We Told You It Would Be Like This

We Told You It Would Be Like This

We don’t actually have a crystal ball, but Volta seems to have a good track record in identifying trends. Last week, there was a spate of articles validating things that we have been saying for some time. Last April we did a webinar with Light Reading and pointed out that 4G was about connecting consumers and their devices while 5G’s new revenue opportunity would be enterprises paying to connect things:

AT&T is all-in on 5G for enterprise. “We really think that the sweet spot for 5G, initially, is going to be the enterprise,” AT&T CTO Andre Fuetsch said. “We have dozens of trials underway to prove this out.”

Manufacturing in advanced and complex factories requires reliability, and sensing applications that feed on high bandwidth and network capacity present those environments as a real business case for 5G, he explained.

from SDX Central

We also pointed out that bandwidth was price constrained.  In economic terms, it had unitary price elasticity (see, I do remember something from all those econ theory classes).  This means that when the price of bandwidth drops, people use more.  Turns out carriers are seeing that happen in early 5G deployments:

Sprint CTO John Saw said here that the operator’s new 5G customers are consuming three to five times more data than its 4G LTE customers.

from Light Reading

Based on new figures from South Korea, it seems that customers will use them a lot.

Research firm Strategy Analytics, citing data from the country’s telecommunications ministry, reported that average customer data usage on 5G was 24GB in June, which was 2.6x higher than the 4G average of 9.1GB and 3.2x higher than the overall market average of 7.4GB.

And when comparing customers on unlimited plans specifically, the firm found that 5G users still consumed more data: 27GB per month on 5G versus 23GB on 4G.

from Light Reading

Finally, we have been pointing out that the legacy routers were not suited to meet service provider needs as their networks change.  This was a topic we covered in our recent webinar with IHS. We saw the need to scale out the control plane, drive down the cost by an order of magnitude and embrace automation.  Turns out, the experts are seeing this trend reflected in the market:

Quizzed by analysts on a call about earnings, CEO Rami Rahim blamed market weakness and said rivals were also struggling. More worrying is the assertion by George Notter, an analyst at Jefferies, that Juniper is threatened by architectural and technology changes in routing networks.

Rahim’s points about spending constraints among service providers seem reasonable. “They’re reprioritizing investments so that they’re addressing spectrum and RAN [radio access network] buildout first,” he said, according to a Seeking Alpha transcript. “That means that they have less to invest in IP [Internet Protocol].” The upside, he said, is that 5G rollout will ultimately force operators to invest in their core and edge networks, where Juniper has strength. Contrail, its cloud software stack, is winning business, Rahim insisted.

Notter is unconvinced that is the whole story. “We also suspect that Juniper is losing market share among SP [service provider] customers,” he writes in a research note issued after the results came out. The Jefferies base case, moreover, is that Juniper’s routing business will remain “secularly challenged” as emerging technologies, based on the principle of software-defined networks, give rise to new competitors. While this risk is greater in the cloud and “hyperscale” segments, the worst-case scenario is that competition spreads into the telco space.

from Light Reading

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