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CBRS – Share and Share Alike

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Greetings from Lake Norman/ Davidson, North Carolina, where the college football season has started.  We took in the Davidson College home opener and the Wildcats (red jerseys) defeated Georgetown 27-20 to a crowd of more than 2,300.  It was an exciting part of the Labor Day weekend and a good win for the Cats.

 

This week’s Sunday Brief focuses on the potential of Citizens Broadband Radio Service (CBRS) to change the telecommunications landscape.  We will also have an update on C-Band spectrum auction news.  First, however, a quick follow up to last week’s article on AT&T’s system and network architecture changes.

 

Follow-up to last week’s AT&T article

We had greater than expected interest concerning last week’s TSB including receiving several background articles that we had not uncovered in our research.  One of the most important of these was a blog post by AT&T Senior Vice President Chris Rice on their Domain 2.0 developments that was posted on August 21.  In this article, Chris describes their major architectural change:

 

We started on a path for a single cloud, called AT&T Integrated Cloud (AIC). This was our private cloud, meaning we managed all the workloads and infrastructure within it. Originally, AIC housed both our network and several of our “non-network” IT workloads and applications.

But we quickly learned it wasn’t optimal to combine both types of workloads on a single cloud. It required too many compromises, and the IT and network workloads needed different profiles of compute, network and storage.

We opted for a better approach: Create a private cloud for our network workloads, optimize it for those workloads, and drive the software definition and virtualization of our network through this cloud approach and through the use of white boxes for specific switching and routing functions.

 

The change to last week’s article is subtle but not insubstantial:  AT&T’s network cloud (formerly AIC) is optimized for network traffic loads and functions (but still built on white box/ generic switching and routing), while non-network functions are operated in the public cloud through Microsoft and IBM.

 

john-donovanIt’s important to note that the executive champion of this cloud strategy, John Donovan, is going to be retiring from AT&T on October 1 (announcement here).  We have included an early speech he gave on AT&T’s Domain 2.0 strategy in the Deeper post on the website.  John brought engineering discipline to AT&T’s management, and, while the parlor game of his replacement has begun, the magnitude of his contributions to Ma Bell over the past 11+ years should not go unnoticed.

 

CBRS – Share and Share Alike

When we put together a list of Ten Telecom Developments Worth Following in mid-July (available on request), we were surprised by a broad range of CBRS skepticism in the analyst community, especially given the breadth of US wireless carriers playing in the CBRS alliance.  “Nice feature” or “science experiment” was the general reaction.  Many of you chose instead to focus on the C-Band auctions, which are important and addressed below.

 

After some reflection, we have come to the conclusion that the most important feature of CBRS is neither its mid-band position (3.5 GHz), nor the mid-band spectrum gap it fills for Verizon Wireless (more on that below), but the fact that at times all of the spectrum band can be shared.  Customers receive the benefits of an LTE band without a costly auction process.

 

If you are intimately familiar with CBRS, you can skip the next couple of paragraphs.  For those of you new to TSB or the industry, here’s a copy of the slide we used to describe CBRS in the Ten Telecom Developments presentation to start your education:

cbrs top 10 slide

 

 

The commercialization of shared LTE bands is pioneering and one of the reasons why it has taken nearly a decade to move from concept to commercialization (the original NTIA report which identified the CBRS opportunity is here).  This does not appear to be a singular experiment, however, as Europe is proceeding with shared spectrum plans of their own in the 2.3-2.4 GHz frequencies (more on that here).

 

To enable this sharing mechanism in the United States, a system needed to be developed that would prioritize existing users (namely legacy on-ship Navy radar systems) yet allow for full use of the network for General Authorized Access (GAA) users when prioritization was not necessary (opening up to 150 MHz of total spectrum for GAA which could power 5G speeds for tens of millions of devices nationwide).  A great primer on how CBRS generally works and how spectrum sharing is performed is available here from Ruckus, a CommScope company and one of five Spectrum Access System providers.

It’s important to note that the Environmental Sensing Capability (which determines usage by priority) and the Spectrum Access System (which authorizes, allocates and manages users) are two different yet interoperable pieces of the CBRS puzzle.  And, while the ESC providers have been approved by the NITA (CommScope, Google, and Federated Wireless), the SAS providers have not been approved (more on that here in this Light Reading article).  While all of the SAS providers have not been made public, it’s widely assumed that they include the three ESC providers mentioned above.

 

Delays in the SAS approval process have not kept the CBRS Alliance from heavily promoting a commercial service launch on September 18 (news release here).  This event will feature FCC Commissioner Michael O’Rielly, Adam Koeppe from Verizon, Craig Cowden from Charter, and others who will celebrate the Alliance achievements to date and place the development as a central theme going into 2020.

 

CBRS Use Cases:  Not Everyone is Waiting for Private Licenses

The myriad of CBRS use cases mirror the different strategies for telecommunications industry players.  Here are four ways carriers are using CBRS in trials today:

 

  1. CBRS as a last mile solution for rural locations (AT&T and rural cable providers MidCo Communications mapMidCo and Mediacom Communications). In the MidCo configuration, outdoor Citizens Band Service Devices or CBSDs (see picture above) are placed in proximity to potential (farm) homes passed (see nearby map of MidCo territories in the Dakotas and Minnesota).  Per their recent tests, MidCo was able to connect homes up to eight miles from the outdoor CBSD.  They estimate that CBRS will add tens of thousands of homes and businesses to their footprint (they serve 400K today so every 10K new customers is meaningful).  Good news for an over the top service like Hulu, Netflix, and YouTube TV and bad news for DirecTV and Dish.

 

AT&T has been testing CBRS as a similar “last mile solution” in Ohio and Tennessee using equipment from several providers including CommScope (ESC, SAS) as well as Samsung (network).  These trials are expected to wrap up in October.  If AT&T can find a more effective last mile solution for copper-based DSL in rural areas, revenues and profitability will grow (by how much depends on Connect America Fund subsidies and service affordability).

 

AT&T has been mum on their trial progress to date.  In June, however, AT&T asked the FCC to allow them to turn up antenna power in these markets to test various ranges and speeds (bringing the power allowances to a similar level of the WCS spectrum that AT&T already owns and operates in the 2.3 GHz spectrum frequency).  This was met with strong opposition by a coalition of providers, and it’s not clear that AT&T’s request was ultimately granted.  More on the AT&T request and response can be found in their FCC filing here, and in this June 2019 RCR Wireless article.

 

  1. CBRS as an additional LTE service for cable MVNOs (Altice, Charter, Comcast). It’s no secret that cable companies are eager to continue to grow their wireless presence within their respective footprints (and corporate is equally as eager to improve profitability and single carrier dependency).  CBRS would add a secure option that is seamlessly interoperable with other LTE bands to create an alternative to their current providers (Verizon, Sprint, etc.).  It also provides a new “secure wireless” service for small and medium-sized businesses which can be deployed with Wi-Fi.  A cheaper alternative for out-of-home wireless data?  Count cable in.

 

We spent some time a few weeks ago talking about the evolution of Verizon plans, specifically how their cheapest unlimited plan now includes no prioritized high-speed data (article here).  Is CBRS a better alternative to deprioritized LTE?

 

The short answer is “not yet.”  LTE Band 48 is only available across the most expensive devices, and, presumably, if customers can shell out $1000-1500 for a new device, they can probably afford extra LTE data allowances above 22-25 Gigabytes (see previous article linked above).  Notably, the new Moto E6 (budget-minded Android device) includes neither CBRS nor Wi-Fi 6 (specs here).  The new ZTE Axon 10 Pro phone does not include Band 48 or Wi-Fi 6 (specs here).  The OnePlus 7 Pro, however, does include Band 48 but not Wi-Fi 6 (specs here).  And, if rumors are to be believed, the upcoming Apple device announcement in a couple of weeks will disappoint everyone – no 5G, no CBRS even though the new device will likely support the 3.5GHz spectrum band in Japan, and likely no Wi-Fi 6 (which is why the Apple Card will likely be used to offer attractive financing options).

 

This leaves cable companies with a good selection of Samsung and Google devices that can use CBRS (Galaxy Note 10, Galaxy S10 5G, upgraded Pixel 3X and 3XL, and likely the upcoming Galaxy 11 release).  For cable to win on this front, they may need to provide plan incentives to influence the pace of upgrades and request this band for Moto and low-end Samsung devices.

 

  1. CBRS as a mid-band LTE outdoors/ public venue solution for Verizon. It is no secret that Verizon is going to use CBRS GAA as a part of their carrier aggregation solution (see this August 2019 article from Light Reading for more details). Such a solution is usually not designed for greater throughput in rural markets alone – Verizon clearly sees some form of CBRS as a portion of their overall licensed/ un-licensed solutions portfolio.

 

The question that will be answered in the next quarter or so is whether CBRS is valuable enough to be a part of Verizon’s licensed portfolio (e.g., they buy 20 or 30 MHz worth of private CBRS licenses, or whether they use the GAA portion in the same License Assisted Access (LAA) manner as they use 5.0 GHz Wi-Fi).  It’s likely that if CBRS is important, they will be at the auction table.

 

It appears that the C-Band (3.7-4.2 GHz) license quantity and auction schedule is in flux, if the latest report from Light Reading (and the corresponding New Street Research analysis references in the article) is true.  This also impacts Verizon’s near-term interest in CBRS PALs.

 

Verizon’s interest is important as they can drive manufacturers to quickly include Band 48 in devices.

 

  1. CBRS as an indoor and/or private LTE solution for wireline. One lesser-discussed option for CBRS is as a private LTE indoor solution for enterprises and building owners.  While we touched on this option for cable companies (who will undoubtedly drive business ecosystem development), this could also have ruckus cbrs routerinteresting implications for companies like CenturyLink (Level3), Masergy, and Windstream.  Ruckus, a traditional Wi-Fi solutions provider now owned by CommScope, already has an indoor unit for sale here (picture nearby).  The implications for in-building coverage are significant because 3.5 GHz does not overlap with existing deployed frequencies (including existing 2.4 GHz and 5.2 GHz Wi-Fi solutions), and, as a result, will not increase interference that deploying an AWS (1.7/ 2.1 GHz) or EBS/BRS (2.5 GHz) might create.  With solutions as cheap as industrial Wi-Fi and minimal interference concerns, there might be more value created with CBRS indoors than outdoors.

 

Bottom line:  CBRS is a real solution for rural broadband deployments and will attract the interest of large and small rural providers.  CBRS will be important to wireless carriers when Samsung and Apple join Google and Facebook in building a robust ecosystem.  This is a good/great but not an industry-changing technology.  If the first commercial applications are successful in 2019 (the odds are good), demand for Private Licenses will be significant (if not, expect more pressure to resolve C-Band spectrum allocation issues quickly).

 

What makes CBRS great is dynamic spectrum sharing among carriers.  Should that continue with all new frequencies auctioned (including C-Band), you should expect to see competitive pressures grow in the sector, particularly with private LTE/ indoor applications.

 

Next week we will provide the first of two third quarter earnings previews, focusing on wireless service providers ahead of the Apple event.  Until then, if you have friends who would like to be on the email distribution, please have them send an email to sundaybrief@gmail.com and we will include them on the list.

 

Have a terrific week!

 

AT&T’s Herculean Lift

 

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Greetings from Lake Norman/ Davidson, North Carolina where everybody is working (including the neighbor kid, Caleb, pictured with the Editor and yours truly).  This week, we’ll look at two studies that examine data usage, and try to deftly explain AT&T’s efforts to improve their cost structure and competitive cloud position.  But first, a follow up from last week’s column.

 

Follow-up Idea to the Apple Card TSB

I did not anticipate the overwhelming response the Apple Card TSB would receive (Craig Moffett did a mid-week post on the concept and CNBC picked it up here).  I have had about a dozen in-depth conversations on the Apple Card TSB this week with several of you and I think we have come up with the ideal suggestion for Apple:  2x Daily Cash towards your monthly phone payment.  So, if you get 2% back from using Apple Pay (say $2 on a $100 grocery purchase), that would become $4 towards your monthly phone installment.  There could also be an incentive to pay the phone installment first or sooner.

 

This promotion would reward existing Apple users with a new phone just from using Apple Pay (or buying other products from the Apple family, or just using the physical card), and would be a way for existing Android users to make the switch to Apple for a discount (or to lessen the blow of being underwater from a low trade-in value).  The opportunity to “earn” your way to a free iPhone increases Apple Pay (or card) usage, which increases value, etc.  And, customers would have the ability to worry less because their phone is never locked to a wireless carrier.  Not that the marketing department at Apple needs any help, but if this ends up being the incentive, you heard about it first in TSB.

 

There’s a Deeper post on the Apple Card that might be very useful for those tracking the topic closely.  Thanks for all of the ideas and please keep them coming.

 

 

Two “A Ha” Reports This Week Generate Minimal New Insights

Meanwhile, we had two “a ha” reports come out this week.  The first was a supposed “scoop” from the Wall Street Journal that customers were being duped by their internet service provider (AT&T, Comcast, Time Warner Cable, others) into paying more for higher throughput speeds and receiving nothing in return.  This was not a passing consumer interest story, but had substantial article placement, a video, and even a podcast to support it.  (Both the video and the podcast take more time to analyze the complete array of things that could contribute to slower speeds in the home, such as interference or neighborhood congestion, and, inadvertently, make a very strong yet indirect case for paid prioritization).

 

At TSB, we seek first to understand, but at the end of the day, it’s very difficult for us to have as much excitement as the Wall Street Journal did about possible overpayment for the following reasons:

  • The consequences of paying too much for home broadband are not substantial. Analyzing whether customers are over-insured on their home or auto insurance is likely to have 10x more impact than the $10-20/ month being paid for a premium tier.  Consumers should spend their time wisely.
  • Pursuing an alternative to your current speed (buying a premium tier) usually carries no contract and can be immediately evaluated. Most ISPs do not have a change fee.
  • The sample size used in the article is not large enough to make a national conclusion (34 multi-streaming tests with a majority made in New York City is good to know, but not conclusive that Charlotte or Phoenix or Tampa customers will have the same experience).

Bottom line:  There’s car picnothing wrong with 1Gbps speed even if you don’t need it.  There’s also nothing wrong with buying the nearby Dodge Challenger SRT Demon (840 hp – don’t we all need one?) if you can afford that.  Faster Internet speeds from your ISP could help, and so could a new Access Point or Cable Modem. 

 

The second study that came out this week deserves more attention because of its sample size and implications to the industry.  The University of Massachusetts and Northeastern University used a mobile app called Wehe to track the Internet usage patterns of 126,249 mobile users over several months (over 1 million samples).  The summary (which is not surprising to most cellular users) is that average speeds for popular sites such as YouTube and Netflix are slower than expected.  Here’s a summary chart of the findings for AT&T and Verizon (June 11, 2018 is the day that Net Neutrality rules were made optional) :

wehe results

 

What this shows for Verizon is precisely what we discussed in last week’s TSB:  480p customers get consistent YouTube data throughputs at 1.9 Mbps, and 720p customers receive YouTube data throughputs at 4.0 Mbps.  This is consistent with their advertised plans (why NBC Sports and Vimeo are not included in the throttle was probably the topic of several Verizon Wireless staff meetings this week).  I am sure if they were to upgrade a device to 1080p throughout, they would have a third tier that shows around 8-9 Mbps.  For the record, AT&T has disputed the findings and CTIA in 2018 issued a statement disputing the findings.

 

Bottom line:  If you want video resolution that matches the maximum capabilities of your smartphone, you might have to pay more.  To last week’s comment, this could be a differentiation point for one of the challenger carriers (e.g., T-Mobile resuming their un-carrier ways and making 720p or 1080p the new “basic” video viewing tier).

 

 

 

AT&T’s Herculean Lift

 

Condensing AT&T’s Network and Business strategies into one TSB is a challenge because of the breadth of problems they are attempting to solve.  Unlike the AT&T of the 1990s (more focused on communications innovations like the Internet and mobile), this generation’s AT&T is much deeper and comprehensive (focusing on information delivery, relevance, timeliness, analysis, and action).

 

It’s important to remember that AT&T as we know it today is really a 12+ year-old cingular at&tcompany.  BellSouth was formally acquired at the end of 2006 and with that came the formation of “The new at&t”, replacing Cingular Communications.  That was followed by a substantial network integration project which ended in 2009.  While we think about AT&T as a legacy brand, the common platform that we see today is only a decade old.

 

Since 2009, it’s been a wild ride for wireless:

  • 4G LTE services have been introduced and run their product life cycle (with network traffic growing 40-60X over the decade)
  • Smartphones and tablets have become the primary source for information retrieval and entertainment
  • Many-to-many communication has become a global standard thanks to social networks
  • Commerce and mobility are inextricably linked
  • Wireless Machine-2-Machine (screenless) devices have produced an enormous amount of data and dramatically improved utility and productivity

 

As we discussed in a TSB a few weeks back, mobile growth contributed to fiber infrastructure growth.  More towers and small cells spawned additional conduits, trenches, and pole attachments.  All of this data needed to be stored and processed, and server farms led to cloud computing sites and eventually hyperscale data centers.  The infrastructure and mobile landscapes changed dramatically with LTE network demand.

 

What didn’t change as quickly were the network operating systems and business processes that determined the efficiency and profitability of AT&T.  Integration was the exception rather than the rule, data needed to solve customer problems was available to some departments and not to others and obtaining merger synergies by negotiating better rates with the same menagerie of vendors (often with extended terms) made breakthrough change harder to achieve.  Growth was hindered by incompatible product roadmaps and the quantity of equipment required to accommodate data growth was becoming untenable.  Something had to give.

 

In 2013, AT&T began the painstaking process of separating computer processing from separate software development/ integrations for each of its network vendors with the introduction of Domain 2.0 (see whitepaper here).  The picture below from the whitepaper summarizes AT&T’s direction and provides a good roadmap for their recent Microsoft, IBM, and Dell announcements:

AT&T Domain 2.0 schematic

 

Routers (Cisco and Juniper being AT&T’s main providers) and optical infrastructure (Ciena and Cisco) were the first focal points of Domain 2.0, and it manifested itself in the creation of a mobile packet core.   Key Domain 2.0 vendors as of the end of 2015 were Cisco (via their Tail-F Systems purchase), Ericsson, Nokia (with Alcatel/ Lucent), MetaSwitch (private UK-based company), Affirmed Networks (Evolved Packet Core or EPC), Amdocs, Juniper, Fujitsu, Brocade, and Ciena.  There will be others as this new platform makes it much easier to attract new entrants.

 

Being able to separate operational instructions (core optical equipment and routing functions – the “do this/ do that”) from monitoring, alerting, and change management functions, and then standardizing the structure of the latter across the vendors mentioned above is no small task.  All of that had to be done (or at least close enough to completion) to have the Microsoft/ IBM and Dell announcements.  Here’s a brief summary of what each does:

 

The IBM agreement takes the AT&T Business’ internal application infrastructure and moves it to the IBM cloud (this will be a consolidation from multiple providers).  As a reminder, IBM’s acquisition of Red Hat allows it to service hybrid cloud configurations.  Much of the NFV Infrastructure Cloud will move to IBM.  In turn, IBM runs a very large cloud business for third-party customers (top part of the diagram).  This moves the network closer to IBM’s (particularly AI or Artificial Intelligence) software.

 

It makes a lot of sense moving internal application infrastructure to IBM given the strong network relationship the two companies have had for two decades.

 

The Microsoft agreement takes non-network infrastructure applications and moves them to the cloud.  Microsoft is another very large cloud provider but also the developer of Windows, Bing, Office 365, Skype, and Xbox software (Microsoft’s IPTV platform, Mediaroom, was sold to Ericsson in 2013).  It gives Microsoft an easy path to both Mobile Edge Computing (MEC) and low latency network APIs.  Unlike the IBM agreement (which appears to have a heavy AT&T Business focus), the Microsoft agreement appears to be more open-ended. Xbox wins in a 5G world that’s also tied to AT&T Fiber homes.  So does Skype on mobile, desktop, and tablet applications.  More video and less latency demand a different way of thinking about network management.  Microsoft will help push the product envelope in the home and in the workplace.

 

The Dell agreement brings the Austin-based company into Airship (an organization governed by the OpenStack Foundation), described as “a collection of loosely coupled, but interoperable, open source tools that declaratively automate cloud provisioning and life-cycle management utilizing containers as the unit of software delivery.”  AT&T needs more network edge capacity flexibility and is engaging Dell to help them (via Airship) improve network server delivery.  More details on the agreement can be found in this Fierce Telecom article.

 

Bottom Line:  AT&T’s July and early August announcements show their early hand cloud and edge technology partners.  They have been at the leading edge of Network Function Virtualization (NFV) and Software Defined Networking (SDN), and are finally bringing together all of their infrastructure platforms into a common architecture.  This is the most efficient (really the only) way to enable rapid, profitable local growth.  It will be interesting to see how other carriers (specifically Verizon) follow AT&T’s lead.

 

Next week, per many requests, we will be discussing the role of Citizens Band Radio Services (CBRS) in the communications landscape.  Please note that next week’s TSB may not be delivered until Sunday evening due to the Labor Day holiday.

 

Until then, if you have friends who would like to be on the email distribution, please have them send an email to sundaybrief@gmail.com and we will include them on the list.

 

Have a terrific week!