Driving 5G Network Evolution: Revenue Growth, AI Integration, and Collaborative Innovations

Patrick Moorhead:
Welcome back to the Six Five Summit 2024. It is day two. I hope you enjoyed day one. As a reminder, the theme for this year’s summit, it’s all about AI. Of course it is. It’s all about not only building out the AI infrastructure but also about the benefits that AI is already bringing to consumers and businesses. And I am just pleased to introduce our show opener, Yossi Cohen. Great to see you.

Yossi Cohen:
Nice to meet you.

Patrick Moorhead:
It’s been so long. I think Mobile World Congress.

Yossi Cohen:
Yes. Actually not that long, but so many things happened. So you actually feel so much time.

Patrick Moorhead:
Totally. So much stuff has gone on. I mean, it is crazy. It feels like technology has amplified. And I know we’re going to be talking a lot about AI, but I thought it was really good if you could just talk a little bit about the conversations that stood out for you in the first half of this year.

Yossi Cohen:
Yeah. So crazy time for us. Actually service providers for mobile revenue is growing for quite some time. And inflation is there. It’s not catching up with inflation and almost nothing catches up with inflation, but it’s never dead. And in reality it usually, if you look at the history, it used to be flat. But in the last couple of years it’s grew 3.7% the last year. So it’s pretty good. If you look at the overall adjacent industries, you see that mobile apps grew by 6.4%. Mobile ads grew by almost 15%. Cloud services globally grew by more than 20%. And they talk about our industry like we are a utility, that you need to have connectivity like you need water, like you need electricity. But in reality, our business model is actually worse than them because the fact that traffic continues to grow even more than what you consume water and electricity, but the revenue doesn’t grow proportionally. And that’s why we need to, at the end of the day, add more capabilities to the network to help our customers monetize.

Patrick Moorhead:
One expression I really appreciated that you gave was putting 5G into halves. We have the first half, we have the second half. Pick your favorite sport. But 5G first half was clearly about smartphones and there were some really bright spots on this 5G deployment cycle. What stood out for you so far?

Yossi Cohen:
Yeah, so the first half of 5G still is leveraging mobile broadband. That’s the vast majority of the revenue and the innovation that comes from there. If you look today, the US market, depends which operator you choose. It’s between 200 to 300 million population coverage that you have on real 5G spectrum midband. It’s only when you use midband or maybe midwave, you have the experience that is required for 5G. You see that there is a little bit north of 60% penetration of 5G smartphones, which is actually pretty high. It shows a healthy market here. People are leveraging this capability, are using this technology. And even though that it’s only 53% of the Americans are satisfied with 5G, if you compare it to last year, the satisfaction grew up by 12%. So the work that the CSPs are doing is working and customers are leveraging these capabilities and enjoying it more and more. The fact of the matter, the churn in the US is only 1%, which is as low as it gets.

Patrick Moorhead:
No, that’s great. And it wasn’t just about smartphones, it was also about fixed wireless access. I actually picked up an FWA device from a major carrier and I was actually shocked at how easy it was to set up. It even worked inside of my cement-laden high-rise. So tell me about how that rolled out.

Yossi Cohen:
Yeah, so you’re talking a very, very important point. The user experience in terms of taking the device and activating it and how quickly you get the service-

Patrick Moorhead:
So easy.

Yossi Cohen:
If you compare it to others that you have to wait weeks and they have to deploy, it’s a big differentiator. Fixed wireless access has been the big use cases with big success, even though people initially were skeptical. If you look today at the US market is 9 million subscribers, whether it’s consumer or businesses. Tell you something, in the last few quarters almost 100% of the fixed broadband [inaudible 00:04:42] are actually on fixed wireless access. Basically taking all the growth from the cable companies, which is pretty amazing. And when you look at the net promoter score, you see results that you wouldn’t expect. It’s matching fiber but actually beats cable. So these customers that are taking the modem like you, they’re not only taking it because it’s easy to take it and put it at home and you immediately get the service, they actually enjoy a better service than they get today from the cable players. So I think it will continue to be a big player. Operators are generating new money with it and they’ll continue to invest in it.

Patrick Moorhead:
Yeah. FWA was a big surprise for me. But once I experienced it and how easy it was, I just knew that this was going to be popular. And I didn’t even have to go… I went into my local outlet to pick up the box. I didn’t even have to do that. They could have mailed it to me. But anyways, big success story. So we’re like a third of the way into this conversation. We haven’t even talked about AI yet and it seems to be there are businesses other than AI, but AI is permeating everything. And I’m curious, how has the telco industry used and taken advantage of AI so far?

Yossi Cohen:
Yeah, so CSPs and network vendors like us is already taking advantage of AI in many, many ways. It is still the beginning of the journey but we are already doing it. I’ll give you some examples. Some of them are very tacky, some of them are kind of obvious. For example, if you look at cell edge downlink throughput. So everybody’s interested to have high throughput. Cell edge is one of the key measurements you have. Some customers define it as 10 megabit per second, some at 50 megabit per second. But if you can increase the cell edge throughput, it is very important for you in terms of your capacity and the user experience and your coverage. So we have implemented a capability called AI-powered link adaptation. And what that does, it’s actually, unlike today or before using AI-linked adaptation where the cell coordinate with itself what is the link that is required and how much power is required, it coordinates with the rest of the network, specifically with the other sales, in order for you to get the best power to the user and optimize the throughput.

Other capabilities, for example, is associated with sustainability, which I think you talked about in other session. A 14% average power saving can be implemented by AI-powered massive MIMO sleep mode. So massive MIMO is the latest technology when it comes to providing high-capacity, high-throughput, high-performing mobile broadband. And it has using many, many elements. So this type of massive MIMO antennas has 64 elements, 128, 256 element. And not always you need all these elements. Sometimes you have lower number of customers or they’re very close to the antenna, then you might be able to use lower number of elements. AI understands that. It sees how many customers there is [inaudible 00:07:43], what’s the demand, and you can actually put some of the elements to sleep and by that reduces the power consumptions of that radio. So this is one of the capabilities that we’re using AI for.

Other capabilities are, for example, when we do customer support we use travel report resolution that is using of course GenAI and of course the usual suspects when it comes to our research and development, using coding buddies for us to accelerate the level of innovation and implementation of capabilities.

Patrick Moorhead:
So you must have… You’re implementing a lot of these today, right?

Yossi Cohen:
Yes.

Patrick Moorhead:
So you must’ve been working on this, you didn’t just start 18 months ago when ChatGPT and OpenAI got on stage. You must have been doing this four or five years ago? More?

Yossi Cohen:
Yes, of course. We have been working with gen AI for many, many years. And we have been actually implementing them and using them for many, many cases. It’s just that the hype was not there. So we were talking about it with our customers, but not the way we talk about now in the media.

Patrick Moorhead:
No, I love it. So you were doing it before it was cool. Okay, so we talked about where AI is being used today. You were doing it before it was cool. But what about the new ones, the upcoming applications?

Yossi Cohen:
So one of the good things about 5G is that you have a lot of parameters to tweak on and you can adapt the network to what is the user needs. So today you have a table of parameters. When there is a business need, you need to adapt to one of this things that disappears in the table. Okay, this is the parameter that closely meet to what you need from a terms of business. But we are introducing AI-based, intent-based networking, which basically means instead of you telling, “Okay, this is the business need. Let’s see where in the table is the closest setup,” you actually give the network, “This is my business need.” And the network basically using AI adapts the link to what you think in terms of the business. And it also do a closed loop assurance that you could actually get the [inaudible 00:09:42] that you need for this connectivity. So this is something that you couldn’t do without AI and it is taking the capabilities of 5G to the business to the maximum.

Patrick Moorhead:
No, I like it. And hopefully you can go in there and program it with a chatbot as opposed to pulling a thousand different levers. I love it. So we talked about the first half and two bright spots we talked about was a 5G broadband for mobile devices. And the second one, which, again, I was pretty surprised at, was fixed wireless access. What is the second half of the 5G rollout look like?

Yossi Cohen:
Of course, architecture evolution. You’ll see that operators are launching 5G standalone. I mean, up until now 5G non-standalone was the dominant technology and architecture we do. In terms of radio, we need to finish the job. Actually in reality today only 43% of the sites in the US have midband, which means we are almost halfway but not even halfway. We need to make sure we are putting midband in all the sites, giving access and capacity to all the populations. And we need to start introducing differentiated connectivity. Network slicing. That will be enabled by standalone 5GC. And then of course making sure to give access to all these good things through APIs to application developers. For us in Ericsson North America, as you know, we focused a lot with on consumer with CSPs, we focused on enterprise through CSPs indirectly, but also recently we have established Ericsson federal technology group that focuses on the DOD.

Patrick Moorhead:
So I think this is the third time you and I have chatted on the Six Five and we haven’t talked 6G and maybe we should go there maybe. But can you talk a little bit about the on-ramp architecturally, what’s either being done or what needs to be done before we hit 6G?

Yossi Cohen:
Yeah. So mentioned standalone, this is a big enabler. It enables higher performance, lower latency. It actually gives all these parameters that I talked about to provide you the right business needs for your connection.

Patrick Moorhead:
So it requires a standalone network.

Yossi Cohen:
It requires a standalone network that enables network slicing and it’s basically the base for 5G advanced. Other things that are coming: open run. Everybody was talking about but still in early stage. I do believe that this will get industrialized more, get into scale. Cloud run. Still most of the traffic runs today on purpose-built hardware. We are desegregating the hardware from the software and introduction of Cloud into the run will provide way more capabilities. And then you will see more and more AI and automation coming to fruition in these capabilities, simplifying the way of operating a network but also making things much faster. 5G-Advanced will introduce enhanced massive MIMO, meaning even more capacity to the same equipment, which is very required because traffic continue to grow. Introduction of technologies like reduced capability of 5G in order to introduce cheaper and smaller devices into the ecosystem.

Precise positioning. And something that I particularly very excited about is sensing capability. This is a technology that is planned for 6G. We might pull it into 5G-Advanced. This basically unlike until now that 5G and all these G’s technology provide you mostly connectivity capabilities. This capability, suddenly the network will be able to give you sensing of the network. So it will be able to sense whether there’s drones, whether there’s cars. So it can be used for many uses. Case for example, to make sure that cars don’t hit each other and other use case… any use case that you can come up with yourself.

Patrick Moorhead:
Yeah. No, that’s exciting. Exciting stuff. At Mobile World Congress, a bigger conversation I thought there would be was this idea of open network APIs. And Ericsson and your sister company Vonage were very engaged in this conversation, but it was a global conversation. Can you talk about the role that why we need these and what the benefits are?

Yossi Cohen:
So we talked before about the fact that operators are increasing their revenue, but still the model is very difficult. What we are trying to do in Ericsson, we try to enable them to create other streams of revenue. So for example, all these fantastic capabilities that we talked about, like network slicing and positioning and sensing, et cetera. Eventually in order for them to generate additional revenue, it needs to be open to application developers. You need to make your 5G network a platform. And in order to do that you need to create an API platform like global network platform that we are working with Vonage in order for having application developer innovate on the network and scale in that perspective. Recently we signed contracts. We partnership with AT&T and Verizon that were announced. With Deutsche Telecom, et cetera. And we are working very closely with others to add more and more operators into this global network platform.

Patrick Moorhead:
Yeah, it’s exciting and when I look at it, I mean, before these open network APIs if you were a developer, you might have to, in the United States, write specifically to three different APIs per category that you want to go into. And I hope in just for the United States you would just have to write to one. That’s the way that a lot of these open APIs and other industries work.

Yossi Cohen:
Yeah, I mean, that’s the only way to scale. Application developers don’t want to talk to different CSPs. They don’t want to have contracts with different CSPs. They want to have one API that actually they don’t care where it is, if it work here, it works in Europe, work with Verizon, work with AT&T. They just want to work with one. And that’s exactly the objective of global network platform that we have in Vonage.

Patrick Moorhead:
Smart, smart. So I want to end… Here we are in your beautiful office in New York City. I want to talk about Ericsson and your footprint here in the United States. Can you talk us through that a little bit?

Yossi Cohen:
Yeah, of course I can talk about it. We are very proud. In terms of business we have the largest install base in market share in North America. We have north of 45% market share in radio, north of 50% when it comes to core. That’s our situation as of now. We actually hope to be better. Half of the radios that are actually deployed in the United States are our equipment. We have a very solid presence, higher than 7,600 employees. We are in 30 different sites across the US. Six research and development centers. And we have a factory which we built a few years ago. It’s in Lewisville, in Texas. It’s the latest and greatest. We are developing the latest technology when it comes to run compute, when it comes to massive MIMO radios.

All this equipment that’s manufactured there is going to our customers here in North America and we are really proud of it. It’s also the only Build America Buy America compliance radio in the US. We have extensive collaborations with a lot of companies here with hyper-scalers, with players like Qualcomm, Apple, Dell, HP, Intel. I mean, you name it we work very close with them because they are very important to the ecosystem and what we’re trying to achieve. And the true is that US has been a main market for Ericsson, if not the biggest, since the inception in 1902.

Patrick Moorhead:
I had the privilege of visiting your Texas facility. It was a very short drive up from Austin. But I was struck at how automated it was and unsurprisingly connected by a lot of 5G technology. But you were actually building infrastructure in Texas, in the United States. I thought that was impressive.

Yossi Cohen:
Thanks.

Patrick Moorhead:
So you’re the day opener for the Six Five Summit 2024 here. Any final words for the audience? Anything we didn’t cover here that you wanted to talk about?

Yossi Cohen:
With the risk of saying the obvious, everything that can become wireless will become wireless and 5G is a fantastic technology to leverage this. We are planning to improve it and increase the capacity to be able to connect more and more devices and phones and carry more and more traffic. And it’s very good for the economy, it’s very good for the consumer and the enterprises, and we are looking forward to see how it happens.

Patrick Moorhead:
Yossi, great to see you and I hope we can talk about the next step of your adventures, but more importantly, broadly base the industry progress that is being made. And you guys are at the forefront of it, so I appreciate that.

Yossi Cohen:
Thank you. Thanks for having me.

Patrick Moorhead:
Thank you. So this is Pat Moorhead, Six Five Summit 2024, day two. We are talking about networks. And it’s funny, like I always say, with every big inflection point, the system gets tested. And that’s compute, that’s memory, that’s storage and the network. And AI is certainly not only stressing the network, but also AI in the network is helping as well, not only with performance and efficiency, but also with sustainability. Check out our sustainability conversation with Ericsson if you have the chance. Take care and thanks for tuning in. Bye-bye.