Can 5G Help Telcos Get Rid of The Dumb Pipes Tag?
They can, if they get 5G monetization right...
As 5G deployments pick up pace across the globe and move from non-standalone to standalone 5G, there is a growing realization that the technology offers an opportunity for the telcos to finally get rid of the dumb pipe tag? The question of 5G monetization is intrinsically linked to this.
On the consumer side, it is reasonably clear that 5G will be able to provide better speeds, improved network reliability, and lower latency networks. However, without a killer application, it is unlikely that the end consumers will pay significantly more for 5G than they do for 4G. Even so, the 5G services, based on virtual reality, augmented reality or real-time gaming, might be created by OTTs or the Communications Service Providers (CSPs). To the telcos, 5G offers better spectral efficiency and a more efficient way to deliver bits of data over the RF spectrum for the telcos.
However, it is on the enterprise side that the real monetization opportunities lie for the CSPs. 5G, along with distributed mobile edge computing infrastructure coupled with analytics capabilities, is clearly more than just a dumb pipe. It can be then argued that 5G provides an opportunity to the telcos to go beyond being dumb pipes to take control and be in the driving seat.
3G and later 4G provided opportunities to the OTT players and gave rise to the app economy. This meant that these players were able to piggy ride on the networks created by CSPs while telcos were more or less relegated to the status of dumb pipes. WhatsApp, Uber, Ola, Netflix, Amazon Prime were able to create businesses based on networks set up by the telcos. Now, 5G might be the perfect opportunity for the telcos to get back some control.
Even so, 5G will be an open and intelligent network that will provide opportunities to create products, applications and smart IoT products.
What are the challenges that the telcos face in trying to take the lead in 5G opportunities?
It is not as easy as it sounds. Capturing 5G opportunities requires the telcos to go beyond offering connectivity solutions. They have to rethink their roles and come up with new business models. All this will not be without internal restructuring and reorganizing.
Developing use cases for different industry verticals means that the CSPs need to understand the processes and operations. It is very different from selling connectivity solutions to enterprises. It involves educating the customer about the capabilities of 5G while at the same time learning about the company’s processes and their business goals. This consultative approach is key to coming up with winning use cases for a particular business vertical.
5G use cases for the enterprises are dependent on CSPs' ability to collaborate and co-innovate with the partner ecosystem. It can help the telcos accelerate innovation and better support their customers’ growing needs with comprehensive solutions, utilizing 5G with other advanced technologies, like cloud, IoT and AI. 5G presents a unique opportunity to the telcos
There are some technology challenges as well that the service providers face in addressing the needs of the enterprise market. The modernization of the operational and business support systems is going to be key in delivering 5G use cases to the enterprises. The telcos need to keep in mind that the enterprise customers expect simple workflow, right from ordering to maintaining a quality experience. Further, ensuring security is fundamental to any offering to the enterprises.
The telcos will need to automate their own networks to be able to offer secure and reliable services. This is also required to facilitate the growing number of use cases and different business models. End-to-end service orchestration will be needed to quickly test and customize use cases for different customers.
To grab the 5G opportunities in the enterprise space the telcos will need to decide which verticals to focus on. The recent Ericsson survey says that Manufacturing, automotive/logistics and smart cities are the three areas with high potential.
The telcos are adopting different strategies to gain expertise in different industry verticals. For instance, Verizon Business partnered with Deloitte to package 5G and MEC solutions for the retail sector.
A key challenge for telcos is that they are not known for innovating. This is not surprising considering that voice and data services are more or less commodities. On the other hand, OTTs have innovated to capture the bigger opportunities based on connectivity offered by the CSPs.
CSPs realize this and are trying to change the mindset to collaborate and fuel innovation. The service providers are entering into partnerships or funding startups. Reliance Jio incubates startups, and Airtel has also invested in several startups recently; AT&T in the US launched the 5G innovation Program to co-create new service capabilities for 5G.
The telcos must make all efforts to grab the 5G opportunity because of the several challenges faced by them. The CSP revenues are stagnant across the world; the telcos face fierce competition from Over-The-Top players; while data demand continues to surge, it does not lead to a corresponding increase in telco revenue. Lastly, the CSPs need to continuously invest in networks as customers demand faster and better services.
The telcos are also partnering with hyperscalers, system integrators, vendors and application providers to meet the needs of their subscribers. These are crucial to enter new markets and climb up the value chain. Partnerships with hyperscalers is vital as they already serve enterprise players. On the other hand, the service providers bring know-how in network slicing along with experience of offering extremely reliable and secure experience.
The Massive Private Network Opportunity
To be honest, private networks have been around for several decades now, especially in industries such as mining, mission-critical or utility. Several enterprises are also using 4G-led private networks because of better security and upgradability.
So, why are we talking about them in 2021? Because they promise to be one of the biggest business-to-business use cases of 5G. With 5G’s extremely low latency, ultra-high-speed, private networks are going to be much more widespread now. They will enable several new Industry 4.0 use cases and in critical infrastructure like ports, airports, healthcare and railways. 3GPP refers to them as Non-Public Networks and are intended for the sole use of a private entity, be it a big enterprise or government.
Essentially, there are three deployment models of private networks: deployment can be standalone, totally independent of a public network, in conjunction with public network or a hybrid model. Wholesale players may try to cut the CSPs out from private network opportunities. However, the CSPs have an advantage in being able to offer management of the network, which most of the enterprises might not be interested in taking up. The concept of network slicing is key to realizing the opportunity of 5G private networks.
The 5G-enabled private networks will power several futuristic use cases like 3D models to bring down deployment time for complex machines, enhancing productivity by running machine-led production for a longer time, among others. Private networks are emerging as one of the telecom industry’s highest growth sectors with the potential to touch $60 billion in the next five years.
5G-enabled use cases for the enterprises offer a massive opportunity to the CSPs, but they need to define their roles, partner ecosystem and business models. Unless and until they do this, the CSPs are likely to be stuck with the tag of dumb pipes for a long time.