5G backhaul: How to deliver promised performance

For 5G to deliver its promise, carriers need to use higher frequencies than today’s mobile networks.

Higher frequencies means more bandwidth. This can deliver faster data and more connections per square kilometre.

As a rule, higher frequency radio signals travel over shorter distances. Higher frequency sites will be useful in areas of high population density. In some cases they may be only a few dozen metres apart.

Cover every street

When cell sites are a few dozen metres apart, you need a lot of them. They will, in effect, need to go down every street in the country. The antennae don’t need to be as high as today’s cell towers. You can install high frequency cell sites on telephone and power poles or the sides of buildings.

Compared with today’s cell sites each one will cost a lot less to build. The hardware is smaller and less of an eyesore so the planning requirements will be simpler. And there will be some incremental upgrades.

Yet there will be so many new sites that the total cost of a 5G network could be as much as the earlier mobile. It all depends on how far New Zealand carriers intend to push the technology. It’s possible we won’t get the same 5G service as customers in say, Shanghai, Paris or New York.

Fibre is the 5G backhaul answer

Connecting lots of cell sites is tricky. Today’s cell sites often connect back to hubs using fibre connections. This is the best technology.

When Telecom, now Spark, built its XT mobile network it made a big deal of its towers using fibre backhaul. That’s the name engineers give to the practice of getting signals back to major centres.

Fibre backhaul gave the XT network a clear performance edge over Telecom’s rival. At least it did once Telecom ironed out the initial teething troubles.

Wireless option

Carriers don’t have to use fibre for 5G backhaul. In my NZ Herald interview Alex Wang said self-backhaul would be a feature of 5G. That is the towers link to each other in a wireless mesh network to get traffic back to a central hub.

Wireless backhaul is possible, but it limits overall network performance. You need a lot of bandwidth to backhaul thousands of 10 or 20 Gbps data streams.

It needs to be line-of-sight and it often uses higher power signals. Cue the protests and renewed fear of microwave signals causing health problems.

In practice fibre is a better way to handle 5G backhaul. It’s the most practical way to deliver the promised performance.

Overbuild

And that’s where the New Zealand mobile telecommunications industry hits a potential problem. There is already a nationwide fibre network for UFB.

Fibre companies already have fibre running down every urban street. It cost more than $5 billion to build that network.

That’s how much carriers must spend if they want a viable nationwide 5G network and compete with each other.

You could argue that building three more nationwide fibre networks would waste resources.

It would also add a lot to the cost of using a 5G network. Add in the cost of new antennae, site fees and network controllers. It could add up to more investment than carriers spent on earlier mobile generations.

Shared network

In practice there’s little chance of carriers building three more nationwide fibre networks. In theory the carriers could build a shared network.

There are arguments why this should not happen. For a start it could shut out any new competitors. There’s also a fear that three carriers owning shared mobile infrastructure could become a cartel. That’s also bad for competition and terrible for customers.

You can assume the Commerce Commission wouldn’t sign-off on shared infrastructure unless it is open access and otherwise regulated. The alternative is anti-competitive and would stifle innovation.

One third of a lot of money is still a lot of money

Even if carriers build a shared fibre 5G backhaul network, the cost per carrier would still be one-third of a big sum. It is more money than Vodafone or 2degrees appear to have today. This is before they need to spend on towers, antennae and the other kit needed to run a 5G mobile network.

Spark could raise the money for its share. The company has little debt. But even its investors might baulk at the cost of a nationwide fibre 5G backhaul network.

As we’ve already mentioned, a 5G network may need many more towers than the 4G networks that are in place today. Each site is likely to cost a lot less than the cost of a 4G site. The number of 5G sites needed to blanket cities and towns means the capital expenditure is going to, at least, be on a par with the investment in 4G. In reality it is likely to cost more.

A billion here, a billion there

Carriers don’t like to talk about the cost of building their networks. In round numbers each has spent in the region of NZ$1 billion on mobile network infrastructure.

Sure, that’s a back-of-an-envelope calculation. The exact numbers aren’t important. They have also invested many millions in buying spectrum.

The three carriers’ total capital spend on 4G to date is on a par with the amount needed to build the UFB network. They will also need to find the thick end of billion or so to build the extra sites needed for 5G.

This would be fine if there was a chance of getting customers to pay a premium for 5G mobile. That’s not going to happen. We’ll look closer at the business case for 5G in another post.

The open access model

New Zealand already has a tried and tested model for a separate wholesale layer. It’s called UFB.

The big telcos don’t like that model because by law wholesalers treat them the same as small ISPs. Spark can’t go to, say, Northpower and ask for a special deal “because we’re your most important customer”. That grates with the big carriers.

They also resent the wholesale charges. Remember the copper tax debate? It annoys telcos that the wholesaler gets 40 percent of each customer’s subscription.

Never mind that sum means the wholesalers gets a fair return on their investment. The regulator decides what’s fair.

The Chorus proposal

Which explains why the four big telcos scorned Chorus CEO Kate McKenzie’s proposal. She suggested that Chorus could provide the fibre 5G backhaul. They fear loss of control and they fear having their tickets clipped. The cost per mobile connection for such a service would be tiny. It would be far less than the cost of building a new network.

In reality one or more of the mobile carriers may end up using some Chorus fibre to backhaul. They may also use NorthPower, UFF or Enable resources. What they don’t want is another wholesale network muscling in on their turf.

Yet, it looks like they will end up with either Chorus or a regulated Chorus-like wholesale organisation. Only Spark could go it alone. But it has better capital expenditure options on than overbuilding a fibre network.

Disclaimer: Chorus pays me to edit the Download magazine and a weekly newsletter. It didn’t pay me to write about 5G backhaul. Indeed, this post doesn’t reflect anyone’s opinion other than my own. No one vetted or otherwise approved this. Any mistakes are down to me. Your corrections or alternative opinions are welcome.