We attended the Mobile World Congress last week in Barcelona along with an estimated 104,00 others from nearly every country in the world. We met with over 42 companies and nearly 200 people at the show and attended many press announcements. While most of the MWC19 headlines were about 5G, we were struck that much of the hyped growth will in fact be the result of deployments in enterprises and could be served using unlicensed (or lightly licensed) spectrum. Many of the presentations and product announcements suggested as much, if you read between the lines. We'll step through these two, enterprise and unlicensed next.
The Enterprise opportunity. A major theme we picked up at the Mobile World Congress show is simple: that for the mobile telecom market to grow, 5G must expand to the enterprise. We see ample evidence that without an expansion to the enterprise, the cellular market as we know it will likely experience declines as consumers expect more bandwidth for less in the future. The 5G narrative at the MWC19 show was straightforward: German & Chinese robots, trucks and drones need 5G to unlock the potential for future growth. There were robots, drones and trucks bleeping and whirring to make the point for visitors. We wouldn't argue with the contention that robots and very fast moving vehicles that are controlled remotely need very low latency; yet, there are so many use cases that don't actually need such low latencies.
Wireless is just a small part of "Enterprise." Enterprise 5G use cases being presented at MWC, including the wirelessly controlled robot, involved far more than just a wireless connection to succeed. To automate a workplace with robots, there is far more technology that has to be brought to market, including software, integration, wireline networking and the list goes on. None of these capabilities have traditionally been delivered by telecom equipment vendors; they have been delivered by vendors who have served the enterprise market (examples would be Cisco, IBM, Oracle, etc.).
Unlicensed Opportunity is Robust. In both the enterprise market and the outdoor market, unlicensed spectrum has tremendous potential. This goes for a) WiFi, which is already immensely popular, b) for in-building 'lightly licensed' CBRS (a US-only market), c) the soon-to-be released 6 Ghz spectrum, as well as d) outdoor mid-band spectrum like 5 Ghz (already very popular), e) outdoor 60 Ghz (like the kind relating to the Facebook Terragraph project) and f) 900 Mhz LoRa. While each of these unlicensed (or lightly licensed) frequencies was discussed at the show, 5G licensed was so overwhelmingly promoted it was hard for these exciting unlicensed markets to get any airtime. We think this lack coverage relatively speaking is a dis-service and we'll touch on just a few of them in this post.
Wi-Fi isn't going away. Related to the enterprise 5G topic, we found points and counterpoints about 5G versus WiFi interesting. Huawei's Enterprise group issued a press release about its 802.11ax (WiFi-6) expectations and how important WiFi is for the enterprise market. On the other hand, Huawei's telecom group was pursuing a press agenda about partnering with Operators to pursue the 5G market. Few companies on earth possess as broad a produt portfolio as Huawei, who has ample expertise, market share and credibility in both the mobile wireless market and the enterprise wireless market. We felt this dual-message (5g AND WiFi) was well-balanced. On the other hand, vendors and operators who have historically focused on cellular-only were pushing a "5G will displace WiFi" or at least a "5G is the only solution for mission critical enterprise" agenda. We feel that 5G-only in the enterprise message is to broad-based; we think 5G in the enterprise is far more nuanced because:
802.11ax/WiFi-6 is cellular-like. 802.11ax, which was launched commercially in 4Q18, incorporates many cellular-like capabilities. Many of the technical merits debates presented at MWC compared older 802.11ac WiFi against LTE and 5G NR. This is not a fair comparison because both 5G NR and 802.11ax actually began shipping commercially generally at the same time (4Q18 and 1Q19).
There is very little overlap between the Wi-Fi opportunity and that for cellular. The overlap in opportunities being discussed as the 5G enterprise opportunity at MWC have surprisingly little overlap with the vertical industries currently being served by Enterprise-class WiFi. Take manufacturing, which represents 9% of the Enterprise WLAN market by units in 4Q18. Or the outdoor WLAN market, which is only 3% of total Enterprise-class market in 4Q18 by shipments. The point is, there is very little overlap between the Enterprise WLAN market and the 5G enterprise market being discussed at MWC.
LTE will be the workhorse for many years. Additionally, let's consider the fact that many of the use-cases being discussed at MWC will initially be served by LTE, not 5G. In the enterprise market, the use of LTE in unlicensed (or lightly licensed, like the US's CBRS) bands is often called private LTE. The main difference between unlicensed LTE and licensed LTE is that with unlicensed, the enterprise can work directly with enterprise-focused VARs, resllers, solutions providers and complementary equipment suppliers, while with licensed LTE, the enterprise will need to work directly with its local mobile service provider who owns the spectrum, likely ensuring that the operators becomes the prime integrator of the project, or at least part of it. Private LTE will therefore have fewer parties involved (no operator), lower monthly costs (no operator) and will likely get the project to completion faster (fewer parties and a prime vendor/contractor/solutions-provider with expertise in the enterprise's vertical market). So, why not consider unlicensed/lightly-licensed LTE instead of licensed 5G to achieve the goals illustrated in many of the 5G use cases at MWC?
Where will WiFi lose out? If it has wheels or wings on it, Wi-Fi is not your friend - look to cellular.
To conclude, yes, 5G will fit some very exciting use-cases, especially those for low-latency applications. These are indeed exciting and deserve attention. We see it this way for the wireless industry: if the things involved have wheels or wings, or are of such high value that you must use cellular, there's a good chance LTE will cut it. And next, it makes sense to consider using unlicensed spectrum - which is just emerging as viable for many uses.
Mid-band spectrum shortages in the US was the main thrust of the 5G Americas sponsors. The idea is that the rest of the world has lots of mid-band spectrum available and service providers in countries that could be considered economic leaders (Japan, Korea, China, Western European countries) have plenty of available mid-band spectrum that is ideal for 5G, while the US does not. This group at 5G Americas, which includes service providers, vendors and standards bodies, is saying that US leadership in cellular infrastructure and the entire app economy that relies upon it may be at risk as 5G get deployed.
Other topics discussed: AT&T is currently out for bid on its 5GC infrastructure, and this caused some interesting posturing by the vendor attendees (like Ericsson, Nokia, Cisco, Mavenir) at this conference, with each trying to identifying their strengths. It seems the consensus is that all mobile operators in the US market are using Option 3X, an EPC anchoring system. And, the consensus seems to be that US operators will need to move to 5GC once most traffic is coming over 5G Radio (“New Radio”). Vendor selection appears an open field, once again, as 5GC has 13 different microservices, each which could theoretically be parsed out to different vendors. Operators are saying, though, that while this multi-vendor selection may lead to savings on purchasing, it will increase integration spending, so these two have to be balanced out.
Mobile Edge Computing: The consensus is that a 50 mile radius (or others are saying 100 km) is considered the ‘edge,’ or the ‘low latency’ zone. We expect, however, that the data forwarding plane (‘user plane’) will be distributed to, say, 100 locations within a territory like the US market, while the control plane will be much more centralized (perhaps as centralized as it is currently, where it might be considered to be like 1/4th the number of locations).
CBRS. The consensus is that testing will be done by mid November 2018 and Initial Commercial Deployment by 1Q19, potentially spilling into 2Q19. PAL auctions are expected by attendees to be a 2019 event, with 2020 traffic running on PAL spectrum. Commscope represented the views from a SAS standpoint for this discussion.There were discussions about the C-Band (6 Ghz) potentially using the same type of Automatic Frequency Coordination system, but the consensus is that it is too early to declare that the path forward.
We attended Mobile World Congress Americas (MWCa) in Los Angeles, CA this week, as well as the AT&T Spark event in San Francisco. Since 5G is launching first the US, these two events became the public events where significant 5G-related announcements happened.
Additionally, discussions about spectrum in the US market were very active discussions. Some points we picked up on:
Not quite a year ago, Cisco and Google announced a Cloud partnership. Today, at the very first keynote at Cisco Live 2018, Diane Greene, CEO of Google Cloud joined Chuck Robbins on stage to talk about the partnership, highlighting Kubernetes and a unified security policy. Both Chuck and Diane want a large ecosystem of partners and developers. Later on, Chuck mentioned Cisco passing the 500K developer milestone for DEVNET.
Chuck touched a litter on routing, mentioning next-generation branch and highlighting intent based networking activity in the SP space. For example, one of their SP customers updates 60,000 routers each night using automation. He then quickly got back to the Catalyst 9K switch, highlighted as the fastest ramping product ever in Cisco history.
Children’s Hospital of Los Angeles was highlighted as a customer of the Cat 9K. As a customer, they have over 35,000 connected devices. They purchased over 2,000 WLAN APs and over 200 Cat 9300 switches. They are also deploying ISE and have done over 23,000 different device profiles/identifications and are track to start policy enforcement. They are now in the process of deploying at their branch locations. They noted 550k blocked threats over the first few months of deployment.
My key takeaways are that there is an explosion of devices and data on the network, much of which is encrypted and a human can only do so much; thus the network must scale and automate. Cisco is looking to use AI, automation, and its architecture to allow the customer to scale with those IoT devices and to have the network automate many tasks, especially around security. Monetization for Cisco will occur both in the hardware, but also in the solution sale. An ideal customer would be end-to-end Cisco, but Cisco will also support open APIs in order to allow partners and customers to operate with their preferred solutions.
Keynotes at the NFV World & Zero-Touch Congress in San Jose, California were very interesting today. We share our observations and view of the main themes from these interesting presentations by Nokia, NEC/Netcracker, Google, CenturyTel. The main theme of these presentations, we think, is this: NFV/SDN is now deeply in the deployment and commercial phase, where compared to 3-4 years ago, it was just a concept.
Nokia. The company announced that its Airframe server platform, which is an OCP based design, comes available with either embedded acceleration or pluggable acceleration. This comment includes its software acceleration. The company explained that its Reefshark chipset can be equipped on the Airframe server and can perform better than a non-accelerated server:
In explaining functions that an Airframe with Reefshark can perform, the company gave a good example: massive MIMO beamforming can be assisted by the machine learning capabilities.
NEC/Netcracker. Enrique Gracia presented several uses cases of the NEC/Netcracker customers that related to NFV/SDN. He explained that 16 customers have deployed one or more of these uses cases.
Full Stack OSS/BSS/MANO. A customer deployed this system in 12 weeks to launch a VNF. The system managed both physical and virtual devices.
Expand to a new territory using VNFs from home region. A customer now delivers services to a customer outside the home territory by deploying the software and service from the network location at the home location. In this particular case, NEC/Netcracker and its customer do revenue sharing and VNFs include SD-WAN, virtual firewall and others. The service provider is expected to expand its customer addressable base by 40%, mainly targeting small/medium businesses in this non-home region. This system uses MANO, OSS, BSS and the marketplace. The company says in this case, time to revenue is expected to take 50% less time to deploy new VNFs in the future.
uCPE (Universal Customer Premises Equipment) deployment instead of branded hardware. The company worked with a service provider company to enable uCPE to be deployed as an alternative to Cisco, Juniper and others' gear.
Google Cloud. Vijoy Pandey, who represented Google Cloud, presented on the topic of using AI/ML to reconfigure its data center system. The company's cloud data center architecture has been evolving continuously since it was first introduced. Currently, the company is using its own AI/ML system to learn from current network traffic patterns in order to design its future network architecture.
CenturyTel. The company has deployed Broadcom based Ethernet switches using its own Network OS. These switches do their own packet forwarding. Additionally, the company has built its own orchestration system called VICTOR. It draws upon Ansible, NetCONF, uses the service logic interpreter from ONAP and uses parts of Open Daylight. The company plans to open source this development and the spokesperson Adam Dunstan said, perhaps jokingly, that this might be called ONAP-lite.
We attended the #OFC18 show and found the major theme to be the emergence of 400 Gbps modules. The next most noteworthy theme, we though, was that made by a single company, Nokia, which made its PSE-3 engine announcement. Juniper also caused a buzz with the introduction of its ACX6360 router/packet optical product announcement (paired with other announcements, too). There were countless other announcements at the show that we will touch on in our reports, but these struck us a quite noteworthy.
400 Gbps optical modules, generally, are expected to be ready for sampling in the next couple months, and then be ready for volume shipments in 1H19. Most every module vendor is planning to introduce DD-QSFP. A subset of the same vendors was demonstrating OSFP modules, suggesting it was less popular at this time. We recognized a sub-theme of the 400 Gbps theme was that vendors, including Cisco and Juniper were both demonstrating hardware designs that are capable of operating at 15 Watts, which appears to be the heat that will be generated for some of the 400 Gbps modules. At the time of the show, module companies reported to us that the DSPs that would power 400 Gbps modules were unavailable, and the way it was represented to us on multiple occassions was that there is no clear indication which DSP maker would introduce the first working part.
Nokia made its PSE-3 chip announcement in support of its Optical Transport product line. It was standing room only, with lots of customers involved in the presentation (not just a bunch of analysts and competitors). We were impressed with the marketing aspect of this announcement, but also with the the statement, "we have reached the economic Shannon's limit" with the introduction of the PSE-3 engine. The implication of economic Shannon's limit is that to achieve an even more efficient design that would asymptote even closer to the theoretical Shannon's limit would be too costly. The company is claiming 25% improvement in capacity and reach, 70% increased network capacity, 60% reduction in power per bit. Chungwa Telecom and Facebook were live, on stage, serving as references for Nokia's launch. We expect full fledged PSE-3 based products will be available in about 9-12 months based on discussions at the show.
Juniper announced its ACX6360 system (as well the announcement of the ACX5448 Universal Metro Router and the PTX10002 Packet Transport Router). The ACX6360 can operate as a packet optical device, and with a software update, can also operate as a router. The general idea behind the introduction of this product is it can serve in either the packet optical transport role or as a IP/MPLS router, thereby collapsing multiple networking layers into a single platform operating at speeds up to 200 Gbps. For many uses cases, it could reduce the number of boxes from two (packet optical plus router) to one (ACX6360).
Today, Cisco announced the Catalyst 9000 family. The first new Catalyst line in many years focused on campus networking as a unified network involving security, WLAN, and switching. This is a very big announcement for Cisco as it’s a real step towards Unified Access and not thinking of WLAN as simply an overlay network. To keep the blog short, we will focus on just a few highlights here.
New hardware – the 9300 fixed switches are the next generation 3850s which were the revenue work horse for Cisco on the campus side. The 9400 is a modular access switch, currently more focused on user connectivity then campus aggregation and core. Finally, the 9500, a Fixed form factor aggregation and core box. The 9300 supports multigig with no fast Ethernet. We suspect a modular core is likely in the works as well and future generations will shift the uplinks from 10/40G to 25/100G.
New software – This is really about a security in networking and intent based policy. In other words, these switches take less human hours to administer, allowing more things to be connected to the network and the human to scale. Software Defined should allow these new switches to scale with the IOT device onslaught that many enterprises are about to go through.
New ASICs – As we all know, I’m a fan of ASICs, Cisco’s new in-house ASICs take many design ideas from Cisco’s DC ASIC family. They allow for some pretty cool security features that will allow Cisco to differentiate from the competition.
New Subscription Model – This does not come as a surprise, but a big component of the new offering is a subscription model. We see 3,5, and 7 year options listed on the website and believe this aligns well with Cisco’s push more towards recurring revenue. Given the availability of these switches, this is a 2018 event for the market.
New upgrade cycle – the combined hardware software approach will allow Cisco to touch its entire installed base to upgrade them. This is a big benefit to Cisco as over the past few years this installed base lacked a compelling reason to upgrade. This has caused the age of the installed base to creep up recently.
Ericsson and Cisco representatives provided an upbeat presentation about the corporate partnership, offered some customer success metrics and discussed some new initiatives. The teams held back from providing concrete measures of progress such as revenues. Our judgement is that since each is continuing to make joint offerings, the relationship is moving ahead.
Customer engagement progress was characterized at 100+ deals and 300+ engagements.
It is interesting to figure out what each of the two parties deliver to customers. The way the two companies characterize what each is good at and what each delivers to customers is quite similar to the way it was characterized at the previous year's MWC 2016 presentation - with one possible exception: Each of the spokespersons said that customers are using the Ericsson wireless packet core (Cisco also sells wireless packet core).
Roles and Responsibilities. Generally, the teams still see the roles and responsibilities split up as follows:
Given how strategic the NFV landscape is for the future of the telecom industry, we were interested in each company's participation in NFV Orchestration. The partners say the way they split up the orchestration between each other would typically be as follows: Cisco's NSO is used typically in managing the network and resources (Cisco claims it wins big here). Ericsson's transport-oriented NFV is typically used. And then Ericsson's orchestration system manages both Cisco's and Ericsson's lower level management systems.
Some wins discussed:
As we explained earlier, the partners discussed new three initiatives discussed for the future: