Before the consolidation in the Mobile Radio Access Network (MRAN) market that occurred in the past decade during Huawei’s ascendancy, there were a dozen major RAN vendors. They included Motorola, Lucent, Alcatel, Siemens, Nokia, Ericsson, NEC, Fujitsu, Samsung, Nortel, Huawei and ZTE, and they hailed from the US, France, Germany, Finland, Sweden, Japan, Korea, Canada and China.
As Huawei entered the market, using a price aggressor strategy, it catalyzed mergers, resulting in the elimination of Motorola, Lucent, Alcatel, Siemens, Nortel, plus a reinforcement that led to the Japanese and Korean players to sell primarily to their home markets. The result is that in many markets during recent years, there were only two vendors left, and that left operators with little choice but to look elsewhere.
The punchline is that going forward, due in part to Open RAN, and in part to the response of operators looking outside their traditional supplier base, we now have 10 RAN players who can bid on projects. And there is a multiplier on top of the 10 players, because going forward, operators can buy radio heads from different vendors than their primary RAN baseband vendor, essentially doubling the number of choices an operator has when making mobile RAN vendor decisions.
Here is how we arrive at the conclusion that there were only two players per major geography. Just a couple years ago, the state of affairs was quite different; we had only Nokia, Ericsson, Huawei and ZTE as players, and last year, it became clear that in the US, only two major players were left. In China, the same could be said, with Huawei and ZTE as main suppliers (Ericsson has won business there and Nokia ceded the market in 2019). And in 2020, we’ve seen much of Europe and English-speaking Asia whittle down to two suppliers, as well.
And here is how the procurement teams at operators have much choice in the future. The “Open RAN” vendors are now deemed viable given the success at Rakuten and the push by operators to demand Open RAN compliance, and these include Altiostar, Mavenir and Parallel Wireless. Nokia and Ericsson are invited to most, if not all bids worldwide.
Huawei and ZTE are invited to many, but a declining number of bids in markets that are siding with the US viewpoint. We saw a turning point in late 2018 when AT&T announced it will buy from Samsung, who has now gotten a strong foothold in both India and the US. And, more recently, we have seen two Japanese players, NEC and Fujitsu, in some way filling in the void left by Huawei and ZTE’s woes in the US/China spat, as they get wins (Fujitsu recently won DISH) and get invited to bid (NEC and Fujitsu are being asked to bid on UK projects). Add these up and we have Altiostar, Mavenir, Parallel Wireless, Nokia, Ericsson, Huawei, ZTE, Samsung, NEC, Fujitsu.
There are other factors at work that are adding to more RAN choices, as well. Two such trends are Facebook’s efforts, ONF’s efforts and the variety of radio head vendors who are now viable with Open RAN/FB/ONF efforts. Facebook has promoted projects such as Telecom Infra Project (TIP) that have many goals, including one that supports the goal of $1,000 radio heads (these cost much more from the major vendors).
The Open Network Foundation (ONF) supports projects such as SD-RAN and Aether.
Radios can be purchased from non-traditional sources, as well because with all three projects we have mentioned above (TIP, ONF SD-RAN and Open RAN), these allow radio purchases to be made separately from baseband purchases, literally doubling the choices that operators have when building out a roster of vendors.
The trends in mobile RAN have changed significantly. Vendors with little to lose (startups and players entering new markets) are getting aggressive to grow their businesses. Incumbent vendors are at risk, as their business practice of selling baseband and radio simultaneously to captive operators is coming to an end. We may look back at this early 5G era and say there was a lot more to it than just the upgrade to 5G, and it begs the question, who will acquire whom to consolidate the market once again and get pricing under control.
We attended the Mavenir analyst meeting last week. The company has made progress in developing its radio products, while at the same time it has grown revenues approximately 15% this year and bookings are estimated to reach $510M this year. The company expects to achieve a 28% EBITDA margin this year, greater than last year’s profitability rate. The company has 3,100 full time employees, up significantly from last year. We met executives hired recently with impressive pedigrees. The company is positioning itself as a US based end-to-end mobile network operator supplier.
In 2019, most of the company’s revenues are from the telecom core products. Generally, the company is taking a software-only approach to the mobile network market, which in many ways is what operators want from its suppliers. By taking a software-only approach, the company leaves some of its destiny in the hands of others, especially when it comes to hardware acceleration and radio units.
The company has achieved success in VoLTE and RCS. It is using the growing brand it has developed in these telecom core services areas to get access to RAN projects. The company describes its RAN activities and its partner’s radio capabilities as being able to handle radio connection densities on the order of 200 users per radio.
Mavenir plans to bring User Plane Forwarding capabilities for packet core to market next year with hardware acceleration; chip suppliers that were mentioned include Intel and Mellanox (now Nvidia). The company is investigating various acceleration techniques such as GPU, ARM and FPGA, which presumably will allow the company to provide a denser baseband system than is currently possible.
The company is targeting mobile operators that are making initial deployments of O-RAN based radio systems. Mavenir explained that European RFIs are allocating a certain number of RAN sites to O-RAN. The company claims to have recently been awarded some O-RAN contracts that have limited deployment scenarios. Vodafone CEO made public statements in support of working with Mavenir recently.
ORAN and CBRS were the main themes at Mobile World Congress Americas, held in Los Angeles. I have to say, though, that unlicensed was the third most important theme, though it will emerge to the main stage in future years.
ORAN encompasses several topics woven together. ORAN is a set of common interfaces that describe how various devices in mobile RAN work together. ORAN may also represent a new way of building radio networks. Recently, new vendors are being invited to bid on major mobile network projects, including Mavenir, Altiostar, Parallel and others. And, the major market share players in mobile RAN, which include Ericsson, Nokia, Huawei, Samsung, and ZTE are being asked by operators to support ORAN. The incumbent vendors are responding in various ways: Samsung, a challenger in the market, has whole-heartedly embraced ORAN, while Huawei has only recently acknowledged the existence of ORAN. Ericsson and Nokia have embraced ORAN with the view to embrace and extend - in the sense that Microsoft used this term in the 1990s. Based on presentations made by Ericsson, Nokia, and Samsung, we expect that the incumbents, Ericsson and Nokia,will embrace ORAN but will establish a path to continue serving customers with the same vertically integrated business models of today. We are eager to see the results of mobile network operator bidding to observe how many startups win projects for wide scale deployment.
CBRS. Today, CBRS is available in the US market and has been so for about a month. We had an interesting opportunity to moderate three panels on the stage at MWCa and found some very interesting indoor/campus uses for CBRS, including WiFi backhaul, secure/critical communications, surveillance, IoT/sensor monitoring. Since CBRS indoor spectrum generally allows for more output power than for WiFi, the range is better. We see this as a key advantage for CBRS users, though enterprises who take advantage of the so-called OnGo service must pay various monthly fees such as those for the SAS and potentially other ongoing services. We expect that CBRS will be successful in certain verticals.
Unlicensed. We believe the existence of CBRS could uncork the value of unlicensed spectrum at 900 MHz, 5 GHz, 2.4 GHz, and 6 GHz. We are conducting significant research into each of these and other spectrums.
We attended the operator and vendor consortium of 5G Americas. The themes of the show were: 5G, spectrum, cell siting, Asia-Pacific operator progress. For the second time in the past couple weeks, we saw FCC Commissioner Michael O'Reilly present, and his key messages were similar both times, focusing on CBRS, C-Band and 6 GHz. In attendance from the North American service provider side were AT&T, T-Mobile US, Shaw, and Sprint (we focused on NA operators mainly in this write-up). Notable vendors included Cisco, Commscope, Ericsson, Intel, Kathrein, Mavenir, Nokia, Qualcomm, and Samsung. We would say the most important theme from the show is the surge in interest in unlicensed spectrum, both for the use of mobile operators, as well as competing carriers, as well as by enterprises both for indoor and outdoor applications. For this write-up, we are focusing primarily on comments made by some of the leading operators who attended the conference.
AT&T discussed mmWave, future 3GPP releases, 5G phones, Mobile Edge Computing and indoor cellular, mid-band spectrum strategies, 5 GHz spectrum usage, Mobile Edge Computing (MEC), StandAlone (SA), among other topics. AT&T views mmWave as just a tool in the toolkit, so to speak, and not the only spectrum that is useful in 5G. It considers mmWave to be most helpful in urban and potentially indoor settings. Representatives said that future 5G-oriented Releases 16 & 17 are expected to be software upgrades to existing hardware and won't require new equipment to incorporate these new capabilities which will include network slicing. AT&T is making a big deal about its Mobile Edge Computing (MEC) initiative. At the conference, it emphasized MEC as having two main parts: a) expansion to about 100 edge sites (mostly Central Offices) from about 20 central locations in the LTE era and initially supporting packet core, and b) Microsoft Azure services managed end-to-end by AT&t. The company also emphasized that it plans to pursue some indoor cellular opportunities, some that currently leverage 5 GHz using LAA technology, some that will leverage CBRS and some that will leverage mmWave. We get the impression from AT&T that it is open in how it pursues future mid-band spectrum strategies. Its strategy could change based on: a) the timing of the CBRS PAL licenses (currently slated for June 25, 2020), b) the potential for C-Band private auctions (potentially in the mid 2020 timeframe), c) the potential for some or all of the 6 GHz spectrum availability (where Wi-Fi 6 would co-occupy), as well as other factors. We learned that, at least in certain regions, the company is making very ample use of 5 GHz spectrum using LAA techniques. AT&T seeing its picocells (small cells) get around 100 Mbps from LAA out of a total 130 Mbps inclusive of around three other licensed spectrums. We were surprised the company makes such ample use of unlicensed spectrum where Wi-Fi currently exists. The 5 GHz experience of AT&T leads us to think that 6 GHz, which promises to offer far more spectrum that the 5 GHz swath presently available, could be very beneficial to mobile operators and their consumers, as well as the Wi-Fi industry, and its consumers. AT&T expects that by this time next year, it will be "pushing" 5G to all its customers, part as a result of handsets adopting 5G capabilities, part the result of its network seeing nationwide coverage. Of the services that AT&T operates, it is installing mainly Packet Core in its MEC systems. AT&T is also planning to run Microsoft Azure services in its MEC locations. It expects that both Packet Core and Azure will see a 10-20 ms latency reduction by being located in MEC locations. AT&T says that StandAlone (SA) is "just new software," and downplayed the significance of the upgrade from EPC/NonStandAlone (NSA) to SA.
Sprint "is all-in on 2.5 GHz mid-band deployments for 5G services." Given the company's potential merger with T-Mobile USA, we view its network-build-out choices as being somewhat limited. It has limited options because it increases its near-term value to its acquirer, T-Mobile, if it deploys 5G in 2.5 GHz. Likewise, it is doesn't implement in mmWave, this reduces overlap with T-Mobile, who is deploying there. The company reiterated that it had launched 5G in 9 markets. It is seeing its peak speeds on 5G (aided by the fact that it has simultaneously upgraded hardware to Massive MIMO) be about 3-5 times that of its 8T8R LTE systems. It currently covers 11M POPs and 2,100 square miles with 5G. Sprint also shared that it sees RFPs from customers to replace Wi-Fi with 5G, though it didn't share more about this topic. The company's experience is that in upgrading its macro base stations to Massive MIMO 64T64R capabilities, it is getting 3-4x faster throughput than its 8T8R systems, though in the field these measurements vary widely. Additionally, Sprint said that its Massive MIMO systems relative to earlier systems show "generally the same coverage," with 1-2 dB better sometimes. Sprint is exploring ORAN and vRAN but "not adopting near term."
Shaw (Canada) presented its mobile LTE and 5G efforts and plans. Shaws plans are interesting because the company has significant cable services deployed in Canada. The company said nearly all the mobile technology it has installed in the past three years are "5G-ready." It will use 5G first in 600 MHz, then in mid-band (probably in 3.5 GHz) and the last in mmWave. Shaw expects that low-band 5G handsets will be available in 2020, and, similar to what AT&T said, it expects that is when 5G mobile will start in earnest in Canada. Shaw admitted that it is behind where the US operators are in deploying 5G, but offered no apologies, as it felt it is where it needs to be from a competitive standpoint in Canada. Almost laughing, Shaw explained that it would never consider deploying mmWave along highways, and that only high-density locations would get mmWave coverage. Shaw's view that mmWave is for high-density locations was shared universally by other operators in attendance, including AT&T, Sprint and T-Mobile US.
T-Mobile US spokespersons explained that mmWave has seen some challenges, relative to initial expectations and that while it does get mmWave to operate beyond near-line-of-sight, the view of T-Mobile is that mmWave is "just part of 5G." T-Mobile expects 3GPP Release 16 to be completed in 2020, but that it will be 2021 before it deploys Release 16, which won't require "a massive hardware refresh" and which will incorporate industrial and connected vehicles features. T-Mobile views 5G as being appropriate for indoor installations because while mmWave has challenges penetrating glass and concrete, but when 5G operates in low and mid-band spectrums, the "issue goes away." By 2020, T-Mobile expects StandAlone packet core to be ready, but since its current EPC/NonStandAlone (NSA) systems are already virtualized, the upgrade to SA is "not a forklift" upgrade. T-Mobile says virtual RAN (vRAN) "will take time," and that it will "need accelerators," which we take to mean FPGA-based Network Interface Cards (NICs) or the like to allow servers to operate faster than just x86 processors will allow.
At Mavenir’s analyst meeting in Dallas today, the company stated that it expects to grow its revenues about 10% Y/Y in 2018. In arriving at this revenue, it is pursuing a price-aggressor strategy to some extent and has a surprisingly broad portfolio of telecom-focused products. Its product line is software-oriented, though the company does still have hardware development on an ongoing basis. Using 5G as its ‘insertion point,’ the company is working on a strategy to get 10-15 large, Tier 1 mobile network operators at the tens-of-millions per year level. The company’s portfolio encompasses voice core, messaging core, mobile packet core and radio access networks. What is really interesting is that Mavenir expects to expand past its traditional revenue stream (telecom core and messaging) into the radio market, with revenues coming in 2019.
In its traditional telecom core market, the company suggested that some of its customer wins are with Tier 1 mobile network operators across its product portfolio, including IMS/VoLTE, EPC/5GCore, Security and advertising messaging. To illustrate its success in selling a differentiated Telecom Core portfolio, it shared subscriber statistics that its operator customers who use Mavenir core system such as IMS TAS, CSCF and RCS application servers (mostly supporting VoLTE, and secondarily RCS):
In its new market, RAN, this is exciting – Mavenir is a new entrant to the RAN market, and it is US-based. The company expects that it will have Radio Access Network (RAN) revenue in 2019 after successful completion of trials now underway. For reference, the company’s RAN systems generally follow open standards such as xRAN and can be considered “cloud RAN.”
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.
Mavenir held a 'virtual' analyst meeting - essentially a webinar - that conveyed the company's efforts on several new initiatives: (a) SMB UCaaS - small business unified communications, (b) Messaging as a Platform (MaaP), (c) Monetization of messaging, (d) Security Solutions (relating to toll fraud, for instance), and (d) xRAN/Open RAN/Cloud RAN. Pardeep Kohli, CEO of Mavenir explained that the company is at a $450M revenue rate.
Small Business Unified Communications - its mobile UCC service can be deployed as a service or on premise. The company sells through its service provider partners. Messaging as a Platform - the company sees its capabilities in RCS messaging as a means to enabling branding, chatbots, sale of digital goods, and enriched calling. A month ago, at Mobile World Congress in Barcelona, we saw the Mavenir MaaP system in work - it looks nothing like what is available from traditional telecom equipment vendors. Mavenir, it its re-imagined MaaP offering, looks more like an "OTT" company than a traditional telecom supplier. We hear the refrain from service providers - show us new sources of revenue; well, this system from Mavenir looks to us like a new source of revenue. On a secondary basis, to the extent Mavenir is successful in getting its MaaP system deployed at service providers, we think this can help the company grow its presence with other products.
Mavenir recently acquired Acuto, a monetization specialist company for messaging. Susie Kim Riley, Aquto's founder and CEO, now part of Mavenir, presented the company's offerings. Riley showed off the Sponsored Data system of enabling brands to provide mobile data connectivity to smartphone consumers. She explained how Facebook, Google, Alibaba and Baidu offers free access to consumers in various countries to consumers who don't pay for cellular data. The company discussed that its customers typically pay for data using Zero-Rating (where a marketer can enable users to download/use apps or browse specific sites without using any of their data plan) or Data Rewards (where a marketer can reward users with additional data buckets for taking a specific action like downloading an app). Mavenir showed how Banko Azteca offered both Zero-Rating and Data Rewards to engage with customers and had strong results. We asked the company how long it takes to get a SP up and running and Mavenir said it takes a couple months, depending on the billing system integration.
The company discussed its Radio Access Network and Telecom Core products, too. Mavenir is making "Whitebox LTE" available by integrating its Cloud RAN technology with a Universal Customer Premises Equipment (uCPE) offering, which allows enterprise-deployment of CBRS and LTE Licensed frequencies. We asked the company after the analyst meeting whether its 5G Core (5GC) is available today, and management said, in fact, it is. We think this means a pre-standard version of its 5G Core is ready for customers to take delivery of today, and architecturally, it is similar to its control user plane separated system that performs EPC for customers. Additionally, the company highlighted a new capability that it has made available to the market that is calling its breakout gateway - the goal of this product (technically, a vSAEGW) is to allow mobile operators who carry lots of video traffic for mobile customers to offload this traffic to other operators, thereby reducing carrying costs. I'm not sure how this impacts the quality of video traffic and what is effect on churn might be, but the company claims that by using this breakout gateway, it calculates that it can reduce spending on EPC/5GC by as much as two years.