Wednesday, May 25, 2016

Will 5G Enable New Birth of Fixed Wireless Business?

Fifth-generation mobile networks might be more strategic than you might think, boosting both the value of wireless access and the fixed network. It is easy to focus on the "gigabit per second to every mobile device" 5G is designed to support, with higher speeds up to 5 Gbps or 10 Gbps conceivable in some scenarios.

In addition to making mobile access speeds competitive with--or higher than--fixed networks in many instances, 5G might also allow some Internet service providers to rethink access architectures, in region and out of region.

Verizon, for example, now is studying ways to use fiber backbone networks, especially out of region, to anchor fixed wireless access, in much the same way that competitive local exchange carriers long have operated. 

The same approach could work in region, where Verizon does not intend to build dense optical access networks, but might have greatest value out of region, allowing Verizon to leverage fixed network facilities in new ways.

Looking only at "out of region" opportunities, Verizon might be able to leverage new core optical networks acquired from XO Communications, with fixed wireless, to reach many business customers, at lower costs, than ever before.

The access services business model, in other words, could change with the advent of 5G, especially for business customers out of region, or for some consumers, in region, where Verizon does not intend to build FiOS fiber to the home networks.

5G fixed access might also allow Verizon to serve some customers, even where it does build FiOS, who cannot be reached by fiber to home facilities, for cost reasons.

When you have firms including Facebook, Google, Verizon and AT&T all looking at fixed wireless, and AT&T publicly committed to adding as many as 13 million new connections using fixed wireless, you know something has changed.

Fixed wireless is not new, as a concept. It has been seen as the solution for any number of business models, ranging from multi-channel video delivery to Internet access to consumer and business voice. It never has gotten much traction, as a percentage of industry connections.

That could change, dramatically, over the next decade, for several reasons. First, most Internet service providers now acknowledge that fiber to the home is not always the best “use everywhere” platform for high-bandwidth (gigabit) services. In areas where demand is spotty or light, fixed wireless will be a better option, in terms of a sustainable business case.

Second, suppliers--notably the potential ISPs themselves--are working on ways to make fixed wireless work better, at higher frequencies, at lower cost, and have gotten significant support from traditional equipment and platform suppliers, in some cases.

Third, the strategic role of fixed networks now is evolving in a way that makes them backhaul networks, allowing more-affordable “fiber to where you can make money” deployments that, in turn, can use fixed wireless instead of cabled drops.

That strategy is not new, either. Many metro fiber businesses long have built fiber rings to underpin access operations, gradually extending spurs off the rings to reach actual customers.

In a clear sense, fiber networks (metro ring or transport and access) now are going to play the same function in the consumer business. Fiber backbones will have subtending fiber distribution rings or spurs, which will in turn terminate close enough to customer locations that fixed wireless can be the drop (access).

That, fundamentally, is a variant of the hybrid fiber coax network design, fiber to the curb or fiber to the neighborhood architectures, perhaps beginning with services aimed at business customers, especially small or mid-sized businesses.

Now Verizon has begun to talk about using 5G networks in a fixed mode, supported by optical fiber backhaul.

“I think the problem that the telcos have had is a DSL service is really not going to keep up with DOCSIS and so we’ve had to do fiber, and fiber is expensive for all of us,” McAdam notes. “So if you think about it if I can get we than say a 1,000 meters of a business and I give them a router, a basic router that has a 5G service inside it, and I’m up and operating immediately.”

“If you look at 5G in a fixed wireless environment we've demonstrated for some of our shareholders in our Basking Ridge facility putting 1.8 gigs into the house without a wire,” said McAdam. “Think about the difference for the carrier and the cost structure.”

In principle, assuming the acquisition of XO Communications is approved, Verizon will be positioned as a competitive local exchange carrier “out of region,” as XO Communications has fiber rings in 45 of the top 50 U.S. markets.

“That gives you the ability to be out into those markets and then you just run your extensions off of them,” said McAdam.

Though we are early in the process, it appears fixed wireless might be poised for its biggest-ever role in U.S. access operations.

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