The NBN and 5G:What happens as NBN reaches completion and 5G begins in 2020?

BOB JAMES, IMEDIATE CONSULTINGAPRIL 2016

Fixed and wireless are co-evolving, and maybe converging.

Fibre ever nearer to people and premises

Wireless reaching back to fibre backhaul

“There is a great fixed network behind every mobile network”

And there is a great wireless network completing every fixed network

Every mobile player needs a fixed strategy and every fixed player needs a mobile strategy. We need to talk about wireless and the NBN (to maximise outcomes for Australia)

NBN will have evolved through 7 elections by 2020. Mobile will have evolved almost 3 generations

Election PM Key Fixed Broadband - NBN Event Key Wireless Event40 2001 Howard AT Kearney - Australia falling behind - 2002 Hutchison launches 3G April 2003 - 128Kbps 41 2004 Howard Telstra proposes $4.7Bn NBN in 2005 WiMAX adds mobility to fixed wireless 200542 2007 Rudd $4.7Bn RFI, then $43Bn NBN, 7 April 2009 One mobile service for every Australian2

43 2010 Gillard Coalition proposes $6.3Bn alternative Telstra launches LTE – September 201144 2013 Abbott Multi Technology Mix adopted late 2013 Optus Home Wireless Bband - $70, 50GB 201545 2016 Turnbull? Focus on delivery up to election.

But 44-60 in global rankings1 and slipping.Australia leads average peak speed, & % above 4Mbps1. Equals fixed average speed 8Mbps.

46 2019 Turnbull? NBN finishing around 2020 5G commences around 2020

1. 2015 Akamai SOTI. 2. http://www.amta.org.au/articles/2.5.million.more.mobile.phone.services.than.people.in.Australia.says.new_.report

Mobile has advanced 2 generations through small competitive steps. NBN is shaped by elections. Fit between finished NBN and 5G? Post 2016 election – pivotal time for NBN and mobile players

3G4G

Is the game changing faster than anticipated?

Mobile far behind in speed and capacity

Government and operator decisions will determine whether we have convergence or competition post 2020

Mobile a serious alternative for many

Mobile parity in speedAdequate capacity

5G

Operator investment shifts

5G and Fixed Applications1. 100Mbps whenever needed

2. 1,000-10,000 X capacity

3. Optimised approaches to IOT and latency

4. Optimised approaches for small cells and wide areas

5. “5G is expected to include…the integration and optimisation of fixed networks (fibre) into a heterogenous 5G specification to support wireless access. New network concepts are needed to ensure the target specs for an integrated fixed/mobile hybrid infrastructure are met”1

1. http://wi360.blogspot.com.au/ May 21 2015

Fixed Broadband Demand (NBN 2016 Plan)

90% of premises below “average” usage

7

Bottom 50% use just 10% of GB/m

Source: Derived from Sandvine. Global Internet Phenomenon Report. 1H, 2014 and FCC September 2013 Test Data

There is a core fixed broadband market – but low usage tail creates very significant substitution opportunity.

Update from Bill Morrow

NBN users consume 2.2X ABS usage figures• NBN drives new usage?• High end users adopting first?

Too early to tell – but can tell the limits:

Median usage (50% point) = 30- 64GB/month90th Percentile = 58-128GB/month

What percentage can contemporary wireless plans meet?

Optus Home Wireless Broadband

Up to 12/1 Mbps in 2300 MHz areas.Up to 5/1 Mbps in other areas

Slowed to 256kbps after 60GB usage

Enough for perhaps 50% of households?

Lightning Broadband 20161. Leveraging Wi-Fi and free “unlicensed” spectrum2. Emphasising availability and unlimited usage3. Competes with NBN and licensed wireless broadband4. “Relay” to nearby premises

24GHz Microwave 802.11 n and ac External Antenna RelayFibre backhaul

Australian entrepreneur sees business case and opportunity. “Unlicensed” spectrum a resource.

Mobile plans are hitting fixed substitution sizes

“Three Ireland launching 225Mbps 4G Plus with unlimited data next month” Telecoms.com March 2016

Fast Track to 5G?Most operators have plans to deploy advanced LTE-A networks that fulfil the original promise of 4G as they move to trials of 5G technologies and then 5G.1. “Optus has partnered with Huawei to test what its calling 4.5G or the less catchy LTE-Advanced Pro.

Trials at the Optus Gigasite in Newcastle saw an over the air peak download speed of 1.23Gbps”2. “Telstra partnering with Ericsson for a trial of 5G in Gold Coast during the 2018 Commonwealth

Games.”3. Nokia “Chief Executive Rajeev Suri said the company plans to pick up investment in 5G technology in

2016 and that sales of 5G-ready equipment capable of future upgrades could begin as early as 2017. "5G will happen faster than expected. This may surprise some of you”

http://www.cnet.com/au/news/telstra-5g-2018-1gbps-4g-upgrade/http://www.afr.com/technology/nokia-5g-pickup-could-begin-as-early-as-2017-20160221-gmzttl

Standards coming in progressive small steps – delivering gains earlier than many expectedApplication of spectrum and densification of cells key to relationship between fixed and mobile

Historical: Each Operator has Parallel Networks(with mobile only addressing many 100s of premises)

Today

Small Cells / Macro 0

Premises/Cell 500

Spectral Efficiency 1

Potential % Premises 15-30%

FTTH HFC

FTTN - FTTdp

Fixed BackhaulMobile Backhaul

Substitution for low end needs and price sensitive only

Operators like Verizon and AT&T add Small Cells to Fixed and Mobile Networks as 4G Matures (often to fixed distribution networks including HFC)

FTTH HFC

FTTN - FTTdp

Fixed BackhaulMobile Backhaul

Today HetNet

Small Cells / Macro 0 4

Premises/Cell 500 100

Spectral Efficiency 1 2

Potential % Premises 15-30% 30-50%

As many as half of all premises – below median usage – vulnerable to substitution

Operators like AT&T rationalise fixed and mobile with shared backhaul and add more small cells in 5G

FTTH HFC

FTTN - FTTdp

Converged Backhaul

Today HetNet 5G

Small Cells / Macro 0 4 16

Premises/Cell 500 100 30

Spectral Efficiency 1 2 3

Potential % Premises 15-30% 30-50% >50

Mobile viable as lead-in for over 50% of premises – convergence or serious competition

Emerging Global model: Competition between vertically integrated operators

How does a structurally separated fixed network fit in Australia’s urban and rural areas ?

Premise Services(fixed)

Shared Fibre Infrastructure

Personal Services(mobile)

Operator 2Premise Services(fixed)

Shared Fibre Infrastructure

Personal Services(mobile)

Operator 1

Infrastructure based competition

Verti

cally

In

tegr

ated

Au Operator Business Case for Substitution

Can I deliver the same gigabytes at acceptable speed for less incremental cost than the NBN wholesale costs?

1. Can I afford to forgo $1500 PSAA1 payment from my customer base? Or wait till after 2020?

2. Do I leverage my own, or existing fibre to displace both the AVC and CVC charges? Or,

3. Do I use NBN Co to provide one connection through which I connect many premises – paying one AVC charge only, but incurring similar CVC charges.

4. Do I serve adjacent premises wirelessly? External antenna?

Back of envelope calculations suggest considerable potential for substitution, especially if NBN ARPUs rise through $40 - $50 per premise. Serious competition possible.

1. http://www.malcolmturnbull.com.au/assets/Coalition_NBN_policy_-_Background_Paper.pdf

Urban Options for Operators and NBN

Operators1. Review urban wireless substitution once PSAA payments made

2. Find synergies between fixed and mobile assets – eg VHA and TPG

NBN 3. Explore macro cell backhaul

4. Offer small cell backhaul – to locations such as poles

5. Consider wireless lead-in options including Wi-Fi and LTE/5G

Wild Card – Utility Companies6. every light pole a small cell? Leveraging simplicity of deployment

TTP LTE small cell

“50 meter cells …32 active users …up to 100 Mbps”

Convergence best option for all players ?

Rural and remote options for Operators and NBN

Operators

1. Look for opportunities to deliver multiple services from single set of infrastructure including USO, PSMB – and very wide area extensions (400MHz), blackspots and fixed substitution.

2. Internet of Things

NBN

1. Divest fixed wireless and satellite to promote evolution and integration with other needs (see above)

Using a shared wireless platform for multiple applications is likely cheapest and best solution. Could be one operator, a consortium, different operators in different geographies…many alternatives

Options for Government1. Consider early sell off of NBN assets to allow/encourage infrastructure competition

2. Bring forward write downs to maximise affordability and support sale

3. Consider shift in product definitions - to reduce costs, increase delivered performance and meet wireless competition1. AVC: Move away from speed focussed fibre like pricing – adds costs for some and limits delivery for most2. CVC: Simple gigabyte pricing (5 cents/gigabyte) to separate necessity of raising revenue from pernicious throttling

4. Look for innovative solutions to rural and remote needs:1. USO2. NBN fixed wireless and satellite sale3. Blackspots and limited rural wireless competition4. Public Safety Mobile Broadband – synergy with all of the above

5. Encourage urban convergence 1. Early sale of assets – especially if by technology - to allow infrastructure competition2. Consider wireless as 4th lead-in technology – copper, coax, fibre, wireless

6. Promote the benefits of the continued evolution of Australia’s broadband infrastructure

Fixed and wireless are co-evolving

Fibre ever nearer to people and premises

Wireless reaching back to fibre backhaul

“There is a great fixed network behind every mobile network”

And there is a great wireless network completing every fixed network

Thank You!