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What is driving 5G spend?
To most experts, 2020 was supposed to be the year of 5G rollouts and massive growth. Covid-19 changed that expectation, as it did many other things. Most people now expect 5G to roll out extensively through 2021. In fact, 5G's importance has only grown due to the pandemic. With much of the world working remotely, data speeds and increased network support are now necessary for people to do their jobs.
The recently released 5G Telecom Market Forecast 2019-2024 by Technology Business Research (TBR) highlights some interesting predictions. This blog post summarizes TBR’s forecasts regarding 5G spend over the next few years.
Governments provide support to drive national 5G agendas
Governments throughout the world are planning to step in and support communication service providers (CSPs) during the economic downturn, via a range of support mechanisms. They also plan to use this crisis as an opportunity to drive forward infrastructure development.
Several governments in key parts of the world such as China, South Korea, the UK, and the US have committed public funds to drive adoption of new technologies. 5G, along with AI and edge computing, are being implemented to improve public health and safety as well as strengthen national security and drive digitization.
This type of government support will help CSPs pay for the capex associated with deploying 5G networks and help make a stronger case for adopting the technology. It will also expedite the telecom industry’s migration to standalone 5G architecture, which is the ultimate goal.
According to TBR, “Based upon this, typical deployment curves for cellular technologies will not apply to 5G, which is expected to be widely deployed globally by the middle of this decade instead of in the later years of the decade.”
Key growth drivers and key detractors
TBR states that some of the key growth drivers for 5G are , “government support and stimulus, use cases driven by social distancing (such as telehealth, robotics, and video conferencing), 5G phones, and the need for additional capacity to support residential broadband due to work from home requirements.”
The report lists the following key detractors to growth, which include a range of issues, “complexity of new technology, impact of COVID-19, geopolitical roadblocks, and the supply chain.”
5G hardware deployments will require significant spend
TBR states that to be successful in the coming years, CSPs will need to invest in deploying new 5G base stations and 5G mobile cores over time. As CSPs transition from non-standalone (NSA) to standalone (SA) 5G architecture, the disaggregated and open approach of new RAN platforms will facilitate faster deployment. Overall 5G capex will scale quickly but at a relatively lower level compared to previous RAN generation upgrades.
CSPs will be required to spend more on services to install and/or integrate 5G radios to obtain the best performance.
5G spend by use case
In their findings, TBR predicts mobile broadband and fixed wireless access will be the predominant use cases for 5G technology by CSPs through 2024. Other use cases will materialize in the middle to later years of the forecast period of 2019 – 2024, mostly related to machine type communications such as massive IoT or mission critical IoT.
They went on to forecast that 5G, also referred to as mobile 5G, will be the primary use case for 5G as CSPs embrace the technology to stay competitive. CSPs will do this by providing better service and support for new devices and subscribers.
TBR predicts the majority of spend on 5G infrastructure will be tied to traditional network use cases, specifically mobile broadband and fixed wireless access. This investment is forecast to start in 2021, driven by the availability of key features and the pressure on enterprises and governments to leverage new technologies (such as 5G) and adjust to the post-pandemic new normal.
5G spend by CSP tier
The promise of 5G technology to transform the way we work, play, travel, and communicate has created significant anticipation for new offerings in both business-to-business (B2B) and business-to-consumer (B2C) markets. To get this competitive advantage, a growing number of CSPs are prioritizing Investment in 5G infrastructure, and it is critical to gauge these spends by CSP tier.
TBR states the following:
Tier 1 CSPs (multinational or national CSPs with more than 50 million mobile connections) will drive, on average, over 75% of total market spend on 5G infrastructure. CSPs in the U.S. and China are expected to aggressively deploy nationwide 5G networks followed by CSPs in Japan and Europe. With some exceptions, Tier 1 CSPs in most developing markets will be late adopters of 5G, as many of those CSPs will remain focused on deploying and densifying LTE across their footprints during the forecast period.
Leading Tier 2 CSPs (national, regional, or local CSPs with 5 to 50 million mobile connections) include South Korea’s three CSPs (Korea Telecom, SK Telecom, and LG U+). It also includes select CSPs in other developed markets such as Australia (Telstra and Optus), Switzerland (Swisscom), and Nordics (Telia). These leading CSPs will drive the bulk of 5G investment with an influx of other Tier 2 CSPs, mostly in Europe and Canada, who are expected to begin deploying 5G en masse in the early 2020s.
Most Tier 3 CSPs (national, regional, or local CSP’s with fewer than 5 million mobile connections) will be late adopters of 5G, preferring to wait until the technology and business model mature before implementing.
5G spend by region
A growing list of governments from countries around the world are making support available to drive forward their 5G agendas. Their expectation is that investing in 5G will hasten economic competitiveness and improve public health and safety in the post‐pandemic world.
According to the report:
North America: U.S. CSPs are accelerating and broadening their 5G deployment timetables to stay competitive and align with government mandates. Mobile-based broadband (MBB) is the predominant use case, but fixed wireless access (FWA) and business‐to‐business (B2B) are also prevalent. CSPs in Canada began deploying 5G in 2020, but investments will ramp up in 2021, once new spectrum becomes available.
CALA: CSPs in CALA will minimally adopt 5G during the forecast period as they remain focused on LTE buildouts. Economic and public health issues in the region will also stifle development during the forecast period.
EMEA: Many Europe‐based CSPs will deploy 5G during the forecast period, albeit at a smaller scale and over a longer time frame compared to other developed countries. Most CSPs in developed countries in MEA will deploy 5G during the forecast period, while most in developing countries in MEA will not.
APAC: CSPs in China, South Korea, Japan, Hong Kong, Taiwan, Singapore, Australia, and New Zealand will drive most of the 5G investment in the region during the forecast period. Developing market CSPs will remain focused on LTE with a few exceptions such as in India. China intends to deploy 5G nationwide as fast as possible.
5G telecom spend in a snapshot
Recent events, most notably the response to COVID‐19, as well as geopolitical considerations, have prompted a growing list of governments to support 5G. These countries expect 5G will hasten economic competitiveness and improve public health and safety in the post‐pandemic world. High levels of support by governments in a range of countries, including but not limited to China, the U.S., the U.K., Japan, South Korea, and Singapore will enable CSP spend on 5G infrastructure to scale faster and peak higher than originally anticipated.
The majority of spend on 5G by Tier 1 CSPs will skew the overall market due to the aggressive, nationwide deployment timetables of CSPs in the U.S. and China. Nearly all CSPs will need to deploy net‐new 5G base stations and 5G mobile core over time as they transition from a non‐standalone (NSA) to standalone (SA) 5G architecture.
This seamless software upgradeability of new RAN platforms to 5G will facilitate deployment at incremental cost, keeping overall 5G capex spend scaling quickly but at a relatively lower level compared to prior RAN generation upgrades. Significant spend on services will be required to install and/or integrate 5G radios to obtain optimal performance. Mobile broadband (MBB) and fixed wireless access (FWA) will be the two predominant use cases for 5G technology by CSPs through 2024. Other use cases will materialize in the middle to later years of the forecast period, mostly related to machine‐type communications such as massive IoT or mission‐critical IoT.
Unlock the full potential of 5G
As CSPs prepare for 5G, they need a business partner they can trust at every step of the process—from initial strategy through rollout. With more than 20 years’ experience delivering telco infrastructure, HPE has completely reimagined CSP core networks to deliver new levels of agility, flexibility, and speed.
HPE offers solutions for 5G from the telco cloud to the enterprise edge, leveraging a new carrier-grade architecture—designed from the ground up to be open and cloud native, integrating stateless network functions from multiple vendors on a common, service-based architecture and shared data environment. HPE’s management platforms reduce operational costs through end-to-end orchestration and automation.
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Jacquelyn Morgan and Manish Lawankar
About the authors:
Jacquelyn Morgan, Industry & Workloads Marketing Manager, HPE
Jacquelyn is an Industry and Workload Marketing Manager for the HPE Americas region, supporting the telco industry and HPE GreenLake Cloud Services.
Manish is an Industry & Workloads Marketing Manager for HPE EMEA & APAC. He is focused on hyperconverged technologies and HPE's 5G solutions driving innovation from the edge to the cloud through secure, open solution stacks delivered as a service.
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