Fibre will surge with 5G
08 Jun 2017
Region:Global (USA), North America (USA), Topic:Demand, Market & Product:Communications (Single Mode Fibre)
In April Verizon announced a large contract with Corning. In early May, it announced another with Prysmian. The two contracts total $1.35 billion and will cover optical cable and other networking products for a period of three years starting in 2018.
The contracts are noteworthy for two reasons. First, the fibre quantities are substantial. Second, Verizon has indicated it will use this fibre in a dense architecture that will support 4G and 5G mobile, plus future fixed-broadband network requirements. If other carriers adopt a similar architecture, fibre demand could show a strong surge as 5G construction gets underway -- in the US and in other countries.
The Corning contract
Verizon and Corning signed a supply agreement covering optical fibre, cable, and associated hardware. Verizon's commitment is to spend a minimum of $1.05 billion over three years, starting in 2018. Corning's commitment is to supply up to 20 million fibre-km of optical cable per year. Verizon will use the materials for a dense access network that will support its 5G wireless network plans, 4G "densification," and fibre-to-the-premises (FTTP) - fibre connections for homes and businesses.
The announcement did not indicate how much optical cable Verizon actually planned to purchase in any year. Corning's commitment to supply "up to" 20-million fibre-km per year suggests the potential for large quantities but no specific information. Why would Verizon make such an agreement? Verizon is aware of the current fibre shortage and clearly will wish to proceed as efficiently as possible once it has begun construction. Delays in cable deliveries can cause considerable problems once work has begun on a site.
We also note that Verizon appears to have entered a public relations battle with other US and global carriers that are posturing to be early leaders in 5G adoption. There may be some bragging rights at stake, but more significantly, there may be some new revenue streams from new commercial services offered over a 5G network. The timing needed to introduce new mobile services differs from fixed broadband, where carriers can turn up neighbourhoods as they install cables, and market to different cities or different states at different times. For mobile, and perhaps especially for high-speed, low-latency 5G networks, major metro areas or regions must be ready in a short period of time. This may be part of the reason to commit a billion dollars and lock up a guarantee for substantial fibre quantities, as they are needed.
The Prysmian contract
Less than a month after the Corning announcement, Verizon and Prysmian announced an agreement whereby Prysmian will supply "more than 17 million fibre-km" of optical cable over three years starting in 2018. The contract was said to be worth approximately $300 million. To put the quantities in perspective, Verizon is currently buying about 3 to 4 million fibre-km per year, from multiple vendors. During its peak year of FiOS FTTH construction, 2006, Verizon purchased 9 million km of fibre. Thus the requirement for more than 17 million km over three years suggests another surge in demand for Verizon.
We note that most large telecom operators seldom use a single supplier of optical cable or other critical materials as a sole source. Usually, there are two or more, although the operators may often select one supplier to be "primary." This means that supplier will receive a larger share of the carrier's total orders. In this case, Verizon has not said whether one supplier will be primary, or which one it will be. CRU believes that in the past, Verizon has placed more orders for optical cable with Corning than with Prysmian. If Corning will be the primary supplier to Verizon for this three-year "5G" project, then the total amount of fibre involved should be greater than 34 million km over three years. It is also possible that Verizon might use more than two suppliers for its optical cable requirements.
High fibre demand
There have been some additional comments suggesting that fibre demand could be quite high. A week after the agreement with Verizon was announced; Corning held a quarterly conference call to present its Q1 2017 financial results. In his comments during the call, Corning CEO Wendell Weeks said Corning had been working with Verizon on the technology requirements and architecture of this new program. He said, "this architecture will use two times to six times more fibre than an FTTH build." He explained that the range depends on what coverage you want and how the neighbourhoods are laid out.
On the day that Corning and Verizon announced this agreement, both Weeks and Verizon CEO Lowell McAdam appeared on a televised interview (CNBC news). McAdam said that its plan for 5G coverage requires high fibre counts and high density. He said Verizon has experience from adding capacity for its 4G network, noting that the company currently has 60,000 large cell towers in the US and 13,000 small cells in the US. For the new 5G architecture, he said, Verizon will add 8,000 small cells to a city such as Boston, and a larger number for New York City.
Fibre counts
As for fibre counts, McAdam said the company is placing 1,700-strand cables in Boston. Of course, such high counts would be used on some cable segments, with lower counts on others. As an example of the dense network's fibre requirement, McAdam says Verizon will run six or eight fibres to each lamppost, meaning for individual small-cell antenna sites such as lampposts. These comments about fibre counts and density support the likelihood that cable procurements could be quite large. In its announcement, Prysmian said it would supply both ribbon and loose-tube cables. Ribbons may well be used for high-count cables.
From our perspective, an important aspect of Verizon's announcements is that they are the first by a major carrier to give some indication about how much fibre may be required for building out its 5G mobile network infrastructure. Generally, many carriers have acknowledged that fibre would be needed for backhaul and front haul to meet the capacity and latency requirements. There is also some information available to indicate that the radio heads may be spaced quite densely -as few as 200 metres apart - in high-density (urban) areas. But few carriers have commented on fibre counts or specific fibre requirements per cell site.
If other carriers also adopt an architecture like that of Verizon, the amount of fibre and related products supplied for 5G network projects could provide a significant boost to US and world optical cable markets.
Contributors:Richard Mack, Principal Consultant, Wire & Cable, CRU