By Grant Lenahan
Appledore Research Group attended Nokia analyst day that was held coincident with CTIA this year in Las Vegas, Sept 8th. The main topics were 5G, Small Cells and process improvements to improve their economics, and reserved comments about the Alcatel Lucent pending acquisition.
5G continues, in our opinion, to be relatively fuzzy compared to previous “G” releases. UMTS and LTE brought new modulation schemes, significant improvements n spectrum utilization, and consequently major improvements in both peak speed and more importantly, in ARG’s opinion, cost per MB delivered. But LTE essentially hit the theoretical Shannon limits, creating a challenge for further improvement.
Yet the demand for more and more mobile broadband appears insatiable, and new forms of traffic are straining networks through the sheer number of connections and the density of traffic in certain public areas. Video on mobile RANs continues to grow, densely populated areas are experiencing spectrum exhaust (finally?), and IoT is placing new demands on networks – not so much for throughput and bandwidth, but for cost and for the number of simultaneous connected devices in a cell or region – heavy taxes on mobility management, registration, signaling and session management capabilities. These are the challenges that NOKIA – and others – claim that 5G must address.
NOKIA is predicting a phased introduction of 5G, beginning earlier than originally anticipated. Around 2017, they anticipate that 3.5GHz (wall penetrating) 5G technologies will begin to appear to support fixed broadband – in effect a more up-to-date FTTC. The goal is 1 Gbps to individual premises. What’s different you ask? Three things, according to NOKIA: No need for a terminating CP antenna, better performance, and lower cost. How this works remains to be seen. Later in the evolution (2018) NOKIA foresee Mobile BB “5G”, with 10 Gbps peak speeds and 1 ms latency. ARG remain interested in better understanding how the industry (and this applies well beyond NOKIA) will reduce radio latency while at the same time effecting MIMO – with the need to combine streams and deal with “slowest link” limitations.
NOKIA has, in ARG’s view, a story worth watching carefully in their SAC wireless acquisition. SAC was an independent firm that identified, acquired, and developed cell sites, from concrete to turn-up, for carrier customers. NOKIA has acquired them, but kept them semi-independent and able to work multi-vendor – which they feel is a key attribute in today’s market. We agree. SAC’s story is an interesting one, in that they have created expertise and tooling to in effect improve the repeatability and productivity of all the drudgery of finding sites, dealing with regulation and approvals, finding back-haul, etc. While at first somewhat hum-drum, we must remember that the money in our industry is not in the cool technology, but in “the poles and the holes” – they physical plant. As the industry moves to small cells the administrative and civil engineering component of cells increases as a proportion of cost (and can be 75-90% of the total cost of a small cell). SAC has centralized, highly trained teams, well documented procedures, and most importantly, sophisticated systems and data to identify sites, identify back-haul, identify obstacles, and help automated the process, while reducing time-to-market and errors. Given the percentages just quoted, this is more important, potentially, than improvements in the remaining 10-25% – the cool 5G technology. We hope that this can be scaled up and provide real benefits.
Finally, NOKIA covered its ALU merger. This merger is early days, and there can be no market nor product collaboration, nor exchange of sensitive materials, but NOKIA did provide some interesting data to show how complementary the two firms are geographically, and in product lines. The combined firm will have the scale to compete 1:1 with the likes of Ericsson and Huawei, and has the potential to combine two strong, but different product lines – gaining strengths and overcoming product gaps and weaknesses. They also noted that planning teams have begun forming; looking at how the company will combine and operate.
Hold that thought. Synergies and “taking the best of both” is almost ALWAYS the goal of mergers. Yet statistics show that reality generally falls far short of the promise. There are many reasons, but one of the most prominent is the unavoidable conflict between what is best for the corporation and what is best for individual decision making organizations that in effect protect their turf and their careers. On paper NOKIA has shown that they realize they have opportunity to choose wisely. This is not small acquisition; it is not made to gain one customer or to enter one market. To actually create shareholder value, rather than destroy it, NOKIA-ALU must look objectively at how they build the best combined portfolio from the two sets of assets at their disposal. From our perspective, it is clear that there are radio assets in both firms, significant gains in core and IP in the ALU assets, and very, very different OSS/BSS/MANO portfolios which, independently, have been incomplete, but together could offer a much more complete end-to-end transformative architecture. ARG think this software synergy is significant – in order to effect the economic promise of new technology. We have also learned how nebulous and poorly understood these systems are to those outside the world of telecom software stacks.
We encourage NOKIA-ALU to consider a methodology that has served Appledore Research Group well. Before we evaluate any supplier or product/solution, ARG focuses on a vision of the industry, the implied operational needs and the further implied software requirements. From this we create both a functional architecture and a set of objective requirements that we can measure any offer against. This has many benefits: 1) it anchors evaluations in business objectives – not merely technical ones; 2) it creates an end-to-end environment; the way the product will in fact be used; 3) it provides a consistent yardstick, independent of politics and turf. This sounds simple, but is not as common as it should be.
We thank NOKIA for a well-organized and informative day and evening, for open conversations with the many senior executives and engineers in attendance, and wish them all the best on the challenging journeys – to 5G and to a new company, that they laid out for those in attendance.