The interactions of physics and economics that help 5G add up

There is a constant negotiation between the disciplines of physics and economics; a tension between the natural science of matter and energy, and the dynamics of markets. The evolution of the telecoms industry, at the forefront of technology, shows how physics changes economics, whilst economics demands new solutions from physics and science. This is especially true in the area of 5G where optical technologies, which provide the core network bandwidth, and radio technologies for access, are being pushed to new heights. How does this play out? In this article, our VP of Engineering, Nathan Sowatskey, explores this tension.

Network access investment is somewhat governed by the concept of “Average Revenue per User” (ARPU). In economic terms, greater population densities, in urban areas and cities, lead to more people potentially paying for telecommunications services than in rural areas. The cost of putting cables in the ground, or mounting radio masts, are much the same. With more people comes more revenue and so more money to pay for the installation of the physical infrastructure.

For rural 5G to be economically viable, two things need to happen to improve the ARPU equation: the costs need to be lowered and the revenue increased.

The potential for improving the revenue dimension in this equation is illustrated in a report by the World Bank , estimating that if a country increased high-speed internet connections by 10%, they would benefit from a 1.3% increase in GDP. However, there are over 4 billion people across the world who do not have access to internet connectivity, many in areas of low population density. This creates a digital divide that risks becoming even starker.

A key use case for 5G is the Internet of Things (IoT), which has the potential to create new business opportunities in smart farming, for example, addressing the revenue side of the equation. This will not happen, unless those sensors can connect to data networks. That, in turn, requires a significant reduction in the cost of that equipment, and an increase in its performance and capacity.

Lowering the costs requires improvements in different kinds of communications systems, and also different ways of integrating components into systems. The components aspect is driving physics research and development, for example, in higher density optics and different forms of multiplexing. It is also driving  research into the way that radio equipment can manage radio waves that operate at high frequency  bandwidth, but also with higher density, which requires focused radio beams that reduce overlap and interference.

Economics also comes back into the picture here, as radio frequency is scarce and much of the radio spectrum is licenced and therefore expensive. In the UK, the majority of the 5G spectrum will come through Ofcom auctions, and the regulatory body has just approved six telecoms companies for the first auctions. This licenced spectrum has to be paid for, and so ARPU looms.

With 4G not offering economic returns in rural areas, where does that leave 5G? The trick is to achieve technologically viable 5G at a commercially lower price point to provide bandwidth for rural areas. Indeed, even in urban areas.

To make rural 5G an economic possibility we must also look beyond the Ofcom spectrum to unlicensed radio bandwidths that are available to use with the right enablers. An example is the gaps between frequencies used for TV transmission, which is called TV whitespace. The physics of the VHF and UHF wavelengths are such that high penetration over long distances can be achieved. TV whitespace was trialled in 2014 in the UK, and is being actively pursued globally as a solution for rural communities as part of 5G solutions.

One of the drawbacks of 4G is the nature of the systems used to deliver services. In essence, 4G is made up of a number of “stovepipe” systems that deliver services such as voice, data, VoIP, SMS, MMS and so on. Each of these systems is designed independently, without an explicit focus on common components or technologies. This is a systems engineering problem that makes 4G both more expensive, and less capable of delivering new types of services.

5G architectures are designed with the idea of common components, which are disaggregated, i.e. sold separately. This, in turn, drives an industry for developing common components, with standard interfaces, that can be integrated into systems. An industry body supporting this is the Telecom Infra Project (TIP), of which Zeetta Networks is a member.

Importantly, this then creates the economic incentives for specialist suppliers, such as Acacia for optical modules. Acacia can now build a significant business, and so afford to invest in the advanced physics that can be used to expand the capabilities, and lower the costs, of optical network components.  

Those components can then be used, along with components such as the Tomahawk chip set from Broadcom, to build systems like the Voyager optical switch. Again, Zeetta Networks can then play a role to help bring together customers and partners to build a complete solution aimed at rural communities.

Another aspect of physics is related to the trade-off between frequency/band, where high frequencies have high bandwidth, and distance/range, where high frequencies have lower range. Since ubiquity is essential for 5G, the answer is to increase density, i.e. have more radio access-points (APs). This is problematic, as APs cost money, and take up space, so the cost per AP has to decrease, they have to get smaller, consume less power, and probably have to be shared in some way. Also, more radio emitters in a given space can cause interference, so the placement and emission power has to be carefully considered, and probably dynamically optimised, which requires sophisticated software. That software runs on compute servers that also take up space, power and so on.

In the UK’s Next Generation Mobile Technologies: An Update to the 5G Strategy for the UK report, it is acknowledged that infrastructure sharing could be required in order to improve the economic case for investment, in both rural and urban areas. The idea of a “neutral host” is the economic response to these physical constraints, where antennae systems are owned by third parties and leased to operators/carriers and service providers.

Given the neutral host, and so shared infrastructure, network slicing then becomes critical to sharing infrastructure securely whilst offering control to third parties who consume the connected infrastructure, whether for connected cars and homes, e-healthcare or public infrastructure. Zeetta Networks’ NetOS® platform uses 5G connectivity to slice the network and offer customised slices that can be controlled and managed separately by different users and stakeholders. One example of the neutral host concept is the smart city, where NetOS® can be employed to manage and control the network securely and efficiently. As a test-bed for this, Zeetta Networks are involved in a world-first project involving open networking technologies in the Bristol is Open project to deploy a smart city network.

Network slicing also enables increased interactivity in sport, entertainment and public art. A great example illustrating the potential of this is the Layered Realities Weekend, which takes place in Bristol this month. Artists have been invited to test the capability and potential of 5G, and they have responded with immersive and entertaining experiences from virtual reality dance performances to interactive guided tours. Our slicing technology allows each artist to have their own network slice which will give them the necessary control to maximise the audience’s experience.

As we see, physics and economics are intertwined in this area; with physics both defining constraints and driving new developments for network slicing, and economics providing new business cases to overcome constraints and fund new technologies. For 5G to reach its full potential it is essential to reduce the costs to market, marrying economics with physics.

To find out more about our exciting work in this field, contact us.