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White paper Operators can use SuperDSS to fast track their 5G network deployments October 2020 Roberto Kompany and Caroline Gabriel Operators can use SuperDSS to fast track their 5G network deployments | i Analysys Mason Limited 2020 Contents Contents 1. Executive summary 1 2. Customer demands and network economics are driving operators to upgrade 2 MNOs in a variety of countries have launched 5G in the hope of securing some immediate benefits 3 3. MNOs must launch 5G services in a timely manner 3 Operators must continuously re-evaluate their network economics and use the most efficient products 5 Operators cannot launch new services in a timely manner without access to 5G spectrum 5 4. SuperDSS will enable MNOs to use their existing spectrum bands and accelerate their 5G roll- outs 6 DSS was the first iteration of 5G spectrum sharing technology 6 SuperDSS will make it easier for MNOs to launch 5G while still serving legacy use cases 6 SuperDSS will enable operators to improve their 5G coverage, but it can also lead to spectrum cost savings 7 Operators will use SuperDSS to ensure that sites are aligned and to reduce O without it, MNOs cannot deploy new networks. Spectrum in the sub- 1GHz, 3.5GHz (known as mid-band) and millimetre-wave (mmWave; above 26GHz) bands has been designated for 5G use. However, national regulatory authorities (NRAs) must either auction or allocate spectrum blocks in these bands to MNOs because it can be used. On occasion, existing incumbents (such as satellite service providers) may already be using spectrum in these bands. In these cases, different spectrum will have to be allocated in order to free up resources for mobile services. This process can be arduous, bureaucratic and may require lengthy negotiations, which can delay MNOs 5G deployment plans. MNOs can use SuperDSS technology to launch 5G networks using their existing spectrum assets in countries where NRAs spectrum auction plans have been delayed (due to COVID-19 in some cases). SuperDSS is an innovative technology that goes one step beyond 3GPP-defined DSS. Traditional DSS only considers the dynamic sharing of 4G and 5G, while SuperDSS, an industry first, supports triple-RAT sharing (that is, either 2G, 4G and 5G dynamic sharing, or 3G, 4G and 5G dynamic sharing). As such, MNOs can use SuperDSS to maintain a competitive advantage in the market, fast track their 5G deployments using existing spectrum assets and continue to deliver legacy services. Even those MNOs with advanced 4G networks may still depend on 2G and 3G networks for legacy services, such as circuit-switched voice and other machine-to-machine (M2M) or internet of things (IoT) services. There may be several reasons why next-generation voice-over-LTE (VoLTE) services have not been launched on a nationwide basis. For example, M2M devices for smart meters and point-of-sales (POS) devices can still have several years of life left and are costly to replace. As such, MNOs must continue to deliver legacy networks services as they plan their 5G service launches. SuperDSS will simplify the O they simultaneously launched 5G networks on 3 April 2019. MNOs in other countries such as Rain in South Africa, Sunrise in Switzerland, Telstra in Australia and Verizon in the USA quickly followed suit. Early movers can secure the following benefits if they are in a position to move quickly. Improved efficiency. 5G RAN provides improved spectral efficiency compared to even the most advanced versions of 4G, such as LTE-Pro. The first 5G deployments used the non-standalone (NSA) architecture, where 5G new radio (NR) technology was connected to the 4G packet core. The main advantages of this approach are the fast time-to-market for 5G use cases and the commercial benefits to MNOs. Improved QoE. Enhanced-mobile broadband (eMBB) and fixed-wireless access (FWA) are the main use cases that MNOs deliver using 5G NSA architecture. These allow operators to continue to improve QoE compared to that of 4G networks (thereby driving overall customer satisfaction) and address new revenue sources. For example, FWA will allow MNOs to enter the broadband market and compete with fixed network providers. 4G FWA has been available in some countries, but its success has been limited. 5G FWA will allow MNOs to compete with fibre-to-the-home (FTTH) providers for the first time. Increased smartphone sales. MNOs finances have been negatively affected by flat or declining smartphone sales because consumers have been keeping their phones for longer due to higher device prices. The onset of 5G has given MNOs an opportunity to revamp the smartphone upgrade cycle. New revenue streams (see Section 3). 3. MNOs must launch 5G services in a timely manner There are nonetheless challenges for early adopters too, and these will drive those wanting to deploy 5G early on to seek even greater spectral and cost efficiencies. A few operators have been able to increase their prices following a 5G launch, at least until they were no longer the sole 5G provider in the country (such as EE in the UK). However, there has been no 5G premium in most cases, and KPI improvements have come from higher data usage and increased take-up of high-value packages that include video streaming services, AR/VR services and gaming (as was the case in China and South Korea). SK Telecom in South Korea said that its ARPU rose by 1.7% in the first three quarters following its 5G launch. However, it also reported that its operating profits were down by 50% year-on-year in 2019, largely because of the costs of 5G build-out and marketing. 3 GSA (2020), 5G Market Status September 2020-1 Snapshot. Available at: september-2020-snapshot/. Operators can use SuperDSS to fast track their 5G network deployments | 4 Analysys Mason Limited 2020 3: MNOs must launch 5G services in a timely manner Mobile ARPU has been flat or declining in many countries during the last 5 years. In fact, mobile ARPU fell by 20% worldwide between 2015 and 2020,4 which puts pressure on MNOs ability to invest in new networks. Operators will launch 5G networks to not only offset declining revenue, but also to ensure that new revenue- generating services can be rolled out. Analysys Mason carried out a survey of 60 Tier-1 and 2 mobile and converged operators and asked them about the business goals for their next-generation network deployments. Figure 3.1 shows that the key top-level commercial objective that will shape MNOs decisions is a reduction in the total cost of ownership (TCO); more than half of the respondents said that this is one of their top-two objectives. Other important drivers are generating new revenue from new or existing user bases and improving the user experience across many applications. Figure 3.1: MNOs most important high-level commercial goals for next-generation network deployments, 2019 Source: Analysys Mason, 2020 MNOs have a focus on new revenue sources because the revenue/margin growth that is available from established mobile broadband applications is limited. Traditional operators are relying on new use cases to increase their revenue and carve out new markets. These use cases may be new user experiences for mobile broadband consumers (such as virtual reality gaming) or services targeted at the enterprise, industrial and IoT sectors to enable players in these verticals to support their own digital transformation programmes. In either case, MNOs will need to build their 5G networks differently than those for previous generations. 4 For more information, see the Analysys Mason DataHub. Operators can use SuperDSS to fast track their 5G network deployments | 5 Analysys Mason Limited 2020 3: MNOs must launch 5G services in a timely manner Operators must continuously re-evaluate their network economics and use the most efficient products The efficiency of RAN technology and spectrum usage is more critical than ever to support these new use cases while keeping costs low. In the past, operators migrated to new RAN technologies by adding new base station hardware at each site. This required additional capex, not just to cover the cost of the hardware and software, but also to pay for the new spectrum required. Operators also incurred opex costs with every additional RAN generation due to the need to lease extra floor and tower space for new equipment and antennas and the requirement for higher-capacity fibre to support the rising consumption of mobile data. MNOs also has to pay for increased power consumption. Our research shows that MNOs opex is typically three times their capex each year. MNOs have demanded increased efficiencies from their vendors products because they cannot continue to build next-generation networks in the same way without sacrificing profitability. Vendors response has been to create smaller and more-efficient radio units that fit on the towers near the antennas and support spectrum used in previous network generations, as well as that for 5G. Operators cannot launch new services in a timely manner without access to 5G spectrum Timely access to spectrum is one of the most critical success factors for the launch of a new network. It allows an MNO to decide on a launch date that meets its commercial objectives, and sometimes enables it to improve services or QoE more quickly than its competitors. For instance, during the migration from 3G to 4G, some operators, such as EE in UK, were able to launch 4G services several months ahead of their competitors. As a first mover, EE had 9 months to capture market share before its competitors launched services. It gained this lead by refarming some of its 1800MHz spectrum that was previously used for 2G services. However, refarming spectrum can be arduous and bureaucratic because it requires the NRAs permission. As such, this is not an option for every MNO in the build-up to 5G. The 5G specifications target new spectrum bands, mainly the sub-1GHz band, the C-band (around 3.5GHz in most markets) and the mmWave band (26GHz and higher). Each band has different characteristics and will enable different benefits; for example, the sub-1GHz band will deliver wide-area network coverage, while the C-band will deliver the best combination of coverage and QoE, and mmWave spectrum will support applications that require very high, localised capacity. Operators must have access to one or more of these bands in order to deploy the revenue-generating use cases that 5G networks can deliver. MNOs ability to deploy 5G networks will be limited unless NRAs plan and execute 5G spectrum auctions in a timely manner or MNOs are allowed to refarm existing spectrum. MNOs that are permitted to refarm existing spectrum can roll out 5G on legacy frequency division duplex (FDD) bands, such as the 900MHz, 1800MHz or 2100MHz bands. However, refarming will prevent these bands from being used for other legacy radio access technologies (RATs). Most MNOs already use these bands to carry 4G traffic, and MNOs in countries with existing 2G and 3G RATs may also depend on these bands to carry legacy traffic. For this reason, MNOs will need to use spectrum sharing technologies to simultaneously utilise the same spectrum band for two or more RATs. However, when creating hybrid networks, MNOs must ensure that the unbalanced distribution of 2G or 3G traffic in the network does not negatively affect the O there are plans to release more, but no firm date has been announced. MNOs may need to use existing investments, such as legacy circuit-switched networks for voice services, even in countries where 4G networks have been launched. This is the case when the IP multimedia subsystem (IMS) that is needed for voice-over-LTE (VoLTE) is absent, for example. Analysys Mason conducted a survey of 72 mobile operators (including Tier-1 and 2 MNOs) in 2Q 2020 and found that 17% had not deployed any kind of IMS. It will therefore be impossible for these operators to turn off 2G or 3G networks completely in the near term. Operators must also continue to support legacy networks when there are M2M and IoT devices that rely on 2G or 3G networks. These devices are usually used as POS solutions, smart meters and vending machines, and a substantial number of such devices are still in operation in many countries. These devices have a significantly longer lifetime (about 710 years) than feature phones and smartphones (25 years in most markets) and cannot Operators can use SuperDSS to fast track their 5G network deployments | 7 Analysys Mason Limited 2020 4: SuperDSS will enable MNOs to use their existing spectrum bands and accelerate their 5G roll-outs be migrated to 4G or even 5G cost-effectively, so legacy networks will continue to play an important role for a number of years. Analysys Mason research shows that there were 277 million IoT devices that used 2G worldwide in 2019, the majority of which were in emerging AsiaPacific (186 million).5 We forecast that the number of these devices worldwide will decrease at a CAGR of 5% to 201 million in 2025 (105 million in emerging AsiaPacific, at a CAGR of 9%). This means that there will still be significant demand for legacy networks, even in 2025. A substantial number of 2G and 3G handsets are still in active use. 2G and 3G handsets accounted for 18.5% and 25.3%, respectively, of all handsets worldwide in 2019. The majority of these handsets were in the Middle East and North Africa (MENA) and Sub-Saharan Africa (SSA) (35.6% and 47.6%, respectively, for 2G and 38.3% and 43.6%, respectively, for 3G). To summarise, operators can use SuperDSS technology to go ahead with early 5G service launches in countries where there are auction delays or requirements to meet commercial obligations related to legacy network services. SuperDSS will enable operators to improve their 5G coverage, but it can also lead to spectrum cost savings Spectrum cost (measured as price per megahertz (MHz) per member of the population (pop) represents significant capex for operators. The bands are valued according to both their coverage and capacity. Figure 4.1 shows the average price per MHz per member of the population for spectrum in the sub-1GHz and mid-bands in recent auctions in Germany. The prices for mmWave spectrum are usually significantly lower than those for spectrum in other bands. This is shown in Figure 4.1 by the price paid in the 2018 auction in Italy because the German NRA did not auction spectrum in the mmWave band in its latest round of spectrum auctions in 2019. 5 For more information, see the Analysys Mason DataHub. Operators can use SuperDSS to fast track their 5G network deployments | 8 Analysys Mason Limited 2020 4: SuperDSS will enable MNOs to use their existing spectrum bands and accelerate their 5G roll-outs Figure 4.1: Prices paid for spectrum in the 700MHz, 900MHz, 1800MHz, 2100MHz, 3600MHz and 28 000MHz bands, 20152019 Source: Analysys Mason, 2020 The spectrum in Figure 4.1 was auctioned for different RATs and in different year
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