Andre Fuetsch, AT&T CTO, paused for a moment to think before answering my question about telco cost trends. "“We've gone from 10 gigabits to 100 gigabits to now 400 gigabits on our fiber. MIMO and massive MIMO are extremely productive. Yes, I think 40% per year is a reasonable estimate of how our costs are going down. AT&T’s leadership in open white box and SDN will continue to drive that number higher, which is needed as network demand increases.""

Lee Hicks and others at Verizon estimated their costs were falling 40%/year. Does that that sounds right to you, I had asked Fuetsch. Andre had just presented the challenge he faces of continued traffic growth. Whether cost savings can cover the increased traffic carried is a major question.

I know cost accounting is heavily subjective; in a past life, I wrote accounting software. For example, Fuetsch leads both AT&T's capital spending and its operation. How much of his salary should be allocated to each?

The remarkable Reliance Jio has added an almost unbelievable 300 million customers in just three years. Is it profitable already? The financial releases claim it is, but Economic Times believes Jio has chosen an inappropriately low figure for depreciation. Accounting statements are indicators, not absolute answers. 

If Cisco's traffic forecasts are accurate and the 40% productivity improvement continues, AT&T faces overcapacity if it maintains the current capital spending. Cisco has been reporting a consistent fall in traffic growth for several years. It anticipates U.S. growth falling to ~30% in 2021. Tower company Crown Castle, a major supplier to all U.S. carriers, is seeing a similar trend. To be proven.    

I have been able to confirm that the 40% Verizon efficiency savings figure is on target if not exact. You can replicate my thinking. Traffic has been growing 40% per year. Sales have been roughly flat for the similar time period. If productivity growth hadn't been a similar 40%, profits likely would have trended down. In fact, they have been flat or slightly increasing.

That's not absolute proof but does support Lee's expert opinion. I can't perform a similar analysis on AT&T's figures, which also include Time Warner and DirecTV. Top analyst Craig Moffett tries to break things out but doesn't find enough information in the AT&T financial reporting.

Andrew Collinson asked me, "Exactly how and where, and how does it work with write-offs/write-downs etc.?" While I can confirm the overall figure with the macro analysis above, I don't think anyone has the data to be exact on the details. Fuetsch in his presentation pointed to the success they are finding with Open RAN as well as the improvement in wireless and fibre technology.

Hicks is particularly proud of the "One Verizon" work that is rebuilding the transport and core. Verizon over the years has accumulated about 200,000 routers, switches, and the like. The wired, wireless, and enterprise networks had enormous duplication. He's replacing them with about 20,000 modern boxes, which are very efficient. He estimates the first year savings is about 50%.

In 2014, Paulraj and others predicted a pace of wireless improvements others found unbelievable. MIMO, carrier aggregation, 256 QAM, and other technologies were reaching the market.

Five years later, Paulraj is proving right.

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.