Industry Voices—Schoolar: RAN vendors will finally see growth thanks to 5G

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Network equipment providers could benefit from 5G. (Carl Lender/Flickr)

As expected, the Mobile World Congress Americas event held in early September in Los Angeles, California, was a hotbed of 5G announcements. Verizon took the wraps off its 5G (or 5G-like, to be specific) fixed wireless access service. This new service comes with an Oct. 1 launch date. AT&T announced Ericsson, Nokia and Samsung as its 5G network vendors. T-Mobile added Ericsson to its already-announced 5G partnership with Nokia. But the U.S. isn’t alone in making 5G news.

Elisa of Finland claimed the first standards-based 5G network in late June 2018. Vodacom in South Africa said it had a fully standard 5G fixed wireless access commercially available in the city of Lesotho in late August. Vodacom says two local business are subscribing to the service. But, with these and other 5G announcements there are questions.

What counts as first? Is it really 5G? Can it be commercial if there aren’t any compatible devices? These debates are typical of a new network technology and are short-lived discussions. What isn’t short lived is the overall impact 5G will have on the radio access infrastructure market.

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The radio access network infrastructure market is currently in the middle of multiyear revenue decline. This decline started in 2016 and Ovum doesn’t expect it will change in 2018 or 2019, but 2020 does look brighter.

5G will bring growth back to the radio infrastructure market in 2020, and for at least the three years following that. 5G enthusiasm continues to grow. The operator rush to declare some sort of first certainly supports that. The initial networks, however, will be a far cry from what LTE can eventually be.

Early 5G networks will be focused on enhanced mobile broadband (eMBB) and fixed wireless access (FWA). eMBB will essentially be large mobile hotspots. Operators will use it to alleviate network traffic in high congestion areas. The case for eMBB will be built on cost savings versus LTE. It's not exactly the most exciting network application, but it is one that does compute when it comes to a company’s earnings statements. FWA will be the first new service. It isn’t ground breaking but does give mobile operators a new way to make money, which is never a bad thing. Even T-Mobile, which had earlier shunned FWA, is now talking about it being one of the positive outcomes from its planned hookup with Sprint. AT&T plans to use 3.5GHz for 5G FWA as well.

The more advanced services 5G has promised will take several more years to develop both technically and from a business case. Ovum doesn’t expect a slew of new enterprise and consumer media services to take hold until at least 2022. It will take that long for all the network pieces and devices to fall into place to support those services. Sadly 4G already claimed long term evolution, because that moniker does a good job of describing 5G. But for vendors, that does mean 5G investments will have a long-life cycle. I am skeptical at this time that peak 5G investments will meet peek 4G investments, but I do think 5G investments in total will at least meet LTE investments.

LTE, however, should not be forgotten. 5G alone won’t turn around the RAN market. LTE will be a very important part of the equation for a long time. Many markets still lack broad-scale 4G networks. And they will start with LTE instead of going straight to 5G. Those markets have less economic resources, so as prices drop on LTE kit and devices, it makes sense to focus network builds on 4G. 4G will do a better job of meeting demand in those areas then 5G.

Overall sales from LTE gear will still be greater than those from 5G gear for several more years. For vendors this means doing double duty—promoting 5G while not killing the appetite for LTE. Setting realistic expectations for 5G will be a big part of this.

Daryl Schoolar is Principal Analyst of Wireless Infrastructure for Ovum. Daryl's research includes not only what infrastructure vendors are developing in those areas, but how mobile operators are deploying and using those wireless networking solutions. Contact him at [email protected] and follow him at @DHSchoolar.

"Industry Voices" are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by Fierce staff. They do not represent the opinions of Fierce.