Orange Ups 5G Broadband Stakes in Romania

The use of 5G technology could help Orange to overcome its broadband challenges in Romania – but only if the economics stack up.

Iain Morris, International Editor

July 5, 2018

7 Min Read
Orange Ups 5G Broadband Stakes in Romania

Arnaud Vamparys, despite his surname, is neither bat-like nor bloodthirsty. But the Orange executive has been flitting around Transylvania, sinking his teeth into a 5G project that could have a major bearing on Orange Romania's broadband business. (See Orange Romania Weighs Fixed 5G for Broadband Expansion.)

As of today, Orange Romania has a beefy presence in the mobile market, with about 9.5 million customers, but only a marginal one in broadband, with around 200,000. In a country with about 19.7 million people and 7.3 million homes, that broadband figure looks disappointing.

It points first to Romania's broadband immaturity compared with leading European countries. Even now, only about two thirds of homes can access fiber-based networks, says Liudmila Climoc, Orange Romania's CEO. But that still puts Orange a long way behind its largest rivals in what is, admittedly, a highly fragmented market. Deutsche Telekom AG (NYSE: DT), which owns the former state-backed monopoly, serves around 1.2 million broadband customers, even though it trails Orange in mobile, with 5.2 million.

The greater competitive concern is perhaps Vodafone. In the mobile market, Vodafone Romania is only just behind Orange, with 9.2 million subscribers. But following a planned merger with cable giant Liberty Global Inc. (Nasdaq: LBTY), it will have 600,000 broadband subscribers, too. Orange has already lost 360,000 mobile customers since September. If Romanians increasingly opt for providers that can offer the full range of fixed and mobile services, a broadband-anemic Orange may be vulnerable to even bigger mobile losses. (See Vodafone Pounces on Liberty Cable Assets in €18.4B Deal.)

Broadband expansion is not easy, though. While Orange signed a wholesale agreement with Deutsche Telekom in 2016, only about 50,000 of its broadband customers are on fixed-line networks. The other 150,000 are actually using 4G to receive broadband connectivity, it emerged at a press conference in Transylvania this week. And as more advanced services become popular, 4G technology may struggle to measure up.

Enter Vamparys, the senior vice president of radio networks for the Orange (NYSE: FTE) group, and the emerging 5G standard. In the US, operators including Verizon Communications Inc. (NYSE: VZ) have talked at length about using 5G to provide residential broadband services in areas that are hard to reach with fiber. (See Verizon's Fixed 5G: Are You Ready for the Wireless Gig Rush?.)

Orange now has similar ambitions in Romania, with Vamparys given the task of communicating the strategy: For those of a certain age, "Trans Vision Vamp" seems like an appropriate sobriquet for the Orange exec.

Figure 1: The Different Flavors of Trans Vision Vamp On the left, the 1980s pop group; on the right, Arnaud Vamparys, senior vice president of radio networks for Orange. On the left, the 1980s pop group; on the right, Arnaud Vamparys, senior vice president of radio networks for Orange.

Following successful customer trials in the last few weeks, it thinks 5G could feasibly provide broadband connectivity for around 10% of Romanian homes. At around 730,000 households, that would be more than three times as many as Orange currently serves.

On the plus side, Orange's 5G trials have delivered better results than it had expected, and been well received by customers. Using radio technology from Samsung Electronics Co. Ltd. (Korea: SEC), and core network gear from Cisco Systems Inc. (Nasdaq: CSCO), the operator recorded connection speeds of about 3 Gbit/s with four simultaneous downloads, and peak speeds of 6 Gbit/s. The 15 homes taking part in these trials seem delighted with the service, judging by the feedback Orange shared with reporters. Some even preferred it to their existing fixed-line services.

The challenge will be to make the business case add up. Asked by Light Reading how 5G rollout costs compared with the expense of deploying fiber, Vamparys said there were "no figures yet." Similarly reluctant to share details, Climoc acknowledged that funding needs would be substantial. "We know this technology will require significant investment on the technology layer and on spectrum," she said. "It is still too soon to talk about the business case."

Next page: Cost hurdles

Cost hurdles
Spectrum availability is outside Orange's control, but Climoc is anticipating a government auction of 26GHz spectrum in the second half of 2019. While these airwaves do not carry signals over long distances, they provide much higher-speed connections than lower frequency bands. After receiving an experimental license, Orange was able to use 26GHz spectrum during its trials, relying on a mixture of indoor and outdoor customer premises equipment (CPE) from Samsung to overcome the challenges of signal propagation. Assuming commercial licenses are awarded in late 2019, Climoc sees a 5G broadband services launch in 2020 as a possibility.

Unless regulators are hell bent on crippling the telecom sector, as some did when 3G licenses were sold, they seem unlikely to set high base prices for 5G spectrum. The real concern is about investments on the network side. According to Orange spokespeople, each antenna site can serve between 10 and 30 customers, which does not seem like a huge number, and Orange will also have to factor in the CPE costs per home. Then there is the expense of providing "backhaul" for all that mobile traffic. (See Europe's Backhaul Black Hole Looms Above 5G.)

"The technology will require some heavy investment because the radio sites need connecting by fiber," explained Stefan Slavnicu, Orange Romania's chief technology officer. "There will also be the cost of densifying the network."

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Virtualization, which separates network software from underlying hardware and promises cost efficiencies, might help to address some of the investment concerns. While Orange prefers to highlight this technology as a way to speed up service development and deployment, the virtualization of its radio access network (RAN) would give it some "flexibility" when using 5G for broadband, said Vamparys. (See Is vRAN Still Too Hot to Handle?.)

Its trials, accordingly, used Samsung's virtualized RAN technology, and Orange has also made progress on virtualizing its "regular" RAN. In essence, this means running some baseband functions as software programs on generic hardware, which can then be housed in data facilities to boost efficiency. Although Vamparys is disclosing few details at this stage, the update suggests some of the operator's previously voiced concerns about the operational complexity of RAN virtualization are starting to recede. (See NFV Is Down but Not Out and Orange: Still No Clear Business Case for vRAN.)

That said, Orange appears to have opted for a higher layer "functional split." Put simply, this means it is virtualizing only some of the baseband functions and will therefore not realize the same "coordination gain" as an operator that has gone for a more comprehensive lower layer split. Explaining the concept of coordination gain during a previous interview, Gabriel Brown, principal analyst for mobile networks and 5G at Heavy Reading , said: "You can coordinate which resource blocks are allocated to which user at which point in time at a microsecond level, and you can reduce interference and improve performance and efficiency."

The drawback of a lower layer functional split is that it puts far more pressure on the "fronthaul" connections between radios and baseband processors. Orange appears to be steering clear of this option in Romania because the fronthaul burden would likely necessitate a bigger investment in fiber.

While 5G is no kind of panacea for Orange's broadband challenges in Romania, it could be an economical means of providing connectivity for some consumers and businesses. The crucial factor is the return on investment. If Orange cannot make the numbers add up, it may need to find an alternative way to satisfy customer demands.

— Iain Morris, International Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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