The 5G Wave of the Future

Today, congestion plagues low-frequency below 6GHz spectrum bands, which, consequently, not only makes it very difficult to add more capacity but also limits the number of antennas used (no more than two or three antennas).

The landscape, however, is much different in the high-frequency bands, usually known as the millimeter wave (mmW). The channels are much wider, reaching even 250MHz and multiples thereof in some bands (such as E-band), providing the needed capacity for 5G access and backhauling. In general, the mmW can request a wide availability of spectrum, which is a prerequisite for both access and backhaul. More antennas can be used (ranging from 4, 16 or even 32), resulting into beamforming that as it advances to shorter wavelengths allows for smaller antennas (including arrays needed for beamforming and beamsteering). Antenna directivity is much better in high frequencies, allowing a high spectral reuse factor. High-frequency radios can widely be used today and demand will continue to grow, especially for E-Band (80GHz) in dense areas where high capacity is needed. ACG anticipates that the momentum for E-Band will continue and will be preferred for new 5G (by 2020 or earlier) deployments technologies. (One in five links could be E-band in 2020.)

Regulation is the main enabler for high-frequency solutions adoption because by applying different licensing models it could encourage better use of spectrum, weighing in factors such as frequency bands, geographic region, and local microwave hop density. Ericsson recently described the multiband booster method, which could maximize spectrum efficiency, add new technologies that can exploit unused spectrum, and upgrade the capacity of microwave backhaul networks up to tenfold. This is a great option that has been used for years from other leading vendors as well but in most cases is still restricted by regulation.

Introducing and allowing wider channels in less deployed areas would further encourage the use of multiband solutions. Leo Macciotta, Huawei’s Senior Marketing Manager, highlights that “the challenges in capacity and latency requirements posed by LTE-A and in the future 5G make this kind of equipment the best and most cost-efficient choice for a future-proof deployment. Continuous investments in component, system and antenna technology provide a clear and dependable road map of improvement in performance such that we are confident that E-band will become one of the key building blocks of the future front- and back-haul networks for 5G and beyond.”

For access, most vendors could offer high modulation, wider channels, and multiple antennas (MIMO). The capacity offer varies between 2 and 4 Gbps full duplex, although some vendors are testing solutions in the lab that could go up to 10 Gbps in a range of a few kilometers. The MIMO types used today in most cases are 2x2 and 4x4 but could increase much higher along the 5G spec. This is not the case for backhaul; although the MIMO feature is offered, there is no real demand yet, but that might change beyond 2020.

E-band has recently come into mainstream use for mobile backhaul, allowing capacities of up to 10 Gbps over link lengths up to several km (even more than 10 km when bundled with lower frequency bearers) and is currently shipping in volume. Regarding backhauling, Yigal Leiba, co-founder and CTO of Siklu, mentioned that “a capacity of 2 Gbps could be enough today and possibly for the next 2 years for Mobile Operators and specifically for network aggregation layers and major Macro Base Stations backhauling, while 1Gbps street level backhaul could serve effectively Small Cells.” Looking to the future, the industry shares a vision of using frequencies above 100 GHz, as they will enable capacities in the 40 Gbps range over hop distances of about a kilometer but mostly for access. Regarding 5G and backhaul, there is already pressure, and leading vendors and major Tier 1 operators are worried that backhaul requirements may not be kept in the right considerations.

Tying the whole industry ecosystem together is the ETSI mWT (Millimetre Wave Transport) ISG, a common forum for component, subsystem and system manufacturers, telecommunications operators, and regulator. The forum promotes understanding and acceptance of mmW worldwide. With endorsements from such respected groups the future of these technologies looks promising.

    

    Elias Aranvantino

    earanvantino@acgcc.com

    www.acgcc.com

New Entrants into the DCI Small Form Factor Market

Two equipment titans Coriant and Alcatel-Lucent entered the Data Center Interconnect (DCI) small form factor market with targeted packet optical networking products. Coriant added to its 7100 family of products with the 7100 Pico™ Packet Optical Transport Platform and Alcatel-Lucent added to its 1830 Photonic Service Switch (PSS) family of cloud optimized metro products with its 1830 PSS-4, 8, 16 optical transport platforms. Both of these devices integrate cleanly into their respective portfolios and are Software Defined Network (SDN) enabled for dynamic service instantiation.

These products are significant because they validate the need for higher performance in this growing sector of the packet optical market. Bell Labs forecasts an increase of metro traffic by 560 percent by 2017. By 2019 there will be 60 percent more data centers in the world’s metro areas and DCI volumes will increase 400 percent. Why? With cloud-based services, the industry has recognized the need for data center interconnect (DCI). Initially, service providers offering XaaS solutions were connecting customers’ data centers to service providers’ data centers.  New requirements for DCI have grown out of the operators’ needs to deploy very high-capacity, high-speed, low-latency, efficient transport between their own data center sites. In addition, rich data types such as video, multimedia mobile backhaul, cloud and data center traffic are also forcing the need for more intelligent programmability and automation in management of these traffic patterns. However, because of the size and power constraints of the metro data centers to date, platforms need to fit strategically into smaller Point of Demarcation (POD) locations with low power and high cooling requirements. This is where the DCI small form factor market emerges.

Some key specifications and product comparisons for DCI Small FF at-a-glance:

DCI Small FF Requirements	Coriant 7100 Pico	ALU 1830 PSS –4, 8, 16
4 RU Chassis or less	2 RU	PSS-4=(2 RU), PSS-8(3 RU), 16(8 RU)
DWDM w/ Tb/s fiber capacity	88 DWDM @ 10 & 100G	8 CWDM, 32 DWDM (400G – 1.6 Tb/s)
Eth, OTN, SONET	Eth, OTN, SONET	Eth, OTN, SONET
SAN (FICON, etc.)	SAN interfaces	SAN interfaces
Video (DVB, SDI, etc.)	Video interfaces	Video interfaces
40 - 100G+ ntwk interface	40G	10G, 100G, 200G
10GE – 100GE modular I/O	1, 10 , 100 GE (176 GE max)	10 , 40, 100 GE (w/112SDX11 card)
Pwr (AC or DC)	AC/DC (110/220VAC / -48VDC)	AC/DC (110/220VAC / -48VDC)
Open API/SDN mgt	Transend	SDN Enabled

ACG sees a bifurcation of the DCI market between small and multislot form factor devices. The total high-speed DCI market was approximately $400 million in 2013 and is forecasted to grow to $4 billion by 2019. Growth for the DCI small form factor is predicted to be $3 billion by 2019, 97.3 percent CAGR 2014–2019. Growth for the DCI multislot is predicted to be $1 billion by 2019, 27.1 percent CAGR 2014–2019. This market segment is growing because of ADVA, BTI, Ciena, Cisco, Cyan, ECI Telecom, Ekinops, Fujitsu, Huawei, Infinera and ZTE. Who will command the market share? Time will tell but in the meantime ACG is tracking the progress of this exciting market in its new DCI Optical Networking Market Worldwide syndication.

Contact sales@acgcc.com to find out more information or schedule a meeting with Dennis Ward and Paul Parker-Johnson to discuss this research.

Dennis Ward

dward@acgcc.com

acgcc.com

Looming Fiscal Cliff and Europe Uncertainties Continue to Undercut Router Market Growth

In addition to economic uncertainty, vendors in the router and switching market are dealing with more intensive competition, diminishing service provider’s profit margins, and their largest customers cutting spending and delaying purchases of new equipment.

Against a backdrop of global economic instability and political unrest, the Worldwide Carrier Routing & Switching markets reflected typical cyclical performance, remaining slightly flat in Q3. ACG Research anticipates global economic uncertainty, a challenging market and aggressive competition will continue to put pressure on vendors’ pricing and margins. “Enterprise CEOs will, most likely, remain conservative and more focused in their IT spending and hiring for the remainder of the year,” states Ray Mota, managing partner. “These factors will continue to force vendors to innovate and develop technology that can deliver significant operational savings as well as address market demands for new and cutting-edge services that are application focused. Despite some vendors providing low guidance for Q4, AT&T announced a CapEx increase of $2.5 billion per year.”

Q3 Total Worldwide Carrier Routing & Switching market posted revenue of $2.75B. The global market decreased 1.7% q/q and 2.5% y/y. Core Routing revenues were down 1.9% q/q and 9.6% y/y. Edge Routing and Switching revenues were down 1.7% q/q and down 0.4% y/y.

Cisco posted a total worldwide decline of 0.3% q/q and a decrease of 0.8% y/y. In spite of the decrease Cisco reports that its CRS and ASR series continue to demonstrate strong traction. Alcatel-Lucent decreased 2.16% q/q but was solidly up 8.2% y/y. ALU’s 100 Gig is a big differentiator for the company, and the company continues to see more sales traction with this port for core solutions, edge and metro. Juniper increased worldwide routing revenue 1.2%, q/q but was down 7.7% y/y. The company cited the reduction in service providers purchasing high-end networking equipment, difficulty penetrating new markets with new products and strong competition from Cisco as factors influencing its quarterly results. 

Vendor	Q-Q MS Point +/-	Y-Y MS Point +/-
Cisco	+0.8	+1.0
Alcatel-Lucent	-0.1	+1.8
Juniper	+0.5	-1.0
Tellabs	-0.1	-0.4
Huawei	-0.2	-0.2

In the US the threat of the “fiscal cliff” is creating a tremendous uncertainty and service providers are monitoring it closely in order to get some visibility on what kind of impact it will have on consumer, small, mid and enterprise business spending. The threat of another recession could potentially extend service providers’ build-out of new services that, in turn, could impact their CapEx spending. ACG plans to monitor this closely in 2013 with our service provider capacity index service, which tracks the rate of change in capacity and how “hot” SPs are running their networks.

QUARTERLY TREND and DRIVER HIGHLIGHTS

• Core network traffic is growing in excess of 50% per year and new services such as content-rich digital media, cloud and mobile placing new requirements on the network.
• Competitive factors such as lower pricing and reduced margins are putting pressure on the routing segment.
• Interest in mobility and cloud computing continues to grow, especially with SPs that recognize that to have a cost-effective, scalable, automated data center that enables them to offer new services/products they need technology that can deliver significant operational savings.
• In a recent ACG survey, 78% of respondents reported that they have SDN plans that were either under discussion or were planned deployment. Interest in SDN has increased in momentum for two primary reasons: 1) a less than positive macroeconomic environment and 2) providers are searching for a new way to deliver new services and realize significant operational savings while increasing service velocity.

For more information about ACG Research's Router and Switching service, click here or contact sales@acgresearch.net.

Ray Mota

rmota@acgresearch.net

www.acgresearch.net

Dropping the Bomb on Huawei and ZTE

The “Investigative Report on the U.S. National Security Issues Posed by Chinese Telecommunications Companies Huawei and ZTE” report concludes that these two companies should be banned from doing business with the US government and recommends that private companies shun them as well.

The U.S. House of Representatives’ Permanent Select Committee on Intelligence just released its scathing report on Huawei and ZTE, two of the world’s largest and fastest growing telecom equipment vendor. The report emphatically concludes that both of these companies are a threat to U.S. national security interests and because of the vulnerabilities in the telecommunications supply chain pose a significant risk.  

During the investigation, Huawei and ZTE, instead of cooperating fully, obfuscated, provided unbelievable, unsubstantiated and contradictory answers. Their evasiveness led the committee to conclude that both companies are hiding “the influence of the foreign government in company activities and decision making process.” The committee also stated it has every reason to believe that Huawei and ZTE will continue to ignore US intellectual property (copying patented products with impunity) and business laws/practices.  To be fair, ZTE is a public company and is more transparent. 

Accordingly, the committee recommended excluding Huawei’s and ZTE’s equipment in government agencies and departments and urged that the private sector follow suit. They also called for the US government to investigate the unfair trade practices and intellectual property violations and proposed that Congress pass laws to address these risks.

A day late?

Although the U.S. House of Representatives’ Permanent Select Committee on Intelligence report banning Huawei and ZTE from the US market is reverberating throughout the telecom world, will it change the telecom landscape significantly in the long term or will it be just a temporary detour? 

In the short term, this report spotlights and temporarily deters China’s attempt to enter into the US. Carriers and enterprises, already cautious, will not want to jeopardize their government contracts. Outside of the US, it will somewhat slow China’s penetration in western markets in the short to medium term (in emerging markets, it will likely not have much effect). 

The long-term outlook is less clear and depends on how much China is willing to abide by western market standards and to what extent governments are willing to enforce market rules. To date, many customers and governments have benefited from the ethically challenged business practices and are willing to look the other way. At some point, there may be a backlash. Another key factor is their actual support and security track record. A major security incident related to these companies’ equipment that could have been avoided would bolster the US’ position. 

The bottom line? 

China is protesting that this report is politically motivated — that stands to reason given national security is at stake and laws are being broken — but given China’s lack of cooperation and transparency, the committee really had no other choice. It should come as no surprise that the committee had ample, credible evidence backing up the allegations. (Many of the allegations of misconduct, including bribery, espionage, and beaconing, have been verified to me privately by people with first-hand knowledge.) When China stonewalled the committee’s investigation, it is easy to see why they came to these conclusions and followed up with targeted and specific recommendations. Sorry, China, but lip service does not cut it.

The long-term solution for China is to actually disentangle the private sector from the government and military; show transparency about corporate ownership and decision making; and abide by the same rules of commercial engagement as its western counter parts.

David Dines
ddines@acgresearch.net
www.acgresearch.net

Global Mobile Industry Continues to Invest, Profit, and Increase GDP

The mobile industry and its outlook is the envy of Wall Street and leads innovation in an era where wireline telecommunications generally has become a commodity business.

The global mobile industry continues to invest, profit, and increase worldwide GDP growth by 2 percent. Mobile operators worldwide have generated $1.5 trillion in revenues in the last 12 months, served 6.3 billion subscriptions and by 2015 will employ 10 million skilled workers.

The industry continues to invest heavily in LTE worldwide. Today, there are 90 commercially deployed LTE networks with 40 new LTE launches globally in Q2 2012. By year end 2012, there will be 150 commercially deployed LTE networks globally. The US, Japan, and South Korea today account for 9 of 10 LTE subscribers globally according to GSA. Within the next 12 months, these same markets will have completed deployment and enabled nationwide services. European LTE mobile operators are differentiating with speed-based tariffs. U.S. and Canadian mobile operators are focusing on enhanced services such as premium mobile video, RCS, and multi-device data plan pooling.

Looking forward to Q3 2012, areas to watch will be related to global development and mass usability/validation of voice, video, and rich content services over LTE networks. Apple’s release of iPhone 5 with much anticipated LTE support will create significant load and complexity on Verizon Wireless and other major operators with commercial LTE services. As the “iPhone effect” takes on LTE networks, vendors and operators will continue to focus on optimization, real-time network/data services management, and subscriber services awareness/differentiation.

Vendor	Rank	Market Share ($)
Cisco	1	40%
Ericsson	2	14%
Alcatel-Lucent	3	12%
NSN	4	9%
Huawei	5	7%

QUARTERLY TRENDS and DRIVERS HIGHLIGHTS

• Within five years, LTE networks globally will near one billion mobile subscribers.

• The US, Japan, and South Korea today account for 9 of 10 LTE subscribers globally.

• Europe is facing fierce competition in LTE, yielding some of the lowest data prices globally.

• As the “iPhone effect” takes on LTE networks, mobile operators will continue to fine-tune performance, capacity, and network operations.

• Q3 2012 will see mixed performance by vendors experiencing slow growth in 3G business as CapEx shifts to 4G.

For more information about ACGResearch’s mobility services click here or contact sales@acgresearch.net.

Second Half of 2012 Poised for CapEx Spend

Although there is instability in global economies, demand fundamentals remain intact and network traffic continues to rapidly increase, adding more performance pressure on service providers’ networks. The outlook for the second half of the year is for SPs to spend, invest, and upgrade networks and launch new projects.

The European debt crisis as well as a reduction in service providers’ CapEx spend continues to affect the global router and switching markets. Vendors cited the turbulence in Greece, Spain, and Portugal and decreased demand from service providers as factors that contributed to their weak revenues in Q2. ACG Research still anticipates growth in the Worldwide Carrier Routing and Switching markets by the end of 2012. One factor that will affect growth is the surplus of CapEx, with some operators reporting having spent less than 50 percent of their CapEx thus far. “Growth in network traffic continues to rapidly expand and add more stress on SPs’ networks. Service providers have to make the investments and upgrades in their networks to meet capacity requirements; it’s that simple,” states Ray Mota, managing partner. “In the long term, this bodes well for vendors, and if SPs remain true to being flat or slightly up then the spend in the second half of the year should be positive.”

Q1 Total Worldwide Carrier Routing & Switching market posted revenue of $2.8B. The global market increased 2.7% q/q but decreased 5.1% y/y. Core Routing revenues were down 0.6% q/q and down 11.4% y/y. Edge Routing and Switching revenues were up 3.6% q/q but down 3.3% y/y.

Cisco posted a total worldwide decline of 2.1% q/q but an increase of 2.3 y/y. Cisco reports macroeconomic conditions contributed to the decrease in its Q2 revenues. Brocade posted a significant decrease, 23% q/q but a solid increase of 1.8% y/y. Juniper increased worldwide routing revenue 4.6% q/q but decreased 20.2% y/y; the company stated cautious purchasing prioritization by service providers, which is 64% of Juniper’s revenue, and some large enterprises as factors influencing their quarterly results. Alcatel-Lucent, which continues to institute more cost cutting measures, staff reductions and management restructuring, increased 6.6% q/q but decreased 2.2% y/y. 

Vendor	Rank	Market Share ($)	Q-Q MS Point +/-
Cisco	1	54.7%	-2.6
ALU	2	18.4%	0.7
Juniper	3	16.7%	0.3
Tellabs	4	2.5%	0.5
Huawei	5	1.9%	0.2

QUARTERLY TRENDS and DRIVERS HIGHLIGHTS

• Service providers and enterprises are looking at networks that are flatter, that reduce complexity and OpEx, while delivering greater performance and scale.

• Core network traffic is growing in excess of 50% per year, and new services such as content-rich digital media, cloud and mobile broadband place new requirements on the network for optimal distribution and delivery. Core routers, consequently, must scale rapidly and meet demanding network performance objectives with the lowest possible total cost of ownership.

• A key driver contributing to service provider router and switching market growth is the increasing demand for mobile broadband and providers investing in wireless networks to meet that demand.

Click here for more information about ACG Research's router and switching service.

Ray Mota

rmota@acgresearch.net

www.acgresearch.net

Switching Architectures and Implications on Network Efficiency

Operators realize that in order to better monetize their networks they must significantly reduce their time to market delivery for new services while keeping capital and operational expenses under control. These challenges require a newer and more efficient network. Almost every operator is examining changes to their core and metro architecture to address these needs, either by migrating to a new architecture or technology or with an overlay of one. 

In  "Switching Architectures and Implications on Network Efficiency" we discuss new architectures, why service providers like them, and which architectures best promote network efficiency and flexibility.

Click here to download the Market Impact.

For more information about Eve Griliches, click here.

For more information about ACG Research's optical service click here or contact sales@acgresearch.net.

Eve Griliches

egriliches@acgresearch.net 
www.acgresearch

Huawei Conference 2012: Mobility Focus

Huawei’s message at the 2012 Huawei analyst conference was “We consider ourselves leaders in mobility and we will prove it to you.” The presentations were full of market details. They included account wins to show depth of success in key mobile network areas: HSPA+, TD-LTE, FD-LTE and EPC as well as a global picture of Huawei’s success (the US notwithstanding). Where LTE is about doing new business “Huawei is trying to make the cake bigger.” Read Chris' analysis of Huawei's strategy, corporate positioning, mobile broadband focus, smart phone strategy, contracts and statistics. 

Click here to download the Market Impact.

For more information about ACG Research's Mobile Infrastructure service, click here or contact sales@acgresearch.net.

Chris Nicoll
cnicoll@acgresearch.net
www.acgresearch.net

Huawei Symantec Set to Shake up Data Center Market

Huawei/Symantec just announced at it 2011 Partner Summit their entry into the Ethernet switching/routing market. Providing a full suite of products from low-end SMB switches to high-end performance, density 1/10G chassis, Huawei/Symantec is positioning itself as an Ethernet competitor to Cisco, HP and Juniper. Leveraging its security and storage products, Huawei/Symantec is rolling out a high powered Terabit switch/router chassis and top-of-rack 1G and 10G switches to complement the data center switches. Huawei/Symantec, through the extensive development capabilities of Huawei, can claim the number 2 position with over 4 million units and 2 billion ports shipped to over 10,000 enterprise customers.

The S9300 is a high-end terabit routing switch developed by Huawei for the service-focused network. The intelligent multilayer switching technology provides intelligent service optimization methods such as traffic analysis, comprehensive QoS policies, controllable multicast, and integrated security guarantee to high-performance L2/L3 switching services. In addition, it features super high extensibility and reliability.

The S9300 is geared for WANs, MANs, campus networks, as well as the core layer and aggregation layer of data centers to help enterprises build an application-oriented network. It integrates the switching and routing functions to build an end-to-end integrated network. The suite features three models: S9303, S9306, and S9312. Their switching capacity and port density can be expanded indefinitely. The three models use universal modules and components. This not only ensures the extensibility of the equipment, but also protects the investments of carriers. In addition, the S9300 adopts various innovative energy saving technologies, which greatly reduce the energy consumption and noise of the equipment without affecting the performance and stability of the system.

The S6300 series 10 gigabit switch is a 40 port Ethernet switch that can provide top of rack capabilities in the data center. This is an ideal switch that complements Huawei/Symantec’s storage efforts in the entertainment, media and high-performance computing market. This 1U fixed configuration provides low latency, high performance with dual power capabilities.

S5300 series gigabit switches are new-generation Ethernet gigabit switches developed by Huawei to meet the requirements for high-bandwidth access and Ethernet multiservice convergence, providing powerful Ethernet functions for carriers and enterprise customers. Based on the new-generation high-performance hardware and Huawei’s versatile routing platform (VRP) software, the S5300 features 1U fixed configuration of either 24 or 48 ports gigabit Ethernet with interface choices of copper or fiber ports. 1G and 10G uplink options come in either copper or fiber options or unique combo cards. Stacking is also supported for this family of products. The S5300 series are classified into SI (standard) and EI (enhanced) models. The S5300 of the SI version supports Layer 2 functions and basic Layer 3 functions, and the S5300 of the EI version supports complicated routing protocols and rich service features.

The partner community was very enthusiastic about the Ethernet switching announcement. I am sure the rest of the industry will be closely watching the developments from Huawei/Symantec.



Marshall Bartoszek
mbartoszek@acgresearch.net
www.acgresearch.net

Huawei Conference 2011: An ACG Report

Eve Griliches and approximately 200 financial analysts, industry analysts and media attended the 2011 Huawei Analyst conference in Shanghai and Beijing last week.

In 2010 Huawei forecasted 20% growth for 2011. Actual growth was 24.2%, $28 billion, and the company’s operating profit increased 15.8% to $4.4 billion. Cash flow was $4.3 billion with a CAGR of 49% over 5 years. Huawei estimates that the company will end 2011 at $31 billion for the year. Huawei attributed the increased revenues to its 1) consolidation of leadership teams, which increased efficiencies and focus, and 2) expansion into and penetration of the enterprise and device businesses. Highlights for 2010: enterprise segment came in at $2 billion, and Huawei initiated 47 major managed services contracts and created a cyber security center in the UK.

This report covers some general highlights, which are in the annual report, some key trends, internal challenges as well as Huawei’s overall strategy for several product lines. It also discusses some product line issues. To read more, go to ACG Research's our store or contact sales@acgresearch.net.

Eve Griliches

egriliches@acgresearch.net
www.acgresearch.net