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How 5G is shaking up the network infrastructure market

The unprecedented fast growing need for bandwidth and low latency driven by 5G brings service providers great opportunities to create value – however, this does require extensive re-thinking of existing business models.

6 MIN READ

5G requires great flexibility when it comes to operating and managing network infrastructures, as well as vastly improved performance in the areas of bandwidth, latency, and coverage. What’s more, computing and storage resources need to move to the network edge to support frequently referenced content and applications close to where it is needed.

New players

The paradigm shift caused by 5G is leading to new approaches to network design and planning, and to new types of service providers and business models entering the market. A company might set up its own private network, for example, and have 5G frequencies allocated for its own use. Network operators upgrading mobile networks with 5G technology are increasingly drawing on the capacities of existing fiber optic networks, relying on, for example, operators in the fixed network, FTTH, or CATV sectors. Let’s take a closer look at two types of new entrants on the market renting out capacity to other parties: neutral hosts and tower companies.

Neutral Hosts

One of the concepts that have evolved is the ‘Neutral Host’ network. Instead of traditional individual deployment and operation by individual Mobile Network Operators (MNO), a third neutral party builds and operates part of the network, offering private and public connectivity.

So-called ‘Neutral Hosts’, for example, are entering the market, offering additional fiber capacity and bandwidth. Integration and cooperation between these players, from planning to implementation, is particularly complex but absolutely necessary in order to make 5G rollouts feasible – especially in large municipalities and urban regions, where businesses require 5G services.

A Neutral Host, is a communications network-operating party offering software-defined (in other words, tunable or somehow assignable, scalable) networks, using their own fiber optical core, edge, or RAN infrastructure, or even additional frequencies and/or purpose-built transmission and reception technology on the radio-side. A 5G Neutral Host could be a former cable TV provider or a so-called ‘private-public’ network license owner with specific infrastructure. It could also be a bank or IT service provider that owns data center interconnect infrastructure. All of them can use their ‘assets’ to assign specific communication network capacity, software services, and logical network slices to third parties. All such network slices and computing resources in an edge, core, or remote access network (c-/v-RAN) or a local small cell radio network using a certain frequency spectrum provide additional fiber capacity or radio coverage or mobile network reach for anyone looking to deploy services across a given area. Neutral Host architecture and business models provide new mobile coverage solutions – typically on a localized basis – to national mobile network operators (MNOs) or other communications service providers (CSPs). This allows them to realize rollouts, for example, in areas where they face technical obstacles or business case challenges driven by too high deployment costs. Finally, it enables them to realize fast, interoperable, and flexible provisioning of 5G services when needed, without timely planning. A Neutral Host could be selling its own spectrum, or spectrum owned by a Mobile Network Operator (MNO). An open-access Neutral Host model for 5G is particularly useful in urban areas with large numbers of Small Cells. These could be deployed by the host company, who would additionally sell such network capacity to service providers of a different kind.

The Neutral Host model offers different benefits for different stakeholders. End customers can extend their services in new areas in an agile and highly flexible way, for example, whilst cutting operational network costs. Mobile network operators may realize a significant reduction of cost on infrastructure, system hardware, and maintenance freeing up time and budget to develop new services instead.

Tower companies

Cell towers are essential to the rollout of 5G networks. These are largely built up from Small Cells and distributed antenna systems (DAS), but towers form the backbone for mobile network connections. Originally, telecoms companies built and operated these cell towers, but increasingly this business is moving to dedicated tower operators. In recent years, mobile carriers would sell their towers to independent external companies and lease them back, to generate cash for new investments. In certain instances, the tower company might not be the owner of the hardware, but will have lease rights and may possibly acquire the towers after some time. These tower companies now operate existing and new 5G cell sites for mobile network operators – although they generally lack experience in operating this kind of infrastructure and future site development. In addition, their clients – including the telecoms companies that originally built the towers – are demanding upgrades and performance enhancements across sites. They might require more antennas and ask the tower company for technical proposals and cost calculations. The two parties might share the financing another- yet another interesting new business model.

Tower companies often have a significant competitive advantage due to existing operational cost benefits and very high barriers to entry for new players. Tower companies can host multiple carriers, and more customers’ mean higher returns. Because 5G networks are complex and may open up surprising business opportunities and models, operators should seek expert support for their 5G projects at an early stage to avoid over-specifying and overspending, or not being flexible enough in the long term. Competent partners are essential to infrastructure expansion, installation, and system integration allowing network operators and providers to outsource tasks and concentrate on their core competencies. Tower operators also require cost-optimized, customized but also highly standardized infrastructure technology at the same time – for the construction of new Macro Cell sites and for integrated Small Cell installations.

Challenges

Many countries are still working on 4G capacity upgrades and a large number of consumers are unwilling to pay a subscription fee that maybe two or three times higher than what they’re used to. This is a widespread issue across the EU. However, when it comes to developing professional services such as private networks for corporations, newcomers have the opportunity to earn on everything from design and infrastructure to software testing and providing premium call services.

Other issues include environmental considerations and health concerns around 5G – although the latter is almost exclusively based on disinformation and erroneous interpretation. More about this last topic in our next blog post!

5GFiber OpticsFTTAPublic Networks

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