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13 December 2019

Nokia announces trio of private network deals as MNOs ditch tower assets

Nokia’s private network strategy continues apace, with three deals announced in quick succession in the past two weeks – at Finland’s Fingrid, Germany’s Deutsche Bahn, and a Japanese partnership with Hitachi. As it builds more Industrial and IoT networks, Nokia drives a larger wedge between the MNOs and their former direct customers.

Given the scale of MNO IoT revenues, we’re still at the stage that their IoT divisions could be written off without causing major upheavals in share prices. While once they talked about the incredible opportunity that the IoT represented, most MNOs are now extremely muted on the subject.

The industrial sector was championed as a standout IoT opportunity, by these MNOs, but as we have seen, major industrialists are mostly interested in campus-based deployments, and are working with partners like Nokia and Cisco to install private LTE networks to serve those applications – leaving the MNOs in the lurch.

Those sorts of deployments don’t need the national or global coverage that an MNO provides, and if they can use unlicensed spectrum or can purchase an exclusive license, they don’t even need the MNO’s spectrum holdings. This sidelines the local MNOs, in a rather disruptive fashion. As communications regulators start making more spectrum available in both manners, the value that an MNO can provide to such industrial customers diminishes – leaving the door open for the likes of Nokia.

This would relegate the MNOs to applications that require the WAN functions that are beyond the capabilities of a campus network, and in industrial contexts, those tend to be quite low value. Things like asset tracking are the most obvious, but those would likely be provided as services to these industrialists, likely by their logistics and supply chain partners. The really valuable applications that take place in these campuses seem to be an emerging walled garden, in which the MNOs aren’t exactly welcome.

In Finland, Nokia is installing a mission-critical IP/MPLS network for Fingrid, the national transmission system operator (TSO), which will be using it as the basis for smart grid upgrades. This will also support all of Fingrid’s legacy grid control applications, across its 14,600 kilometers of transmission lines, and 120 high-voltage substations.

MPLS (Multiprotocol Label Switching) is a telecommunication networking technology that helps move packets between network nodes and routers in a very quick fashion, by using a shorter labeling system. A very rough analogy is that it is like writing a shortened version of the full address on the front of an envelope, which will help move the packet through the network quicker, as the post-sorting workers have to spend less time reading the envelope address and working out precisely where to send it.

Essentially, MPLS labels packets so that each step in the network doesn’t have to examine the entire contents of the packet, consult the routing table, and then pass the packet onto the appropriate next step – it’s a bit like adding a new address to the letter that just defines the city it needs to head to, instead of bothering with the full version. It’s also really quite tedious.

The multiprotocol part means that it supports many different protocols, such as IPv4, IPv6, UDP, TCP, and even the legacy ATM and Frame Relay protocols that were mainstream when it was developed. In the smart grid context, MPLS should allow for network latencies low enough to support the automation of grid assets, the control of renewables that have variable generation output capacities, and the scheduling of demand response (DR) and other ancillary grid services.

Kari Suominen, head of ICT for Fingrid, said “we are committed to realizing the potential of renewable energy generation and are embarking on an ambitious transformation of our national grid to make it smarter and more flexible. Nokia’s IP/MPLS solution plays an important role in the digital transformation of our distributed energy resource management by providing us with a reliable, secure and agile communications system that has the potential to support all of our power management needs.”

Moving to Germany, Deutsche Bahn, the national rail operator, has picked Nokia to help it automate its S-Bahn light-rail projects, using a 5G network. The initial proof-of-concept will examine whether 5G is now mature enough to be used in future autonomous and automated rail deployments, with a specific focus on the Future Railway Mobile Communications System (FRMCS) standard.

To date, Nokia says it has deployed GSM-R networks for rail operators in 22 countries, covering 109,000 kilometers of track. However, it has supplied over 110 operators with networking, cybersecurity, IoT, and analytics offerings. The Deutsche Bahn could be the first step in Nokia’s evolution toward 5G-based networks. The current goal is to have automated Line 21 on the Berlin S-Bahn in 2021, a 23-kilometer run that will prove that the technology works.

Kathrin Buvac, President of Nokia Enterprise and CSO, said “we are very pleased to be Deutsche Bahn’s partner, bringing digital technology to the forefront of the Hamburg S-Bahn network and rail system. Together, we have worked to research, develop and deliver the world’s first 5G-based communication system for automated rail operation, an important milestone towards the Future Rail Mobile Communication System and a major step in making Industry 4.0 a reality.”

The final bit of Nokia news was a partnership it has struck with Hitachi, to provide private networks to Japanese industrial and government organizations. Like Germany, Japan is planning to provide spectrum to companies looking to build their own networks, and with Hitachi, Nokia will be pushing its Digital Automation Cloud platform as the foundation on which these new applications can be built. The initial targets are the public sector, transport, logistics, manufacturing, and energy.

Kaichiro Sakuma, representative director, President and Chief Executive Officer of Hitachi Kokusai Electric, said “industrial grade private wireless networks will be very important for our industry customers, helping them to become more efficient, automating dangerous operations, and improving worker safety. Our collaboration with Nokia is helping to speed the delivery of these innovative capabilities to the Japanese market.”