For the past couple of years in the USA, we wireless watchers have had the fun and fascination of the ‘5G race’ with China, and the biggest spectrum auction of all time. But now it’s time for us, and the operators, to come back down to earth, stop thinking of grand visions and promises, and understand how the telcos are going to turn all that frantic network build-out and spectrum bidding into profitable business.
The USA’s 5G build-out may not, whatever the politicians say, have the scale of China’s, but its operators and ecosystem are highly influential over the whole global industry. In many ways, US operators are atypical – in the spectrum they own; the high ARPUs and capex budgets they command; their competitive landscape. But their decisions to drive new architectures or adopt new service or pricing models are closely watched by operators in many other markets.
In trying to analyze the key developments in the USA, and how the 5G market will develop, we believe the operators’ recent regulatory filings and investor meetings have raised four critical questions, which relate either to spectrum assets or to new platforms. The answers and outcomes, which Wireless Watch will be watching closely over the coming months, will shape the market landscape in the USA, with knock-on effects for the world ecosystem.
These questions are:
- How quickly will the 5G enterprise market grow, and which service providers will benefit most from it – telcos, private network operators, webscalers, vendors such as Nokia, or a fragmented combination?
- Will the USA finally achieve a broad wholesale network that can support many MVNOs, enterprises and service providers from a common cloud framework, and what will that mean for the operators?
- Which operator will prove to have the best spectrum, not just on paper, for coverage and targeted capacity, but to support the most profitable services and locations?
- Was millimeter wave spectrum mainly just for showing off, enabling Verizon and AT&T to score early mover laurels, or will it support a truly new 5G business model?
- Will an open, disaggregated architecture really transform the 5G cost base, or will its benefits, if these materialize, be centered on new revenues, and perhaps on a future phase of 5G?
All these big topics were hinted at in a string of regulatory filings, capital markets days and earnings calls conducted by the big three operators and Dish Network. But there was also a tone of realism, and a recognition that the time has passed to rely just on marketing slogans and 5G promises. Before the operators can fully address the big business questions outlined above, they need to be very clear about their spending, and revenue opportunity, for the challenging year ahead.
The three national MNOs are increasingly pursuing different paths when it comes to 5G. Verizon deployed first, but initially only for fixed wireless, a strategy borne of necessity because of its lack of midband spectrum. Now, it has spent huge sums in the C-band auction, and more money on implementing dynamic spectrum sharing (DSS) in order to use 4G spectrum for 5G too.
AT&T, too, has invested large sums in the midband spectrum that delivers high 5G capacity without the propagation challenges of millimeter wave. And it has been chasing T-Mobile USA – which was a global outlier in deploying 5G first as a coverage network in sub-GHz spectrum – in the 600 MHz band too.
Though T-Mobile remains in the best position in terms of overall spectrum, with the huge 2.5 GHz assets it acquired with Sprint to complement 600 MHz and millimeter wave, the other two operators are now on a far more level playing field with the challenger. But they are aiming to differentiate rather than merely engage in a head-to-head race, and each has different strengths.
T-Mobile has the broad coverage and the marketing wizardry, and is building 5G on a good foundation of strong customer growth and brand perception in the 4G phase.
AT&T has been the most radical in exploring new architectures to reduce its cost of ownership and support high commercial agility, but the results of that are slow to kick in of course. Meanwhile, the company has slipped into third place in terms of mobile market share, making its strong moves in some industrial 5G services, in sectors like automotive, especially important.
Verizon is the most serious about fixed wireless, and is aiming to deliver a fixed/mobile platform over far more of its footprint than it can address with fiber (TMO is also promising a fixed/mobile proposition, including TV, but with less broad usage of mmWave spectrum). Verizon, as always, differentiates itself by quality of its network, and it has been the most advanced US telco in pursuing the quality of service, and the efficiencies, that come from converging fixed and mobile at staffing as well as network levels.
Of course, this is not just a traditional picture of two entrenched telcos being worried by a challenger (and a much-enlarged challenger, since TMO acquired Sprint). There are also other disruptive forces at work. Dish Network may become a significant competitor, especially if it takes over the wholesale-centric model that has been, in the past, championed by Sprint, Google and Ligado, though not yet fully delivered.
The cablecos, particularly the partnership of Comcast and Charter, have been cautious about spectrum purchasing, but still have the potential to harness their customer bases, their readymade xHaul networks, and their ability to pool resources, to be disruptive to the big telcos.
And of course, the webscalers are getting more active in providing core network and connectivity services from the cloud to enterprise customers, while the CBRS shared spectrum will enable many smaller local or enterprise operators to enhance their business models.