Is the 5G Competition Over Before It Starts?

The race to 5G is underway, and it is initiating a heavy discussion within the industry regarding the technical development and business opportunities that this new network technology will bring. Most national-scale LTE deployments concluded and all infrastructure vendors developed add-on products that enhance these networks to reach higher speeds and better efficiencies. All vendors named their product lines in different ways, but these enhancements are essentially very similar. Ericsson named its LTE enhancements 5G Plug-Ins, Huawei named its enhancements CloudRAN and 4.5G, Nokia named its own version 4.9G, and ZTE calls its enhancements Pre5G. These are enhancements to existing LTE-based basestations, which are mostly Massive MIMO, higher order modulation (256QAM), and three-carrier aggregation, bringing the maximum data rate to more than 1 Gbps. These enhancements also introduce structural developments to the cellular network so that the foundation for 5G is prepared, especially in the transport and core network domains.

A group of vendors and telcos gathered to send a proposal for the acceleration of 5G New Radio (NR) to 3GPP to freeze the technical specification of the new technology three months earlier, allowing silicon, infrastructure, and device vendors to create 5G products faster. The acceleration plan will focus on non-standalone access (NSA), meaning that new 5G networks will be anchored in existing LTE packet cores, thus relying largely on existing LTE deployments. This means that there may be limited mobility and vendor churn as the industry progresses to 5G, since incremental upgrades to LTE (which will ultimately lay the foundation for 5G) will always be provided by a single vendor. The following example illustrates a relevant scenario:

• Vendor X deploys a nationwide LTE network that takes several years to complete. Some telcos may have commissioned more than one vendor for a large geographical area.
• This vendor will deploy software and hardware upgrades to the existing basestations to introduce LTE-Advanced and LTE-Advanced Pro. For example, new antennas for new frequencies, software upgrades to 256QAM, and the introduction of 4x4 MIMO. In almost 99% of cases, there will be no vendor change between LTE and LTE-Advanced Pro unless the telco chooses to overhaul the network and change vendor completely.

So, the network progression from LTE to LTE-Advanced Pro—which includes several technologies that will be used in 5G—will be single-vendor for the access part, which drives the largest share of vendor revenue.

The LTE deployment race was subject to several vendor swaps since LTE was deployed in parallel to network modernization that consolidated previous generations into one platform, namely SingleRAN. Almost all LTE networks today are SingleRAN and are continuously upgraded by the same vendor to reach LTE-Advanced Pro and gigabit speeds. Similarly, for end devices, LTE modems have been packaged in to multi-mode chips, which is instrumental for enabling operators to smoothly migrate subscribers to LTE and create scale for the technology. 

Given that 5G may initially be deployed as an incremental upgrade to LTE-Advanced Pro—using Massive MIMO and other backwards-compatible technologies—it is safe to assume that 5G contracts will also be awarded to the same underlying 4G vendor. Even if we assume that mmWave 5G NR contracts may provide some opportunity for vendor changes, it is unreasonable to assume that there will be a new vendor deploying a mmWave island inside a stronghold LTE deployment of its competitors. Again, from a device perspective, chipset suppliers that have a strong footprint in offering LTE multimode multiband chips, including LTE-Advanced Pro, will find better position for adding 5G to their portfolio.

Naturally, it is too early to tell how the 5G NR NSA market will develop, yet, all major vendors are fortifying their existing deployments with incremental enhancements, which in turn reduce the flexibility in changing vendors for 5G. One thing is for certain: the 5G deployment race will not be as competitive as the 4G race was. At the same time, vendors will be able to better predict how their revenues will be distributed throughout the world. Only when standalone access becomes the deployment norm for services in adjacent market verticals, telcos may be able to mix and match between vendors and start new greenfield opportunity deployments for their next-generation packet core. However, even then, 5G NR NSA deployments may have already locked most telcos in single-vendor relationships.