After a week of intense and exciting meetings with key players in the wireless industry during the inaugural MWC Americas show in San Francisco, one of the key takeaways was that the U.S. runs the risk of not taking on the same leadership role with 5G as it did with 4G.
This is consistent with the forecast we outlined in our recently published 5G report suggesting North America’s 5G RAN share position in 2021 will be roughly half the size of its LTE share in 2011 (Figure 1). The four primary drivers behind these projections include:
- China will be more aggressive in the shift towards 5G than it was in the transition towards 4G.
- Spectrum positions will impact sub-6 GHz macro investments in the U.S.
- Small cell citing remains a challenge
- The enhanced mobile broadband (eMBB) use case is expected to dominate initially (investments in fiber, virtualized core, edge computing to improve the latency for IoT applications are not reflected in Figure 1)
Executives again reiterated China’s 5G roadmap which calls for the country to be a leader in 5G. Aggressive plans for nationwide 5G deployments coupled with the spectrum proposals in the sub-6 GHz bands form the basis for our regional 5G RAN market projections, which suggests China will be the largest 5G infrastructure market by 2021. In addition, MIIT is considering allocating more than 200 MHz of contiguous spectrum for 5G deployments, providing the carriers with the fuel for delivering a consistent high capacity mobile broadband performance.
At the same time, spectrum positions in the U.S. will impact the country's ability to lead in the 4G to 5G transition for the eMBB use case. Both T-Mobile and Sprint again reiterated their plans to deploy 5G aggressively in the sub-6 GHz spectrum while Verizon and AT&T remain more likely to allocate capex to both the sub 6 GHz and millimeter Wave (mmW) spectrum.
For the eMBB use case however, Sprint is the only carrier that has enough contiguous spectrum to ensure substantial performance improvements between LTE and 5G using only the sub 6 GHz spectrum. This limited availability of larger swaths of sub-6 GHz spectrum is prompting the carriers to focus on the mmW band to ensure the perceived performance delta between 4G and 5G for the eMBB use case is material instead of incremental.
While many analysts, including myself, have been skeptical about the feasibility of deploying mmW radios aggressively in any larger scale over the near-term, what was interesting during the show was that multiple leaders in the industry began expressing some hesitation publicly about the business case limitations in larger scale mmW deployments.
During Nokia’s analyst event, the vendor shared simulations and calculations it had done with one customer concluding that 5G FWA in the mmW spectrum will only be economical as a fiber replacement in niche cases. Although Qualcomm painted a more upbeat outlook about the near-term mmW potential with its recently released 5G study, we got the impression expectations in general have come down a bit over the past year or so for both the mobile and fixed mmW use cases.
This is not to say the mmW spectrum will not be important over time and play a pivotal role in 5G. But when it comes to assessing the 5G splits between mmW and sub-6 GHz over the near-term, the meetings we engaged in added confidence to our projected global mmW growth rates suggesting the high-band spectrum will account for a negligible portion of the overall 5G infrastructure RAN market by 2021 (Figure 2).
In addition to the inherent economic challenges with outdoor micro cell sites, carriers are still struggling with the regulatory environment that is hindering wider deployments of small cells—a fundamental building block for mmW deployments. The average U.S. carrier has fewer than 25,000 outdoor small cell sites on air, but it needs hundreds of thousands of sites to create the mobile network of the future.
Unless the rules and processes are redesigned to treat 30 meter macro towers and lamppost deployments differently, there are few reasons to expect the pace of the deployments to be materially different between mmW small cells and sub-6 GHz macros. And per CTIA’s website, it took 15 years to grow the U.S. macro cell site installed base from 100,000 in the year 2000 to 300,000 in 2015.
It was an exciting week at MWC Americas, with more data points indicating that 5G is moving ahead at an unprecedented pace in both the U.S. and the Asia Pacific. And while there is no doubt that the U.S. will play a fundamental and leading role in the 4G to 5G transition, the show also reminded us that the government needs to do more to free up vital sub-6 GHz spectrum and accelerate small cell deployments.
Until then, we will maintain our forecast suggesting China will be the largest 5G infrastructure radio market by 2021 and mmW will account for a negligible portion of the overall 5G RAN market.
Stefan Pongratz is a Senior Director at the Dell’Oro Group, the trusted source for market information about the telecommunications, networks, and data center IT industries. Mr. Pongratz joined the Dell’Oro Group in 2010 after spending 10 years with the Anritsu Company. Mr. Pongratz is responsible for the firms Radio Access Network and Carrier Economics Research programs and has authored advanced research reports on the wireless market assessing the impact and the market opportunity with Small Cells, C-RAN, 5G and CBRS.