The mobile industry faithful from around the globe made their annual pilgrimage to the beautiful city of Barcelona. The spring-like weather was a welcome change from the cold wet winter. Predictably, the major themes of the show were around 5G, IoT, Digitization of Industries, User Interfaces, Implications of the 4th Wave and Connected Intelligence. Chetan Sharma Consulting participated in a number of sessions and panels throughout the show – Workshop on 4th Wave, Connected Intelligence Roadmap, Digital Transformation of the operators, Role of Identity and Trust in Digital world, Sponsored Data landscape, and AR/VR. We also had formal and informal sessions with several key executives in the industry and of course, we did our usual rounds of the show floor. This note presents the summary of our observations from the show.
First the numbers – There were several forecasts released during the show that are worth noting. Whether they are realistic or not, we will deal with the subject at a later date. GSMA forecasted 1.1 billion 5G connections by 2025. Ericsson estimated the 5G opportunity to be in the vicinity of $582 billion by 2026. Softbank talked about 1 Trillion IoT connections by 2035.
4th Wave in full swing – Six years ago, we laid the framework for the future of the industry in our 4th Wave thesis. The industry has evolved pretty much along the same lines. Vimplecom’s chairman Alexy Reznikovich’s keynote was titled, “Telecom Industry: Beyond Connectivity” something we have been guiding our clients towards for the past many years. While it is not difficult to figure out the areas that will generate the biggest revenues and new streams of profitability, it is harder to change the culture that will enable operators to execute on these opportunities.
Operator Keynotes – Operators still play an important albeit increasingly diminished role in the mobile industry. Hearing from the top CEOs gives us a sense of the pulse of the industry. In the past, CEOs especially from Europe have complained about the regulations and those keynotes assumed a tad depressing tone. This year Masa from Softbank and Jose Maria from Telefonica gave an uplifting view of the industry. Masa barely talked about Softbank with the entire focus being on IoT, AI, and Connected Intelligence. He laid a 30-year vision of opportunities, threat, and the fundamental shift in the industry architecture (see below).
Telefonica’s CEO Jose Maria talked less about spectrum and regulations and more about the AI layer to mine new opportunities. It is good to see CEOs going beyond the access layer to explore the 4th Wave in detail. While Bharti’s CEO Sunil Mittal kept the focus on now and here, some of the initiatives he mentioned could have far reaching implications like getting rid of high-roaming prices. KT’s CEO Chang-Gyu Hwang provided an update from their 5G trial in Pyeongchang. He also talked about the application layer more than the network layer e.g. 3D Locator, sensorized jackets, drones, security platform, energy management, and others.
Masa’s 30-year plan – Softbank’s Masa’s keynote was unique that it deserves its own paragraph. I would recommend everyone in the industry spend 20 mins to view the presentation. He implored the industry to think broader and longer-term. Yep, he pretty much talked about Connected Intelligence, something, we have been talking about for the last 3-4 years. The gist of the message was – Connectivity and Intelligence will lead to Singularity and it is critical for humanity to embrace the reality vs. fighting it.
Year of Operator Introspection – Many operators already knew what was coming because of the 4th Wave and had planned accordingly, others are just waking up and realizing the world has changed under their feet. They need to adjust. Quickly. I found several execs from different mobile operators in various regions being self-reflective on what has gone wrong and how they need to change their behavior, investments, perspectives to be successful in the future. Better late than never.
5G – 5G took MWC 16 by storm with a number of operators announcing their plans, all major vendors demoed lab equipment and results. This year, the trials were more mature, the technology looked more stable, the radios decreased in size, forecasts for adoption skyrocketed, and there were plenty of live trials and systems to talk about. However, there is a fear that the industry might be expecting too much from 5G in the short-term.
First let’s talk about the 3GPP requirements for 5G that were released just before the show. To be considered a 5G technology, the network has to perform the following key functions: 20Gbps per cellsite download capacity with peak upload speeds up to 10Gbps, should be able to serve 1 million connected devices per square kilometer, latency down to 1-4ms, consistent speeds of 100 Mbps for download and 50 Mbps for upload, should be able to handle 500 km/h speeds. Perhaps the most important immediate question is which of these requirements can be addressed by Gigabit LTE? The basic download/upload speeds a are low hanging fruit, the density requirements are not as necessary in the short-term, and the latency requirements are the most challenging. The 20Gbps requirement can potentially be reached with fixed wireless deployments. Probably, the question for 2017-18 is which important operator will call their version of “pre-5G” 5G and create commotion in the marketplace?
The number of 5G use cases discussed at the show increased and in general the buzz for 5G was palpable. If we had a buzzograph, 5G will probably cover over 50% of the coverage out of MWC 17. However, the question about the 5G business case remains. The fixed wireless deployments are on shaky grounds. The deployment cycle of 5G will be dependent on 5G Economics rather than technology as we illustrated in our 5G Economics paper. There is also a question of how many operators can the 5G Capex requirements support in any country.
NTT DoCoMo, SK Telecom, and KT seem to be a step ahead of others in their 5G tests compared to other operators. I was quite impressed by DoCoMo’s trials with all the major vendors. They are all considering 5G for both the coverage and capacity layer while a majority of the operators are initially focused on 5G for capacity gains. Qualcomm is spearheading a lot of the nuts-and-bolts ecosystem work.
The technical progress industry has made in 12 months is indeed breathtaking. The stuff works. The usual suspects along with some new comers had a number of cool 5G demos: Qualcomm, Ericsson, Nokia, Huawei, Telefonica, DT, DoCoMo, SKT, Intel, and others. However, some of the use cases are cute but not very helpful. How many of you will be ready to put yourself under the knife operated by a robot using 5G being directed by a neurosurgeon in Bahamas? Exactly! How much will you pay good money to see a robot on drums? How about a round of tennis at Wimbledon with a robot? Some amusing scenarios but they do raise some fundamental questions for homo sapiens.
5G NR acceleration – A group of industry heavyweights led by some of the most prominent operators want to accelerate the standardization process for 5G New Radio (NR) and get the deployments up and running by early 2019. Current timeline puts the process into 2020. The intermediate step of Non-Standalone 5G NR is intended to continue to the momentum and get a head start on 5G deployments. However, not all major operators are on board most notably Orange, Telefonica, and Verizon.
Breaking apart the telco-stack – There are serious brain cells being put to use to rethink the stack and what it means to be a telco. To what extent would a telco go to maintain their margins – running the network from the cloud, completely outsourcing the network, network sharing with competitors, putting spectrum to open access use, using commodity hardware + open source software, etc. Scenarios vary but everyone is looking at the economics of running a telco and pick its parts and pieces to create a leaner stack.
Gigabit LTE – In the short-term, I am actually more excited about the advent of Gigabit LTE. With a step-function change in throughput, we could see significant jump in traffic and perhaps new set of applications and services that will be enabled by a fatter pipe. Gigabit LTE devices are already in the market and many operators have promised the network to be ready this year for the next iPhone which will have the gigabit capability this fall.
Facebook TIP – One thing I have admired about Facebook is ability to continuously iterate and hone in on the strategy despite setbacks. To enhance the utility of its internet.org and TIP programs, Facebook is putting money directly into the infrastructure backbone starting with collaboration with operators in Uganda.
Virtual Digital Assistants – Operators are getting into providing digital assistants. Hey, why should Amazon have all the fun? Deutsche Telekom introduced Tinke while SK Telecom palled with Nugu. Telefonica had Aura to romance with while Softbank continued its love affair with Pepper.
Connecting the next billion – The notion of “connecting the unconnected” was lost in the noise of 5G. We shouldn’t forget, there are still billions of users who are not connected and yet even more without a smartphone. We will of course get there but as an industry, we shouldn’t lose the focus on connecting everyone.
Regulations for the digital age – As we noted in our recent paper, “Competition: Rethinking the Regulatory Framework,” folks in the industry are starting to realize that the current regulatory regimes in their respective countries are outdated and doesn’t represent the evolving industry landscape wherein applications, services, and content are the new throne bearers. Ajit Pai has indicated his desire to pull back on Net Neutrality policy though Tom Wheeler reminded that the process of doing that is not that simple.
IoT – After 5G, IoT was the next biggest headline grabber. The use cases for deploying IoT are increasing, the platform layer is becoming more mature, people are starting to think about standardizing functions for scale, $50K pilots are turning into $500K deployments, large scale industrial and smart city initiatives are underway. However, some of the basic issues haven’t changed much especially around security, privacy, and identity. Lot of work to be done. Lot of opportunities. Also, current deployment models don’t require 5G yet.
Handset launches – While there were several plain vanilla Android device launches, one that stood out was Sony’s Xperia which has the top of the line performance capabilities in Gigabit LTE, 4K HDR video, it will be the device to beat this year. Sony’s Xperia Touch projector ($1600) is also a welcome innovation to search for new ways to interact with content.
eSIM – The future of eSIM is a matter of intense debate in the inside circles of the industry. Depending on how it manifests itself in smartphones can have significant implications for the industry. The notion of eSIM in IoT, Tablets, Cars, etc. is well understood and accepted but in what form will it find acceptance in smartphones is not clear. Stay tuned on this development.
Big M&As are in the works – There were some serious M&A discussions taking place at MWC as CEOs and Board members met with potential future mates and foes. Lots of permutations and combinations available but the shift is towards becoming multi-play operators in respective geographies. Pure-play wireless operators will have a hard time competing long-term.
AR/VR – Pokémon Go (btw, it has probably generated over $200M in data revenues for the operators) proved the efficacy of AR. VR toolkits from HTC, Sony, and Facebook are getting better, however, we are in the early phases of an industry that requires quite a bit of work to enter the mainstream consciousness. The Enterprise use cases are also becoming quite compelling in manufacturing, transportation, healthcare, and more. This space will continue to evolve as software, hardware, and tools get better. There is working going on to reduce the bulky VR/MR headsets down to a regular wearing glasses. Now, that will be quite transformational (Zeiss and DT announced some collaboration along these lines)
3GPP IoT standards take shape – As we have previously noted, Lora/Sigfox and similar standards remind us of WiMax and while these technologies have merits, the lack of a worldwide ecosystem will inhibit growth at scale. In the meantime, facing the threat, 3GPP standards have aggressively pushed Cat-M and NB-IoT and ecosystem is starting to take shape and we are likely to see several announcements from operators throughout the year.
Smart City initiatives – Last year was about announcements; this year the smart city initiatives were taking shape. Accenture had a cool simulation of a city hologram of the City of Barcelona with sensor data overlay. When there are anomalies and exceptions, one can zoom into the specific city location. Dubai, Singapore, Helsinki, Barcelona, and many other cities are trying to figure out the business model to make it work. Pretty much every country has some form of Smart City initiative to lay the sensor infrastructure and manage the city using the intelligence that is derived from the data.
Netflix Keynote – Reed Hastings was the main keynote this year and it was disappointing. The session could have paved a vision for the industry but got mired in the here and now.
Wearables have lost steam – I am a big believer of wearables but disappointed with the current state of software. Wearables had a “meh” MWC 2017.
Unlicensed LTE – There is a quite a bit of excitement about using unlicensed bands for LTE and improving performance of content delivery and easing the network load. US operators have already announced their plans and we should see much progress later in the year.
AI was everywhere (in the marketing materials at least) – Just like a few years back, cloud entered every vernacular. Now, AI has taken center stage and it is its turn to be abused. AI startup funding did reach $5B last year but how AI is applied to practical scenarios in the mobile space is an evolving art. Just because someone slaps AI on their brochure means very little until they can show the use of data to fine tune the algorithms that automate functions at massive scale.
Automation is pervasive – There was more anecdotal data on how companies around the world are reducing the number of jobs because they can automate functions that previously required humans. Even in emerging markets, companies are eliminating 1000s of jobs as they master the art of automating functions. The policy world remains completely disconnected to this reality.
Disconnect between operators and industries – One of the key assumptions in 5G growth is that there will be tremendous demand for high capacity and low latency from different industries. Currently, there seems to be a disconnect between two sides of the ecosystem. Some of the folks in various industries – auto, manufacturing, etc. we talked too weren’t convinced they need 5G for their roadmaps to work. I would suggest that the wireless industry work more actively with the industry leaders to hash out use case scenarios that lead to enough business cases that in aggregate the ROI justification is clear for everyone to see. We would want the deployment cycles to resemble 4G and not 3G.
Huawei is hitting its strides – That Huawei is a dominant player in the infrastructure space is not news but this MWC was different. The Chinese giant was clearly the biggest spender at the show with some eye-popping numbers. It is more confident about its prospects going forward and is going after the market very aggressively.
Chip-as-a-service – While there is money in IoT chips, you have to sell a boatload to make up for the low prices. Some silicon vendors are considering giving chips for free and tap into the services revenue stream instead.
Economics of Unlimited Data – Though not officially covered much during the show, it came up in most private meetings. Operators outside US wanted to know what US operators are having for breakfast. The economics of unlimited data are tough. We will discuss this in more detail in the coming months.
Chatbots – While chatbots are supposed to end world hunger, there is a long road ahead. The current set of tools, platforms, and interactions are quite experimental and not ready for prime time. The potential to aid certain use cases is clearly there.
Chinese influence on the ecosystem – The amount of traffic running pipes controlled by Chinese vendors is increasing fast. The number of devices sold by the Chinese OEMs dominates the rankings. The commercial model driven by Chinese application provider continues to lead the western world. Even in the emerging space of AI, China is not that far behind. Interesting times ahead indeed.
Misc: Nokia Nostalgia (Nokia 3310 for your grandparents), 5G NR Collaboration (deployments in 2019), Qualcomm’s X20 LTE modem (Cat 18 w/ 1.2 Gbps), Intel’s 5G Autonomous Car (why not!), DoCoMo (Using operator data to predict traffic), Graphene Experience Zone (some interesting research work going on a various institutes).
Your feedback is always welcome.
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles, and our annual thought-leadership summit – Mobile Future Forward. The next US Wireless Data Market update will be released in March 2017.
Disclaimer: Some of the companies mentioned in this update are our clients