We introduced the Private 5G “readiness wheel”  last year, to illustrate the maturity of the private 5G ecosystem or lack thereof. The “wheel” isn’t rounded yet, so it highlights the challenges of scaling the private wireless market.

In our newly released Industrial Private Cellular market report, we show the current state of the wheel and highlight the changed macro-environment that will likely result in steady – not exponential – growth.

One new factor to consider is the craze around artificial intelligence, specifically generative AI (GenAI). With the introduction of OpenAI’s ChatGPT-4 last year, GenAI has captured the mindshare of the general public and businesses.

According to this article, ChatGPT reached 100 million users just two months after its launch. Unlike traditional AI/ML, which is good at data analysis and pattern recognition based on existing data, GenAI uses machine learning models to learn and create new data and content.  

This ability to create and improve new data content enables GenAI to “reason across audio, vision, and text in real time,” according to the announcement of OpenAI’s latest “omni” GPT-4o. With genuine excitement about the potential uses of GenAI in business – e.g., new drug discoveries in healthcare, new compound material discovery for renewable energy, replacing customer service agents, and many more possibilities – businesses across almost all industries are exploring ways to leverage AI. 

Lost hyperscaler leadership  

AI investments are primarily confined to within the four walls of hyperscalers’ core regional mega data centers today. With each rack of AI servers with Nvidia GPUs costing $1 million+, not many businesses can afford to invest heavily in AI. Hyperscale cloud providers have a global scale and multiple sources of revenue to make that kind of “at-scale” investment.

The current flurry of AI infrastructure investments has distracted the hyperscalers away from 5G networking. With an extensive network of relationships with developers, partners and customers in the enterprise IT space, Microsoft and other hyperscalers could have played a vital role in scaling the private networking ecosystem. That leadership is lost at the moment.

System integrators can pick up the slack. We see the private 5G ecosystem progressing with telco-centric and enterprise IT and OT-centric suppliers introducing turnkey and discrete point solutions across core, RAN, LAN/WAN transport, devices and a roadmap towards unified network management/service delivery platform. It should be remembered that the private wireless market is growing at a healthy double-digit growth rate despite some dour headlines in the press in recent months… and it will reach $5.8 billion in infrastructure and device equipment sales by 2029. 

Today’s market isn’t big enough yet to support too many players. It is reminiscent of a crowded pond with too many frogs muddying up the water. Some are pulling back; others are focusing on specific sectors. This is a natural business cycle of market forces weaning out winners and losers. But the pond is filling up with water, becoming a lake, and the fastest frogs will thrive.

So, is the current craze around GenAI an accelerant or inhibitor to private 5G networking?

Despite some interesting use of AI in the mobile network itself, we view GenAI as a headwind to private 5G in the near term. We see a mindshare shift to AI among major enterprises and key stakeholders in the enterprise IT ecosystem, including IT hardware vendors, system integrators, distributors, etc. Companies are diverting capital expenditure and resources towards AI projects and initiatives. However, we believe that future AI/ML applications and workloads will eventually move away from hyperscalers’ core data centers to the edge of enterprises. 

There are plenty of data sets from sensors and workers in industrial and enterprise settings that require low latency and reliable connectivity links that private 5G networks promise. There are plenty of existing data sets that traditional AI/ML can process to gain insights for operational efficiency and worker safety before we take advantage of GenAI to gain newer insights and further productivity gains. 

Over time, that “$1 million+” rack of AI servers will become a few hundred-thousand-dollar rack to be deployed at enterprise edge for edge computing. By then, we see enterprise private networks with 5G and other technologies providing “always-on” connections to myriad data sources to enable the AI future that businesses envision.

In the future, AI/ML will become a driver for private 5G, not a distraction.

Gen-AI may be sucking the oxygen out of the room for now, but in the longer term, we see the AI world connected with private 5G.

Even as neutral host private radio access networks (RAN) are starting to arrive in the United States, the market is “way ahead” in the United Kingdom and continental Europe, according to network infrastructure company Boldyn.

Neutral host RAN enables 4G and 5G cellular subscribers to get a strong signal from multiple carriers, even when no public network towers are nearby, rather than just relying on service from a single mobile network operator (MNO).

Neutral host RAN systems generally use either multiple small cells that enterprises deploy to share several operators’ coverage among users in an office building or factory or a virtualized baseband system that enables a multi-operator core network (MCON) to support multiple MNOs. 

Lotta Roma Mova

“Neutral host is critical for us globally,” Andy Penley, group CTO at Boldyn, told Fierce this week. He highlighted the Roma 5G project as the largest neutral host project for Boldyn. This is a project to prepare Rome for the influx of visitors expected for the Pope’s jubilee in 2025 by sprucing up its communications infrastructure.

This will include deploying public 4G and 5G in 83 metro stations, as well as public Wi-Fi and small cells all across the city to support multiple mobile operators. “We’re doing 2,200 small cells and 1,800 IoT [Internet of Things] sensors,” Penley noted. “On the DAS and the small cells, it’s all neutral host. We expect at least 2 of the carriers to join very soon and a third before the end of next year.”

Outside of major public projects, Boldyn is also hard at work on neutral host private networks in Europe.

He explained that the standards are set by operators, tested by Boldyn and can be rolled out “at a much quicker pace with a truly shared brand.” This has not happened in the U.S. yet, he said.

There may be a catch, however, as Asad Khan, research director for 5G at SNS Telecom and IT, noted in an email. “In the UK, the JOTS NHIB (Neutral Host In-Building) specification has made it easier for third parties to provide mobile connectivity services on behalf of one or more of the operators. However, some small cell vendors have voiced concerns regarding the NHIB model’s preference for the MORAN (Multi-Operator) RAN approach, which, unlike MOCN, requires dedicated spectrum for each operator.” 

“Neutral host provider Freshwave has recently partnered with all four national mobile operators (EE, Three, Virgin Media O2 and Vodafone) to roll out in-building 4G mobile connectivity using CommScope’s multi-operator small cells. From a global perspective, SNS Telecom & IT estimates that as much as one-fifth of all RAN node installations in carpeted enterprise environments and public venues will be based on multi-operator small cells by the end of 2027,” the analyst added.

Going forward, this will much more widely require a neutral host approach from both operators and suppliers.

Hard times aren’t stopping for Nokia, which saw sales decline by 18% year-over year in its second quarter, reported Thursday. But at least this was a little better than the previous quarter, when the company saw net sales decline by 20%.

Nokia also adjusted its net sales guidance for the full year. In its Network Infrastructure business, the company  revised its net sales planning assumption down to -2% to 3%, compared with the previous 2% to 8% growth. And in its Mobile business, Nokia revised net sales to -14% to -19%, down from the previous -10% to -15%.

India drives wireless down sharply

Nokia reported sales in its Mobile business of €1.97 billion ($2.15 billion) for the quarter, down 25% year over year, largely driven by a big decline in India, making for difficult comparables this quarter. “Q2 last year marked the peak of their 5G rollout,” said Nokia CEO Pekka Lundmark on today’s call. Almost three quarters of Nokia’s massive revenue decline was attributable to India, he said.  

However, the Finnish vendor is expecting sales to start to rebound in Q4 this year, continuing into 2025. For now, however, the dark days continue.  

Nokia got a €150 million ($164 million) boost from the resolution of an outstanding contract with AT&T in the U.S. this quarter. In December, AT&T dropped Nokia as its radio access network supplier in favor of rival Ericsson. Nokia’s AT&T revenue would be “largely stable year-on-year in 2024 and approximately halved in 2025,” Nokia CFO Marco Wirén said.  Nokia’s base stations will populate the AT&T network for many years to come, Nokia noted.  

Lundmark also highlighted Nokia’s RAN deal with operator Meo in Portugal in Q2. Nokia will replace Huawei as the radio supplier for the carrier.

Looks to Infinera to drive growth

Nokia’s Network Infrastructure business reported net sales of €1.52 billion ($1.66 billion) for Q2, down 11% from the year-ago quarter.

Recently, Nokia announced the planned divestment of its Submarine Networks business to the French state and also its intention to acquire Infinera, the North American optical networking company.

 “The Infinera acquisition will significantly increase the scale and profitability of our optical networks business,” Lundmark said on Thursday’s earnings call. “It will enable us to deliver faster innovation for customers and expand our position with webscale and regionally in North America.” 

He said, “Fixed networks continues to be well positioned to benefit from strong demand in the fiber market. This is evident in markets where fiber is not yet highly penetrated and in more mature markets where customers are starting to upgrade to XGS-PON or 25G PON.”

Lundmark added, “We had good orders actually in Fixed Broadband in Q2, particularly in North America, which is a promising sign because we received now the first BEAD-related orders in North America, some of which will be already supporting Q4 revenue. Of course, the BEAD will be much more a 2025, 2026 story.”

And India is not all bad news for Nokia. Although India’s 5G slowdown hurt Nokia, the company’s Network Infrastructure unit also does business in India, and that business will start paying off soon. Lundmark said Nokia has a fixed wireless access (FWA) contract in in the country “that will start delivering significant revenues in Q4.”

The company is continuing to implement a cost savings program that it announced in October 2023. It has already cut more than 6,000 jobs,  largely in the Mobile sector. “At the end of June our headcount was just under 80,000,” Lundmark said.  Nokia will continue to shrink its workforce through 2026. The CEO expects to helm a company with between 77,000 to 72,000 employees by the end of 2026.

Plunging capex is a sign that telcos have an excess of capacity – and user demand is levelling off.

Comms vendors are battening down hatches for what could be a long capex winter.

Dell’Oro has just cut its outlook for mobile core spending for the fifth consecutive time. Not a single operator has adopted 5G SA this year, while the research firm has also written off the RAN market as “a disaster” and tips optical transport to decline as well.

But the deeper problem seems to be that traffic growth is falling.

The red flag that has caught people’s attention has been the restated numbers in the latest Ericsson mobility report. The authors cut mobile data traffic figures for the second half of 2023, yet declared that the growth outlook was virtually unchanged.

William Webb, a consultant and senior advisor at Access Partnership, is one who’s called out the authors of the report for this leap in logic. “If lower numbers are being reported for 2023 … then why should the traffic growth rate predicted remain the same?” he posted on LinkedIn.

He denounces the forecast as “a mess,” pointing out that the report, without any explanation, has somehow introduced a 10% jump in growth over 2023-24 to bring its new forecast into line with the old.

Bandwidth overproduction

The vendor community might dismiss Webb as a confirmed growth skeptic. He is the author of a (2016) book called “The 5G Myth” and has predicted that mobile data growth will plateau in 2027.

But he’s not the only one.

A new Analysys Mason paper says the telecom industry is running up against the limits of growth and faces a “crisis of bandwidth overproduction.” It says the telco responses to this looming crisis – volume price discounts and untried business models – replicate every other industry in the same predicament.

“Growth rates are not declining because of supply-side constraints such as spectrum or coverage; access networks have never been emptier,” the paper argues.

“Rather, the two principal drivers of traffic growth, smartphone usage and broadcast-to-streaming migration on mobile and fixed networks, respectively, have both run up against human limits; limited hours for engagement and the limits of human vision.”

If demand does not revive, then the lower unit costs brought about by over-investment in capacity will result in further deflation of margins and profitability, the paper argues.

It calls on telcos to reduce capex to make available more resources to invest – in M&A, into other adjacent infrastructure businesses, or in some key non-connectivity B2B segments.

While this is happening the 6G process marches on.

The case for 6G is pretty much the same as the one for 5G. More data, more capacity, greater efficiencies and a slew of new technologies that may enable new use cases. Some of the use cases are in fact the same as were predicted for 5G, like immersive experiences, FWA and next-generation IoT.

Which isn’t to write them off. It is just that telecom operators have just about maxed out their core connectivity business and have no visibility on a return to margin growth. How many have the appetite or the capacity for another capex binge?

Which leaves us in the curious situation of governments and vendors driving the 6G bandwagon at speed, while those footing the bill just want to get off.

During HPE’s event in London, the company outlined the plans for its recently launched private 5G offering, which it expects to bring to Europe early next year.

HPE’s networking business, Aruba, outlined its plans for rolling out private networks in Europe during the HPE Viva Las Vegas event that took place in London this week. Dobias van Ingen, HPE Aruba’s EMEA systems engineering director and CTO, said the company is targeting roughly Q1 2025 for deployments in the EU. 

The remarks come after the launch of the HPE Aruba Networking enterprise private 5G solution in June. With HPE acting as the mobile network operator (MNO), the single-vendor offering includes a 4G or 5G core, as well as SIMs or eSIMs cards, small cells and a dashboard.

HPE says its small cell radios ensure coverage indoors and outdoors, preventing the need for a third party management tool.

“What we do is we focus initially on data, because most of the things are moving to data like push to talk – it’s not traditional voice anymore – and then build a solution up from that perspective. But you only deal with one vendor,” van Ingen said.

HPE Aruba devised the solution to address enterprise deployments in environments like harbors, warehouses and healthcare organizations. “We took a new core, and we created our own RAN [radio access network] indoor and outdoor and packaged that into one,” he said.

Nevertheless, the solution can be used for smaller deployments. Van Ingen highlighted the fact that Athonet has developed a core that can be placed in a backpack for deployment in circumstances including natural disaster relief. 

Deploying private networks

This means the private network can be pared back to “a single RAN” or even deployed on a drone, van Ingen added. Nevertheless, he argued Wi-Fi coverage typically targets areas measured in square feet, while private networks deal in square miles. 

When it comes to deployment, van Ingen said that rolling out private networks is easy in the US because of the Citizens Broadband Radio Service (CBRS) spectrum. Meanwhile, HPE Aruba is targeting Q1 2025 for deployments in European countries where spectrum is made available for private networks. The company is waiting until next year partly in order to get the partner community ready, van Ingen said. 

Asked whether the solution can be deployed without an MNO partner, he said it depends on the market. In countries that allow spectrum use for private networks, the solution only needs to register, which takes about one to three days. Meanwhile, in some countries like Austria a partnership with an MNO would be necessary to deploy a private network.  

Outside of private networks, HPE Aruba has – much like everyone else these days ­­– also been focusing on generative AI. However, according to van Ingen, the company is planning to have a network centric and security centric model, rather than focusing squarely on text. 

For example, the company has been trying to make sure a device that can connect to multiple frequencies can help determine the right band to connect to. Moreover, HPE Aruba has also created an opt-in model, where support calls are logged automatically using AI if there is an issue – otherwise, van Ingen said, this takes about an hour.