What is to Come for Private Networks in 2022? Insights from the Early Adopter Markets Across the Globe

As the end of 2021 is fast approaching, it is time again to look back at the year and think about the year yet to come. A good method to do this is to consider early adopters for private cellular networks from different parts of the globe, like the United States, China, and Germany.

In the United States, CBRS Priority Access License (PAL) auctions have generated US$4.58 billion in total, with 257 bidders. As a result, more than 20,000 10 MHz licenses were awarded on the county level. In terms of enterprise verticals, education, hospitality, healthcare, oil & gas, utilities, and Wireless Service Providers (Neutral hosts) are leading the race.

In China, the Government’s Set Sail Program set the ambitious target of 3,000 private network deployments by 2023. While public announcements are lagging, the industry speculations talk about 500-800 operational private networks in China, as of October 2021. Meanwhile, recent news has dampened the enthusiasm as the Chinese 5G Industry is reported to have radically cut unprofitable 5G use cases (such as remote surgery) to narrow their focus.

In Germany, the telecom regulator Bundesnetzagentur has awarded spectrum licenses for local campus networks to 158 licensees (as of October 2021, up from 121 licensees in April 2021). This shows that the adoption rate of enterprise spectrum in Germany is slowing down considerably. To understand why this the case, a closer look into market dynamics in Germany is needed. This will then allow to draw conclusions for future learnings.

Frequent discussions with (potential) implementers of enterprise cellular in Germany reveal a few interesting trends that are worth discussing at this stage, as it provides some important lessons for the global community.

Firstly, the community of licensees still is largely dominated by Research & Development, as well as testbed initiatives. In addition, there is a range of Information and Communications Technology (ICT) companies with licenses that have a strategic interest in selling 5G capabilities to enterprises. Only roughly one fourth of licensees currently use (or expect to use) the network for real life enterprise workflow use cases. This picture manifests when you look at the regional spread of licensees; roughly one third of licensees each are based in the German states of North Rhine-Westphalia and Bavaria. This is an important observation, as both North Rhine-Westphalia and Bavaria have instigated one of the largest public-private testbed initiatives for enterprise 5G.

While this shows that enterprise 5G still is in its very early stages, the reliance on R&D projects and public funding for network deployments comes with an important limitation. As German research projects shift their focus towards 6G, the amount of 5G research projects (and subsequently, funds) is expected to decrease dramatically. Industry experts expect only a couple of new enterprise 5G research projects to be kicked off in Germany in 2022.

Secondly, private networks deployments are still primarily driven by particularly large enterprises, as most enterprise spectrum licensees in Germany count 1,000 employees or more. As these have sufficient financial and personnel capabilities, it does not come as a surprise that most licensees are looking to operate the private network entirely on their own with no public network integration.

Furthermore, discussions with industry-implementers reveal an important market education gap: most licensees in Germany are looking to deploy a 5G standalone networks straight away and forgo the opportunity to deploy 4G as an intermediary technology. Enterprises are still waiting for Release 16 capable devices, while in fact, LTE or non-standalone 5G (based on 3GPP Release 15) can address 85-­90% of today’s enterprise use cases, as ABI Research has argued previously.

These findings from the German market can be translated into important action points for all relevant actors across other global markets.

Firstly, national regulators need to carefully assess what spectrum policy is most appropriate for their market. Degree of criticality of use cases is an important deciding factor here; industry players from manufacturing, ports, oil & gas, mining, or hospitals prefer to have full control over network customizability and performance of the network (and therefore prefer to deploy their own network, fully isolated from public infrastructure). In these cases, dedicated licensed spectrum resources set aside for enterprise use (like the cases in France or Germany) could be a successful model. Other verticals, like education and retail, are mostly concerned about total cost of ownership, and are therefore open to collaboration with Communication Service Providers (CSPs) to use their existing resources. Depending on which enterprise segment drives the private network interest in the respective national market, setting aside licensed spectrum for enterprises might either be overall beneficial or harmful.

Secondly, the industry needs to move away from research projects and onto real deployment projects. The telecom industry and hyperscalers need to make the entry as easy as possible, both from an investment standpoint and from a technology deployment standpoint.

Thirdly, additional market education is necessary to show enterprises what Release 15 5G can already address. It seems that CSPs, telecom infrastructure vendors, system integrators, and hyperscalers must make do with what is available today, given that Release 16 capable chipsets for IoT use cases will not emerge in the market in 2022. This is also the key takeaway of the most recent webinar panel in the Cellnex Connectivity Days Series, that ABI Research had the pleasure to moderate: both enterprise implementers as well as private network suppliers need to depart from their “wait and see” approach and actually get started (the replay of this webinar can be watched here).

Finally, telecom vendors need to assure enterprises that private cellular in its current state can deliver for most enterprise use-cases. Ericsson’s recent announcement for a software solution to support time critical communication (as announced on October 25) can be an important step for the short- and medium-term future. However, this does not relieve chipset manufacturers from their responsibility to develop Release 16 and 17 capable chipsets to clear one of the most important bottlenecks that are currently preventing the large-scale adoption of enterprise 5G. If the telecom industry fails to do so, enterprises will intensify their search for alternative, non-cellular connectivity technologies. For example, while Wi-Fi 6 has a few shortcomings as compared to 5G (e.g., no robust handover at access points, no deterministic networking), enterprises increasingly consider this as a “good enough” alternative. Therefore, the window of opportunity for the telecom industry is closing.