Applications of millimeter wave (mmWave) technology in 5G fixed access are subject to a few important levers. To start, it’s important to understand that the cost of fixed access networks is directly proportional to the number of houses passed. This provides the advantage of growing the network selectively on geographic basis. But it also means that economies of scale are slower to affect the business case: passing more houses means more expenses. By comparison, mobile networks are designed to cover a wide area from the start which places emphasis on gaining subscribers to load the network and scale revenues.
How fixed access networks makes it important to control a few parameters:
1- Number of houses passed per node: a cell radius of about 100 m covers around 100 houses whereas 200 m radius servers around 350. Range is critical to amortize expenses over as many houses covered for capital efficiency. The range of mmWave is highly susceptible to environmental factors (rain, snow, sand, etc.). Effective range can only be assured under line of sight conditions as mmWave have dreadful ability to “round corners” and wall penetration capabilities. Therefore, not only the range will matter, but also the percentage of houses with line of sight path.
2- The cost of transport: Connecting the mmWave node to the core network is another cost driver that impacts the viability of the business case. mmWave networks depend on fiber backhaul and deployments will follow the fiber footprint. The key will be to drive the cost of transport to under $500/month per node. Even lower value is required if the range proves to be below expectations.
3- Pole leases: Similar to transport, recurring pole lease expenses for the last mile access node are a business case killer. Target should be in the tens of dollars as opposed to hundreds of dollars that service providers pay today.
4- Revenue per sub: Competitive options limit the ability of the network operator to monetize services. Service providers seek to bundle different services such as TV, video and mobile services to extract value from the subscriber. This leads to a price over the $100/month per subscriber or home.
The interplay of these levers will impact the viability of the business case for 5G mmWave systems. If we set a revenue limit of $150/subscriber, the it will take at least 10 subscriber per access node to generate a viable business case based on common expenses for the other critical parameters.
Is 10 subscribers practical or too many for breakeven? Time will tell as 5G mmWave solutions are put to the test to validate performance and capabilities in the context of applications and service packages.
A concluding word about an aspect that has tremendous impact on the success (or failure) of fixed wireless access: the CPE cost and the deployment model. CPE cost in particular is often ignored, but it can make or break the business case!
1. At Xona Partners we have been involved in helping investors, both technology corporations and financial investors, define the business case for 5G fixed access services.
2. For additional information on key issues in 5G mmWave fixed access networks refer to my earlier article: The Value Proposition of mmWave 5G Networks