CommScope Exits the SAS Business for CBRS in the United States—The First Signs of Market Consolidation for Enterprise Connectivity

In a recent announcement, U.S. antenna manufacturer CommScope announced it will discontinue providing its cloud-based SAS portfolio for the shared CBRS band in the United States (2.55 – 3.7 GHz) as of May 31. This should not come as a surprise to the educated observer of the telco industry. After all, CommScope’s strength is in Distributed Antenna Systems (DAS) and its business model has always been hardware-centric, so the SAS business was always a stretch for CommScope. While this might well be an individual development, subject to very individual microeconomic decisions, it can also be seen in a sequence of other recent developments in the market for enterprise connectivity, so it deserves to be discussed in more detail. The U.S. market around CBRS has always been one of the more advanced markets for enterprise connectivity globally, so developments in the United States could be an indication of what is to come for the enterprise connectivity market in other geographical regions.

Most likely, CommScope’s decision to exit this market is a combination of two factors. On one hand, CommScope realized that its competitive advantage really lies in manufacturing hardware components instead of SAS. On the other hand, the market size for spectrum access service solutions does not seem large enough to justify building up capabilities that are not directly strategically aligned with the core competency of manufacturing antennas. At first sight, the decision of CommScope to exit the SAS market seems like an isolated development, as this is the first instance of a company deciding to give in to competitive market forces. However, it can also be seen in a sequence of recent developments on the enterprise connectivity market front. In 2020, Microsoft acquired Affirmed Networks and Metaswitch Networks; in November 2020, telco infrastructure vendor Ericsson acquired Cradlepoint; in July of the same year, tower company Cellnex acquired private networks operator Edzcom; and earlier in 2022, Intel acquired Ananki to extend its product portfolio to include private networking. All of these are first moves toward a more consolidated market structure (either through suppliers exhibiting the market or M&A).

This comes hardly as a surprise to ABI Research, as it follows a similar trend seen with previous technology innovations and new market introductions. To illustrate this in terms of enterprise connectivity and private networks, look at the situation around MWC Barcelona 2022, where 9 out of 10 discussions centered around private networks, with most companies trying to determine their share from the private networks cake. The high number of vendors attracted to this market is particularly interesting given that exact commercial arrangements are still being worked out, as well as determining the exact revenue opportunity for the different channels and partners within the supply chain.

In the long term, even a rather fragmented market, as private networks, will not be able to sustain such a high number of suppliers still trying to find their exact place in the supply chain. In other words, consolidation is imminent and has, in fact, already started with the developments described earlier.

Both a careful strategy and scenario planning are necessary. This requires a careful analysis of the market and the different channel opportunities. This analysis should take a vertical-specific approach, as each vertical will most likely be served by slightly different supply chains. For example, while the so-called uncarpeted verticals (i.e., manufacturing, energy generation, logistics & transportation) will most likely be served by system integrators, component vendors directly, or other vertical-specific players (e.g., machine automation vendors in industrial manufacturing), carriers will have a realistically bigger chance to serve carpeted verticals (i.e., retail, office environments, hospitality, event locations and stadiums). At least in the short-to-medium term, a horizontal approach trying to please every enterprise vertical at the same time is unlikely to generate enough revenue to offset the considerable investment necessary to address multiple verticals at the same time.

In a similar fashion, infrastructure providers and system integrators should carefully look at how to extend their reach and provide a full end-to-end solution. Their eyes should, therefore, be on component providers like Athonet, Druid, Celona, or Ciena to either secure partnerships (like NTT has done with Celona) or look at M&A opportunities. The growing competition in the private networks market for these individual component providers will make it much harder to survive on their own. Consequently, it is in their best interest to side with a strong partner, either via a co-creation initiative or an M&A scenario.