by Stefan Pongratz, Dell’Oro Group
With gross proceeds from the U.S. C-Band auction fetching around $81 B, the question is not so much about the investment thesis it’s more about what this means for future mobile bands. After all, global mobile data traffic has advanced roughly 1000-fold since the 3G smartphone was introduced. And even though traffic growth rates are slowing, operators need to consider the potential of another 20x growth over the next decade, implying reducing cost per GB and expanding the available capacity will remain essential objectives for any operator that wants to remain competitive.
Taking into consideration that the upper mid-band in combination with Massive MIMO will provide significant amounts of incremental capacity, but likely not enough to meet the capacity demands of the next decade, preliminary C-band auction results are renewing the focus on what is next—what will the operators do once they exhaust the incremental capacity offered with the upper mid-band?
And there is no magic. Operators have three basic tools at their disposal, including leveraging more efficient technologies, deploying more cells, and using more spectrum. Historically, adding more cells has been one of the leading vehicles to expand capacity. But with the overall macro cell site and BTS installed base approaching ~8 M and ~16 M, respectively, much of the low-hanging fruit has been picked and the trees are more bare than we would like to think. So, in addition to increasing the reliance on small cells, operators will from a licensed spectrum perspective have three high level options once the upper mid-band has been exhausted to deliver the next most economical and sizeable capacity boost, including FDD Massive MIMO, millimeterWave (mmWave), and 6425 MHz to 7025 MHz (changes to the CBRS power limits could also make the CBRS spectrum a more viable capacity option for U.S. operators).
While it is no secret that FDD-based Massive MIMO has not gained the same mass market acceptance as TDD-based Massive MIMO, partly because of technical challenges with the FDD spectrum and practical limitations due to the required antenna size with typical FDD frequencies, operators and suppliers appear to be warming up to the idea that there is a role for FDD-based Massive MIMO solutions in future roadmaps. Huawei signaled some optimism during its 2020 MBBF event, sharing preliminary results suggesting 3x to 4x incremental cell capacity is within reach. Measuring 0.5 meters in width and weighing around 50 kg, it remains somewhat unclear at this juncture how operators will prioritize FDD-based Massive MIMO in the broader long-term capacity roadmap. We expect that FDD Massive MIMO adoption will remain limited for some time and likely be a stronger candidate for mass-market acceptance once operators exhaust the upper mid-band spectrum.
mmWave investments are growing rapidly, with total shipments on track to surpass 0.1 M units.
Still, even with this output acceleration, mmWave volumes remain small relative to sub 6 GHz. While we project mmWave investments will more than double by 2025 and outperform sub 6 GHz growth rates, we don’t envision that operators will embrace the technology for broader city-wide coverage any time soon, reflecting cost-per-bit challenges relative to the upper mid-band sub 6 GHz spectrum.
Yet there are some reasons to be optimistic about the mmWave prospects. First and foremost, 5G NR mmWave is working, and operators globally are exploring how to incorporate the technology into their roadmaps. Because even if the RAN economics are not always compelling at this juncture, operators are fully aware of the end-user trends and the long-term implications, implying that all tools will need to be on the table to support a potential twenty-fold growth in capacity over the next decade.
There are still economical and technical challenges with mmWave deployments, but it is safe to conclude that some of the more ardent sceptics have been proven wrong. The technology is working both for fixed and mobile applications. The economics remain challenged relative to the sub 6 GHz spectrum, however, mmWave coverage is turning out to be much better than some initially feared.
The North America and Asia Pacific regions are driving the mmWave forecast at this juncture. But with spectrum availability improving and more than 130 operators investing in the technology, we anticipate adoption will improve in other regions.
Despite improving market sentiment for both FDD-based Massive MIMO and mmWave technologies, the broader business case is not assured. As a result, the interest in the 5.925-7.125 GHz spectrum is growing. China appears to favor licensed 5G for the entire 6 GHz spectrum, while the FCC and MSIT have made the decision to make the entire 1200 MHz of spectrum in the 6 GHz available for unlicensed use. Other countries/regions and the GSMA are considering a more balanced approach between the unlicensed and licensed spectrum, allocating possibly up to half or 600 MHz for licensed use. According to a GSMA survey, 90% of MNO’s responses placed the 6425-7125 MHz as a high priority for IMT.
While the higher operating frequencies will undoubtedly challenge the link budgets, there is growing optimism that macro-based EIRP levels, combined with further Massive MIMO and beam forming advancements, will minimize the number of incremental sites required to realize equivalent city-wide coverage relative to the upper mid-band and ultimately become a compelling option in the overall capacity toolkit.
More countries will make their decisions about their 6 GHz plans in 2021. It is not trivial. On the one hand, WiFi is a major success story and remains the de-facto connectivity technology for enterprises and consumers, not just for the MBB use case but also for IoT usage scenarios. And the unlicensed spectrum is increasingly congested. On the other hand, we are still in the early days of 5G and while it remains unclear exactly how much of the 5G vision will be realized over the next decade, there are few signs that cellular data traffic growth will slow enough to obviate the need for more valuable spectrum. NR-U is an option, but there is a reason operators believe the C-band spectrum is 15x to 20x more valuable than the CBRS spectrum—EIRP limitations impact the inter-site distance and the overall TCO. Nokia estimates that to realize the same edge speeds with CBRS and the C-band, operators would need to deploy 4 to 10x as many CBRS sites.
In other words, all eyes are on the C-band for now. But it won’t be long before operators will need to go back to the shed and open up the toolbox. The only question is, which 6 GHz toolkit will provide the best foundation to address the opportunities ahead—the American or the Chinese or something in between?
A version of this article previously ran in Fierce Wireless.