In the first two parts of our roundup of MWC 2023, we spent a fair bit of time highlighting the key issues facing the telco community around the world. We posited the burning platform theory in part 1, the Gordian Knot bedevilling telco infrastructure in part 2 and the common theme was the many challenges, strategic and even existential, that are staring telcos in the face. In this post, we shall explore the topic of private 5G as it is a core coverage area.
We have been watching the market for private networks evolve for over five years now. Admittedly, we may have got out a little ahead of the trend, but it was gratifying to see that private 5G was one of the buzzwords of MWC2023. Walking through the halls, it felt like every exhibitor had some reference to private 5G, with the gamut spanning pretty much the entire value chain. This was also true of the operator booths, where several had whole zones set up for exhibits on Industry 4.0, smart cities and other private network use cases.
We visited several of these booths and demo areas, and while it was impossible to cover the entire list, we left with a few takeaways. We will attempt to summarize these before getting into more details on the respective stakeholders and their approaches to this emerging market segment.
The private 5G narrative is not going to script for the telco community. End users have a variety of options today, and regulatory flexibility on spectrum is opening up new opportunities for deployments.
Radio and antenna solutions for the enterprise are now table stakes. The real value will be in integration with the existing IT systems which tend to be complex in brownfield environments, and in orchestration solutions for seamless end to end connectivity to the edge and cloud.
On the supplier side, the market will split into three camps broadly.
One, the big boys like Nokia, Ericsson, HPE, Cisco who will position themselves with end to end offerings from cloud-to-edge.
Two, at the other end of the spectrum, we increasingly see a long tail of solution vendors and SIs who will “assemble” private 5G for enterprises who have less intensive or highly custom requirements. These will also be aided by a rising trend towards “national supply chains”, as evidenced by providers emerging in markets like Japan, Korea, Taiwan and India.
Three, a select group of telcos will front private 5G engagements, either like Singtel and China Mobile with their own platforms and channels, or like Verizon in partnership with vendors like Nokia and Celona.
A variety of business models are emerging but the most prominent one is likely to be Private Networks as a Service. We want to coin a new term and call this PNaaS but are unwilling to wager on its popularity. This is based on our belief that that majority of enterprise customers will not be willing to invest the significant upfront capex required to set up and manage a network on their own. Rather, a packaged and likely customized solution with a monthly fee that is calculated on the number of access points deployed seems to the most common theme. To be clear, there will be others but we don’t believe that pricing based on the number of endpoints connected or data traffic carried will be sustainable.
On the semiconductor side, a number of companies are positioning themselves to benefit from the expected surge in demand for small cells and other access point form factors. The usual suspects will benefit from small cell demand but the one company that has the widest portfolio of chips (processor and endpoint), software and reference solutions for private 5G is Intel Corporation, and they have cast the net wide in both geographic and industry vertical terms.
Device availability for private 5G continues to be constrained, especially in markets that have dedicated different frequencies for enterprise use. A good example of this is Japan, Korea and Taiwan in Asia reserving the higher frequencies (~4.8 GHz) in the n79 band. These kind of moves will create new SKUs for devices and fragmentation of volume. There is some evidence that this supply chain is beginning to take shape but we may not see mass market availability till late 2023.
The verticals that are seeing the most traction for private 5G continue along expected lines, with manufacturing, mining, utilities ports/transport/logistics and campus networks (education in the US is a major adopter) are seeing some of the earliest adoption trends.
The use cases that are seeing the most traction do not, as yet, require the kind of low latency that we has been hyped with 5G. However, a rising number of use cases revolve around video analytics for access control, safety and other use cases. These, in turn, will require advanced compute vision models based on AI/ML which in turn require edge compute and connectivity to the cloud.
Regulatory “flexibility” ruins the private 5G script for Telcos but some will shine
It was supposed to follow a well-worn script for the telcos. Yes, private networks over cellular would happen but so what? Spectrum was “owned” by telcos and they would be the natural choice for as service provider. Things have not gone to plan. Regulators in Germany and then in the US disrupted the status quo by offering enterprises access to dedicated and shared spectrum respectively. Cue the outrage and heavy lobbying efforts from telcos but the course of history has changed. Many will accuse the telcos of entitlement, but the reality is that there is a disconnect between the standard operating procedure (SOP) of telcos and the agility that enterprises seek for their digital ambitions. Throw in the healthy mix of fiscal conservatism that has dogged the telco community and you have a recipe for frustration.
As private 5G increasingly comes to life without telcos involved, we can’t help but feel a sense of dread. We are reminded of an old Hollywood classic called “Zulu”, which is based on the battle for Rorke’s Drift, a small British outpost that held out against a vastly superior Zulu force. Historical fact and analysis aside, the majority of the movie is filled with the British regiment waiting, waiting and waiting for the impending Zulu charge. When it finally comes, the British, with superior firepower, are able to hold out but just barely and at huge cost. The huge numbers of private 5G solutions coming to market allied with new business models and ecosystems represent market forces that have taken several years to take shape but now they are threatening to overwhelm the incumbent telcos. To be fair, several telcos are cognizant of the impending chaos and have made moves to create solutions customized for the private 5G segment. Verizon Business is the best example of this, with significant investments made in edge computing and go to market offerings already mapped out with Nokia and Celona as partners. China Mobile was also at MWC23 and showcased several of their private 5G offerings in China, marketed through “1+1+N” strategy. Singtel, which was not exhibiting at MWC23, has put a comprehensive solution out with their Paragon platform, which combines the radio network and orchestration software.
The big boys jostle with the pack in a quest for “re”invention
On the supplier front, the market is getting increasingly crowded, with major vendors jostling with SIs and upstarts as they seek to reinvent the market segment and stake out their respective claims and credentials. But first, we take a quick look at the “big boys” before the others, though the list will almost certainly not be exhaustive.
Nokia - when private networks first emerged on the scene a few years ago, Nokia was the first major vendor banging on the drum, as it were. They even raised eyebrows at the time by trying to establish a direct sales channel to the enterprise, though they have backed away from this of late with nearly two thirds going through indirect channels. Nokia continues to set the pace for private networks and claims a 52% market share based on GSA data as of Q4 2022. This leadership stat does hide the fact that the majority of these deployments are still based on 4G LTE. The Nokia solution has evolved, and now includes the MX Industrial Edge (MXIE) product for enabling applications at the edge. The company’s messaging is signalling that they expect to move past the table-stakes delivery of radios and routers to a higher value add strategy.
Ericsson – has increasingly made moves to address the enterprise segment with its 5G WAN strategy. However, it has struggled to make inroads beyond the large enterprise customers who are content to deploy private 5G in-house or through telco partners. The primary issue seems to be a product fit for the mass market and this is where the Cradlepoint acquisition might finally move the needle for Ericsson. In the past, we had argued that Cradlepoint could become the tip of the proverbial spear for Ericsson’s attempts to make inroads into enterprise spending on the extended, “wireless WAN” and “wireless edge”, with pull-through for Ericsson’s IoT, small cell and enterprise private network products. The newly launched NetCloud Private Networks solution, adds Cradlepoint’s enterprise channels and expertise to the existing Ericsson Private 5G offering, as well as Cradlepoint’s endpoint devices. This is a good move for Ericsson and will increase its addressable market.
Hewlett Packard Enterprise – garnered the biggest buzz of the show in terms of private 5G news flow. Its acquisition of Athonet was a strong statement of intent, pulling together their Greenlake cloud-to-edge portfolio with the Athonet mobile core, as well as expanding the Aruba WiFi endpoint family with 5G. The combination of assets positions HPE to enable telcos to deploy services, or it can also go through existing enterprise channels to deploy the private 5G network. Athonet has been one of the pioneers of the private network segment with their mobile core platform and has had significant traction within industry verticals like public safety. HPE, through the merger, has also created pull-through for private 5G through their existing channels for Aruba. Bottom line, WiFi and 5G will coexist within the enterprise and HPE is now positioned to offer both.
Cisco – made a number of announcements at MWC23 on private 5G as it seeks to push into new global markets. The biggest of these was the partnership with Intel to create reference architectures based on Intel solutions for specific industry verticals as well as create private 5G innovation centers around the world. Cisco also announced a partnership with NEC to qualify NECs Univerge radios with Cisco’s Private 5G solution and work to create opportunities in the Japanese market. Finally, Cisco also announced a partnership with NTT to leverage NTT’s systems integrator expertise in industry verticals around the world that are looking to deploy private 5G. Cisco has also launched a line of Meraki 5G gateway products for driving SD-WAN in the enterprise but that is the subject of a future discussion.
Celona - Celona, by dint of size, can’t be described as one of the “big boys” but they merit a notable mention here because of the significant industry traction they have received to date. A US company, they have done well to gain traction in the CBRS-centric market in the US, with the Verizon deal a real statement of intent, as is their global partnership with NTT. Celona’s pitch on private 5G, or 5G LAN as they refer to it, is that their solution is built ground up to address enterprise IT’s legacy infrastructure and make the integration process as seamless as possible, and at a much lower price point. Regardless of technical comparisons, there is no question that Celona is getting traction for its solution, and we expect them to expand to other regions in 2023.
National supply chains and the long tail
Another trend that was visible at MWC23 was the emergence of what we are loosely referring to as national supply chains for private 5G. The earliest example of this was the ecosystem that emerged around #CBRS in the United States, with this unique model incubating an ecosystem that doesn’t quite port well to other markets, including the supply of “CBRS-ready” gear. At MWC23, we met with a number of companies from Asian markets that are active and deployed private 5G in their home markets. For example, HFR in Korea. Quanta in Taiwan. NEC and Hytec Inter in Japan. All of these companies have commercial deployments within major industry verticals though most have started with manufacturing. The latter is hardly surprising given the manufacturing and heavy industry focus in these economies.
At the same time, there are a number of systems integrators (SIs) who are positioning themselves for the private 5G segment. These include the global giants like Capgemini, Deloitte and PwC who all had large booths with multiple examples of use cases and stories of adoption. Not to be left behind, the Indian SIs were all out in force at MWC23, including the usual suspects like Infosys, TATA Communications, NTT Data and others. While these companies claim traction with and deployments in global markets, they are also positioning to tap into the sizable demand that is expected in India. In India, enterprises will soon be allowed to either own dedicated spectrum or “lease” it for private 5G. many of the SIs and local vendors have already put solutions together that are end to end, with spectrum “leased” from incumbent mobile operators in India.
Private 5G is a technology whose time has finally arrived. Already, the evolving market for private networks looks very different to even three years ago. There are several enabling factors at play here, including regulatory flexibility, post-pandemic shifts to remote work and branch connectivity needs, and an increasing industry obsession with productivity to list a few. This is not a homogenous market at all and we expect to see many flavours and variants as we track this space globally. Stay tuned!