to provide backend solutions and services that leverage connectivity of devices. Intelligence and security are the game here. Companies such as IBM, SAP, and many others are moving fast to adapt solutions for this nascent segment. On the other hand, alliances continue to emerging to tackle interoperability and compatibility in connectivity and management, a trend that we expect to accelerate with the industry titans like Apple, Samsung, Google, IBM, Intel and others fighting it out on different fronts. Aside, in an interesting note, this year and for the first time, a session was dedicated to IoT startups to pitch their wears and ideas. More to come on IoT!

Voice over Wi-Fi catching on. Interest in VoWiFi is on the rise and for good reasons. Wi-Fi is in every enterprise and if carriers can route voice calls over Wi-Fi, it kills many birds in a stone: offload macrocells and avoid capex related to small cells. The driver behind indoor small cell volumes is voice traffic as data can be offloaded to Wi-Fi anyway. With VoWiFi, the business case for small cells takes a step back.

Wireless fronthaul is maturing. More operators are looking to leverage existing real estate assets to reduce operational expenses. This requires the ability to transport CPRI over the air as fiber is not always available everywhere. A couple of years ago, Ericsson demoed CPRI over microwave for the first time. This year, there were multiple wireless fronthaul solutions commercially available or under test from companies such as E-Blink, DragonWave, Ceragon, Fujitsu and NEC. While we expect CPRI over wireless to be a niche market, backhaul vendors are looking for new ways to improve sales in a difficult market.

Other notes.  There were some interesting outdoor small cell backhaul systems such as the one from Interdigital that uses a Peraso 60 GHz 802.11ad solution and features an adaptive array antenna that makes significantly reduces deployment effort. Nevertheless, our outlook on the outdoor small cell market is tempered with developments on the macro cell site where six sectored macro-cells will see greater traction (Asian operators taking the lead in such advances with Docomo in this case moving to such architecture).

In another note, SDN/NFV continues to advance with Telefonica making an update on their UNICA efforts and partnering with HP to further SDN/NFV in the core network. These technologies will propagate from the core towards the edge in due time considering the opex and capex savings that can be realized.


About Frank Rayal
Technology strategy, markets and M&As

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