How is Nokia getting Charter to spend money to save money?

Aug 29, 2023

Articles / News

Nokia scored a 5G radio access network (RAN) deal with U.S.-based cable connectivity giant Charter Communications. Nokia says the deal is a first with what it terms a "multiple system operator" that is expanding its connectivity reach into the mobile communications space using its own network equipment.

Charter will use Nokia's AirScale platform running on Citizens Broadband Radio Service (CBRS) spectrum to support 5G connectivity for its Spectrum Mobile service. This equipment includes Nokia's 5G RAN products, which encapsulates CBRS strand-mounted radios, baseband units and Nokia's new 5G CBRS Strand Mount Small Cells All-in-One portfolio.

These strand devices are radio antennas and transmitters that can attach to a cable provider's already-installed wires, which are often deployed along telephone poles.

Charter paid $464 million for 210 CBRS spectrum licenses focused on its cable footprint across parts of 36 states. CBRS spectrum is a swath of around 150 megahertz in the 3.5 GHz band that the federal government has set aside for licensed use.

Access to that spectrum is through a multi-tiered access program that includes tier-one incumbents with "protected status," including the Department of Defense (DoD) for use by Navy ship radars and registered fixed satellite receiving stations; a tier two for "priority access licenses" (PAL); and tier three for "general authorized" (GAA) channels. Charter's licenses are of the PAL variety.

Charter currently serves approximately 6 million mobile customers using a mix of Wi-Fi connections and a mobile virtual network operator (MVNO) agreement with Verizon. That agreement was part of a broader deal cable companies struck with Verizon that involved the cable providers selling spectrum to Verizon and then scoring a roaming deal that allowed those cable providers to offer mobile services running on Verizon's network.

Charter hinted that it plans to use the CBRS spectrum and the Nokia assets to help migrate customers, traffic and the resulting cost it has to pay to Verizon to allow its 6 million customers to roam onto Verizon's network.

"As Charter continues to grow its mobile customers, the company needed a 5G wireless connectivity solution to offload traffic from its leased mobile network," the cable giant noted in a statement.

Charter has been rapidly growing its mobile customer base, including the addition of 686,000 new connections during the first quarter of this year. Charter CEO Chris Winfrey told investors that more than 10% of its cable internet customers also have a mobile connection, "and we expect mobile penetration to meaningfully grow over the next several years and our increasing convergence capabilities will contribute to internet growth."

Winfrey noted that Charter's company-owned service was "already live in one large market. It's going very well." He added that roughly 15% of customer mobile usage was running through the Verizon network, which he expects will start to drop as it ramps up its own network build.

Charter's move mimics what Comcast is doing with its own growing mobile service. That cable provider is also building out its own 5G mobile network using both CBRS and the 600 MHz spectrum to help wean traffic from its Verizon MVNO agreement.

Comcast last year struck a deal with Samsung to provide 5G RAN equipment, including Samsung's 5G Strand Small Cell that is designed to be mounted on Comcast's existing aerial cable lines. This all-in-one piece of equipment is central to the deployment as it will allow Comcast to mount cellular antennas where it's already running cable connections for wireless backhaul.

Comcast more recently selected Nokia to provide a 5G standalone (SA) core for that cable operator's 5G network build. This includes the vendor's Packet Core platform, operating software and consulting services.

Dell’Oro Group recently lauded Nokia for outgrowing its RAN rivals during the first quarter of the year.

Stefan Pongratz, VP at the analyst firm, noted Nokia "recorded the highest growth rate among the top five suppliers," with its RAN revenue share outside of China now "trending upward over the past five quarters."

Despite that growth, Nokia remains behind Huawei and Ericsson globally and behind Ericsson among RAN suppliers outside of China. Samsung earned the No. 5 position globally behind ZTE, but jumped a spot to No. 4 when taking China sales out of the equation.

Nokia CEO Pekka Lundmark told investors that the vendor had indeed entered 2023 with strong momentum, but cautioned it was "starting to see signs of the economic environment impacting customer spend." But, he added that customers still had a need to maintain their investments in 5G and fiber, with questions remaining over the timing of any spending impact.

"It's clear that there is some economic uncertainty impacting customer spending plans," Lundmark said. "In that regard, it is worth noting that if we look globally, excluding China, only about 20% of sites … are currently active for mid-band 5G, which should help illustrate how much investment still needs to be made. And even if we look at some markets like North America, which had invested earlier, mid-band site penetration is still only around 50%."