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Commercialization of 5G in Saudi Arabia

Posted on | by Matt Walker

The fifth generation of wireless technology (5G) is steadily growing in the Kingdom of Saudi Arabia (KSA). During 2019, all three operators launched 5G service and are continuously increasing its coverage. The next major step for KSA, which the world is watching closely, is the development of cost-effective and viable 5G in vertical industries such as oil and gas, marine navigation, and connected cars.

Recommendations
While KSA is an early leader in 5G, the following steps can be pursued to improve the commercialization of 5G in KSA:

  • Develop a long-term roadmap to shutdown 2G and 3G services.
  • Subsidize the cost of 5G devices.
  • Enable vertical markets for 5G in consultation with relevant stakeholders. Provide a near term deadline to shutdown 3G services


KSA Overview

Saudi Arabia, officially the Kingdom of Saudi Arabia, is the world’s 13th largest country by geographical area. The kingdom is bordered by Jordan and Iraq to the north, Kuwait to the northeast, Qatar, Bahrain, and the United Arab Emirates to the east, Oman to the southeast and Yemen to the south and it is separated from Egypt and Israel by the Gulf of Aqaba. It is the only nation with both a Red Sea coast and a Persian Gulf coast, and most of its terrain consists of arid desert, lowland and mountains (Figure 1).

Figure 1


Source: Nations Online Project

The Saudi economy is the largest in the Middle East and the 18th largest in the world. It also has one of the world’s youngest populations; about 40 percent of its 34.5 million people are under the age of 25. And, it also has one of the world’s highest immigrant population, about 30% of total. Immigrants account for around 70 per cent of the employed population and 80 per cent of the private sector workforce.

Telecom Market Overview

Government

The Ministry of Communications and Information Technology (MCIT) oversees all information and communication technology matters in the Kingdom. It sets up policies and supervises ICT activities to contribute towards the socio-economic development of the country and citizens.

The regulator, CITC (Communications and Information Technology Commission) is responsible for regulating the affairs of the ICT and postal sectors in the Kingdom. CITC aims to create a highly competitive environment, provide excellent services to subscribers, and establish an attractive ecosystem for investors. It is also responsible for issuing ICT licenses (telecommunications licenses; radio frequency licenses; numbering licenses; and equipment licenses) and monitoring license obligations.

Telecom Operators

STC, Mobily and Zain Saudi Arabia are the three long-established mobile network operators (MNOs) in the country. The state owned and incumbent operator STC founded in 1998 lost its monopoly to Mobily in 2004. Zain, newest to the market, started its operations in 2008.

The mobile telecom sector has more than 42 million subscribers led by STC followed by Mobily and Zain respectively. Virgin Mobile Saudi Arabia and Lebara Saudi Arabia operates as MVNOs in the Kingdom. They utilize the infrastructure and radio spectrum of the MNOs to provide services.

STC and GO Telecom are the two fixed telecommunication licensed entities in the Kingdom.

Infrastructure

Fiber Optic Networks

Fiber optic penetration is on the rise due to vigorous efforts of the government and the industry since 2017. According to the MCIT two million urban dwellings were covered with fiber optic networks (FTTx) at the end of fiscal year 2018, with 0.78M subscribers or nearly double the 2015 total. Overall subscription for fixed broadband service stood at 33.7% of for the same period. (Figure 2).

Figure 2

Source: MCIT 2018 Annual Report https://www.mcit.gov.sa/en/publications

Satellite Connectivity

KSA is a member of the 21 member-state Arab Satellite Communications Organization. ARABSAT is a satellite operator that provides broadcasting and telecommunication services across the Middle East, Africa and Europe. KSA has so far launched 16 low-earth orbit satellites.

Submarine Cable Connectivity

KSA is considered as an important hub for submarine networks in the Middle East region, along with the UAE, Oman and Qatar. As of now, there are 13 in-service submarine cable systems connecting the Kingdom to neighboring countries as well to other continents.

Spectrum

KSA’s three operators have been offering 2G, 3G and 4G using a variety of bands. 2G is primarily offered through 900 and 1800, 3G via 2100 while 4G is running on 1800, 2300 and 2600 MHz frequency bands.

5G in KSA

KSA is one of the early adopters of 5G in the Middle East. One key reason is the concentrated effort made by both government and industry in its development. For instance, during the initial period of 2018, the government established the National 5G Task Force to speed up the availability of 5G. It also increased regulatory certainty through the Unified License scheme and released a sizeable amount of spectrum. Furthermore, in February 2019, the MCIT released an additional 400 MHz in mid-band (3.5 GHz) spectrum, taking the combined spectrum available for mobile services, including 5G, to around 1,000 MHz.

Operators have been deploying 5G after successfully completing trials. Zain has so far launched commercial 5G services in 27 cities, STC is deploying 5G home broadband services in a number of cities while Mobily has signed a memorandum of understanding with Huawei for the development 5G in the Kingdom. Zain has also recently launched 5G roaming service between KSA and Kuwait.

Huawei, Nokia, Cisco and Ericsson are all important players in providing the required radio access and core infrastructure for KSA’s 5G rollouts. For instance, STC says that it has blended Huawei and Cisco core networks with Ericsson and Nokia radio access networks.

Key Challenges – 5G

The KSA’s key challenge is the commercialization aspect of 5G in conjunction with the heavy baggage of 2G, 3G and 4G networks.

The second, smaller hurdle – directly connected to the first one – is the availability of affordable 5G devices in the market. The current cost of a 5G device hovers around US$1,000 (~SAR 3,500). Close to 50% of the immigrant population is low-skilled and employed in low-paid jobs and thus are not eager to join the 5G bandwagon, at least in the near future.

The third hurdle will be the enablement of 5G in vertical markets. The list of stakeholders is long and complex. With many open as well as clandestine political agendas, it won’t be easy to come up with a solution. The concerned governmental agencies along with the corresponding industries (education, finance, health, maritime, telecommunication, tourism, transportation, etc.) will eventually face an uphill battle.

Recommendations

KSA is one of the richest countries of the world with a GDP per capita of over $23K at the end of 2018. The IMF expects the KSA economy to decrease by 0.2% in 2019 and grow by the same amount on average per year through 2024. In the telecom sector, the state-controlled structure has landed the operators in a reasonable financial state. With little possibility of any structural change and enough spectrum for 5G, the existing operators as compared to many other markets have few things to worry about, at least in the near term.

At the same time, to further streamline the process of effective and meaningful commercialization of 5G, the following steps can be considered by the government and the industry:

2G and 3G Services Shutdown: A long-term roadmap is needed to shutdown 2G and 3G services. 4G has been available since 2011, and 5G’s penetration throughout the kingdom will grow significantly in coming years. Thus it is prudent to have an effective plan to shut down 2G and 3G networks. At the same time the immigrant population (particularly the low-paid and /or low-skilled segment) has a high tendency to save money for families in their home countries. Thus they prefer cheaper 2G/3G phones over more tech-savvy and high-end devices. Regulators and operators should jointly consider developing a detailed roadmap for the discontinuation of 2G/3G services. It will free up capacity, reduce the number of network elements, reduce carbon footprint, reduce operators’ annual license costs, and allow spectrum to be returned to the regulator or to be reused for 5G if possible. In a nutshell, it will improve networks’ quality of service and the overall financial health of operators. Transition issues such as QoS (quality of service) degradation and vendor contract renegotiation are manageable.

5G Device Cost: Operators may further increase their due diligence with the device suppliers to lower the cost of 5G devices to attract the low-paid immigrant population. The current cost of a 5G device in KSA hovers around US$1,000 as compared to $10-$30 for 2G/3G phones.

Vertical Markets: The success of 5G to a large extent depends on its enablement in vertical industries. An effective roadmap is needed to strengthen 5G in IoT (Internet of Things), AI (Artificial Intelligence), and V2X (vehicle to everything – connected cars) markets.

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Source of feature image: Kemo Sahab (location: Al Bahah, Saudi Arabia)

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Other sources:
https://www.worldometers.info/world-population/saudi-arabia-population/
http://worldpopulationreview.com/countries/largest-countries-in-the-world/
https://www.cia.gov/library/publications/the-world-factbook/geos/sa.html
http://theconversation.com/which-countries-have-the-most-immigrants-113074
http://gulfmigration.org/media/pubs/exno/GLMM_EN_2018_05.pdf
http://www.mondaq.com/saudiarabia/x/532718/Telecommunications+Mobile+Cable+Communications/Telecoms+In+The+Kingdom+Of+Saudi+Arabia+An+Overview
https://www.mcit.gov.sa/en/page/98877
https://www.citc.gov.sa/en/AboutUs/AreasOfwork/Pages/default.aspx
https://www.tamimi.com/law-update-articles/an-overview-of-telecoms-licensing-in-saudi-arabia/
https://www.thenational.ae/world/mena/saudi-arabia-launches-new-communication-satellite-1.822624
https://www.submarinenetworks.com/en/stations/asia/cable-landing-stations-in-saudi-arabia
https://www.gsmarena.com/network-bands.php3?sCountry=SAUDI+ARABIA
https://knoema.com/pjeqzh/gdp-per-capita-by-country-statistics-from-imf-1980-2024?country=Saudi%20Arabia
https://www.gsma.com/r/mobileeconomy/mena/
https://www.commsupdate.com/lists/country/saudi-arabia/
https://www.telecompaper.com/international/news/all/saudi-arabia
https://www.telecomreview.com/index.php/articles/reports-and-coverage/3173-four-global-vendors-are-laying-the-foundation-for-5g-in-ksa
https://saudi.souq.com/sa-en/kgtel-k80-black-dual-sim-black-32822535/i/

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A Telecom Analyst’s Take On CES 2018

Posted on | by Narola

For most of my career, I’ve been focused on the telecom industry and its components. I’ve been to dozens of telecom-focused conferences & exhibitions, in Asia and the Americas. I had never been to a consumer-focused show, though. In order to learn a bit (and check out some cool new devices), I spent a few days at CES in Las Vegas last week.

It was as chaotic as promised, but also a geek’s paradise. Loads of new tech was shown off in AI, IoT and smart cars. Telcos had a limited presence, but another type of network operator – those building webscale networks – was well represented.

Webscale at CES

Of the biggest companies building webscale networks, most had some sort of CES presence.

As covered widely elsewhere, Google’s Assistant and Amazon’s Alexa were hard to hide from, and overpowered Microsoft Cortana’s limited presence. Apple’s late 2017 decision to postpone the launch of its HomePod (powered by Siri) prevented it from making any kind of CES splash. The absence of Apple in the market, and Cortana’s failure to withstand the competition, left the turf wide open for Google to take on Amazon.

Monorail sponsorship paying off for Google

Chinese providers Baidu and Alibaba were also standouts; both sent impressive speakers and invested heavily in booth space. Baidu’s CES presence had self-driving as the centerpiece. The company formally announced its “Apollo 2.0” platform, in collaboration with 90 partners. Its booth showcased partners’ applications of Apollo in various mobility scenarios, including passenger vehicles, public buses and shared transport services. At the event’s “Mobile Innovation” keynote session, Baidu’s COO Qi Lu expanded on the driving focus, saying the company is “scaling everything around cars”. One positive for vendors: Lu argued that the transition to 5G should accelerate because of advances in AI – and the attendant need for more speed, security, and mobility.

For its part, Alibaba positioned itself well as an industry matchmaker at CES. It sponsored dozens of tiny suppliers in its “sourcing” tent – all of which use the Alibaba platform to serve customers. These suppliers sold every type of electronic under the sun. Some don’t even have products; Alibaba GM Kuo Zhang explained that he encouraged Chinese companies with “incomplete ideas” to come to CES, to meet people. On the buyer side, Alibaba explained in a breakout session how it aims to “de-risk” transactions by providing services like virtual reality factory inspection. That not only drives commerce on Alibaba.com, it also generates lots of traffic for the Alibaba Cloud to manage.

To provide some context, Figure 1 illustrates network-related spending for the top 8 webscale network operators, in 2016. As shown, Baidu & Alibaba are among the smaller companies, but both are growing quickly.

Figure 1

Source: MTN Consulting, LLC

Robots? Be patient. Drones? Watch your head.

CES had hundreds of companies demo’ing robotics of various flavors. This is far from my usual focus, but intriguing. Luckily, I got an hour before CES opened to tour the robotics section. Lots of neat toys, but my impression is the space is very early stage. In a conference session, a speaker noted that the closest thing to a mass market consumer robotic device so far is a vacuum cleaner, iRobot’s Roomba. While this is now being equipped with WiFi connectivity, app control, and dead zone detectors, (because, why not), it’s a simple product yet still only has sold 20 million units since its 2002 release; Apple sold over 200 million iPhones in its last fiscal year.

Beyond household appliances, there is a lot of innovation around sports & games. For instance, one exhibitor demo’d a robotic ping-pong player; cool, but rudimentary so far, and hard to see a mass market application. They will come, though.

Omron’s ping-pong playing robot

As for drones, also beyond my usual telecom focus, they were all over the place. Up, down, and in your face. The range of applications (agricultural monitoring, vaccine delivery), form factors, and swarming capability was impressive. But as with many devices, drones come along with privacy and security issues. China’s drone industry is proliferating rapidly, and aiming for US growth. That could raise some national security implications. With news last week that Huawei & ZTE are facing political opposition in the US again, watch this space.

IoT devices

For anyone skeptical of the Internet of Things, CES did not disappoint. Loads of ideas seemed to have little practical use, or were overly complex. The Daily Beast’s recap put it well: CES Was Full of Useless Robots and Machines That Don’t Work. The popular Internetofshit Twitter feed suggested CES should just be renamed IOS.

But this is too easy a critique. The market is young, and the barriers to entry are low – naturally lots of inane ideas get floated. And let’s not forget that major innovations often have unexpected sources, or look silly at the time. One exhibitor, Petrics, was presenting a smart dog bed last week, equipped with sensors to monitor weight & activity. I laughed at first, but the only pet I own is a desert tortoise. Not much of a commitment. Dog-owners, though, spend hundreds of dollars per year on food and medical care. In the US, it works out to about 1% of spending for the “average” household; pet-owning households spend more. Dogs are often integral members of their owners’ family, so naturally health is important. IoT for pets could go somewhere.

Petrics’ Smart Pet Bed

Who will benefit from this sort of thing? Telcos clearly want a piece of any IoT action, and have home networking & monitoring solutions to target this, on top of connectivity. The actual revenues from these sorts of consumer-focused services are largely speculative though.

Among the many reasons for this: interoperability in the IoT space is not well developed. That was made clear at the CES session on “Connected Ecosystems”. These devices not only have to work on their own – which they often don’t – but also interoperate with other devices. T-Mobile VP for IoT and M2M, Balaji Sridharan, noted that there is “huge value in two or more IoT systems talking to each other,” as interoperability is mostly ad-hoc right now. Zigbee’s President, Tobin Richardson, says it aims to help create a “frictionless environment” for connecting devices, but admitted this is extraordinarily complex in practice. Even for a relatively simple use case, lighting, just defining “on” and “off” in a standard is not straightforward. And Zigbee is not the only standards/certification body to consider; the Open Connectivity Foundation is also important. There are also a wide range of other standards, certification, energy usage, and other bodies relevant to specific types of equipment in the home (televisions, speakers, etc.) and for general safety (e.g. NSF International).

Beyond ease of use and interoperability, security & privacy is crucial in the home. Sridhar Kumaraswamy, who oversees Home Systems for Philips Lighting, noted that devices & home networks must not only be secure when installed, but easy to keep updated since consumers tend to be busy and not technically sophisticated. Currently, IoT is very much a “caveat emptor” environment for consumers. On that note, Amazon Web Services’ GM for IoT Analytics & Applications, Sarah Cooper, noted that AWS assumes it cannot secure every device on the network, so it focuses on monitoring “behavior and deviations.” That’s increasingly the approach taken by cloud-based providers.

The rise of “AI first” companies

Companies old and new see the benefits of artificial intelligence (AI)-based tools; that was an important theme at CES. Some are going further, and putting AI at the center of their messaging. Baidu and Google speakers both emphasized last week that they were “AI first” companies, or had AI at the center of their strategies. IBM is getting there, as it develops Watson and leverages recent acquisitions. These three companies are between 17 (Baidu) and 106 years old (IBM), though. While all three are positioned well now (along with several others), is this market likely to be kind to incumbents? Over three years, maybe, but 10 or 15? The shift to autonomous autos alone is likely to create some new industry giants we haven’t yet heard of.

As awe-inspiring (and frightening) as some AI innovations are – especially when combined with robotics – it’s early. Humans are still in control. The singularity isn’t here yet. Moreover, AI has limitations. Lacking a moral code is one; as Cisco’s VP for Worldwide Services Strategy & Innovation, Rajat Mishra, noted, “we cannot outsource morality to AI.” That puts the brakes on lots of things. Or should. IBM Watson’s CTO Robert High reminded the audience of another limit of today’s AI: “these things are not deterministic, so you should not apply to applications that require high levels of accuracy” such as financial statement auditing.

One takeaway from CES overall, in the AI arena: tech companies are not being frank about job loss questions. When this issue arises, the answer is often something like this: AI will improve the drudgery of jobs, and let employees focus on more meaningful tasks; some job loss may occur in the transition, but it will be the dull jobs that go away. There is plenty of truth to that. But it’s also true that companies are already investing in AI, and it’s often specifically in order to reduce headcount. The use of things like chatbots in call centers won’t decimate entire industries, but things will get worse. This is something we’re watching closely in the telco arena. We expect telcos to be get more aggressive about cutting staff count in the next 2 years, and AI tools are one way to get there.