Huawei MBBF: UK operators take sceptical view of 5G case

Huawei held its 2017 Global Mobile Broadband Forum in London this year, and several UK operators stood up to share their experiences – though senior executives from Vodafone and BT were hardly waxing lyrical about their expectations for 5G.

“The business case for 5G still needs to be built,” said Gavin Patterson, CEO of BT, owner of the largest mobile operator EE. Meanwhile, Vodafone’s CTO, Johan Wibergh, warned against “overhyping” 5G and said the benefits would be mainly about cost efficiency in the early stages, rather than new business opportunities.

In the first two years or so after initial deployment, operators would be able to reduce the operating cost of delivering mobile services, he said. Like other MNOs which aim to be fairly early to roll out 5G, he is looking for about 10 times greater cost efficiency than for 4G, which will enable operators to meet users’ rising data demands while reducing budgets and clinging on to profit margins, even amid price wars.

“The increased efficiency that you get from Massive MIMO and radio that can handle up to 100 MHz means 5G is about 10 times more cost efficient than 4G,” he said during his keynote address. “We should be talking more about this because at first it will be about mobile broadband, and cost is a challenge with growing data volumes.”

Aware that some operators and analysts are sceptical about the new revenue opportunities to be derived from 5G, Wibergh believes the case must first be made on the basis of efficiency. Certainly, MNOs should not hope for higher ARPUs just because they have a faster 5G network – very few operators succeeded in charging a premium for 4G over 3G, for instance, and initially the chief benefits of LTE were to attract and retain customers with higher peak data rates, and deliver that data more cost-efficiently.

However, as LTE evolved, some additional revenue-generating use cases were identified, such as machine-to-machine services based on NB-IoT, but for every positive example, there is a negative one – including the limited impact of LTE-Broadcast, for instance. So although 5G is being specifically designed to be flexible and to support many different network behaviors, from very low latency to very high capacity, it will be important that MNOs do not assume they can make money from all these new use cases. The base case must still rely on enhancing the cost-efficiency and competitiveness of their tried and trusted applications, and then aim to build up from that as demand emerges for new wireless services.

On that note, Wibergh warned the audience against misleading customers about 5G’s capabilities in its early stages. He said: “If we don’t talk about when things will happen, you will get a message the audience won’t understand. If you talk about cost efficiencies and the things you can do in the first two years, you will get a more realistic scenario.”

He believes 2G and 4G were more successful than 3G because they represented a step-change in performance rather than an evolution, and were less hyped to customers, but instead made realistic and deliverable promises.

Vodafone plans to turn off some 3G systems in some European markets in 2020 or 2021, in order to refarm the spectrum for 5G, and it has made some early investments in pre-5G technology in Spain, where it installed 10 Massive MIMO base stations in central Madrid during a recent event.

And in Italy it is running a test network, aiming to deploy about 120 base stations by the end of 2019. Wibergh said the company is now testing over 40 different 5G use cases with a total of 21 partners.

Meanwhile, BT’s Patterson told the same forum that it is currently hard to make the business case for 5G. “5G will get its time, but we need to make sure we get the most out of 4G,” he said. “We need to ensure we actually get an ROI out of the 4G networks, while also building a business case for 5G.” This is why it is important that 4G and 5G have a long period of coexistence.

“I’ve been speaking to CEOs around the world, and we’ve all been struggling to make the business case work,” Patterson continued. While 5G may reduce operational costs once the upfront investment has been made, that investment is currently too high. For instance, the dream of dense networks and ubiquitous 5G coverage will require a large number of points of presence and other elements, which will not come cheaply. And Patterson pointed out that there was a clear need for 4G – to deliver the internet everywhere, in a way that 3G had failed to do. But that urgent demand for 5G has yet to materialize, since many of the most discussed opportunities, such as self-driving cars, are many years away from the mainstream.

FCC frees up more mmWave spectrum amid calls for prompt auctions

The FCC is coming under fire for its assault on net neutrality, but in another area, the new administration under chairman Ajit Pai is building on the good work started by his predecessor Tom Wheeler. That area is millimeter wave, where the US is making a strong claim to be setting the global pace in freeing up high frequency spectrum for 5G. In an order passed last week, the FCC is aiming to open an addition 1,700 MHz of spectrum for wireless use.

This adds to the 11 GHz earmarked in the Spectrum Frontiers report of July 2016, when the FCC voted to open up 3.85 GHz for licensed usage, and nearly 7 GHz in a 64-71 GHz unlicensed band. The new ruling adds 700 MHz of spectrum in the 24 GHz band and 1 GHz in the 47 GHz band.

In addition, the FCC proposes to maintain unlicensed use in the 64-71 GHz band; and to modify Part 15 rules to allow unlicensed in-flight usage on board most aircraft in the 57-71 GHz band.

One of the most controversial aspects of mmWave spectrum policy is conflicts of interest between wireless and satellite industries, with fixed or mobile satellite services being incumbent in some bands. The FCC says it will reserve spectrum in the 48.2-50.2 GHz and 40-42 GHz bands for satellite use and proposes to adjust rules on the siting of earth stations, where these would fall in core terrestrial wireless bands, to incentivize the satellite companies to move their earth stations to less populated areas and reduce potential interference between the two types of communications.

The FCC turned down petitions from some contributors to its consultation process to cap the amount of 24 GHz and 47 GHz spectrum a single bidder could buy at auction.

There are trials in mmWave spectrum in many countries but the US has made the most progress in identifying precise airwaves and starting to consult on processes and licensing conditions.

The risk in moving so early, of course, is that the US will go down its own path and the rest of the world will not follow. For instance, identifying 28 GHz as a candidate band was out of sync with the bands selected by the ITU at World Radio Conference 2015 (WRC-15) for study for 5G usage – that body has 26 GHz on its list. However, if there is sufficient real world activity in 28 GHz, that might be sufficient to ensure this band is included in the final allocations, to be decided at WRC-19.

Though the US and South Korea are working with 28 GHz, and may hope to present the WRC with a fait accompli, most European regulators are focusing on ITU-earmarked bands such as 26 GHz. UK regulator Ofcom said: “When it comes to the pioneer bands for 5G, we have identified 26 GHz and not 28 GHz as the high frequency band. In a February discussion document, Ofcom identified three pioneer bands – 700 MHz, 3.4-3.6 GHz and 26 GHz. However, UK towerco Arqiva recently acquired 28 GHz spectrum covering London to launch a fixed wireless network.

Verizon and AT&T, which are conducting extensive trials in 28 GHz and 39 GHz and plan to launch 5G services from late next year, for fixed wireless access (FWA) initially. They are using test licences, or spectrum in these bands which they have acquired or leased from existing owners (some of the 28 GHz and 39 GHz, or LMDS, bands are already allocated for FWA).

Earlier this year, for instance, they engaged in a bidding war for Straight Path, one of the companies which acquired LMDS spectrum licences after the fixed wireless bubble at the turn of the century burst, leading to several bankruptcies and availability of cheap mmWave assets – which are now being seen as valuable again in the run-up to 5G. Verizon outbid AT&T to buy Straight Path for $3.1bn, gaining 735 licences for in 39 GHz plus 133 licences in 28 GHz. These licences cover the entire US, including the top 40 markets, with an average of 620 MHz in the top 30 markets. This represents about 95% of the commercially available 39 GHz licences and a significant portion of available 28 GHz spectrum, the company says.

Previously,  AT&T had secured some 39 GHz licences with its purchase of Fibertower while Verizon gained the rights to 28 GHz spectrum as part of its acquisition of XO Communications.

The FCC has pledged to open up almost 11 GHz of mmWave spectrum for licensed 5G services, in the 28 GHz, 37 GHz and 39 GHz bands (as well as more unlicensed in 64-71 GHz). AT&T and Verizon are trying to steal a march before those auctions take place, hence their race to acquire LMDS companies.

Other US operators are actively testing mmWave for 5G, including T-Mobile and some cablecos. For instance, Charter Communications has been working with Straight Path to plan tests of equipment in 28 GHz in Orlando, and the UK’s CBNL, a specialist in wireless backhaul and point-to-multipoint, has a deal to supply equipment running in Straight Path spectrum to Windstream, which is expanding its fixed wireless network.

Although Verizon and AT&T are moving towards FWA first, only Verizon has a strong business case for fixed services in their own right (to extend its limited fiber footprint). For other operators, FWA is a good way to test the technology in the real world and launch services without having to worry about the key criterion for consumer uptake, a good base of affordable and attractive handsets.

T-Mobile USA has been scathing about the FWA approach, and even AT&T acknowledges that the real goal is to get to fully mobile 5G as soon as possible, despite the challenges of achieving fast mobile hand-off in the very dense network that mmWave spectrum’s propagation qualities make necessary.

However, beyond the LMDS airwaves, which are currently assigned for FWA, the timescales for mmWave 5G are uncertain. The FCC has not set a date for any auctions, though AT&T and the operator group, CTIA, are calling for these to be held as soon as is practical.

Stacey Black, assistant VP of federal regulatory policy at AT&T, wrote in a blog post: “Now that the Commission has the 5G ball rolling with spectrum allocations, we urgently need to get to the next step – auctioning this newly allocated spectrum so that mobile broadband providers can deploy as quickly as possible. As an industry, we believe the best timing for auctioning the 28 GHz and 37-40 GHz bands is by December 2018. By this time, chipsets and equipment will be commercially available, FCC service rules will have been finalized, and standards will have evolved to a point that permits commercial 5G network deployments in 2019. While we understand that there are challenges for an auction next year, we must find a way to make this happen. This will be the most significant opportunity for the United States to shine as a global leader in 5G network development.”

The MNOs will be particularly keen to get their hands on licensed mmWave spectrum as soon as possible to prevent the initiative, in terms of R&D and commercial deployment, passing to the unlicensed spectrum ecosystem. To some extent this has already happened, since 60 GHz, whose dominant technology is the WiFi-like WiGig, has seen a great deal of early experimentation, and commercial products, in high frequency spectrum.