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With the advent of 5G, mobile service providers (MSPs) have an estimated 50% bandwidth growth requirements, yet mobile/wireless is only about 10% of all global bandwidth. There conservatively needs to be a 2x growth in data capacity to support 5G, yet that currently linearly equates to a 2x growth in cost to the operator. So, how can MSPs decouple their need for the radical bandwidth growth needed to support 5G from the towering cost of delivering it?

The 5G era will usher in a requirement for MSPs to fundamentally reassess the underlying economics of data traffic transport. 5G will require high-bandwidth, low latency data communications, but the worry is that if MSPs don’t reassess their economic model for data transport, 5G itself will become less viable and compromises will need to be made.

If that happens, enterprises will lose lifeblood revenues, consumers will become disillusioned about the promise of 5G, and MSPs will in turn suffer serious setbacks in their drive to make 5G profitable for the long term.

What’s important is that as the world disconnects from cables and ‘goes wireless,’ and wireless access points in the network move closer to the user, the need for fiber connectivity supporting that grows substantially – especially for many of the poster child use cases for 5G. These include streamed gaming, video monitoring, automated equipment and machinery, and fixed wireless access for businesses unable to take advantage of traditional fixed networks.

With 5G, there’s an undeniable need for greater bandwidth to support new use cases, as well as the ability of the network to deliver this with minimum latency in diverse locations. And that costs money – on top of the investment MSPs have already made into the radio and mobile network equipment itself, fixed connectivity really counts.

So, MSPs are focused on the cost of mobile front- and backhaul, where traffic is delivered over a terrestrial fiber network, to and from the mobile network, to the user or consumer.

Strategic 5G investments to date

MSPs have invested a lot in the future of 5G. According to the GSMA, MSPs will invest about $1.1TN over the next five years to build out technology that will catalyze the next great step forward in mobile communications. The main investment areas of 5G are next-generation network equipment, site and power, front- and backhaul fiber/technology, and also spectrum. But without corresponding next-generation data transport for mobile traffic, those investments could fall on stony ground.

Unlike the other costs, front- and backhaul costs are subject to a different economical model. MSPs are not just buying equipment, they’re also paying for fiber routes (physical location) across their footprint, and bandwidth/guaranteed data rate/ultra-low latency (network performance), so it’s a very strategic investment.

The difference here is that front- and backhaul investment is subject to the laws of supply and demand. The cost is lower where there’s a high fiber density and more convenient routing, and vice versa. The result is that the geographic or logical routes under most pressure are priced at a premium.

A contributing factor is that historically traditional fixed backhaul has been a leased services model, where an MSP pays a fixed amount to lease 1Gig, but when they want 2Gig, then it’s two times the cost. The increase in expense has been linear. In the case of fronthaul then because it’s based on leasing a piece of fiber (or an optical fiber wavelength on that fiber).

The new 5G architecture

In terms of architecture, enterprises and MSPs require a network that offers deep fiber density in metropolitan locations, combined with connections into the key central and edge data centres where much more of the processing will take place

This type of architecture is based on moving the compute function to the edge of the network, nearest to the consumer of the service. Where fiber already exists, MSPs obviously want to take advantage of that underlying power. But in a lot of instances, the fiber simply doesn’t exist in enough quantity or in the right place to support 5G densification, and therefore needs to be built out or densified. 

Making the cost of 5G manageable

A significant way to reduce the cost to MSPs of necessary network densification is by allowing them to share connectivity while maintaining individual service level agreements (SLAs) for each of their applications. This new focus on ‘per-application’ versus ‘per physical fiber or wavelength,’ offers much more flexibility and freedom, and an agile network that places resources where they’re most needed at any given moment.

Fortunately, the industry has seen this coming, and we’re investing in segment routing and Ethernet VPN amongst other technologies to reduce the cost of bandwidth delivery and provide network scalability for the 5G era. Segment routing is a new way of routing that makes the network more flexible and scalable, where in technical terms, MSPs don’t need to maintain a per-application state and per-flow state. Simply put, the network is made to bend to the will of the service and provide the requisite service guarantee, rather than the other way around.

Network providers are not just thereby resetting the base point for pricing. We believe this approach is sustainable, and everyone can benefit regardless of their own specific requirements. Historically, this is not without precedent, and in fact, market pricing resets have taken the price down every time there’s a new technology which enables that dynamic to come into play.

The next episode in the 5G story will see MSPs able to draw down as much bandwidth as they need, wherever they need it, in near real-time – and that in itself has several benefits that could lower costs too. We see a bright future for 5G if MSPs are allowed to properly capitalize on their investments by having a front- and backhaul networks that takes advantage of this new economic model.

The post How do mobile service providers handle the shifting economics of 5G (Reader Forum) appeared first on RCR Wireless News.



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