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The Economics of Millimeter-wave (mmWave) 5G with GSMA Intelligence’s Federico Agnoletto – Futurum Tech Webcast Interview Series
by Daniel Newman | January 26, 2021

On this episode of the Futurum Tech Webcast – Interview Series I am joined by Federico Agnoletto, Senior Economist at GSMA Intelligence. Federico is part of the analyst arm of GSMA, one of the largest trade unions in the world representing mobile operators. GSMA Intelligence provides data and insights on the mobile industry and the wider ecosystem — a very important topic right now.

Our conversation covered a recent study GSMA did in partnership with Qualcomm about millimeter-wave 5G and the total cost of ownership over the next five years. It was a fascinating conversation and one you don’t want to miss.

Understanding Millimeter-wave (mmWave) 5G

My conversation with Federico also revolved around the following:

  • The details of how and when mmWave 5G could be most cost effective
  • An exploration into the connection between mmWave deployments and 5G success
  • What operators are missing by going forward with 5G deployments but not mmWave
  • Economic analysis of different deployment scenarios across a wide range of areas including rural, suburban, and urban

5G is booming. Teleco companies are building more infrastructure to support the expansion; device manufacturers are building more compatible devices for consumers. But mmWave deployments are still lagging behind 5G deployments. The good news? The study found that mmWave deployments can be cost-effective for all involved. I think it’s only a matter of time before these deployments are seen worldwide.

If you’d like to learn more about the report, check out the breakdown from my colleague Olivier Blanchard here:
GSMA Intelligence Report: Mobile Operators may Still be Underestimating the ROI of 5G mmWave Deployments

Watch to my interview with Federico here:

Or listen to my interview with Federico on your favorite streaming platform here:

Disclaimer: The Futurum Tech Podcast is for information and entertainment purposes only. Over the course of this podcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.

Transcript:

Daniel Newman: Welcome to the Futurum Tech Podcast. I’m your host today, Daniel Newman, Principal Analyst, and Founding Partner at Futurum Research, and today’s Futurum Tech Podcast Interview Series is an exciting topic. We are talking about 5G millimeter-wave technology and basically what is going to be next in terms of connecting us faster and more rapidly in our everyday life experiences. This may have to do with how we connect to work, how we play games, watch movies, and our favorite shows, but you’ve seen in the last couple of years, 5G really take off.

And I’m excited today on this podcast to have a guest from GSMA, one of the largest bodies in this particular space, and I’ll let Mr. Federico Agnoletto, who is a Senior Economist at the GSMA, tell you a little more about the organization. But we’re going to talk about some research that the group recently performed with Qualcomm, but without further ado, I’m going to have Federico join me here on the Futurum Tech Podcast. Federico, welcome to the show. How are you doing today?

Federico Agnoletto: I’m doing great and you?

Daniel Newman: I’m doing very well. It’s a Monday morning, so depending on what time you are watching this, we’re recording this first thing on a Monday for me, and I’m guessing you’re in the afternoon over in Europe. Yes?

Federico Agnoletto: Yes, sir. Late afternoon.

Daniel Newman: All right. Well, around the world, we have an audience that watches and listens to our show from everywhere. So thrilled to have you here. As I said, it’s a Federico Agnoletto Senior Economist GSMA. Before I hit you up on the study and some of this data that I thought was fascinating. Do you mind just doing a quick introduction of yourself of GSMA and your role there?

Federico Agnoletto: Sure. So I’m a Senior Economist at GSMA intelligence. We are the analyst arm of GSMA. GSMA is one of the largest trade unions representing mobile operators worldwide, and as GSMA intelligence, we provide data and insights on the mobile industry and the wider ecosystem.

Daniel Newman: And GSMA is one of the big partners behind the annual event that I think so many people in this industry know, Mobile World Congress. I mean has a huge role every year in that event. Sadly, we weren’t able to go actually last year or this year, but hopefully with the advancements in biotechnologies maybe next year we’ll be back.

Federico Agnoletto: Hopefully, next year on June, we got our event scheduled, the Mobile World Congress in Barcelona. So keep tight, and let’s hope no more surprises from this pandemic.

Daniel Newman: I feel you. It’s one of my favorite events every year. Great place, beautiful part of the world, always so many great meetings with these innovators, both new companies that are breaking through. And of course, many of the world’s largest technology companies that are developing the standards, developing the hardware, devices, automobiles, so many things and of course, here, we want to talk about a little bit of all those things. So in the last week, you were involved in publishing a study called the economics of millimeter-wave 5G. And the study’s subtitle was in assessment of the total cost of ownership in the period to 2025. So really looking over the next five years. Talk a little bit about this study that you did in partnership with Qualcomm and what drove this particular research for GSMA.

Federico Agnoletto: The starting point was millimeter-wave, the use of millimeter-wave spectrum by mobile operators. So for many years, we heard about how millimeter-wave spectrum could be used by mobile operators, but despite all this talk millimeter-wave was not used. And this past fall, we saw that there were a lot of signs of market readiness for the use of millimeter-wave in 5G, especially in terms of spectrum reliability, consumer devices, and network equipment. And so we decided it was a good time to look at the crucial question where and when millimeter-wave solutions could be cost-effective. So our goal was really to establish whether millimeter-wave solutions can bring so cost efficiencies in supporting some common 5G use cases.

Daniel Newman: And it was a really interesting study in-depth, and one of the things I think that at least comes to mind for me is that 5G for the average consumer is thought of as one thing. It’s just the next connectivity technology. It was 4G, now it’s 5G, and it’s all the same. And I think that’s one of the big things, that reading this study was helpful. And I think this study probably lends itself towards people that are a little more in-depth, a little more familiar with the 5G ecosystem, but not all 5G is the same. There’s multiple different. There’s sub-6, and there’s millimeter-wave. There’s different bands. And that everybody who is supposedly on 5G, whether that’s a fixed network or for their mobile device, isn’t getting that same connection. It’s not one thing.

And so that was something that really did catch my attention straight away because I feel going back to the early days where some mobile operators were even marketing what they were calling 5G enhanced, or there was one that they particularly called a 5GE, which was really 4G LTE enhanced, before 5G. So what I’m saying is everybody out there is still learning what is a 5G experience look like?

Federico Agnoletto: So 5G, indeed, it’s a mix. We’ll be using different bands from low bands to mid bands, to live such as millimeter-wave, and so for now, we’ve seen many operators rollout 5G on mid bands. But we know operators are looking at millimeter-wave bands as well to compliment their networks.

Daniel Newman: Absolutely. So let’s talk a little bit about that in the study of 5G adoption and the connection to millimeter-wave. The study strongly indicates that there’s a big connection between millimeter-wave deployments in 5G success.

Federico Agnoletto: So indeed, and millimeter-wave will be important for 5G success while many argue that there are several challenges in deploying millimeter-wave solutions, including propagation and attenuation and that millimeter-wave radio equipment costs today, generally more than mid-band and lower band solutions. It is well known, that millimeter-wave bands can support way more traffic than lower bands. And in our study, this is the main trade-off we looked at, and in a nutshell, we found that the high capacity of millimeter-wave bands can lead to some targeted and cost-effective 5G deployments in the period between now and 2025, so in the shorter.

To give a short example, for instance, among other scenarios, we looked at two dense urban areas, one in greater China and one in Europe, still in the period between now and 2025, and we found that they mixed the 3.5 GHz or mid-band plus millimeter-wave outdoor 5G network can be cost-effective when compared to a 3.5 GHz on the outdoor network. And we also found that the level of cost savings generated by the use of millimeter-wave is particularly sensitive to the intensity of traffic demand and to the operator market share.

Daniel Newman: We’ll talk more about cost-effectiveness here because I have a question about that later on, but one thing that I noticed and you heard me talk about 5G, not all being equal. There does seem to be a number of operators that are very actively marketing and talking about 5G, but they’re really only doing the low band, mid-band. They’re not doing the high band, and they seem to think that that’s okay and going to be beneficial. But the research really says that in the long-term these operators are taking a pretty significant risk. What are the operators missing that are marketing and going forward with 5G, but not millimeter-wave?

Federico Agnoletto: Just to go back to our study, we find that whether deploying millimeter-wave in 5G network can generate cost savings for a given operator. This year later will mainly depend on the operator circumstances and this in different areas, such as data, traffic, user penetration, and also, spectrum portfolios. So in particularly, I think what we are observing now around the world is in line with our analysis.

Most operators are rolling out 5G using mid-band spectrum to get the service up and running. And as adoption grows, some operators are already providing or planning to provide specific services with millimeter-waves, such as fixed wireless access, indoor deployments, and to provide more capacity in dense urban areas.

Daniel Newman: It looks like the report really tries to take this particular perception head-on. I’m just looking at some notes, and you guys created a number of scenarios that you used to do some economic analysis on it. You looked at the importance of building out millimeter-wave alongside sub-6 and mid-band, and you looked at outdoor sites in a hypothetical dense urban areas. You look at the fixed wireless access in urban, suburban, and rural areas, and then you even looked at enterprise office space. And it seems that across the board, you guys were able to show that not only is it faster but that there was some economic benefits. So it was interesting because like I said, you guys did comprehensively cover the difference potential scenarios. And, of course, you can’t cover everything when you’re modeling, but you guys did take a pretty broad look at things. And as I said, it’s just very interesting that so many operators are thinking there may be an opportunity to escape the investment in millimeter-wave. But as I see it, it looks pretty risky, and your research really seems to support that.

Federico Agnoletto: There’s just been a few assignments of millimeter-wave spectrum. Although, we expect that will be more in the future. What we see is that, and what we suggest to operators right now is to, depending on their duration of their spectrum license, we suggest them to gather insights on traffic demand and expected user uptake in the areas they are targeting deployment in order to understand whether, according to their specific situation, maybe the web solutions would be a good option in particular as a capacity complement to lower bands.

Daniel Newman: Absolutely and that makes a lot of sense. And I realized that I’m riffing with you a little bit from what I’m reading and what you’re saying, and I’m looking at the survey. So it seems that the spectrum for millimeter-wave and this is me, just building on what we were just saying. It seems that the research is suggesting, this is something the operators are missing. What should the operators consider? So maybe they’re not there yet today.

From your research, it indicates that there is a really important consideration that they investments start. Maybe it’s application-specific in the beginning, maybe it’s geographically specific, but in order for people to really get the difference from 5G, and I’ll add one caveat is some of the 4G and LTE spectrum and the very enhanced and 5G low band don’t function and operate that differently. They don’t feel that differently, but when you get into the high band, it’s a whole nother level. I mean, isn’t that really what it’s about? When you really want people to have a noticeable material difference in experience, isn’t that going to be so important that the high band, the millimeter-wave, is what is being offered?

Federico Agnoletto: Yes, no, we indeed, we expect that consumers will be loving millimeter-wave for the speeds that we will provide, and also on the operator side, we expect that millimeter-wave in certain circumstances will have operators provide more capacity. So, but definitely, the key question here is about demand, and traffic demand is going to be the key driver among others, obviously. There’s spectrum, which is the first condition. If you have spectrum available on the millimeter-wave bands, then you can think about something else. And so we expect that in the future, once spectrum will be available and there will be more consumer devices.

By the way, this year, we expect that more than a hundred consumers devices will be available handsets, and more than 50 fixed wireless access customers, premises equipment, CPEs will be made available. And this is another important part, the consumer devices, and the CPEs. And also in terms of network equipment, there are reliable solutions today for millimeter-wave, and almost all tier one and tier two equipment vendors are already offering millimeter-wave equipment products as part of their portfolio. And we expect that as millimeter-wave 5G solutions achieve more scale, there will be a wider choice of consumer devices and equipment, and this will help reduce the equipment costs, increase the availability of affordable devices. And so ultimately facilitate greater adoption.

Daniel Newman: You make some great points there, and this goes back to what I said, Federico, about 5G, not all being created equal it’s the same as in devices. There are devices that are built to support that sub-6 band but that aren’t necessarily millimeter-wave, and then there are certain operators that have been very focused on building devices that are millimeter-wave compatible. And as I said, when you experienced millimeter-wave, and then you experienced the rest of 5G. 5G is great across the board. There’s so much benefit that people are going to get, but that next level, super high speed, faster than wifi experience that people are really looking for. And so, getting the device makers on board, building the hardware and solutions to be not only 5G for the sub-6 but 5G are including the high band and millimeter-wave, is going to be critical, and so you make a great point.

So I have one more topic I want to talk to you about, and thanks so much for your time today. You started alluding earlier to cost-effectiveness, and in your research, you presented what I would call a framework for millimeter-wave and its cost-effectiveness. Can you talk a little bit about some of these examples and maybe rehash some of the examples you mentioned and how you came to these conclusions? Because I have to believe that this ability to find this cost-effectiveness is going to be a driver of momentum for operators getting behind millimeter-wave in the future.

Federico Agnoletto: Definitely, going back to cost-effectiveness. So in our study, we looked at several scenarios, and you mentioned them all. Thank you for that. Deployments, fixed wireless access, then areas and the key common denominator there is traffic demands. We find that if traffic demand is sufficiently high, millimeter-wave would be a cost-effective solution. And this, especially as a complement to mid bands and lower bands when 5G is rolled-out. And this is the key to our study. Once there is spectrum availability, consumer devices, and network equipment available, which is what, something that we’re seeing this year and a trend that’s been going on for the past couple of years, then there will be much more adoption, and this will probably most likely show the need for millimeter-wave in the future.

Daniel Newman: You can absolutely see it, and by the way, that’s a great point to reiterate, and it goes off that last statement I made, and we made talking about the device availability. The spectrum availability is. We are still pretty early days, and that’s something that you guys pointed to in your research that part of it is the operators getting on board. Part of it is going to be the devices being made and the availability of the spectrum so that the operators can scale. But there seems to be clear evidence based on your models and what you shared in the research that if the spectrum is made available the devices in their particular markets, where the spectrum is being made available, adopt the millimeter-wave capabilities, that operators are going to be focused, or they’re going to need to be focused to embrace this opportunity if they want to compete and be as profitable as possible in their endeavors in 5G. Would you say that’s pretty accurate?

Federico Agnoletto: That’s pretty accurate. Yes. In terms of spectrum availability, we’ve seen more and more of millimeter-wave options worldwide. There’s one scheduled, for instance, in Australia, in April. And by the way, I think Telstra, an operator Australian operator, is a good example of putting millimeter-wave at the center of their 5G strategy, especially that they are targeting the residential broadband market with millimeter-wave fixed wireless access solutions.

Daniel Newman: Absolutely. Well, Federico, I want to thank you so much for taking some time with me here on a Monday. Very impressive study from the GSMA. We will make sure by the way that we include a link in our podcast show notes. So, everybody that’s listening to this show, you want to read about the study and just look in our show notes below, we’ll provide a link. It’s worth a read. It was a pretty quick read, a lot to say, and then we also have a research note that Olivier Blanchard, Senior Analyst from Futurum on our team wrote. They sort of breaks down some of the key elements that we found in reviewing this GSMA report, but Federico Agnoletto, Senior Economists GSMA.

Thanks so much for joining me today.

Federico Agnoletto: Thanks for having me, Daniel, anytime.

Daniel Newman: For everybody out there, I want to say thanks again for tuning into this episode of the Futurum Tech Podcast Interview Series. It was great to have Federico on. It’s always good to get behind the research and underneath it. We are hearing about 5G millimeter-wave, and this is here to stay. It’s going to continue to be invested in and enhanced. You can count on that. Again, click that subscribe button, join us here on the Futurum Tech Podcast for regular interviews across the industry. There will be more to come. For this episode on the topic of this GSMA study. I got to say goodbye, but we will see you later.

Daniel Newman