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12 July 2019

Fiber is crucial to 5G economics, but China needs another 3bn kilometers

The 5G roll-out is as much about fiber as wireless. Nokia executives have often said that 5G is a wireline network as well as a cellular one, and the company has supported that view by abandoning a previous strategy to focus only on mobile broadband, and invest heavily in wireline technologies courtesy of the acquisition of Alcatel-Lucent.

Ownership of fiber, or affordable access to it, is critical to the 5G business case. One reason why Japanese operators can move rapidly and boast of far lower capex levels than most of their counterparts elsewhere is the fiber situation. Market leader NTT Docomo says it has invested steadily over recent years in upgrading and expanding its fiber – to support enhanced backhaul, fronthaul and converged access for 5G. That will greatly reduce its capex spike for its 5G launches in 2019 to 2022, and will enable it to offer differentiated performance and services from day one.

Japan has one of the most affordable dark fiber markets in the world, which is important to mobile-only operators and new entrants like Rakuten – the latter is also accelerating its roll-out of 4G, and later 5G, and reducing its costs, by partnering with several energy utilities, which have extensive fiber assets to leverage too.

By contrast, other regions with aggressive 5G timetables are less fortunate when it comes to having a readymade fiber infrastructure. Even China, which is deploying 5G at vast scale, is well behind where it needs to be, to offer fiber access plus 5G xHaul to the same standard as other major telecoms economies like the USA or Japan. And of course, it has a huge population to cover – according to Dan Zhuang, president of YOFC, China’s largest fiber company, the country will need to lay a further 3bn kilometers of fiber to reach the western average of just over one kilometer per head of population.

This is not just about 5G or FTTx – enhanced WiFi, especially the new WiFi 6 standards, are important too, to delivering a new level of broadband experience while keeping total cost of ownership down. “We believe optical fiber, when combined with WiFi, has laid a solid foundation for the 5G generation,” he told the MWC Shanghai event last week.

The pressure to invest quickly in these new fiber networks will be intensified by the plan for Chinese operators to transition from current 5G NR Non-Standalone networks (which work with the existing 4G core) to Standalone platforms. Those will be accompanied by changes to the whole architecture, including far wider deployment of virtualized RAN, small cells and edge computing, all of which will require fiber to be very high quality and low latency, and to penetrate cities, in particular, very deeply.

He cited data predicting that annual global fiber demand will increase from 590m kilometers to 650m kilometers by 2030. As of the start of 2019, the world has an estimated 4.2bn kilometers of fiber, or 650 meters per person.

The Chinese government has the ability, in a planned economy, to insist on the kind of cross-industry cooperation and sharing which has provided Japanese operators with such a strong fiber springboard for 5G. Already, China Unicom has been rescued by investments from a variety of industrial partners, which also bring infrastructure assets to the party.

And operators round the world are looking for unconventional partners to share the cost of fiber and other infrastructure to improve the 5G business case. An example is Vodafone UK, which has not only invested in its own fiber with the acquisition of Cable & Wireless, but has partnered with disruptive fiber provider CityFibre. In a 2017 deal, the two companies agreed to deploy gigabit fiber to up to 5m premises by 2025, a network that can also be used for 5G xHaul and converged access. The network will be built, operated and owned by CityFibre but Vodafone will have the right to a period of exclusivity (mostly during the build phase in each city) – so that it has a head-start in marketing services to consumers and businesses.

The UK is becoming a more competitive fiber market, as start-ups have offered an alternative to the dominant OpenReach (incumbent BT’s wholesale arm). CityFibre is one of the most active, and recently partnered with Cross Keys Homes, a social housing owner, and Comms 365, to extend fiber access and set up IoT testbeds in the UK city of Peterborough.

CityFibre is investing more than £30m in Peterborough along with Vodafone. In a trial based on three city locations, real time IoT data was transmitted from sensors to a network of antennas and then onto the CityFibre network, supporting applications such as humidity and heat monitoring, fire risk alerts, and smart parking.

Clayton Nash, CityFibre’s group head of product, said: “This has been a fantastic opportunity to evaluate the potential of fiber networks to support the IoT use cases.”

Such innovations must encourage regulator Ofcom to protect the shoots of fiber competition, argue the MNOs (which mistrust OpenReach’s relationship with market leader BT/EE) and other customers and challengers. “The spark of competition has transformed into a small flame, but that small flame can be snuffed out if not protected,” said CityFibre’s CEO, Greg Mesch.

CityFibre plans to deploy a fiber spine in more than 70 locations around the UK. And national service providers like Sky and Virgin Media are increasingly working with challenger fiber operators on a regional basis rather than insisting on national contracts, which are hard to support except by dealing with OpenReach.