As operators look to virtualized RAN and commoditized, open source base stations to slash the costs of deploying 5G networks, those savings could be cancelled out by the need to invest in large amounts of fiber to backhaul large numbers of cells, and to provide fronthaul links between cells sites and virtualized, centralized baseband units.
Some mobile operators, of course, are part of converged groups which already have dense fiber in place and can monetize it with multiple services including access, backhaul and enterprise. NTT Docomo of Japan, for instance, has talked of the relatively low capex cost it expects for 5G because it already has so much fiber installed – in the right places, and of the right quality, to support next generation mobile (which is not the case for all wireline networks – some are very extensive but will need upgrading to support the stringent performance and latency demands of 5G Cloud-RAN).
The mobile-only operators will present an opportunity for wholesale and dark fiber providers, if they are not in a position to invest in acquiring or deploying the lines directly. Undoubtedly, access to affordable, high quality fiber will be a significant critical success factor for all MNOs, and that was recognized in Germany’s 5G strategy plan, which was published last week by the Federal Ministry for Transport, Innovation and Technology.
The Ministry called on the country’s telcos to make a “significant” increase in their fiber spending to enable Germany to have a high performance 5G network in operation by 2025. However, it does not appear to be offering state funding for this wireline expansion. Instead, the document says the government assumes “that network operators will significantly increase their investments in fiber optics for connection to base stations”.
The Ministry says its role will be to create the right conditions to encourage private sector investments in wireless and backhaul by easing access to new sites including street furniture. The government has set up a working group to look at using public utilities’ passive infrastructure, as well as federal assets such as government buildings, to support fiber and radio expansion. The document outlines plans to test a range of smart city use cases across as-yet unidentified urban areas, with applications invited from local authorities.
The document does not put a figure on the required spending, just saying: “To achieve the full performance of 5G networks, massive infrastructure investments by network operators will be required.”
Other parties are trying to figure out how “massive” that will be. At Mobile World Congress, Deutsche Telekom’s CEO Timotheus Höttges said it would cost between €300bn ($342bn) and €500bn ($570bn) to blanket Europe with 5G, citing the high costs associated with deploying and backhauling large numbers of cells (especially in millimeter wave bands with their short range). The European Commission’s 5G Action Plan, by contrast, is more optimistic, saying it will cover €57bn ($65bn) to cover the EU.
The operators are well aware of the challenge of deploying backhaul and fronthaul to huge numbers of cells, at an “industrial scale”, as Vodafone UK’s head of mobile networks, Kye Prigg, put it recently. That operator is an example of an MNO which is dangerously reliant on the incumbent telco (BT, also owner of Vodafone rival EE) for fiber, and is considering making the huge investment required to roll out its own lines. It has already done that in Germany, where it acquired the leading cableco KDG.
The incumbents have dilemmas too however. Deutsche Telekom has resisted a major expansion of fiber to the home or office because it is concerned that the government will force it to open those networks to rivals on regulated terms. While it plans to invest about €12bn ($14bn) in capex across all its markets this year – up 9% on 2016 excluding spectrum – much of this is going on wireless, new IT architectures, and upgrading copper networks using vectoring. In 2018, it thinks its capex bill will decrease slightly.
But in the German government’s view, it is essential to the national interest that the operators work out these challenges rapidly. Digital infrastructure minister, Alexander Dobrindt, said the strategy would make Germany the “innovation leader in 5G”. He said: “5G is the foundation of the gigabit company. With the superfast mobile phone standard we give the starting shot for the digital real time age. We are the first country to present a comprehensive 5G strategy. We want Germany to provide a high performance 5G network by 2025. We are pushing the grid roll-out, providing frequencies and testing 5G in cities and municipalities.”
He concluded that the strategy would “put Germany at the forefront and create the foundation for digital value creation”.