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20 July 2020

Huawei ban will delay UK 5G, but that may offer a breathing space to MNOs

The UK government’s U-turn on allowing Huawei to supply the country’s 5G networks (see separate item) has all kinds of political and trade connotations. But it may also affect the cost and speed of deploying 5G, and put paid to successive governments’ vague but noisy promises to be a ‘5G world leader’.

The operators, especially BT and Vodafone, had warned of potentially billions of dollars of extra costs if they had to rip out existing Huawei equipment, in a last-ditch attempt to persuade the government not to impose an outright ban, but to stick with its previous policy of capping Huawei equipment at 35% in the 5G RAN and in fiber networks, while barring the vendor from core networks.

Even the government minister responsible for the 5G program, culture minister Oliver Dowden, sounded notes of warning when announcing the new decision. He said the ban will delay full 5G build-outs by up to three years and cost as much as $2.5bn extra.

And in the wake of the decision, Vodafone repeated its calls for the government to cancel the upcoming auction of a second round of 5G spectrum, and just allocate the airwaves equally between the MNOs, for the reserve price.

“Return on investment in telecoms in the UK is amongst the lowest in the world,” Vodafone UK CEO Nick Jeffery told the Financial Times newspaper. “With additional money being taken out of the mobile industry from the decision on Huawei, now is the time to focus on ensuring operators can still afford to invest in the network this country deserves.”

In fact, the government has acceded to one of BT’s demands, to give a seven-year period to replace Huawei gear, and the deadline for full removal is now 2027 – which begs the question of how scared politicians really are of Huawei’s equipment being used for espionage on behalf of the Chinese state, the ostensible reason for the ban – the claims are hotly denied by the vendor. But providing the long period led BT to reassess the costs it said it would incur to remove Huawei kit, which should now be at the same level it had previously estimated, around £500m.

For the operators, the issue is not just about 5G. It can be argued that the dual blows of the pandemic crisis and the uncertainty over Huawei have given UK operators some breathing space to ensure their 5G strategies are clear, with strong ROI prospects. So the new ruling could be a valid excuse to slow down 5G roll-out and firm up the business case.

But the replacement will not just be a matter of taking out some 5G base stations which were, arguably, deployed before they were really needed by the business. All 5G so far has been deployed in Non-Standalone (NSA) mode, with the 4G core, and in most cases, the 5G upgrade has been done in software in a 5G-ready LTE base station, or a SingleRAN platform that supports 2G, 3G, 4G and 5G. There is also increasing use of multiband, multi-RAT radio/antenna units. In other words, the 4G and 5G networks are closely tied together and replacing equipment presents risks of outages and performance issues for existing services, not just 5G.

Any impact on 4G quality of experience would be worse news, in the short term, than delayed 5G. Telefónica’s O2 UK unit is still smarting from the loss of customer satisfaction that resulted from a high profile and major outage in late 2018. The company will be glad that it is the only UK MNO which does not face major challenges as a result of Dowden’s announcement, since it sources nearly all its 4G and 5G RAN and core equipment from Ericsson and Nokia.

The other three operators had taken a different view of the main vendors. Huawei was the main supplier to BT’s EE mobile division in the earlier phases of 4G, although Nokia was later added as a second vendor. EE is in the process of removing its Huawei evolved packet core and will now have to address the RAN.

Three had selected Huawei as its main 5G RAN supplier, to replace Samsung, which had provided most of the 4G network. Three is working with Nokia on its 5G core and says its installations of Huawei base stations so far amount to less than 25% of its RAN.

Vodafone’s CTO, Scott Petty, had planned to upgrade those 4G base stations provided by Huawei to 5G with the same vendor. In March 2019, he said Huawei provided 32% of the company’s 18,000 UK base stations, with Ericsson being the dominant vendor, with 56% of the base stations installed, and a deal to replace some of Nokia’s share (which amounted to 12% at that date).

But at least the UK government will have to drop its gung-ho approach and give operators time to stabilize amid the recession while planning the replacement of Huawei equipment.

Last year, when deployments were beginning, the UK was one of the countries whose administration was keen to be a ‘5G leader’, and MNO insiders complained of being put under pressure to deploy faster than the business case merited. The use cases for which 5G is a major differentiator are, in the main, enabled by future updates to the standards, such as ultra-low latency, as well as the 5G core. Before those are implemented, operators are spending their money on, in effect, a faster 4G+ network for existing, cost-averse consumer bases.

A more measured pace of upgrade, a breathing space to plan the all-important 5G core, and time to see how emerging platforms pan out, could all outweigh the cost and disruption of the rip-and-replace programs that will now have to take place. And those replacement processes could get quicker and easier as the seven years tick by.

Nokia recently announced an approach that could dramatically reduce the time and cost to upgrade sites (see separate item), no doubt to appeal to operators worried about vendor lock-ins and technology dead ends. The big vendors make a lot of money from roll-out services, but they often have to fund rip-and-replace deals themselves in order to win the new customer, so they are motivated to make the process easier and cheaper too.

And Ericsson denied that the time and cost estimates being used by the UK operators to lobby the government against a Huawei ban were realistic in the modern platforms. Arun Bansal, the head of the vendor’s business in Europe and Latin America, said his company was currently doing rip-and-replace in nine countries.

“The way mobile networks are built, every 5-7 years there is some sort of swap anyhow,” he said. “We do more than 100,000 swaps every year, which is two times the entire UK installed base.” In the UK, it is estimated that about 12,500 Huawei-supplied sites will need to be replaced, about half of them Vodafone’s.

Bansal told the BBC, in response to warnings of outages and black-outs: “We need to work with government and with operators to put in timeline. We can do our part. We have technology leadership, we have the supply chains, we have more than 2,500 engineers employed locally.”