What won't happen in telecom in 2021

'Tis the season for dusting off the crystal ball and playing a Nostradamus of telecom. This contribution to the seasonal lineup of stories predicting the immediate outlook for the sector arrives two or three weeks later than most others, and it was nearly discarded.

Partly, that is because last year seemed to prove the futility of soothsaying attempts. If nothing else, 2020's horrors showed that predictions are generally as secure as a log cabin at the base of a smoldering volcano.

Rather than build on top of that growing fire hazard, why not turn the format upside down and predict the non-events of 2021? A piece that rules out certain developments might not go up in smoke quite as fast as any world-in-2020 outlook written this time last year, just weeks before an unforeseeable virus erupted. Nor would it be so devoid of risk that it proved worthless. In January 2020, prophesying that a pandemic would not scorch the planet would have seemed like a fairly safe bet.

So here goes:

  • Open RAN scaled an Everest of inflated expectations in 2020. This year, it will not avoid a descent into the Grand Canyon of disillusionment. The politicized technology, adored by protectionists and Huawei bashers, sprinkles the elixir of interoperability over the radio access network (RAN), allowing operators to combine products from different suppliers (not previously possible) and make use of general-purpose equipment.

    But various engine problems mean it will not take off as quickly as some analysts expect. Those include performance shortcomings (it's rubbish outside rural communities where 3G is still considered cutting edge), intellectual property concerns (it risks infringing patents held by companies not part of its club) and doubts over cost (is it really cheaper than a traditional network?).

    Yet by far the biggest brake on open RAN was identified by Robert Finnegan, the CEO of Three UK, during a Zoom call with reporters before Christmas: Most operators have already decided on their 5G suppliers and some (including Three) have already had to jettison Huawei at significant expense. They are not about to undergo another costly swap-out for several years, and possibly not until the dawn of 6G.

  • 5G will not justify its existence in 2021 even as the rollout bill soars, with US operators likely to splurge more than $90 billion on new midband spectrum licenses in the latest auction fiasco. While Ericsson is probably right to forecast more than half a billion 5G connections by the end of this year (up from an expected 220 million in 2020), no consumer seriously needs 5G and few businesses currently have much interest in its high-speed, super-reliable, low-latency sales pitch. Yes, 5G will generate billions in economic value over the next few years, but 4G would likely generate almost as much if 5G did not exist.

    Worse, the telecom sector will probably not even be among 5G's main beneficiaries. Operators face huge investments and scant prospect of additional revenues, while outside China equipment vendors foresee little growth from sales to service providers, their main addressable market. This year will be one of deepening existential angst for operators as they ponder their diminished role in the ecosystem despite all their investments in new connectivity standards.

    Mobile subscriptions by technology (billions)
    Source: Ericsson.
    Source: Ericsson.

  • The first quarter will not bring any short-term relief for service providers that saw a decline in roaming revenues and other pandemic-related financial pressure in 2020. Lockdowns and restrictions on movement have become de rigueur across Europe in recent weeks as new virus strains percolate through the population. The worst-case scenario is that a vaccine-resistant mutation is eventually unleashed. Unlikely as this seems to most scientists, the slow rollout of vaccination programs will persuade risk-averse governments to maintain full or partial lockdowns for much longer than libertarians would like. If immunity is lost several months after a vaccine is administered, the initial recipients may become vulnerable again soon after a program has finished, requiring authorities to start all over again. Should this medical equivalent of painting the Forth Bridge prolong reliance on Zoom as an alternative to unmasked, face-to-face meetings, the risk will grow that cash-strapped consumers and ailing businesses downgrade to lower-cost plans.

  • Huawei will not go out of business, but nor will it be removed from the US naughty list. As a president dealing with an increasingly aggressive Chinese government, Joe Biden will have little inclination to soften the US position toward the Chinese equipment vendor, seen by opponents as a potential conduit for Chinese spies and hackers. He will not be as tactless and undiplomatic as his predecessor, attempting to find agreement with other democracies on a constructive and coordinated approach toward China. Huge investments in 5G rollouts by Chinese operators will buttress Huawei and ZTE, a smaller Chinese vendor, as foreign governments and operators give the finger to Chinese gear.

    America's new commander-in-chief is unlikely to go soft on China.
    America's new commander-in-chief is unlikely to go soft on China.

  • European operators will not halt the advance of US technology giants into their territory, and nor will they even attempt resistance. Their "partnerships" with Amazon, Google and Microsoft increasingly resemble relations between a medieval landowner and his tenants, as operators park their IT systems in the public cloud and settle for only a supporting role in the unfolding "edge" drama. Telcos and cloud cheerleaders will justify these arrangements on efficiency grounds and insist edge tie-ups are symbiotic. Skeptics will note the loss of control and ask why operators are content with a public cloud oligopoly when a RAN one is so bothersome. The upshot is that telcos will look even more like utilities by the end of this year.

  • To exacerbate this development, some European operators will not preserve their status as property owners in 2021, selling towers and other infrastructure assets to investment companies in a bid to reduce debt and speed up 5G rollouts. So far, Iliad and Three have been the most high-profile examples of European companies that have sold towers to a specialist infrastructure firm (Cellnex, in both cases). Consolidation in the towers market and the emergence of several powerbrokers would expose tenants to the risk of higher rental fees in the future, although this will certainly not happen in 2021.

  • Automation and artificial intelligence will not create as many jobs in the telecom sector as they destroy, despite what tech apologists might say. Data gathered by Light Reading shows the collective workforce across 20 major service providers with headquarters in Europe and North America shrank by more than 48,000 in 2019, or roughly 3% of the total. At many companies, the carnage continued in the first nine months of 2020, with headcount down 5% at AT&T and Telecom Italia, 8% at CenturyLink and more than 9% at KPN of the Netherlands, compared with December 2019 figures.

    Table 1: Headcount at European and US telcos

    2015 2016 2017 2018 2019 Sep-20
    AT&T 281,450 268,540 280,000 268,220 247,800 234,630
    Verizon 177,700 160,900 155,400 144,500 135,000 133,200
    Deutsche Telekom (DT) 225,243 218,341 217,349 215,675 210,533 227,584
    Sprint 30,000 28,000 30,000 28,500 27,000 N/A
    DT, Sprint combined 255,243 246,341 247,349 244,175 237,533 227,584
    Telefónica 137,506 127,323 122,718 121,853 117,347 113,392
    Orange 156,191 155,202 151,556 150,711 146,768 142,501
    Telecom Italia 65,867 61,229 59,429 57,901 55,198 52,480
    BT 102,500 106,416 105,787 106,742 105,344 101,752
    CenturyLink 43,000 40,000 51,000 45,000 42,500 39,000
    Swisscom 21,637 21,127 20,506 19,845 19,317 19,026
    KPN 14,078 13,530 13,275 12,431 11,248 10,194
    Total 1,255,172 1,200,608 1,207,020 1,171,378 1,118,055 1,073,759
    Difference N/A -54,564 6,412 -35,642 -53,323 -44,296
    Percentage change N/A -4% 1% -3% -5% -4%
    Source: companies, Light Reading.

  • Finally, 6G will become no clearer – even while it receives more attention – as geopolitics and protectionism threaten to balkanize the industry and the global specifications bodies that feed it. Depending on who you speak to, 6G is simply an improvement on 5G, the telecom equivalent of Heineken (refreshing the parts other standards cannot reach), the ultimate realization of open RAN (see earlier prediction), the Strange Days movie brought to life or something to do with quantum computing. No wonder Kyle Malady, the chief technology officer of Verizon, sounds baffled.

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    — Iain Morris, International Editor, Light Reading

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