Equinix/Packet Deal Bringing Cloud Everywhere

Zac Smith of Packet recently introduced me to an entire market I hadn't realized existed: the massive "private clouds" being built by company after company. I had assumed most cloud needs would be well served by the giants, Amazon, Google, ... They have the scale to keep prices low and tens of thousands of engineers ensuring their technology is better than almost everyone else.

Packet is doing very well and has strong products and a growing customer base. Equinix, a $50 billion company, presumably paid a generous price. Equinix's P/E ratio of ~100 requires rapid and profitable growth. Packet can deliver that, initially by serving Equinix's existing customer base.

Packet can deploy private networks for Equinix clients in weeks across a dozen data centers worldwide. Perhaps more interesting is Packet's ability to extend Equinix from the data center to inside carrier networks, towers, and ultimately customer sites. All of that is part of today's Edge design, also called a hybrid cloud. Packet is already there.

Zac is selling "bare metal servers" in large numbers to companies that had particular needs or security concerns the big outfits couldn't meet. Call Packet, and in days or weeks you can have 100's of Linux servers installed almost anywhere in the developed world, ready to go and well configured with software. More

2020 5G Sitrep: Working, Cheaper, Asia Explosion, Europe PR

2020 January Situation Report: Extraordinary growth in Asia, very little in Europe. Prices of phones, radios, and service falling. Performance as engineers expected, disappointing to non-engineers. Millimetre wave < 10%, Few Edge servers. No new use cases generating volume sales.. 

150 million: China plans for 2020, on target so far

15 million: Korea 2020 plan. 30% of the population

85%: Koreans covered end of 2019

~10%: Chinese population covered, end of 2019

>400,000: China radios deployed, 2020. Reduced from 600-800,000. Possibly covering half the population

 

1-2: Countries in Europe or North America 10% covered, end of 2019

1-3: Countries in Europe or North America 5-10% covered

126,000: China radios deployed, December 2019

45,000: Radios in Shenzhen, 2020. Complete city covered

9: Companies shipping 5G phones. 3 others, including Apple, announced.

US$285: Price of decent Xiaomi 5G phone. Several others under $500. 

37: Telcos actually selling 5G. Several others claim commercial service. Dozens more by summer, 2020 

50-150 Mbps down: Speed of slow 5G, about the same as 4G per Verizon and AT&T

200 million: Offered slow 600 MHz 5G by T-Mobile US. Speeds lower than good 4G, maybe 20% higher than T-Mobile 4G in the same spectrum. 

 

 

Verizon Confirms: Microwave Fine for 5G Backhaul

Verizon's Glenn Wellbrock, Director of Optical Transport Network Architecture, Design, and Planning, startled us at  Light Reading's 5G Transport and the Edge event. Verizon is building 1,400 miles of fiber per month. Most talking heads think fiber is required.. But Glenn said:

     "Don't underestimate wireless backhaul. We use that on about 10% of our sites and will increase it, possibly to as much as 20%".

Microwave latency is lower than fiber. Daisy Dunkley Clark of Ericsson wrote to me,  "It is always the shortest path between point A and point B, and air is a faster medium than glass. A latency of much below 100 microseconds is fully feasible."

5 gigabit and 10-gigabit microwave are now standard products at a reasonable price.

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The Five 5G Chipmakers

5 companies are making 5G chips: Huawei, MediaTek, Qualcomm, Samsung, and UNISOC/Ziguang Zhanrui. Apple intends to join them one day. Almost all are made at the 7 nm foundries of TSMC and Samsung. (Large chart below)

Huawei/HiSilicon only produces for their own phones, about 1/3 of the 5G market in 2020.

MediaTek has been #2 to Qualcomm in 4G, mostly with lower-priced chips. It is sampling an advanced 5G chip in January 2020.

Qualcomm has added the mid-range 765 to the premium 800 line and is pricing aggressively.

Samsung makes 5G chips for its own phones as well as Oppo. It's investing over $10 billion to increase capacity.

UNISOC/Ziguang Zhanrui, once known as Spreadtrum, has chip samples in testing. Backed by the very well-funded Tsinghua Holdings, it has the resources to win market share.

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37%/year Productivity Improvement at Telstra

Telstra "delivered 5X data growth at fixed cost by FY21." That required productivity improvement of 37%/year. Verizon estimates 40%/year. CEO Vestberg puts it another way: "Our cost per bit is 1/10th of what it was." Deutsche Telekom estimates 1/8th. None of these figures are exact, but the trend is obvious.

Wireless technology is improving at a ferocious rate. As we all know, demand for bits continually increases. The improvements in technology have generally matched the growth in traffic demand. Now that traffic growth is slowing, overcapacity is likely. 

The rough equivalence between capacity and demand is confirmed by the financial reports of Telstra, Verizon, and most other telcos. Capital spending has been flat while generally meeting demand. Speeds have gone up dramatically.

Supply and demand explain much of what's happening in telco networks. 

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Understanding Telco People

A consulting client, expanding rapidly in the cloud, asked me for advice on how to understand the culture at phone companies. In the cloud/webscale world, mistakes happen often and are fixed quickly. That's usually impossible in telecom. Networks take years to build. A fast 5G rollout is 3-4 years. 5 years or more is common. You can't turnaround quickly.

Don't underestimate the tech people in telecom. Almost all very smart and capable. Few have fancy degrees, Almost all have worked their way to the top against a thousand others. Most are lifers and have spent many years at the same company. They believe outsiders don't understand the business. They are usually right.

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Xiaomi $285 5G is Not Crazy

 A Chinese teardown of the Xiaomi Redmi K30 5G estimates the component costs at $250*, leaving almost nothing to cover assembling, distribution, support ... It will lose money on each one. Prices under $300/2000 yuan were expected by summer 2020. Xaiomi is six months ahead. It's a decent phone: 6.7", 120 Mhz screen refresh, 4 rear cameras including Sony's 64-megapixel IMX686, fast charging,sensor. It also supports 30W fast flash charging, and has a 4500 mAh battery.

Xiaomi founder, Le Jun, explains, " Today's China is an era of overcapacity." There are nine 5G phone makers in a market where it will be hard for even 4 or 5 to be profitable. Xiaomi has no choice but to find dramatic ways to break out of the pack.

The low price is probably a good idea. Since the days of the Hewlett-Packard calculators, electronics companies have often "forward-priced." Costs go down with scale and as the company advances "down the learning curve."The low price builds the volume to a point the company gets better parts prices. Low prices also build demand, for this and other Xiaomi models.

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Live 5G Phones. Basic facts

5G phone prices are down to $285!! 9 companies are selling 5G phones but the market will only allow 4 or 5 to be profitable. That's the China price, where 10M or more have already signed up. The 150 million subscribing in China next year are an enormous market. All the companies are doing what they believe they must to win market share. US & European prices are still $900 and up, as telcos go very slow on 5G.

The chart below has phone, china price, weight, number of cameras, and size for all phones shipping as of December 13. The updated master is here.

 

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