"How much will you save?" I asked Lee Hicks at Adtran's Huntsville event. "About half the first year and more after that," he replied. Put another way, Verizon believes almost all large telcos are spending ~twice what they would with a single, unified, modern network. This is part of Verizon's program to cut cost per bit by 40% each year, a goal it has met the last several years. 

Lee Hicks is tearing out most of Verizon network, replacing ~200,000 network elements. He expects "to have about 10% of what I have today." They will all run standard IP.

Hicks had to do something. His boss, Hans Vestberg, is demanding a $10 billion cut in expenses. Carrier revenues have been roughly flat for several years and there's little chance of changing that. The only way to grow earnings is to cut spending. 

My guess is Lee is underestimating the savings. Reliance Jio and Iliad/Free were built all IP from the start and designed to keep operating costs low. In two years, Jio has connected Indians 225 million to LTE. Rates average under US$5. They added nine million customers in June. Even more amazing is that Jio is already reporting profits.

Startup and customer acquisition costs usually delay profits for years in wireless. The much lower costs of today's all-IP networks, the not quite zero marginal cost of LTE, and a low depreciation figure are. 

Xavier Niel proved the power of a simple network in France. When he came to market with the thirty euro triple play, the industry thought him mad. More recently, he offered a genuine 100-gigabyte wireless offering for 20 euro, about US$23.  He had about three million customers when I last visited. He was running everything on two Cisco CRS-1s. The second was mostly for redundancy.

Xavi is now a multi-billionaire. The low prices saved marketing costs, very high in wireless especially. He is the most efficient manager I've met in 20 years in telecom.  The French regulator took some bold steps to protect competition. (ARCEP is one of the best in the business.)

Xavi's real advantage is that he understands technology. He was running an ISP and knew what his costs were. Moore's Law was sure to bring costs down rapidly, as it still does. He simply estimated what his cost would be in three or four years and priced to the forward costs.

Moving more than 200 million customers worldwide to the new system is a formidable task. The current system supports hundreds of different services, built up over decades.  Deutsche Telecom and AT&T have similar goals but they have moved slowly.

Verizon believes it has no choice. Hicks says they must cut costs by 40% per year to keep up with traffic demand and competition. Verizon has been cutting cost per bit at about that rate for the last few years. Traffic has grown at 40% or more the last few years, but Verizon has found efficiencies to match. Prices have been flat and maybe slightly down, but profits have remained strong. That's only possible if they have found efficiencies.

There's no simple way to measure the impact of the network change. You have to factor in real estate savings and fewer managers for fewer engineers. Hicks made a point of saying his estimate is necessarily rough.

He expects the savings to go up significantly over time.

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I missed part of Lee's speech where he described Verizon's One Fiber initiative. Fortunately,  Mike Robuck was there and did an excellent job at Fierce Telecom. The reporters at Fierce do an excellent job given they have to file so many stories for a daily pub. Mike Dano is one of the best and Monica Alleven keeps finding stories I would have missed. From Mike:

"As we built different services, we would often build cores for them," Hicks said. "I had a voice core. I had a video core. I had a private IP core. I had my public IP core, and I had all kinds of interactions and connections going on between those. At times, it was hard for us to figure out what happened and where things went."

"What we're doing is we have a project that we call the 'converged core.' Underlying this core is great long-haul transport technology that we recently did lab tests on. We've got that to 4000-Gig and we'll probably be introducing that next year. It's running at 200-Gig now, 100 or 200 -Gig connections. There's lots of underlying capacity and then a MPLS switching infrastructure on top of that that forms the core," Hicks added.

Jio is the most remarkable story in telecom. It built a completely modern network and are running it well. They usually come first in the monthly government report. Ambani's company claims coverage of 96% of India, better than giant Europeans. It is going to 99% in a year. (Everyone lies on coverage, using computer models tuned to the desired results rather than actual testing.)

India now has more Internet users than the U.S. has people. Asia now has more than twice the total connections of the U.S. and Western Europe combined. Everything about the Internet will have to respond to the new reality.

 

 

 

 

dave ask

Newsfeed

Vivo is selling new the iQOO 5G premium quality phone for US$536.

Lei Jun Xiaomi "5G to have explosive growth starting from Q2 2020"5G to have explosive growth starting from Q2 2020" I say sooner

Verizon CEO Ronan Dunne: >1/2 VZ 5G "will approximate to a good 4G service" Midband in "low hundreds" Mbps

CFO John Stephens says AT&T is going to cut capex soon.

Bharti in India has lost 45M customers who did not want to pay the minimum USS2/month. It's shutting down 3G to free some spectrum for 4G. It is cutting capex, dangerous when the 12 gigabytes/month of use continues to rise.

Huawei in 16 days sold 1,000,000 5G Mate 20s.  

China has over 50,000 upgraded base stations and may have more than 200,000 by yearend 2019. The growth is astonishing and about to accelerate. China will have more 5G than North America and Europe combined for several years.

5G phone prices are down to $580 in China from Oppo. Headed under $300 in 2020 and driving demand.

No one believed me when I wrote in May, 90% of Huawei U.S. purchases can be rapidly replaced and that Huawei would survive and thrive. Financial results are in, with 23% growth and increased phone sales. It is spending $17B on research in 2019, up > 10%. 

5G phones spotted from Sharp and Sony

NTT DOCOMO will begin "pre-commercial service Sept 20 with over 100 live bases. Officially, the commercial start is 2020.

 More newsfeed

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Welcome  1,800,000 Koreans bought 5G in the first four months. The demand is there, and most of the technology works. Meanwhile, the hype is unreal. Time for reporting closer to the truth.

The estimates you hear about 5G costs are wildly exaggerated. Verizon is building the most advanced wireless network while reducing capex. Deutsche Telekom and Orange/France Telecom also confirm they won't raise capex.

Massive MIMO in either 4G or "5G" can increase capacity 3X to 7X, including putting 2.3 GHz to 4.2 GHz to use. Carrier Aggregation, 256 QAM, and other tools double and triple that. Verizon sees cost/bit dropping 40% per year.

Cisco & others see traffic growth slowing to 30%/year or less.  I infer overcapacity almost everywhere.  

Believe it or not, 80+% of 5G (mid-band) for several years will be slower than good 4G, which is more developed.