Ever since Teliasonera launched the first LTE network in Norway in December 2009, close to 450 LTE networks have been launched - with over 240 networks planned to go live in the near future. During the past six years, mobile data traffic has witnessed a massive 89% CAGR and is expected to grow at 55% CAGR over the next four years.
Technological advances with carrier aggregation and antenna diversity improved LTE data rates and round-trip delays which can theoretically reach 3 Gbps and go below 2 milliseconds, respectively, with LTE Release 13. However, while there is a limit to the availability of spectrum and the number of antennas that can be used, increased data rates are not the only requirement for today’s IoT applications.
All these tech advances and consequent demands have pushed the case for 5G, a technology that is expected to be built around its use cases. From smart vehicles and smart homes to media everywhere and human IoT, new networks need to be tailored to cater for different speed, capacity and latency requirements.
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5G Insights February 2016
The first rollouts
The first 5G networks are expected to see the light in 2020 - with Etisalat vowing to rollout the first nationwide 5G network ahead of World Expo 2020, and with Verizon confirming that it aims to begin testing commercial services in 2017. While other operators from both emerging and developed markets are also engaged in R&D activities and field trials, there is still a lack of consensus between operators and vendors about the technology definition and requirements.
According to a survey conducted by the GSA, over 40% of operators consider that all technology requirements (see Figure 1) should be met for a technology to be tagged as 5G, while vendors seem more flexible with almost 24% classifying the technology as 5G if it meets some of the requirements. Figure 2 shows the current state of development and 5G-related activity by key operators.
Technology hurdles
While earlier migrations from 3G to 4G could be done with software upgrades for recent and upgradeable 3G equipment, the deployment of 5G networks that can handle diverse IoT use cases cannot happen in a simple network overlay to the current LTE/LTE-A networks.
New spectrum requirements (both licensed and unlicensed) differentiates 5G from earlier generations. The focus is currently on high frequencies (6 GHz and as high as 300 GHz), which brings the coverage issue to the forefront and raises the need for small cells to deal with coverage gaps. Moreover, while the need for a new RAN and air interface is still not finalized, network virtualization, self-optimizing networks and fiber backhaul will be among the core enablers of 5G technology.
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The costs associated with these changes come at a time when 4G has yet to reach its peak (which is expected to be around 2030, according to the GSM Association), and when operators are still investing in 4G while maintaining 2G/3G networks. It is thus critical for operators to develop a long-term strategy which defines the role that telecom networks will play to enable future advanced services.
The true 5G question
5G use cases (such as connected cars, smart homes, high capacity broadband, media everywhere, remote surgery, and immersive augmented reality, among others) have different speed, capacity and latency requirements. This means that 5G must be built as an evolution/combination of networks (including Wi-Fi and small cells) that cater to different use cases in logical slices.
This novel concept of network slicing will create a new business model, where monetization of the network is possible as operators enable those on demand services via network-as-a-service concept similar to the cloud model that we have today. Moreover, the opportunity for operators to host content for some critical applications that require low latency will give them more control of those applications.
In times where some operators are still perceived as pure infrastructure providers, this opens up numerous opportunities for them to be key players in the smart services value chain. Other opportunities for operators might emerge from 5G’s low latency requirement: in order to achieve less than a 1ms delay, operators must deploy fiber backhaul, full IP core and interconnect locally to other operators, a measure that makes it unviable to deploy multiple networks by different entities.
The concept of a single network infrastructure might then resurface with one RAN being shared by all operators, which will not only give operators the opportunity to reduce capex but also let them compete on services rather than purely infrastructure. This will enable operators to focus on providing a complete service portfolio and allocate more resources to develop their internal capabilities in the new era of the IoT.
While the question about when 5G will become reality has yet to be answered, the true question lies in what the technology will bring to operators: is it yet another cycle of network investments when operators are still suffering from declining revenues, squeezed margins and high capex spent on network upgrades, or an opportunity to regain much needed competitive edge against the OTT players?
Mayssaa Issa is a senior research associate, and Akmal Abdul Wahab is a research associate, at Delta Partners
This article was first published in Telecom Asia 5G Insights February 2016 edition