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Strategic Partnerships Tap Expanding Private Network Market Opportunities

The private network market is evolving with operators, equipment vendors, system integrators, and specialized solution providers working together to meet enterprises’ needs. In some cases, operators lead the deployment, but in others, an ecosystem partner with an established customer relationship leads the deployment. Collaboration between all players in the ecosystem is essential to satisfy the precise requirements of enterprises.

Let us look at the key announcements in 2022 highlighting growing collaboration with a broadening vendor ecosystem:

These announcements are in addition to some heavyweight announcements from AT&T, Microsoft, HPE and others around MWC 2022. We covered those announcements and key takeaways in our blog ‘MWC 2022 Highlights Growing Interest in Private 5G Networks’.

LISTEN: Private Networks – What are the Key Trends, Market Drivers, & Challenges

Key trends shaping the market

We have seen a fundamental change in the private network market in the last 2-3 years. Major vendors such as Nokia and Ericsson now increasingly sell their network equipment to enterprises or intermediaries, bypassing the operators. Some of the other key trends that are shaping the market are:

New players including hyperscalers are entering the market with easy and simplified solutions, thereby increasing awareness and reducing entry barriers around private networks.
Large enterprises (in countries that offer licensed spectrum to enterprises) are most likely to acquire their own spectrum and deploy private networks. It enables them to control security and architecture.
LTE private networks are having a good run compared to 5G private network deployments as there is a global ecosystem and established scale.

Factors affecting the growth of 5G private networks

There are several factors affecting the private network market’s growth and some of these are specific to 5G private networks. For instance, the delayed release of 3GPP Standards can be blamed for holding up the progress of 5G networks for several years. Many enterprise-oriented features were not finalized until the latest Release-17, and it is still a work-in-progress until Release-18 or even Release-19 is brought to fruition. Another major factor is the unavailability of chips to support applications demanding higher levels of durability. Our latest podcast also covers the most pressing problems in the growth of private networks and how this market is shaping up.

Growing market size

The potential market size of private networks is expanding as more and more countries (such as Germany, UK, Brazil and Japan) are unlocking licensed/unlicensed spectrum for enterprises. Countries that started this trend have continued to expand and develop initiatives based on growing demand. For instance, we saw Priority Access Licenses (PAL) distributed in the US market in 2020 progressing with deployments in 2021. Germany is continuing with granting licenses to enterprises. Furthermore, MulteFire Alliance (MFA) is developing and promoting MulteFire and Uni5G standards based on unlicensed spectrum usage. Counterpoint Research has recently published a report that provides an overview of the global private network market today, including spectrum availability across multiple geographies, device/network equipment availability, detailed information on several use cases from different industry verticals, and more.

Beyond the first movers, we see momentum across the verticals. More and more enterprises are converting their network trials into commercial deployments as private networks are able to deliver the desired results. We expect mining, manufacturing, ports, utilities and energy verticals to increasingly expand private networks at multiple sites and, in some cases, in multiple countries in 2022 and beyond.

Related Blogs and Reports

Podcast #54: Private Networks – What are the Key Trends, Market Drivers, & Challenges

Private Networks, especially in relation to 5G, were one of the hot topics of discussion at the Mobile World Congress (MWC 22) in Barcelona earlier this year. They have been gaining momentum with deployments across different scenarios such as manufacturing and mining, and for connecting devices like smart meters and sensors. Private Networks also have several other use cases that require high-quality and secure communication environments, such as ports, logistics, and transportation to name a few.

We recently published a report on Private Networks highlighting how major vendors such as Nokia and Ericsson are now selling network equipment to enterprises and bypassing the operators. There are also new entrants, including hyper scalers offering simplified solutions and reducing entry barriers for enterprises. We have also highlighted key trends, market drivers, and challenges in the report, and have discussed some of them in this podcast.

In the latest episode of ‘The Counterpoint Podcast’, host Peter Richardson is joined by Research Director Gareth Owen and Research Analyst Charu Paliwal to talk about Private Networks. The discussion focuses on some of the case studies and key deployments, spectrum availability, and challenges for private 5G networks among others.

Hit the Play Button to Listen to the Podcast.

You can read the podcast transcript here.

Podcast Chapter Markers

01:56 – Charu talks about some of the key findings and trends from her research on private networks.

03:38 – Charu further talks about verticals that are seeing the most traction.

06:45 – Gareth sets context on 4G LTE vs 5G private networks.

09:52 – Gareth talks about opportunities for hyper scalers.

11:37 – Charu on how the market is developing within the CBRS space and device availability.

14:25 – Gareth on challenges faced by private network players.

18:17 – Charu highlights some more challenges from her research on private networks.

19:45 – Closing thoughts from Charu and Gareth.

Also available for listening/download on:

Related Reports

5G Spectrum Auction in India: Challenges, Opportunities, Private Networks, mmWave and More

In cricket-crazy India, the annual player auctions for the Indian Premier League (IPL) are a big draw. Fans are glued to their digital screens, eagerly waiting to hear the destination of their favourite players. Come June, something similar will be witnessed in the country when the much delayed and highly anticipated 5G spectrum auction takes place. There have been several important announcements on this front as well as some disagreements that have unfolded in the last few weeks. We give below a quick snapshot of the latest events:

The Department of Telecommunications (DoT) has accepted the Telecom Regulatory Authority of India (TRAI) recommendations to cut the 5G spectrum base price. However, the DoT has also decided that the spectrum will be auctioned for 20 years instead of the earlier announced 30 years. The industry has been pushing for over 90% reduction in the base price as spectrum prices in India are very high compared to global benchmarks.

The government has also decided to prohibit the direct allocation of spectrum to enterprises for private 5G networks. Operators are in favour of the decision, but tech companies have strongly opposed it.
TRAI had recommended that the mmWave spectrum in the 24.25-28.5GHz range be used for both mobile as well as satellite services. But it is reported that the government may not auction the spectrum in the 27.5-28.5GHz range and leave it for satellite services.

We expect many more developments in the coming weeks that will pave the way for 5G services in the country. While India’s telecom industry has grown significantly over the last few years, supported by the pandemic-induced demand as well as digitalization, there are still some market dynamics that can hamper the advent of new technologies and services.

Low fiberization: Currently, 34% of the mobile towers are fiberized and the government wants this number to increase to 70% by the end of the 2023-24 financial year. This is necessary to roll out 5G in an efficient manner and will also boost 4G services. But there are several challenges to achieving this, starting from the right of way (RoW) rules and approvals to lengthy and complicated bureaucratic procedures and lack of skilled manpower.
Bidding intensity: The base price reduction is positive news but not enough to give breathing space for an effective rollout and expansion of 5G services in the country. Considering the financial stress of the operators and their inability to raise tariffs to more profitable levels due to fierce competition, keeping a high base price will adversely impact participation. It may be noted here that Vodafone Idea is yet to attract noteworthy funding and is continuously losing subscribers to Airtel and Jio. This may result in muted bidding intensity and the auction process may become a battleground for only two operators — Jio and Airtel.

Other market dynamics such as rationalizing regulatory levies like USOF and SUC to ease cash flow concerns and underdeveloped domestic hardware manufacturing (important in view of the ban on Chinese vendors) also add to the challenges for a smooth 5G launch in India. Although the government is aggressively rolling out policies in favour of local manufacturing, it will take another two to three years to show an impact on the ecosystem. Additionally, developing India-centric use cases is important as 5G technology is not limited to catering to consumer-specific needs.

Where are we now?

A look at the current telecom landscape of India:

5G smartphone availability: Counterpoint Research expects that by the end of 2022, 5G smartphones will account for 38% of the total handset shipments in India. This is expected to increase to 52% by the end of 2023. Intense competition among OEMs, availability of cheaper 5G chipsets and declining prices of devices will enable brands to push more 5G devices into the market. According to our latest consumer study, buyers consider the 5G feature among their top three priorities when purchasing a smartphone. This reflects consumer awareness and a growing market base while operators are preparing for 5G launch.

What lies ahead?

Delayed auction ≠ Missed 5G opportunities: Although 5G has been launched in various parts of the world and its commercial launch is delayed in India, this does not imply the country has missed the 5G bus. India can use this to its advantage as there is a lot of learning and established practices that can come to India. The local customization along with the implementation of globally successful models will make it possible for India to go straight into a commercial rollout. We expect operators to focus on the 3.5GHz network rollout for initial 2-3 years as it is comparatively cost-effective and has adequate device availability in the market. Almost every mid-range to premium segment smartphone launched in India over the last two years supports this spectrum band. We expect 5G smartphone launches in the budget segment to pick up momentum this year. Later, mmWave can come into play when there are use cases in place that demand that type of speeds, supported with device availability.
Who should own the private network spectrum? Enterprises are demanding direct allocation of spectrum for private networks as it gives them better control of the networks and guarantees to manage solutions/operations as per the changing business needs. However, deploying 5G connectivity solutions is not their core business. Plus, we should not overlook the whole set of technologies that come along with 5G technology, such as edge computing, IIoT applications and hybrid cloud. Therefore, operators will always have a role to play irrespective of who owns the spectrum. And allocating spectrum to enterprises will not limit their return on 5G investments. They should rather capitalize on the growing interest of enterprises in digitalization. The key concern should be whether optimum amount of spectrum will be available for captive use?
mmWave band: It is unlikely that operators will choose to operate in the mmWave band initially. Although this band allows faster speeds and higher bandwidths, its pricing is still higher than operators’ expectations. It will also be very expensive to roll out as operators will have to heavily invest in small cells due to the shorter range of mmWave. Moreover, the Indian market does not have devices supporting this band. But this does not mean the band is not an essential part of 5G networks. It should be put up for auction as many scenarios using enhanced mobile broadband will directly benefit from the low latency and high-capacity connectivity of mmWave. These include crowded areas and hotspots with a large number of users (such as stadiums, surveillance and video broadcast) and suburban clusters. Outdoor FWA will be the main use case and areas beyond fiber connectivity can also be the target market. mmWave will complement operators’ 5G services in future and provide a vital layer to their network strategies.

India’s telecom industry needs an action plan that simultaneously sees the development of the entire ecosystem. Striking a balance between revenue generation through spectrum auction and long-term sustainability of the telecom sector is crucial. The potential of what 5G technology has to offer is unprecedented. The policymakers, operators, hardware vendors and enablers should solely focus on the advancement of the technology and the proliferation of one sector should not come at the expense of the other.

Subscriber Adds and Network Roll-Out Key Focus for Rakuten, Dish and 1&1 Drillisch

With three greenfield operators – Rakuten, Dish and 1&1 Drillisch – at various stages of deploying their open RAN, cloud-native 5G networks, 2022 could turn out to be a pivotal year for the mobile telecoms industry. However, all three will need to overcome significant challenges during the year.

Rakuten: Subscriber Growth Challenge

Rakuten’s most pressing challenge is to ramp up subscriber growth and demonstrate that an open RAN, multi-vendor network operator can compete against incumbents in a very competitive and mature market. The operator maintains that it will break-even by the end of 2023. Using a conservative target of 20 million subscribers, Counterpoint Research estimates that Rakuten needs to at least double its 4Q 2021 subscriber acquisition rate consecutively every six months in order to do this (Exhibit 1). This would involve adding more than 4 million subscribers in the last quarter of 2023. This can only happen with a concerted marketing campaign – which costs money!

On its earnings calls, Rakuten has repeatedly stated that it has no plans to initiate a marketing campaign. Counterpoint Research speculates that there may be several reasons for this:

Network coverage – despite reaching 96% 4G population coverage, it still lags its rivals, all of whom offer 99% coverage, perhaps a deciding factor for customers who frequently roam outside Japan’s metropolitan areas. Also, some cell densification will probably be required to iron out any remaining network problems. Clearly, the last thing Rakuten needs is a backlash from consumers if coverage and reliability are not up to scratch across the whole network!
High capex spending – despite plans for an IPO of its banking business plus some investment asset disposals, Rakuten’s finances are already stretched due to high mobile infrastructure capex. Success in the retail market will require a lot of investment and an expensive marketing campaign at this time might not go down well with the financial markets.

Exhibit 1: Subscriber Growth Path to Reach Break-Even by 2023

As a result, Rakuten may be biding its time. Nevertheless, at some point it will need to commit to marketing if it is going to have any hope of achieving success in the retail market. Although it offers the lowest-priced data packages, particularly for high data users, lower pricing alone does not seem to be sufficient to attract customers in their droves. This may be due to the lack of marketing but also because the number of customers interested in high-data packages at present is limited. However, this will inevitably change with the transition to 5G. And Rakuten is confident that it will benefit, as it believes that it will be able to offer much more competitive pricing than rivals due to its network cost advantages.

Dish: Imminent Deployment Targets

For Dish, the major challenge in 2022 is network deployment. In fact, network planning and deployment is a major challenge for any greenfield operator, whether traditional or open RAN, with many factors, for example, spectrum availability, outside their control. In addition, negotiations with tower companies – often involving 20-year leases – are complex and invariably take longer than expected. For greenfield operators deploying new, untested technologies, there is the additional challenge of integrating and optimizing all the new infrastructure.

At its recent earnings call, Dish maintained that it will satisfy regulatory requirements and launch commercial services in all its 27 markets by the 14^th of June. However, with just over 10 weeks remaining, this looks increasingly unlikely. Counterpoint Research understands that Dish’s agreement with the FCC makes allowances for issues outside its control – such as supply chain problems – which would allow for timelines to be adjusted. An FCC extension therefore looks likely!

1&1 Drillisch: At the Network Planning Stage

Meanwhile Drillisch also looks as if it will struggle to meet its 1,000 radio site deployment target by the end of the year. The German MVNO has a regulatory requirement to provide 25% population coverage by 2025 and 50% by 2030. A complicating factor is the expected auction of 800 MHz band spectrum in Germany in 2026. Acquiring some of this low-band, high coverage spectrum would help Drillisch reduce its number of radio sites. However, there is no guarantee that it will be successful. Clearly, this makes business planning more difficult and may lead to additional delays.

A Window of Opportunity?

Greenfield operators have a window of opportunity to leverage their network advantage to capture 5G market share. However, with legacy CSPs fast migrating to cloud-native 5G, the clock is ticking for all three. Rakuten has barely started mainstream deployment of its 5G network while the other two are still on the starting blocks!

Related Reports

5G SA Core Tracker, March 2022

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Cloud RAN – Waiting for a Viable Business Case?

MWC 2022: 5G Open RAN, Private Networks, eSIM, Foldables & Sustainability Takes Center Stage

It was a great last week to physically go on the annual pilgrimage at the technology mecca GSMA MWC 2022 Barcelona after three years! It was a fantastic feeling to meet many of you in person with my rockstar colleagues.

These were some of the key trends at the show:

💡 5G is Everywhere:

Almost every booth was showcasing products, software or services with and for 5G. We saw a sleuth of 5G chipsets, phones/foldables, IoT Modules, CPEs, Robots, Drones, RAN, edge servers, software solutions and cloud. Foldables were also talk of the town and so were XR glasses as the industry looks for newer form-factors to make communication, content creation, consumption more immersive.

Hot booths: Qualcomm, ZTE Corporation, Huawei, Vodafone Deutsche Telekom, Zyxel, Samsung Electronics, Telit, MediaTek, Quectel, TCL Communication, Vuzix Corporation

Analysis here:

OPPO Find X5 Series, 240W Fast Charging Solution, AR Glass, & More Showcased at MWC 2022 (counterpointresearch.com)

Huawei Expands its Connected Devices Ecosystem with an E-Ink Tablet, AIO PC & More at MWC 2022 (counterpointresearch.com)

TCL Demonstrates New Foldable Concepts, Latest Devices – Counterpoint Research

💡Chipsets: Compute & Connectivity:

Great announcements & discussions with Qualcomm, Arm, Sony Semicon (IL) on the rise of newer technologies(Wi-Fi 7 , Snapdragon Connect, Bluetooth Snapdragon Sound) and architectures (security & compute, accelerators for Auto, IoT, RAN, Datacenters). e.g. ARM demoing the Scalable Open Architecture for Embedded Edge (SOAFEE) to drive collaboration between i automakers, semiconductor suppliers, open-source and independent software vendors, and cloud technology leaders to deliver next-generation connected software-defined vehicles (SDV) experiences. Qualcomm announced its latest Wi-Fi7 solutions in terms of FastConnect 7800

💡Open RAN & vRAN:

The second hot topic across most of the telcos, infra vendors, and SIs. Open Interfaces, cloudification, intelligent automation of RAN and beyond, virtualizing network functions, need for accelerators across the network layers, and more! Rakuten Symphony’s acquisition of Robin.io was the biggest announcement as Rakuten encapsulates the IP behind RCP.

Hot booths: Rakuten, Robin.io, Mavenir, Parallel Wireless, Radisys Corporation, Vodafone, Qualcomm, and others

Analysis here:

Chip vendors showcase open RAN merchant silicon solutions at MWC-22 (counterpointresearch.com)

💡Private Networks:

This was the hottest topic as 5G infra kicks in and everyone in the value chain sees this as an opportunity to digitally transform the enterprises, industries and public sector applications with 5G.

Hot booths: Cisco, Samsung Electronics, Microsoft, AWS,

Analysis here:

MWC 2022 Highlights Growing Interest in Private 5G Networks – Counterpoint Research

💡eSIM:

The eSIM/iSIM is happening and fast. The eSIM Summit was fantastic with great discussions from Truphone, Kigen, Thales, KORE Wireless. Some great announcements on offerings, partnerships, demos from Kigen-Kore-Energy Web to Truphone-free eSIM to chip/module makers to Thales-Adaptive Connect, Amdocs, Ericsson & Nokia as well. Also, the trend of using SM-DP+ for IoT is catching on and so is eSIM driven Digital MNOs!

💡IoT:

While LPWAN (NB, LTE-M) have been proliferating driving plethora of IoT applications, the rollout of 5G is going to unlock multiple high bandwidth and low-latency use-cases as we saw number of 5G IoT modules and chipsets from Quectel, Thales, ZTE, Sierra Wireless, Telit and others. The key applications include automotive mobility, FWA CPEs, Robotics, Drones, XR devices and more.

♻️ Sustainability:

Great showcase and growing focus from infra vendors, MNOs, device OEMs & other players on driving sustainability from using AI to drive energy efficiencies to eco-rated devices to using discarded fishing nets to green packaging, etc.

Hot Companies: Orange, OPPO, Samsung Electronics, Apple. Telefonica Deutsche Telekom EcoAct Assurant and more..

Overall, the above themes are going to shape the technology landscape for the entire decade and the digitization, cloudification, automation trends will make the devices, infrastructure, systems and services more useful, intelligent and efficient.

MWC 2022 Highlights Growing Interest in Private 5G Networks

A lot of discussion around the rollout of 5G focuses on emerging use cases and, more importantly, monetizing 5G. One such theme of announcements at MWC 2022 was private networks. It is still an emerging market but developing rapidly with an expanding ecosystem. Let us look at the significant announcements made at MWC on private networks.

HPE extends enterprise connectivity with private 5G offering

HPE introduced a private 5G solution that offers seamless interworking across both private 5G and Wi-Fi networks. The solution is based on the HPE 5G Core Stack and comes pre-integrated with RAN solutions from Airspan and other leading vendors.

The solution supports two deployment options – ‘fully autonomous’ deployment for sensitive or remote operations such as military and ‘distributed in a hybrid cloud’ deployment for critical applications in places such as hospitals.
HPE private 5G solutions are designed to operate in tandem with Aruba Wi-Fi networks. This integration provides seamless synergies and session continuity between Wi-Fi and 5G, which is also a market differentiator for HPE solutions.
The solution is available on a pay-as-you-use basis with HPE GreenLake, making it scalable and easy on upfront costs for the customers.

AT&T Private 5G Edge to make private networks simple, flexible and easy to use

AT&T teamed up with Microsoft to develop AT&T Private 5G Edge by integrating its 5G network with Azure private MEC. The service is still under preview and details on commercial availability will be announced later in the year.

The solution brings private networks as an integrated platform with connectivity and applications to enable low-latency services at the edge. It allows customers to roam beyond private networks boundary while still connected to the operator’s public network.
AT&T has a large pool of enterprise customers and the new service is aimed at small/mid-size businesses or companies with distributed footprint. The operator is focusing on the needs of this segment by designing a scalable and simple solution that will accelerate the speed of deployment.
Some of the early use cases will be seen in manufacturing plants, medical clinics, retail stores, schools/universities, restaurants, and more.

Qualcomm partners Microsoft to deliver end-to-end, easy-to-deploy, scalable 5G private network solution

The collaboration has introduced a pre-validated private 5G solution that combines Qualcomm’s 5G technologies and hardware ecosystem with Azure Private MEC, including Azure Private 5G Core.
The highly customizable solution targets the right pain points. It aims to reduce adoption barriers and operating costs for high-performance 5G connectivity solutions serving global enterprises.

ZTE demonstrates full process of private network-as-a-service

ZTE’s 5G private network strategy is to deliver innovative ‘Private Network-as-a-Service’ through operators and target industrial customers. The business model is based on service templates and all-scenario precise deployment to offer tailor-made private network services and explore new market opportunities. The offering simplifies the customization process, reduces operational costs and speeds up deployment.

Cisco announces go-to-market strategy for private 5G offering

Cisco Private 5G is delivered ‘as-a-service’ with a pay-as-you-use subscription model. It is easy to integrate with existing enterprise systems, including Wi-Fi. Typically, the focus is on making it financially simple to understand with no upfront infrastructure costs and no requirement for customers’ IT teams to train on complex solutions.

The solution is built on Cisco’s mobile core network technology and IoT portfolio. Cisco is working closely with vendors such as JMA and Airspan, given that open RAN technology is a key component of the solution.

Microsoft Azure Private 5G Core to be integrated with Capgemini’s private network solutions

Capgemini’s private network solutions will be integrated with Azure Private 5G Core with Qualcomm’s advanced 5G technologies and Capgemini’s MEC platform to bring end-to-end simplified solutions for enterprises. The solution will be validated in Capgemini’s 5G Lab in Portugal.

Key Takeaways

Traditional private networks were mainly designed for large and complex set-ups, taking several months to deploy. But now, we see an increased focus on developing transformative end-to-end cloud-based private 5G solutions, making them substantially faster and easier to deploy.
On-demand cloud pricing models, scalability and simplified procurement and deployment process are the key highlights of these announcements. Counterpoint Research believes such developments will reduce adoption barriers among enterprises and accelerate the global adoption of 5G private networks.
Public cloud players are increasingly becoming involved in the private network market, bringing various edge offerings. Players are introducing innovative service-based models that resonate with enterprise requirements and have the power to disrupt the private network market. With an established and ever-growing customer base of enterprises, they are likely to focus initially on the low end of the market and offer easy and simplified solutions.

So, can we expect 2022 to be a turnaround year for private 5G networks? We still see LTE dominating private network deployments during the year, but these developments will likely act as market catalysts. Ecosystem players are moving in the right direction by introducing simplified end-to-end solutions. It will help drive awareness of 5G private networks and enable service providers to capitalize on enterprise connectivity requirements.

However, there is still an enormous amount of hype in the private network market, with many new entrants, both service providers and vendors, believing it to be one of 5G’s low-hanging fruit. Many service providers still do not understand enterprise requirements and with a very fragmented market, there will inevitably be a market shakeout within two to three years.

Chip Vendors Showcase Open RAN Merchant Silicon Solutions at MWC-22

5G Intelligence Tracker – January 2022

Private Networks – High Expectations Amid An Expanding Ecosystem

Gaming, Data Center Shine in NVIDIA’s 2021 Show; Shortages Hit Networking Revenues

NVIDIA has reported a 62.3% YoY increase in its 2021 revenues to $26 billion. In Q4 2021, revenues were at $7.5 billion, a 52% YoY increase. Gaming, data center and professional visualization segments contributed to the overall growth in revenues. In terms of products, high-end desktop/laptop gaming processors, data center GPUs and AI rendering workload-specific hybrid workstations contributed to revenue growth. Networking revenues suffered most from the shortages and disruptions in the supply chain, followed by GPUs.

Annual revenues are CY estimates; Source: Company Earnings, Counterpoint estimates

Segment Revenues

Gaming gets biggest slice of revenues with 46.7% share at $12.2 bn

Gaming revenue grew 63.7% YoY to $12.2 billion in 2021

The revenue came primarily from its RTX 30 series of GPUs. Steam grew 50% over 2 years and had nearly 28 million active users by the end of Q4 2021, the second largest for a cloud gaming platform.

RTX GPUs help NVIDIA realize $2 bn in professional visualization segment

Professional visualization revenue almost doubled to $2 billion in 2021, realizing the best year for the segment.

Growth due to the COVID-19 driven consumer and enterprise shift to remote workstations that can take higher workloads of AI, 3D renderings and visualizations.

Supercomputer compute helps data center to shine in best revenue year ever

Data Center segment reported a growth of 59.1% to $10.2 billion in 2021 to make it a record year for NVIDIA.

Offerings across GPU, networking and software, along with synchronization of technologies stemming from the Mellanox acquisition, have made NVIDIA the leader in accelerated computing. The whole suite of offerings and mass adoption of AI technologies in enterprise applications fueled the demand for accelerators. Supercomputing contributed to <1% of overall Data Center revenues.

Additionally, demand from hyperscalars and cloud focusing on inference workloads and AI workloads contributed to the sales of NVIDIA A100 GPUs, a high-end accelerator. Specifically, Meta has purchased over 6,000 GPUs for SuperCluster, its AI supercomputer for natural language processing and visualization workloads.

Slower lap for automotive revenues with growth of 5.6%

This segment proved to be the outlier in NVIDIA’s growth story, posting only 5.6% growth at $573 million and a decline of 18.2% from its best year in 2019.

We believe the decline is due to shift from legacy cockpit processors and an increased focus on software suites that will contribute to revenues over a period of time.

‘OEM and Others’ segment sees 5.7% revenue growth on volatility

OEM and others reported $574 million in revenue, up only 5.7% from previous year
Crypto mining contributed about $24 million in the ‘OEM and Others’ segment for Q4 2021. The annual revenues from CMPs (cryptomining processors) were estimated to be about $550 million in 2021.

The visibility of crypto revenues is due to the changes in GPU software launched in Q1 2021 to detect Ethereum Mining Algorithm to ensure the intended supply of GPUs to gamers and dedicated CMPs.

The segment continues to be among the company’s key volatile segments as the revenues fell 77% sequentially from the previous quarter. The factors contributing to this volatility include limited stocks of the GPU processors, geopolitical tensions at the Russia-Ukraine border (Ukraine is one of the leading crypto miners in the world) and the increasing climate impact.

Strategic SHIFT Observation: Becoming Software HERO

According to NVIDIA CEO Jensen Huang, “NVIDIA is a software-driven business. Accelerated computing is a software-driven business”.

As the company comes close to executing its triple chip strategy – CPU, GPU & DPU, with the data center CPU coming next year and sampling late this year, it is extensively focusing on building next-generation software suites that support Metaverse, 3D and robotics.

FOCUS: The company is focusing on creating an end-to-end complete stack of firmware that complements and augments the functionalities of hardware that serves as a one-stop solution to implement upcoming technologies and the required compute demanded by them.

With the introduction of three prominent software suites, the company intends to have a comprehensive software portfolio covering all hardware products:

NVIDIA DRIVE for automotive
NVIDIA AI for data centers and enterprises
NVIDIA Omniverse for individuals and enterprises for creation of virtual content

At last year’s Nvidia GPU Technology Conference, the company announced that the software suites, particularly the Omniverse, would be made available for free to all creators. The company is betting on the business that would materialize from the connection between a real-world entity like robots or connected cars and the virtual world through digital twins. The software would act as a bridge and the company would reap benefits as the bridge becomes busy and populated!

Analyst Takeaways and Future Outlook

Gaming: As announced at CES 2022, the introduction of the RTX 30 GPU series to laptops will bring the AAA gaming experience and accelerated computing to wider audiences, adding to revenues. Penetration of GeForce NOW in 5G mobile devices, smart TVs and newer titles will continue to augment revenues through software subscription.

Data Centers: As the hyperscalars enter the rush of the metaverse and enterprises focus on weaving the AI technologies across all processes, the workloads will increasingly demand the accelerators to achieve objectives. In the short term, the company would be looking to fill the demand gap due to semiconductor shortages in the networking product portfolio.

Cryptomining: In the short term, as economies around the world reel under inflation, rising fuel prices and geopolitical tensions in the East, we expect a limited demand coming from miners this year. However, as the metaverse gains momentum, crypto regulations become more clear and enterprises get familiar with the possibilities of the virtual world, the demand will again start shooting up from later this year/early next year.

Future Deals: Due to the termination of the ARM-NVIDIA deal, the company has now over $20 billion in cash and will look to augment its growing suite of software and hardware peripheries in networking to develop efficient solution stacks.

Leveraging AI-driven RAN Intelligence to Maximise Network Potential

The RAN is a critical part of a cellular network as it manages a CSP’s most important asset: its spectrum. Yet despite investing billions of dollars in spectrum, CSPs have historically had little control over their spectrum portfolio using existing RAN controller technologies. This is now changing with the introduction of new AI-driven RAN Intelligence solutions.

Network Challenges

With the introduction of 5G, mobile networks are becoming more complex. Although there are efforts underway to sunset 2G and 3G networks, many CSPs will need to operate multiple base station types across 2G, 3G, 4G and 5G for many years. In addition, they will need to accommodate an ever-widening range of spectrum bands – perhaps up to 20 bands – ranging from sub-1GHz low-bands and 3.5GHz mid-bands to very high 26-40GHz millimetre bands, with even higher 66GHz bands and above expected to be used in future.

In future, CSPs will also need to face the challenges of accommodating multiple network architectures, ranging from the traditional distributed architecture to new disaggregated RAN and edge architectures. At the same time, they will be offering an ever-increasing range of services – voice, video, AR/VR, IoT, WBB, LTE-V and FWA – each with its own specific set of technical requirements, while simultaneously dealing with continuously varying RF parameters, different levels of signal attenuation, channel interference, etc.

Traditional O&M

Traditional routine RAN network optimization typically involves the use of in-house experts who handle all network alarms and faults. This is a labour-intensive process as all data gathering and analyses is done manually and requires a large Operations and Management (O&M) team. In addition, most CSPs only have limited resources at their disposal and hence only the “top N” problematic cells in an entire network are usually selected for optimization. As a result, it may take several weeks, or sometimes months, to adjust network parameters to support new applications. Network management this way is an expensive but unavoidable opex cost for CSPs.

Leveraging AI-driven RAN Intelligence

Traditional O&M is no longer an option for CSPs striving to provide integrated control across a portfolio of multi-standard, multi-band 2G to 5G networks. Instead, CSPs must turn to new AI-based RAN intelligence solutions, which in future will play an essential role in helping CSPs to manage complex, integrated networks, thereby increasing network performance.

Improving RAN performance involves leveraging AI to update and optimize the RAN’s control parameters across time, frequency and space domains. This requires a deep understanding of the nature and the role of the different parameter categories affecting network performance, as well as an understanding of the complexity of each individual category and the potential for improvement. Typically, RAN algorithms are adapted to new network scenarios and conditions by optimizing the network hyperparameters.[1] This brings the performance of a particular part of the network – such as a specific group or cluster of cells – into a steady state thus improving specific key performance indicators or KPIs. Examples of RAN algorithms include self-organizing algorithms and L1/L2 and L3 algorithms.

Huawei’s RAN Intelligence Portfolio

To promote the use of intelligent networks, Huawei has developed a portfolio of RAN Intelligence solutions, which includes the following two solutions:

SingleBAND – enables site-level, multi-band convergence through on-site intelligence. This solution enables flexible full-band decoupling, which through FDD enhanced uplink extends TDD band coverage while also improving network capacity through full-band and multi-beam 3D coordination.
Capacity Turbo – a network-level solution that takes the multi-band convergence concept beyond a single site. Capacity Turbo improves optimization efficiency and frees experts from repetitive tasks to focus on more advanced tasks. In addition, Capacity Turbo has the ability to accommodate existing expert experiences at a CSP and learning from those experiences in an interactive way. This enables Capacity Turbo to become even smarter.

Huawei Capacity Turbo

Huawei’s Capacity Turbo is a flexible solution that integrates with existing network and site AI algorithms (Exhibit 1). Rather than handling network alarms and faults, Capacity Turbo focuses on optimizing network performance. This involves the simultaneous optimization of multiple parameters, a feat impossible with traditional O&M. The solution operates across all spectrum bands and mobile networks from 2G to 5G.

Capacity Turbo enables automatic, smart network-level optimization using intelligent algorithms which perform coordinated optimization between multiple bands and multiple sites. This improves network performance, enhances user experiences while minimizing routine network optimization costs. By using iterative parameter optimization, combined with expert experiences, Capacity Turbo can enable closed-loop, data-driven on-line network optimization.

Compared to traditional O&M, Capacity Turbo can optimize many more parameters (20+ versus 3-5 in traditional O&M) as well as offer automated scenario matching across the whole network rather than just in a single cluster. In addition, this optimization process can be done in less than two weeks compared to a month or more with traditional O&M. RAN intelligence solutions thus provide automated solutions to complex network problems that cannot be resolved by on-site personnel – in effect making the impossible possible!

Exhibit 1: Huawei Capacity Turbo

Commercial Deployments

Capacity Turbo is already in commercial service with many CSPs around the world. Examples include:

China – using multi-parameter optimization-based AI, a leading CSP in China achieved an 18% improvement in downlink throughput ratio using Capacity Turbo in a trial in Guangzhou run across a 1755 cell, 580 base station network. Capacity Turbo also enabled the same CSP to achieve an 81% improvement in downlink packet loss and a 22% improvement in uplink packet loss across the same network. In another example, the CSP used Capacity Turbo to optimise VoLTE performance and achieved an 81% reduction in packet loss while reducing uplink packet loss by around 22%.
Thailand – the Capacity Turbo solution has been successfully used by a major CSP in Thailand to improve 4G coverage. In regions with weak coverage, high interference and limited capacity, Capacity Turbo was able to improve coverage as well as increase base station throughput by between 13% to 15%
Southern Spain – using an AI-enabled personalized parameter policy, a CSP in Spain experienced a 15% improvement in average user downlink throughput across an optimized 766 cell portion of its network while using Turbo Capacity.
Brazil – one of Brazil’s leading CSPs increased user experience by 18% across a 70 base station site region using Capacity Turbo.

Conclusion

In future, RAN intelligence solutions such as Capacity Turbo will play a critical role in managing complex multi-band, multi-RAT mobile networks and AI-driven network optimization will enable CSPs to maximise network potential while lowering total cost of operations. In addition, better RAN intelligence will drive the development of new, innovative 5G use cases, thereby providing CSPs with opportunities to differentiate their networks compared to rivals.

[1] hyperparameter – a parameter used in machine learning to control the learning process

Rakuten and Dish – 2022 Will Be A Critical Year For Greenfield Networks

Rakuten and Dish are pioneering the development of open, cloud-native 5G multi-vendor networks and operate in highly competitive and mature markets. Although with very different backgrounds, both are broadly similarly sized companies with established businesses. Both initially joined the mobile market as MVNOs and are at varying stages of deploying their own network infrastructure. However, there are also many important differences between the two companies, particularly with respect to their network architectures and vendor ecosystems.

Rakuten vs Dish

Rakuten has deployed a 4G network and ultimately intends to migrate all customers to a cloud-native 5G SA network. Dish will deploy a 5G SA core-based network from day 1. Rakuten has developed its own telco cloud with all network functions deployed at its own data centres located at various Rakuten premises. In contrast, Dish is adopting an “off-prem” model with the whole network running on AWS data centres, at least initially.

Rakuten relies mostly on single vendors with a heavy emphasis on its own in-house developed technologies and acquisitions. It also has ambitions to become a telco platform provider generating revenues from its software and technology expertise. Dish has generally adopted a dual-vendor strategy to avoid reliance on a single supplier. Although early days, Dish could conceivably follow Rakuten’s lead in time and similarly launch its own services platform.

Rakuten: Subscribers and Network Coverage

At the end of September, Rakuten Mobile had 5.1 million subscribers, having added just 2 million subscribers during the past 12 months, despite the recent expansion of its 4G network. In a country with a population of over 125 million, this is hardly a huge amount. In contrast, market leader NTT DoCoMo has more than 83 million subscribers.

Management still maintains – probably to alleviate investor concerns – that Rakuten will break even by 2023. It thus has a 12 to 18-month window to dramatically increase subscriber acquisitions. Offering much cheaper tariffs, the company is banking on consumers switching en-masse from bigger rivals, as well as finally being able to hit its 96% network coverage target in early 2022. However, in a largely cost insensitive market and with notoriously fickle consumers, will this be enough to attract sufficient new subscribers? Although the break-even target now apparently includes revenues from its telco software platform Symphony – perhaps a saving grace – management expects losses to be at their worst in the first quarter of 2022 but to improve from Q2 onwards.

In the likely event that Rakuten deviates from its planned 2023 break-even path, it is vital that the company can nevertheless show a substantial ramp up in subscriber acquisition over the next six months to demonstrate that its aggressive loss-leading pricing strategy can work in Japan. Otherwise, there is a danger that investors will start to lose confidence in the company, which may also extend to telco customers at its Symphony business.

Exhibit 1: Rakuten Subscriber Growth

Dish: Network and Service Launch Plans

Against a backdrop of falling pay TV and MVNO subscribers, Dish faces challenges in both its established and new businesses. At its 3Q earnings call, the company reported 10,98 million pay TV subscribers, down 13,000 YoY and 8.77 million mobile subscribers, down 121,000 YoY. Up until now, Dish has been able to blunt the impact of its pay TV subscriber losses with higher prices. However, pricing power cannot last forever.

Dish claims that it will be able to build a fourth nationwide 5G network for $10 billion and plans to launch in its first market – Las Vegas – in early 2022. With regulatory deadlines to provide 70% population coverage by the end of 2023, it is now in a race against time to deploy its 5G network and make the business a success. As with Rakuten, network roll-out will be its biggest challenge initially. While using AWS for its core network may yield cost advantages, putting the entire 5G network in the public cloud is a risky bet, as the recent outages at AWS demonstrate.

Unlike Rakuten, Dish plans initially to target the wholesale and enterprise markets rather than focusing exclusively on the consumer market, where it lacks its rivals’ brand recognition. With its considerable spectrum assets, targeting the wholesale market looks like a no brainer. However, with limited network coverage initially, selling to enterprises will not be easy, plus Dish has no experience of working with enterprises. Despite its recent ties with AWS, it will be challenging to generate revenues from the enterprise market.

The Endgame – Big Tech Takeover?

Building a commercially successful network from scratch with new, innovative technologies that promise significant cost benefits is easier said than done. Rakuten’s progress to date has revealed a lot of issues and there are lessons here for other aspiring greenfield networks. While the contract award with 1&1 Drillisch demonstrates that there is demand for its technology, this is a business where scale and mindshare are required to be successful. With continued high cash burn and a high credit risk rating, any disappointment on the subscriber front over the next six months could hit investor sentiment as well as impact its ability to expand its Symphony business.

Like Rakuten in Japan, Dish is smaller than its main rivals and may also struggle financially, particularly as it will need to offer substantial discounts to attract customers. Counterpoint Research believes that an eventual takeover by a big tech company such as AWS, Google, Microsoft or even Apple looks the most likely outcome for Dish, while over in Japan, open RAN ambitions by domestic vendors, coupled with national pride, will probably ensure that Rakuten Mobile will survive in some form or other.

Cloud RAN – Waiting for a Viable Business Case?

Infrastructure Insights – Cloud RAN Dominates 3rd Quarter

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