February 28, 2014

MWC Barcelona - Wireless Infrastructure

ALU, ALU FP, ARUN, CSCO, ERIC, ERICB, JNPR, NOK, QCOM, RKUS, UBNT
By Paul Ridgewell

Ruckus is expected to benefit from carriers’ plans to integrate more WiFi into their wireless networks and is likely to launch a combined cellular/WiFi small cell in partnership with one or more major wireless infrastructure vendors.

Ruckus Embraces Multi-Mode Opportunity
As mentioned in OTR Global’s Nov. 18 Small Cells note, large wireless carriers -- including AT&T Corp. and China Mobile Ltd. -- are pushing vendors to produce multi-mode small cells that integrate not only 3G and LTE, but also WiFi. While Cisco Systems Inc. and Ericsson LM already have the capability to produce combined small cells, we believe there is a significant market opportunity for carrier WiFi specialist Ruckus Wireless Inc., in particular, to partner with cellular vendors that currently lack a WiFi solution.

Based on conversations with sources at Mobile World Congress, we believe Ruckus is looking to expand its existing relationships with Alcatel-Lucent and Nokia Corp.’s NSN to offer a combined cellular/WiFi small cell (rather than rely on co-located separate cellular and WiFi units, as is the case now). We heard the product is expected to be released within a year, potentially opening up new sales channels for Ruckus. We also heard Ruckus has recently had meetings with another very large cellular small cells vendor about a combined product. With large wireless infrastructure vendors, such as Ericsson and NSN, increasingly pushing "traffic steering" technology, which enables carriers to manage WiFi just as they would any other radio access technology, the stage is set for WiFi to play a bigger role in carriers' wireless networks.

A large U.S. carrier source described the addition of WiFi to cellular small cells as “critical” and said integrating wireless capability into small cells makes sense even if the WiFi component is not initially used. The executive added also that although shipment volume forecasts for small cells have moderated somewhat in the past year or two, he still believes the sector is set to take off. “In the short run, we’re not going to see a hockey stick ramp, but pretty soon, LTE will hit the limits of available spectrum, and then carriers will need to densify. That is when we will see shipments ramp,” he said.

Ubiquiti Growing Rapidly
An industry expert spoke about low-cost WiFi vendor Ubiquiti Networks Inc., describing it as the fastest growing vendor in the WLAN segment. While Ubiquiti's operating expenses now look set to tick up as it increases spending on R&D and engineering talent, the source said the vendor's growth is being driven still by its very low cost base in such areas as marketing and technical support. “What they spend on marketing is what I might tip a waiter. They also don’t spend anything on tech support. So most carriers won’t buy their stuff, but a lot of small guys in places like India and Mexico are buying a load of it. They want cheap. It’s a bad experience, but it works,” he said. Commenting on other WiFi vendors, he said, “Aruba [Networks Inc.] does stadiums better than Cisco and shines in terms of security, but it has terrible RF management. [Cisco’s] Meraki is not a good story technically, and it also has poor RF management, but Cisco gives its WiFi stuff away for free as part of bundles so it hardly matters. Ruckus is the leader in telco and specializes in keeping users happy. It’s also good in high-interference environments. Ruckus came up with the concept of beam forming, but that is now in the chips, so arguably, it’s not as unique in that area any longer.”

Rise of the (Virtual) Machines
Despite the growing importance of software-defined networking (SDN) and network functions virtualization (NFV) to carriers’ network planning, one source said there is little risk that high-level hardware, such as Juniper Networks Inc.’s IP routers, could be replaced by virtual machines in the near future. “VMware [Inc.] says everything is going to be software, but Juniper routers will not be replaced anytime soon. SDN is all about adding new functions on top,” he said. The source added also that virtualization is unlikely to lead to CAPX reductions. “SDN may actually end up costing carriers more, and certainly there will be no big CAPX reductions as a result of SDN. But carriers want it because of the greater flexibility it brings; provisioning gets a lot easier, and the reduced need for human involvement means that reactions can be quicker. It also gets us into the realm of predictive responses,” said the source. However, a wireless carrier head of network planning believes NFV can be implemented quite quickly in wireless networks. “There are some elements needed to make NFV more robust, but actually it's relatively straightforward. We already have some functions that are effectively NFV. I think it will come in quite quickly in some areas. To move the whole core to NFV would take some time, but moving little bits of functionality is possible,” he said.

Cavium Pushing Macro/Small Cells/Cloud Proposition
Also as mentioned in the November note, OTR Global believes Qualcomm Inc. is gaining traction in the emerging small cells sector, vying for leadership with Broadcom Corp. (However, we believe Intel Corp., via its acquisition of Mindspeed Technologies Inc.’s wireless assets, leads still from a revenue perspective due to its legacy chip deployments). Sources in November also said Cavium Inc. is picking up small cell share in some segments. Sources at Mobile World Congress confirmed these trends, with one stating, “Broadcom is in a very strong position, Qualcomm is gaining and Mindspeed is slipping. Cavium is trying to gain ground; they are investing very heavily, and they have some design wins.” He added Cavium is formulating a new plan designed to protect its strong macro cell position while building an end-to-end macro to small cells product line. “Cavium is very strong in the core, and they claim about a 70% share in the host processor side of macro base stations. What they are doing now is launching a product line for the cloud; something called ‘Project Thunder’, which is a virtualization platform. The idea is you can have one architecture spanning small cells, standard cells and cloud in a seamless evolution. By doing all three, they are in a much stronger position while defending their macro business,” he said.