Moore’s Law (the observation that the number of transistors on an integrated circuit doubles every two years) has driven computing, technology, and much of the economy over the last few decades. Smartphones, centralized public cloud, and other tools have all delivered substantial value. But customers are asking: what’s next?
A Short History of Wireless
Around thirty-five years ago, we entered the age of mobile communications with the launch of the first wireless analog phone network. We carried around bulky handsets so we could make voice calls while outside the office. The devices had little security and poor sound quality, but it gave us the promise of connecting with others while on the move.
In 1990, the first 2G network introduced digital technology and enabled the first instant non-verbal communications: texting. In 1998, 3G enabled the first mobile web browsers (WAP) and faster internet (up to 2mbps!), which opened up basic internet browsing while mobile. We could only view websites in a text format, but this was the start of the mobile data age. 3G also introduced packet switching, increased security and really helped kickoff the mobile revolution. But 3G still relied on traditional (and expensive) vendor and hardware lock-in for carriers.
4G LTE, in 2009, brought the wireless broadband speeds and the mobile business models we’re used to today. It is estimated that “the mobile industry accounted for 4.5 percent of global GDP [in 2017] — which equates to $3.6 trillion in economic value added — and directly or indirectly supported 29 million jobs.” (Source).
4G has laid the groundwork for 5G. Progress in Network Functions Virtualization (NFV), and virtual and open source Radio Access Networks (RAN) enables carriers to use white box hardware as part of their network stack, increases vendor choice, and implements software defined networking, where network control and routing can be dynamically updated and changed based on network conditions and user demand without needing to change physical hardware configurations.
But while 4G has provided enormous benefits, there are still many limitations: it wasn’t originally designed to run virtualized, the maximum speed is generally under 100Mb/s, and it’s not as spectrally efficient as it could be (i.e. it requires more spectrum for data) as it doesn’t support millimeter wave (mmW) frequencies or very wide channel widths.
The Promise of 5G
In thirty-five years, we’ve gone from choppy voice calls to being able to run entire businesses on the road. So, what will the next generation of wireless networks bring?
We are now entering the era of 5G, which will provide the connective tissue that delivers the promise of new platforms and business models. Some of the primary technical features of 5G include usage of mmW spectrum, ultra-low latency by design in the RAN, massive MIMO (multiple input-multiple output), custom network slicing (the ability to route and prioritize traffic) and wide channel widths. In addition, Multi-Access Edge Compute (MEC) is being deployed with 5G to enable low-latency cloud compute capabilities at the network edge.
To enable this, network virtualization tools such as software-defined networking (SDN), software-defined wide area networking (SD-WAN) and NFV must be wholly embraced by service providers. Just as enterprises have found value in moving applications to virtual and cloud-based machines, telecoms need to embrace open and virtualized functions in order to bring costs down and enable 5G’s best features. Artificial intelligence will monitor the network in real-time to enable a dynamic, Intelligent Network, a network that shifts its resources – compute, storage, and routing – based on the dynamic needs of customers within its network. Multi-access edge compute, intelligent routing, and “reverse CDN” technologies will place compute and storage closer to the end user.
To manage this dynamic architecture, compute, storage, and security will need to become more distributed and less static and require a greater embrace of serverless and container technologies. Orchestration, monitoring, and security tools will enable more scalability of such tools.
In fact, Verizon is already well down the path of building out the Intelligent Network of the future, embracing software-based open networking architecture and decentralized control to enable a dynamic network that can adjust to meet customer needs and improve network performance. Startups will play a part in the build-out of the Intelligent Network and 5G’s success, by both enhancing core technology and building the ecosystem that will drive revenue in the 5G world.
This new paradigm for an Intelligent Network will ensure that the network is used as efficiently as possible, and will lead to lower cost per bit for delivery while simultaneously increasing the compute capability of the network.
Verizon’s initial 5G use case is fixed wireless broadband, delivering high bandwidth internet to customers. But that’s just the beginning. We see a future where Verizon provides the network, compute and infrastructure for autonomous vehicles, factory automation, mobile VR and AR applications, and things we have not even thought of yet. Much like 4G created the mobile economy, we believe 5G will create new use cases and opportunities that will make our lives better and easier.
It is difficult to estimate the exact market size of 5G at this early stage. But some rough math suggests that there will be a substantial and growing market composed of small and large companies, enabled by 5G. Juniper Research estimates, perhaps conservatively, that 5G could add $65B in telecom service revenues globally by 2025. (Source). Consider that in the era of 4G, telecom firms added approximately $150B in revenue. (Source). If the ecosystem market cap to revenue ratio in 5G is similar to that of 4G, at least four $50-60B companies (or over $200B of market cap) could emerge in the 5G landscape.
Verizon Ventures has already made a number of investments to date in startups that have helped network evolution: Versa, Lumina Networks and CENX to enable software-defined network orchestration; Iguazio to support real-time data analytics at the edge; Kumu Networks increasing bi-directional radio network speeds; and The Fabric and The Hive venture studios to build new network-related businesses.
To that end, Verizon Ventures continues to search for innovative 5G-focused startups that can help Verizon achieve its technology and product goals. We are looking closely at startups that can help Verizon both build our core 5G and networking infrastructure or create ecosystems for 5G use cases. We’re particularly interested in companies that can provide highly innovative solutions utilizing multi-access edge compute, developer ecosystems, edge-based AI, blockchain, distributed cloud security, and low-latency offerings in the industrial IoT, mobility, and other vertical spaces.
Verizon Ventures’ unique position at the intersection of Verizon, startups and the venture capital community provides us with a unique role in accelerating the development of next-generation connectivity and innovation. We invite you to join us in working together to build the 5G-ecosystem.