5G Factor: 2023 Winners, 2024 Peek

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Transcript:

Ron Westfall: Hello and welcome, everyone, to The 5G Factor. I’m Ron Westfall, Research Director here at The Futurum Group. And I’m joined here today at the avett of 2024 by my distinguished colleague, Todd R. Weiss, our Team Analyst focusing on key areas such as 5G as well as communication networks naturally. And today, we’re going to basically look at 2023 and review some key areas as well as look at things that we’re anticipating for 2024 and beyond. So Todd, with that, Happy 2024 and welcome back to The 5G Factor. How did the end of 2023 treat you?

Todd R Weiss: It was a nice holiday. It was nice to have some time to relax, but I was so excited about coming back to The 5G Factor and being here with you, so I’m so excited we’re here.

Ron Westfall: Well, great, yeah. I think that’s just going to be a wonderful way to kick it off and jump right in. And yes, let’s start off by looking at what we consider key areas of 2023 in retrospect and what to expect in 2024. And as we left off 2023, we talked about Open RAN and the Fireworks that we-

Todd R Weiss: Yes, we certainly did, didn’t we?

Ron Westfall: Yeah. Right on, yeah, in the final month of the year. And so, it’s only apt for us to continue on that very same topic and area. And to give an overall review, Open RAN is still percolating as it makes progress across the 5G ecosystem. That’s our perspective at least, and I think that’s a raw consensus.

Todd R Weiss: Yeah, yeah.

Ron Westfall: Right on. And it’s picking up pace in North America and Europe, and it certainly did so in 2023. And we’re anticipating more in 2024, maybe not as dramatic as December of 2023, but nonetheless, progress with capital P. And in terms of, for example, the European Open RAN announcements, one operator I like to focus on is Vodafone. And then, we talk a great deal about Deutsche Telekom, 1&1, and actually what was going on in North America. But I think it’s also important to note here that Vodafone continues to be a strong advocate for Open RAN. In fact, the operator confirmed that it’s on track with its goal to deploy 2500 Open RAN site, so that is good news for Open RAN progress in 2024. Also, Vodafone is basically looking at Open RAN as a blueprint for success, that is in terms of what Andrea Dona, the Chief Network Officer of Vodafone UK, has pointed out.

And in addition, Francisco Martin Pignatelli, the head at Open RAN at Vodafone Group, also highlighted that Open RAN is a lot about ecosystem collaboration, certainly something that we’ve been focusing on since the conception of 5G Factor. And as such, Vodafone is actually positioning itself not only to raise its 5G game in terms of Open RAN but also looking at how smaller operators can also benefit from, for example, the lessons they learned and actually this ongoing ecosystem collaboration. So-

Todd R Weiss: Let me put something in there. He’s absolutely right. This is not one company dominating this. This is a whole bunch of companies figuring out the path of where this is going, where the place right now where we’re way more established in terms of what’s happening, but we still have a long way to go before this becomes a widespread everywhere kind of thing. And it’s going to take all the operators, small and large, to get there, to make it popular.

Ron Westfall: Exactly. That’s why it’s a journey and that’s why it’s fundamentally ecosystem play. We touched on the geopolitical aspects-

Todd R Weiss: Sure.

Ron Westfall: … why there are some strong advocates for Open RAN and, say, government agencies and other key decision makers, let alone the top-tier operators-

Todd R Weiss: Absolutely.

Ron Westfall: … of Open RAN alliance springs that out.

Todd R Weiss: Yeah, definitely.

Ron Westfall: And as interoperability and also testing matures, forecasts are indicating that Open RAN deployments will continue this momentum through 2024. And by 2025, there could be an estimated 1.3 million Open RAN insights, Open RAN cell sites at least, that are implemented by the end of the decade. So, this momentum can only be achieved through Open RAN transitioning from early deployments that are focused on greenfield environments but also now it needs to migrate toward the brownfield pickup, and that I think is certainly something that came out from the AT&T and Ericsson announcement. And so, looking at 2023, we can see that Ericsson was a winner in terms of the 5G ecosystem. Obviously, we note a 14 billion, with a B, deal over five years with AT&T was momentous.

Todd R Weiss: And we also saw, these companies acknowledged, it’s going to take different approaches where it’s easier in new establishments. It’s going to be harder where we have to come in fill in and things like that. Those are different technologies, but they’re working on all those things.

Ron Westfall: Yeah, that cues up my next observation. Thank you, Todd. And that is, again, that’s the ecosystem credentials here that AT&T is evoking. I think they’re real. And the question is why. And here they are, selecting Ericsson and Fujitsu. So, right off, they’re already are not relying on a single vendor to make this happen, but also they made a commitment that they’re going to further diversify their suppliers in terms of the Open RAN environment, but fundamentally their overall open 5G approach, if you will.

Todd R Weiss: That’s huge.

Ron Westfall: Oh, yeah.

Todd R Weiss: We said in December, this is huge. It is incredibly huge as we start 2024, because it will open up the doors to making these things happen in more places, in more ways, more reliably, more efficiently, more inexpensively over time, all those things. The idea that it was going to be wide, broad number of vendors is huge.

Ron Westfall: Right. And going back to AT&T and why I believe they’re true to their word is the fact that when they, several years ago, said they wanted to strategically virtualize up to 65% of their network. At the time, that was an eyeopener. People were like, “Ah, this is a radical departure,” and so forth.

Todd R Weiss: Yeah.

Ron Westfall: And as we can see, AT&T fundamentally met that goal. And other operators are pretty much on that same boat. This is no longer a surprise.

Todd R Weiss: Right.

Ron Westfall: Also, AT&T was distinct and when it came to the core of their network, they adopted really a startup or independent supplier and drive nets, which was an offset because at that time Cisco and others were the primary players when it came to that part of the network, the core. So, I believe that AT&T will further diversify its Open RAN implementation. And again, on board those others players, it pointed to after they had that solid foundation and start with Ericsson pretty much locked into place. So, the other flipside is, okay, we know that Ericsson won the deal as a result, is replacing Nokia’s RAN implementations throughout the AT&T network.

Todd R Weiss: And that was another big deal. There was a lot of going on at the end of 2023.

Ron Westfall: Exactly. And so, looking at Nokia, that deal basically coincided and initiated them at embarking on a reset. And so, in early December, they announced plans to revamp its mobile network’s business to save our future growth and also basically it’s looking at a reset of its comparable operating margin targets be achieved by 2026 from at least 14% to at least 13%. And so, in essence, they had to push that out. And then, after the holiday Christmas part of it, Nokia acknowledged that we’ll not achieve its 2023 financial outlook as other factors such as licensing renewal discussions are expected to continue into this year of 2024. And I think they’ve already made a tangible progress in that regard and, we’ll touch on that on an another upcoming 5G Factor.

But the takeaway here is, I think, two things that are important. Nokia is seeing overall clearly improving order trans in its Q4, and that’s going to help with its overall results when they announce them later in January of 2024. The other part is, just circling back to that, I believe that Nokia can actually capture new business AT&T further out, depending on how AT&T and as well as Ericsson, as well as Fujitsu implements the Open RAN interfaces and so forth. And so, that’s something that will have to be revisited at a later date obviously. But Todd, from your perspective, what about Open RAN in terms of its prospects in 2024 that standout?

Todd R Weiss: Well, obviously, the 2023 event especially the latter half of the year were huge, just huge.

Ron Westfall: Right.

Todd R Weiss: But here now, as we start 2024 and we’ve talked about this earlier last year, Deutsche Telekom has just kicked off its rollout multi-vendor Open RAN technology in Germany in collaboration with Fujitsu and Nokia. And that builds an existing trials that they were doing of the operators O-RAN Town in Neubrandenburg, near Berlin. And Deutsche Telekom said that it plans to operate more than 3,000 O-RAN-compatible antenna sites by the end of 2026. So, again, this continuing escalation of this technology bringing it out in more ways which will allow it to spread, which will allow it to grow, and it’s like everything else. You grow 3,000, that could lead to 10,000 or 12,000 the following year because now it’s spreading out. It’s networking out.

Also in Germany, the greenfield operator 1&1AG announced it’s operating now Europe’s first fully virtualized 5G network based on Open RAN technology. And again, this is giant as we talk about, Ron. This is just giant. Although the network is still small, 1&1’s ambition is to become the fourth mobile network operator in the market that’s underpinned by a new kind of network infrastructure with support from companies like Rakuten Symphony, Mavenir, and others. That’s really a big deal.

Ron Westfall: I agree wholeheartedly, and I think a key takeaway is that probably the topmost winner of 2023 is the Open RAN ecosystem.

Todd R Weiss: Oh, yeah.

Ron Westfall: This definitely revitalized it because, yeah, it didn’t really take off as quickly as some anticipated, and I think we pretty much thoroughly addressed and analyzed the ongoing considerations. And yes, it’s a journey. There’s plenty of heavy lifting and hard work ahead as Ericsson and AT&T can attest to Nokia, Deutsche Telekom, and others. And so, with that, let’s look at other areas of the mobile ecosystem that are very important. And I think one thing that caught our eye was the Adobe Analytics report that came out about mobile shopping in 2023 and its implications for 2024. And one major takeaway from this survey that just came out is that many people are driven by shopping on their smartphones. And online holiday spending reached a record 221.1 billion over the 2023 holiday season. And, as a result, mobile shopping surpassed desktop shopping for the first time as spending increased 4.9% from November 1st through the end of the year, December 31st, compared to the same timeframe last year.

And as a result, Abode Analytics said that 51.1% of shoppers confirmed their deals were by the smartphones, setting the pace for online purchasing, and that mobile made up 47.1% of holiday sales in comparison during 2022. So, I think we crossed the magic threshold here at that horizon, that now the majority of holiday shopping is being done on smartphones. And Todd, from your perspective, what else is very significant about this, I think, noteworthy announcement?

Todd R Weiss: This is actually, to me, the biggest post-holiday 2023 news that I’ve heard in the first week of January. This is huge. I have been covering mobile devices and online shopping and things like that since I was a technology journalist with Computerworld and eWEEK way back from 2000 on. 2007, the first iPhone showed up. We could see this is going to be dramatic change, unbelievable impact. We had no idea. Between 2007 and 2012, do you remember the days when smartphones sales were increasing by 50%, 43% a year? Huge numbers.

Ron Westfall: Right.

Todd R Weiss: Absolutely huge numbers. People were buying phones so quickly. And oh, my God, there were such vendors. Remember HP was in it. Microsoft was in it. Everybody was in it. Nokia was in it. All these companies-

Ron Westfall: Oh, yeah.

Todd R Weiss: … all these phones flying out the doors, and that was amazing then. But the amount of sales on smartphones was tiny. Tiny, tiny, tiny for years, for the first decade. And that’s because, I think companies didn’t really prepare their online sales for mobile. Mobile requires devices to be able to see and have things set up so you can read them on the screen. If you go to website that’s not mobile focus, forget about it. You can’t really order. You have to enlarge it, and it doesn’t work. Well, what happened in this holiday season was, to me, I call it… I said it earlier today, I said this is a milestone. This is a milestone because 51.1% of all online shopping in this past holiday season was done using a smartphone. A smartphone. Not a tablet, not a laptop, not a desktop computer. Nothing like that.

People could do this in the isle of a store. They could be shopping in store A and look and check a price and, boom, buy it somewhere else. People could be in their car, traveling to grandma’s house for the holidays, and they could be while their spouse or boyfriend or whatever is driving, they can do their shopping online. And in fact, the Adobe Analytics report found the highest number of holiday shopping on mobile devices on smartphones was Christmas Day, and I bet you can guess why. People just got all these fabulous gift cards. Now, they could just go online, boom, boom, boom, and order their stuff right there, wherever they just got it. This, to me, as a person who has tracked mobile devices since 2005-ish, 2007, I mean, I was using a flip phone, remember those way back when?

Ron Westfall: Sure. Blackberry and all.

Todd R Weiss: Uh-huh.

Ron Westfall: We talked about that.

Todd R Weiss: Exactly. So, this to me is such a momentous huge event. I don’t think we’re ever going to look back to smartphones not being the leading place for people to shop, I do not think so, because I just think that this transition took a while to get here. I would say, in my opinion, it took longer to get here than I thought it would. 2007 to 2023 is a longer time, but it happened. And that, to me, is huge. Today’s buyers of smartphones, a lot of times these are kids 16-year-olds coming in, 14-year-olds coming in, their parents are buying them phones. This is something we’re going to see growing more and more. I would say this is the new ways to shop, and smartphones in 2023 put us over that edge. I think this is the biggest mobile news of last year. I really do.

Ron Westfall: I can understand. And to concur, I have to admit I’m a bit of a hybrid, that when it comes to online shopping, I still have to rely on the desktop because sometimes the mobile interface might be a bit limited, but my main observation is that the mobile interface, the smartphone interface, has made progress across the board.

Todd R Weiss: Oh, yeah.

Ron Westfall: And this is reflecting ecosystem. It is becoming increasingly more easier to do smartphone online shopping than it was, say, just three years ago.

Todd R Weiss: Oh, yeah.

Ron Westfall: And so, that’s a tribute, yeah.

Todd R Weiss: I’m writing a research note about this for The Futurum Group right now. I meant to have it done today. It’ll be done Monday. But I’m writing this piece about how this is such a huge thing because also, what happens is, is that this allows companies that have a great online presence, that have websites built for the web, that have websites that are built not just for the web but for smartphones, to now be able to capture customers who are saying, “I’m willing to go there, I’m willing to use it, I trust it, I have privacy, I have security,” that’s huge. But companies that still have websites that can’t be seen easily on a smartphone, I think they are going to find sales tanking. I’ve worked for a company of publication that was not mobile focused, that’s all the sites could be visited on a desktop but only some of the sites have been visited on a mobile phone. Well, that’s unless you’re fully mobile-capable today as website, as a company, as a business anywhere around the globe, you are going to be losing business to your competitors who are mobile focused. And I’m not just trying to scare them, I’m telling them, “You do this now or you will perish.”

Ron Westfall: Yeah, the data is there. And certainly, when it comes to consumers for a good majority of the purchases, there has to be that smartphone capability. Or yes, you’re going to potentially lose my share, market share. One other thing about the Adobe survey that I think is worth one final mention, and then we move on to the next topic, is that electronics were on the top of the consumers shopping list.

Todd R Weiss: Oh, yeah.

Ron Westfall: That was 50.8 billion.

Todd R Weiss: Yeah.

Ron Westfall: And that was followed by other categories, like apparel 41.5 billion, furniture 27.3 billion, et cetera. But I think what’s important is that within the electronics category, customers snatched up televisions, smart speakers, tablets, bluetooth headphones, and smart watches the most. And so, this is something naturally will be continually addressing is, here we go, in terms of the 5G ecosystem-

Todd R Weiss: Exactly.

Ron Westfall: … basically driving many of these sales, not across the board, mind you, but certainly it’s going to be impactful because 5G will become increasingly relevant to some of these other technologies that are within the electronics category. And so, this is something we will definitely pay attention to.

Todd R Weiss: All those items need networks. They need fast, efficient connectivity. They need all these stuff to be… This is a warning to all the networking companies and all the cellular phone companies and all the companies that provide these services. This is a market that they’ve been waiting for. Phone sales are saturated. They have been saturated for years and grew, I think I just read, by 1% or 2% in 2023. That’s a tiny number compared to what it was only… What was it? 11 years ago? When it was 43% every year.

Well, so now, they have to find new places to make revenue. Well, if there’s services and things they can bring in here, and Open RAN that can help contribute to this, and all these things can come together, these are new opportunities for all these carriers, for all these network companies. This is huge stuff here, and everybody should be paying a lot of attention as we keep rolling into more Open RAN and more services aimed at where customers are. You got to go where the customers are. And business and consumer customers are all heading in this direction.

Ron Westfall: I agree. And I think it’s also important to look at other aspects of the 5G mobile networks. I know we touched on Open RAN, which is clearly a hot topic, heading into the rest of 2024 to kick off 2024. And certainly, online retail shopping through smartphones is a topic that many people, not everybody, who has smartphone can relate to.

Todd R Weiss: Right.

Ron Westfall: And now, let’s look at something a bit more technical, that is 5G carrier aggregation. And we saw that T-Mobile unveiled its first six-carrier aggregation called using sub-6 gigahertz factor on its live production 5G network. And T-Mobile is tabbing this as a breakthrough as first. But from my review, what’s equally important is that it’s working with Ericsson and Qualcomm to reach remarkable speed from this combination, that its speed is about 3.6 gigabits per second in this particular test, which means that, for example, a user, a customer could download a two-hour HD movie in less than seven seconds.

Todd R Weiss: You could get right before you get on a plane. Just bam, you got it.

Ron Westfall: Exactly, yes. So, that is probably not great news for, say, the DVD side of things, at least the DVD makers. But it certainly is, I think, something that is going to have more impact exactly with how people of a wider smartphones and use them for consuming HD videos, for example. And to quickly review, carrier aggregation is a technique that’s being used in 5G as well as LTE to increase data transmission rates in capacity by aggregating multiple frequency bands or carriers into a single logical channel. And by combining these multiple carriers, the available spectrum could be used more efficiently and that is enabling those higher data speeds and more reliable connectivity. Both of them are clearly important.

And what I think is exciting about kicking off 2024 with this announcement is that it follows on its other important announcement regarding carrier aggregation back in May of 2023. And that’s when it announced that it rolled out its four-component carrier aggregation also across its 5G standalone networks. And that achieved peak speeds of 3.3 gigabit, so clearly progress is being made. And in that case, T-Mobile relied on using two 2.5-gigahertz channels, one 1.9-gigahertz channel, and one 600-gigahertz channel. And that was basically something that enabled Samsung’s Galaxy S23 device to be the first device that works with this 4CA capability. And so with that, Todd, what about T-Mobile six-carrier aggregation announcement that stands out for you?

Todd R Weiss: Well, again, we keep talking about really cool things happening that companies are trying with partners in doing different things together to drive these things in 2024, and this is another one of those cases. 5G carrier aggregation is going to be… It’s another thing that’s really important. It’s going to allow T-Mobile to combine some 5G, multiple 5G channels or carriers, to do all these things, delivering greater speed, performance, things like that. This is absolutely an incredible feat, and it’s going to be incredibly welcomed by consumers in business because it’s going to, at the bottom line, speed up things, make things more efficient, reduce dropouts, things like that. All these kinds of things are a big deal in terms of increasing performance and reliability, which are both incredibly important things. Also, we had talked before, this also proceeds on the 2023 trio we were talking earlier. Nokia, Qualcomm, and T-Mobile announcing back then that they had successfully aggregated 5G standalone spectrum using 5CC carrier… I almost said aggravation, aggregation, in a sub-6 gigahertz spectrum. That was a big deal.

Ron Westfall: Oh, yeah.

Todd R Weiss: The successful trial aggregated two FDD and three TDD carriers resulting in peak download throughput speeds exceeding 4.2 gigabits per second. So, 5G carrier aggregation with 5CC will enable mobile operators to deliver higher data rates and better coverage to even more customers, which is what we were just talking about. This is a big deal. By aggregating these things together, mobile operators will have more options to leverage the spectrum and network assets that they have, and it will help give better performance and user experience to customers, business and consumers. So, I think this is really going to be a big deal.

Ron Westfall: Yeah, I see your point, Todd. And I think what’s also interesting here is that T-Mobile is clearly working with both Ericsson and Nokia to improve its carrier aggregation capabilities. And actually, Qualcomm is essential for both these implementations. And what I think will be interesting to see how this plays out during the course of the year if T-Mobile is going to give more indicators how they will be working with their strategic suppliers in terms of advancing their end-to-end 5G standalone network capabilities. And so, this is good for competition. This is good, I think, for everybody that’s involved. And I think the fact that Nokia is basically an Deutsche Telekom’s Open RAN implementation certainly indicates that it will be part of the T-Mobile competitive mix during the course of 2024. And as a result, they can focus all the more on its position and the T-Mobile network.

Todd R Weiss: And there’s another point that this will help. These are expensive things. Companies don’t want to tackle them on their own. Having partners, having other companies who want to get there and having the idea of sharing the expenses, sharing the needs for the technology, having to dream these things up, having to build them together, it makes it a lot easier and faster to market if you’re working with others to help make these things happen. It’s a shared process. It needs to be.

The world of open source didn’t get to building enterprise software because it wasn’t valuable. It’s the same thing. It’s maybe not literally open source, but it’s companies working together to make things happen, and Open RAN is an open infrastructure. So this, to me, I always try to find something about open source and everything, but when companies huge, giant, international companies, national companies work together for projects like this, I think it’s ultra significant because by doing it together, they speed it to market, they make it better, they make it more efficient, and they add intra-operability, which is going to be needed anyway. So, it’s just a really big deal. 2024 is going to be really exciting with Open RAN.

Ron Westfall: And so, on that positive note, long live Open RAN and long live Open 5G. And I think, yes, the prospects are going in that direction, and I think we touched on some of the major reasons why and naturally we’ll pick this up more. And again, thank you, Todd, for joining today’s 5G Factor.

Todd R Weiss: Thanks for having me, Ron. It was a pleasure, and I think it was a great show today.

Ron Westfall: Absolutely. And also, thank you, everyone, for joining us. And to our viewing audience and our listening audience, as always, please feel free to reserve us in terms of The Futurum Group’s 5G Factor channel. And again, we appreciate you joining us for The 5G Factor. And with that, good 5G Day, everyone.

Todd R Weiss: See you next time.

Other Insights from The Futurum Group:

5G Factor: Open RAN Fireworks

Qualcomm Snapdragon 8 Gen 3 Brings Generative AI to Smartphones

5G Factor Video Research Note: T-Mobile Unveils New Four-Carrier Aggregation Capabilities