The Path to 5G Monetization
March 2019 - China claimed that Shanghai has the world’s first district with 5G coverage.1
May 2019 - Telstra launched limited 5G services in Australia with plans to expand the network almost five-fold, covering at least 35 cities during the next 12 months. 2
June 2019 - South Korea recorded 1 million 5G subscribers within 69 days of the launch of its commercial 5G services.3
June 2019 - The Indian government announced plans to begin 5G trials in the next 100 days. 4
By early 2020 - AT&T plans to have nationwide coverage of 5G in the US. 5
Let’s look at some of the 5G trials — driverless cars that are safe, remote medical access, super-efficient machineries that never fail because we detect trouble before it occurs.
The writing on the wall is clear — 5G is poised to make a big bang, but are we prepared for it?
Most carriers understand 5G will bring extreme speed and near zero latency, but do they have a business plan to make it a commercial success?
Enterprises are excited by the 5G trials. But are they able to identify those use cases that are specific to their industries and will revolutionize the ways they do business?
In other words, how can providers and enterprises monetize 5G and find a positive return on investment?
Network Providers: Expensive 5G infrastructure and a new B2B market
The shift to 5G is an expensive one. A 2018 market study estimates that U.S. telecom operators will invest as much as $275 billion nationwide over seven years as they build out 5G.6 In another estimate by Greensill, a company providing working capital to industries, the total cost of 5G infrastructure rollouts throughout the global supply chain will top $2.7 trillion by 2020.7 Telco carriers also need to pay for 5G bandwidth. As of 2018, the value of all 5G bandwidth bids made during government-run auctions in the U.S. totaled nearly $690 million.8
Carriers are moving slowly, steadily and sequentially with 5G, making initial investments in infrastructure and rolling out services before signing up customers and collecting a return on their enormous investments. This makes the ROI seem far out and adds financial stress.
Secondly, telecom operators have traditionally done business directly with consumers, providing them with services that allow them to do most of what they want with today’s 4G networks, such as watching the “Game of Thrones” TV series on a smartphone, updating their Facebook page from their laptop while in a coffee shop, or joining multiplayer games on tablets. With consumers being highly price sensitive, it is unlikely that an expensive 5G service will appeal to them, particularly if the technology gain is barely noticeable for the average user in their day-to-day operations.
The big opportunity lies in the B2B or enterprise segment, particularly with most uses cases coming from challenges that are more industry-focused than consumer-centric. 5G offers several business advantages that both telecom carriers and enterprises should be able to monetize. These include:
- Extremely low latency: By reducing round-trip data-transfer times to 1ms or less, 5G should enable near-simultaneous interactions among an organization’s remote and branch locations.
- Extremely high bandwidth: 5G aims to bring gigabit bandwidths, enabling it to handle data-rich applications and devices, including virtual and augmented reality (VR and AR), internet of things (IoT) sensors and self-driving cars.
- Network slicing: This capability should let 5G providers offer multiple virtual networks over a single physical network infrastructure. In this way, 5G promises the ability to create new network as a service (NaaS) offerings that are rightsized for specific use cases. Segregating data plane with control plane can give rise to more secure networks and applications.
- Software-defined networking: 5G promises a shift from today’s hardware-based networks to networks driven largely through software. Software-defined networks can be run on simpler, white box infrastructure that can have significant cost advantages as well.
Unfortunately, telecom carriers neither have the experience nor the relationship working in the B2B space. And since 5G isn’t commercially available across the globe, enterprises, while being cognizant of the promise of the new technology, are unsure of how it’s going to help them in their businesses.
Enterprises: Excited but unsure about the possibilities of 5G
How Things Are Set to Change with 5G
Mine monitoring: Natural resources mines can be equipped with their own private 5G wireless networks, giving their operators real-time feedback from devices and tools, as well as the ability to monitor the safety of workers and watch for emergencies. 5G can also help operators automate up to 80% of mining machines by making them either autonomous or subject to remote control.
Remote medical care: 5G’s combination of high bandwidth and low latency will enable physicians to treat patients in remote locations, without leaving their own clinics. Patients can be examined, even operated on, by physicians using medical instruments they remotely control over 5G networks.
Autonomous vehicles: Self-driving cars and trucks will collect huge quantities of data, and to stay safe, they’ll need to process this data very, very quickly. All this can be handled by 5G. Data can be collected and computed in real time, then shared instantly with other vehicles and in-vehicle components. That can help cars navigate through traffic, get from point A to point B directly and efficiently, staying clear of accidents and traffic jams.
Industrial IoT: Factory devices can be equipped with sensors that allow them to be monitored and, if necessary, repaired in real time. For example, 5G’s speed could allow managers of a food-processing factory to detect when a part in a canning machine is wearing out, before it causes a malfunction. This will save time and money, keep workers productive and ensure happier customers.
Discovering potential machinery failures even before they occur is a manufacturer’s delight. Communication between vehicles, vehicle to infrastructure, vehicle to person, and person to person can change the dynamics of traffic management, making it easy for the regulatory bodies. Universities will rejoice at the opportunity to teach remotely. 5G network slicing will allow a music teacher to demonstrate his or her skill using sound, visual data and tactile objects, which will not be any different from the interaction possible in a brick-and-mortar classroom.
These are dramatic trial stories, but are they relevant to a retailer or hospital or insurance company? Enterprises will need a clearer sense of the technology’s benefits to their businesses. The 5G gains are huge, even industry-changing. Wireless networks based on the 5G standard should create opportunities for a wide range of applications, devices and even business models.
For now, businesses are mostly watching from the sidelines. Some, jaded by past technology overhype, figure it’s safer to wait and see. Even 5G enthusiasts do not have much to choose from as the technology is not yet available in many parts of the world. In these regions, businesses can run 5G trials of their own but until the big telecom providers actually offer 5G services commercially, enterprises can’t be certain of what will be possible in the “real world.”
Lastly, enterprises have a great deal of experience working with networking hardware vendors, such as Cisco, Dell and HPE, but they have hardly worked with consumer telecom providers. Yet, that’s where much of the B2B action will be, especially with the rise of software-defined networks.
Victory lies in cooperation: Telecom and enterprises must join hands to win with 5G
Given the above challenges, neither carriers nor enterprises are likely to succeed as individual players in the field of 5G. Partnering early to identify the right problems to solve can prove to be pivotal in driving profitable implementations.
Operators need to understand the business they will be supporting so that they can provide the right services. Businesses need to understand the intricacies of 5G to know how best they can leverage it. It is a tall ask for both the participants since neither has the experience nor the expertise in areas outside their own domains.
A trusted third party, who not only understands technology but is well conversant with the nuances of different industries and their business needs, can essentially act as the glue, binding together their collaborative efforts. This third party is usually the system integrator, as they bring deep expertise with vast experience listening to client needs and creating industry-specific, affordable and efficient solutions. A “living lab” that provides telecom operators with an ecosystem of technologies and enterprises and allows them to come together and create the specific use cases that will enable monetization for all the participating entities is one good way of leapfrogging the wait.
There will be other viable approaches too, and different organizations will adopt different means. But one thing is clear: The path to 5G monetization lies in co-operation between the telecom providers, enabling hardware and software ecosystems, and enterprises with system integrators acting as the facilitators.
7Greensill, “Financing the Future of 5G,” Feb. 2019