Communications Infrastructure Investments Set to Soar

Article By : John Walko

The global communications infrastructure market is on a roll, but the pace of growth is not universally consistent.

The global communications infrastructure market is on a roll, according to recent reports from analysts at Dell’Oro targeting specific sectors.

But the pace of growth is not universally consistent, according to the analysts.

For instance, investments in Multi-Access Edge Computing (MEC) are expected to grow at 140% compounded annual growth rate (CAGR) in servers and packet core user plane functions over the next five years. Yet David Bolan, a research director at Dell’Oro, suggests the sector has lost some of its vigour, primarily due to sluggish adoption of 5G Stand Alone networks, aside from China.

He posits that this may be due to “5G service providers investigating the role that Public Cloud SPs could play in their networks.”

David Bolan, Dell’Oro

Bolan says the cumulative five-year investment in MEC is expected to be $11 billion. Though the CAGR is the same as previous forecast, “the cumulative forecast has decreased due to slower than anticipated wide-scale launches of 5G SA networks.”

As of now, less than 10% of global active 5G implementations are running on 5GSA; the majority are anchored in 4G LTE.

Another factor, Bolan suggests, may be the need for specifications for federated MEC networking. He notes that the European Telecommunications Standards Institute’s (ETSI) MEC Committee and the GSM Association’s Operator Platform Group have “just released their requirements for federated MEC networking, identifying seven use cases that the SP community needs.”


EE Times Asia 5G Webinar: Leveraging New Opportunities and Ecosystems in a 5G World

Hear from experts from Qualcomm, Rohde & Schwarz, Keysight Technologies, Movandi, EdgeQ, Infineon, and SPIL, who will share their insights and strategies—from the test and measurement, to semiconductor design and packaging, all the way to deployment and new applications and services—to stay ahead of this rapidly growing mobile technology.

Click here to register!


The analyst suggests this is important because MEC specifications need to evolve and cater for broader requirements.

The transition to a 5G standalone core is critical for mobile edge computing, Bolan stressed.

For these reasons, it is likely that the analysts’ forecast for MEC investments is significantly loaded at the back end of the five-year forecast, with 60% of the projected revenues expected to materialise in 2025.

Meanwhile, the mobile core network market is predicted to show a steady 3% CAGR between 2021 and 2025, with carriers expected to invest up to $50 billion. And the 5G portion of this MCN business is set to grow at 33% over the period.

The regional breakdown indicates EMEA (Europe, Middle East, and Africa) will account for 30% to 35% of the total market, with North America at between 18% to 23%, Asia Pacific the highest at between 40% to 45%, and Latin America at 5% to 10%.

By 2025, over 70% of the revenue mix between 4G and 5G MCN functions will be devoted to the burgeoning 5G market.

And China is said to be by far the biggest contributor to the MCN total. This is attributed to the big three incumbent service providers for 5G SA networks “continuing to exceed our expectations”. The analysts add that the newest service provider in the country, China Broadcasting Network, will begin construction of its giant 5GSA network, so the figures for the Far East are only expected to improve.

However, they note that the U.K., Switzerland, Germany are all set to deploy more 5G SA networks as well in the latter part of this year, as are Japan, South Korea, and Australia. The big two carriers in the US, Verizon, and AT&T, should begin in earnest with their 5G SA networks next year and in 2023.

Stefan Pongratz, Dell’Oro

For the Radio Access Network (RAN) part of the equation, Dell’Oro predicts investments will approach $250 billion over the 2020 to 2025 forecast period, with, again, 5G deployments driving the growth.

“The global upswing that began in the second half of 2018 has become deeper and stronger, propelling the overall RAN market to continue to surprise on the upside,” commented Stefan Pongratz, VP and analyst at Dell’Oro. He adds that “there is room for expansion over the near term as the early adopters continue to roll out 5G at an extraordinary pace, resulting in a more upbeat five-year outlook relative to our last forecast.”

Pongratz says 5G NR revenues have, perhaps unexpectedly, accelerated to approach $150 billion to $200 billion and cumulative 2020-2025 base station shipments on track to surpass 30 million units. And global macro and small cell transceiver shipments are forecast to approach 0.8 billion units.

LTE is said to be “roughly on target.”

In the private wireless market, however, Pongratz says LTE remains the dominant force, but private 5G NR revenues are expected to surpass $1 billion by 2025.

“In general, we believe the hype around private networks is more warranted this time around relative to previous enterprise small cell hype cycles, reflecting progress with five key components – spectrum, technology, awareness, cloud players and use cases,” he suggests. “And once we factor in all the various private network markets, we calculate that the overall market opportunity is rather large – in the tens of billions. But at the same time, we also expect it will take some time for the private wireless market to realize its full potential,” he concludes.

In its 2021 to 2025 forecast, Dell’Oro has revised upwards its projections for the total market to reflect the improved IIoT momentum in China. The latest forecast also notes that macro LTE is dominating the private capex for now, but, again, the 5G NR share is projected to improve throughout the forecast period.

And the analysts anticipate that Private LTE revenue shares will outperform those for the public MBB LTE RAN shares over the 2020 to 2025 timeframe, “reflecting the state of the ecosystem and the projected uptake with both industrial and non-industrial networks.”

It should be noted that other recent projections for the Private 5G opportunity are even more bullish. For instance, ABI Research recently estimated the market could grow from $1.6 billion this year to nearer $65 billion by 2023, representing an annual growth rate of 60.1%.

And IDC forecast worldwide revenues for building out Private 5G/LTE networks would increase from $945 million in 2019 to $5.7 billion in 2024, representing a CAGR of 43.4%.

As regards the important optical transport segment, which is largely driven by WDM gear, this is forecasted to increase annually over the next five years, reaching a market value of almost $18 billion.

The analysts lowered their outlook for WDM Metro since the coherent 400 Gbps ZR pluggable optics are now readily available. They are also predicting coherent ZR optical demand will reach “a material amount” next year, starting with 400ZR. Such devices are anticipated to be in high demand, notably by Internet content providers. The next generation 800ZR family should start entering the market “a few years later”, and Dell’Oro suggests the entire ZR pluggable optics business will surpass $500 million in annual sales by 2025.

Communications infrastructure

When it comes to 800Gbps-capable line cards – which entered the market early last year – demand and adoption are reportedly strong, as is the market’s continued need for higher performance DWDM transponder cards. “As such, we believe the market is already preparing to release the next generation single carrier wavelength speed,” said Dell’Oro.

After that will come the 1.2Tbps (1200Gbps) business. The analysts posit that the trend of past coherent DSP introductions will continue, so “we anticipate 1.2Tbps-capable line cards could enter the market before the end of 2023”.

Finally, global spending in the broadband access equipment segment and CPE is forecasted to show a CAGR of 3% from 2020-2025, a welcome increase from the zero growth predicted in an earlier five-year forecast made in January this year. One major factor has been the impact of the C-19 pandemic, which has caused a huge peak in subscriber growth and usage rates by residential users.

The analysts suggest that even if broadband subscriber growth slows later this year, the penetration rates and total addressable market for service providers have expanded significantly over the past year, improving profitability and gross margins. Consequently, the analysts posit the transition from copper to fibre will continue at a faster pace than previously forecast.

They note that major operators in Western Europe, such as Orange, BT OpenReach, Deutsche Telekom and Proximus are all expanding their fibre rollouts and moving quickly to XGS-Passive Optical Networks for symmetric 10G services.

Indeed, over the five-year period, expectations of CAGR for PON equipment have increased from 3% to 5%. This even as the Chinese market, traditionally accounting for 65-80% of global spending, has peaked in terms of total ONT units installed on an annual basis. The analysts suggest the FTTH market in China has peaked, with broadband penetration in the country reportedly nearing 80%.

But the impact of this will be partially offset by other Asian countries, including India and Malaysia starting significant upgrades, along with a 10G upgrade cycle in Japan and South Korea in the pipeline.

This article was originally published on EE Times Europe.

Subscribe to Newsletter

Leave a comment