Partnerships and mergers, brought to you by 5G

We are at least 4-5 years away from any mainstream 5G deployments, but that hasn't stopped vendors from pursuing a strategy to promote their vision.

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Samsung Electronics

Although the "hype" around 5G has already started, with early trials being conducted by Verizon and AT&T, the truth is that we are at least 4-5 years away from any mainstream, substantial deployments that will provide users with a critical mass of access points. But that hasn't stopped many of the major equipment (e.g., Ericsson, Huawei, Nokia) infrastructure (e.g., Cisco, Alcatel-Lucent) and chip/modem vendors (e.g., Intel, Qualcomm) from pursuing a strategy to promote their vision of 5G. And while we are at least 1-2 years away from a universally accepted 5G standard, this hasn't stopped the posturing for prime position in what is expected to be a huge, potentially worldwide market opportunity -- not only in infrastructure, but also in client access points (e.g., smartphones, tablets, IoT devices).

The lure of 5G has created some interesting partnership opportunities. Nokia recently acquired Alcatel-Lucent to be able to provide a more complete 5G upgrade offering to its existing customers (and to stave off the heavy-duty competition offered by the Chinese players, particularly Huawei). Nokia is a major provider of carrier infrastructure, with heavy emphasis on the RAN (radio area network). Alcatel-Lucent also competes at the RAN level, but has a strong presence in back-end, IP-based backhaul infrastructure. The "bulking up" by Nokia means it will have more "stuff" to sell, and hence it will be able to control more of the market dollars spent in upgrades. But its size will also allow it to be more influential in the ongoing standards discussions.

Not to be outdone, Ericsson and Cisco recently announced a strategic partnership. While neither currently wants to acquire the other (or perhaps is even able to do so), a strategic partnership, aimed squarely at the future upgrade to 5G, makes a good deal of sense for both companies. Does this mean that in the future this could be more than just a strategic partnership? Both are viable stand-alone entities. But a combined company not only would be a powerhouse in corporate systems, but also would create a primary implementer of all things networking for public and private entities. This initial partnership could be a trial relationship that could end up as something more longer-term.

Cisco/Ericsson is a highly complementary combination. Cisco has a dominant position in the market for corporate and carrier IP infrastructure (although its position has been slipping somewhat of late), and client connectivity (e.g., LAN/WAN Ethernet, Wi-Fi). It has not been a strong player in the carrier RAN space -- an area where Ericsson has great depth and significant market share. However, Ericsson is a relatively weaker player in the backhaul and IP-based network infrastructure market.

Further, Cisco has a major footprint in enterprise and Internet IP systems, which will also need to be leveraged for 5G to be successful. So a true strategic partnership is in both parties' interest. The pairing of the front-end (RAN) and the back-end (IP-based) capabilities with a meeting in the middle around software and servers/services is a big plus. It will take all of the above to make the next-generation mobile -- and especially enterprise networks -- work, and will also provide a strong position for building out carrier systems.

The overriding question: Will this partnership allow Ericsson/Cisco to drive the market for 5G in a direction they wish it to go?

5G is less a single technology (like 4G/LTE was), and more an aggregation that will include using multiple technologies (e.g., 3G/4G, various implementations of LTE, Wi-Fi, WiGig) to get users the reliability, speed and coverage needed to push toward 5G. It means a lot of technologies will be in play, which is why a combination of radio, IP technology and virtualized software/services are critical to making 5G work.

Major players like Intel and Qualcomm are pushing their own agenda of what 5G ultimately should be, with an eye to both infrastructure and access devices. But in the end, 5G will move toward a standard that the big players can agree on. It's why "bulking up" is an important step in being successful. It's likely there will be more partnerships announced in the next year, creating more "zones of influence."

The announced strategic partnership is critical to the success of both Cisco and Ericsson if they want to stay relevant in the coming 5G upgrade cycle. It's too soon to tell if their "weight" will have a major influence on where the 5G standard goes, but without the partnership, it is highly likely each would have had much less influence. And together they can present a much-improved position in supplying products for any 5G upgrades.

Of course, it also remains to be seen whether this is a "paper partnership," or whether it will result in significant new and competitive products neither one could have produced on its own. We should be able to tell in the next 1-2 years.

Copyright © 2016 IDG Communications, Inc.

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