BARCELONA -- Mobile World Congress 2017 -- Australia's Telstra has handed Ericsson a major optical network contract as part of a A$3 billion ($2.3 billion) network overhaul aimed at laying the foundations for the introduction of 5G technology.
The Swedish equipment vendor is also to work with Telstra Corp. Ltd. (ASX: TLS; NZK: TLS) on new trials of 5G radio technology, with the operator keen to establish a leadership role in 5G, and will additionally team up with Telstra on the rollout of an IoT network based on the LTE-M standard.
Telstra announced plans for a three-year, A$3 billion ($2.3 billion) investment in its networks and IT systems last August, with capital expenditure set to rise to about 18% of its sales as a result -- the highest level since 2008/9, when the company was spending heavily on 3G technology.
During a press conference in Barcelona Sunday, on the eve of this year's Mobile World Congress, the operator revealed that some of the network spending would go toward an expansion of its long haul, metro and regional optical networks -- although it would not be drawn on how much.
Besides bolstering Ericsson AB (Nasdaq: ERIC), the deal is good news for optical equipment maker Ciena Corp. (NYSE: CIEN), which will provide the packet optical solutions that Ericsson will install and integrate.
Mike Wright, Telstra's group managing director for networks, described the optical overhaul as part of the operator's shift to more flexible software-based networks.
"We need to evolve the optical network so that we can dynamically adjust modulation and connect that to the upper layers of the network where SDN [software-defined networking] will take control," he told reporters. "That is a fundamental shift in the way the network will look."
The optical systems are crucially aimed at ensuring Telstra can cope with rising levels of data traffic in future as 5G and new Internet of Things services begin to appear.
"There is no point in having a Ferrari if you don't have the road to drive it on," said Emilio Romeo, the head of Ericsson Australia and New Zealand. "This is an optical autobahn for Australia."
As well as embarking on the optical upgrade, Telstra said it had begun working with both Ericsson and chipset maker Qualcomm Inc. (Nasdaq: QCOM) on interoperability testing and over-the-air field trials of the 5G new radio specifications being developed by the 3GPP.
Telstra said it hoped that customer trials on the Gold Coast in April would lead to the early availability of 5G technology in Australia, and that it wants to ensure the final standards take account of the specific conditions in the country, where signals may need to travel over much longer distances than in other markets.
"We're doing trials around understanding 5G and beamforming and how far that might work in Australia," said Wright. "The goal is to make sure we're one of the world's first networks able to bring out 5G."
Beamforming is a technique for concentrating signals on devices to ensure that users enjoy the full bandwidth benefits of 5G technology.
Asked by Light Reading whether there will be much need for 5G given ongoing improvements to 4G technology, Wright insisted that the older network technology would only get operators so far.
"You will need another step up in capacity and speed and multiple slices of the network to handle IoT -- it's about getting the right technology at the right point in time and you can see from older usage graphs that 3G eventually goes flat and all the new growth goes into 4G," he said. "We would like to think we can do that with 5G by transitioning growth while 4G continues to do the work it is doing."
Next page: LTE-M rollout