Over the next five years, CSPs worldwide are forecast to spend USD$1.1 trillion on their networks, 80 percent of which will go on 5G. Revenues meanwhile will grow at just under two percent (source: Ovum).
CSPs will only make money from 5G by unlocking additional value for their business customers from selling solutions that embrace 5G’s game-changing capabilities.
5G connectivity alone isn’t enough
For all of 5G’s breath-taking speeds, extra bandwidth and ultra-low latency, its ability to generate revenue depends on what else CSPs sell “over the top” in addition to 5G connectivity.
Consumer features and services will bring substantial 5G subscriber numbers, but they’ll fail to generate enough revenue by themselves to cover CSP’s 5G network investment cost.
Consumers will adopt 5G faster than they took up 4G. But they won’t pay substantially more for 5G than they do currently for 4G. Consumer-facing 5G features and services - such as augmented or virtual reality, HD broadcast streaming, or real-time gaming – will almost certainly be created by OTT providers rather than CSPs themselves.
Whether or not CSPs can transform their 5G investments into an engine of growth instead depends on how they use marketplaces and ecosystems to drive innovative new solutions and business models that focused on serving enterprise and SMB markets.
However, too many CSPs haven’t yet reached this point in their thinking. CSPs still have a long way to go and a lot of hard work to do in order to have a workable strategy to monetise their new 5G assets.
Forget the kudos of being the first to launch a 5G network and ignore the loud announcements that “5G is here” – the focus must now be on how to make money out of 5G with services that generate real growth by delivering increased value for enterprise and SMB customers.
Make the enterprise your 5G focus
A broad range of industries and sectors are set to benefit from 5G – but only if it’s used in combination with other technologies, such as IoT-based connected devices, augmented or virtual reality, cloud, edge compute, AI, and analytics.
Automotive, healthcare, utilities, retail, manufacturing and many others will all gain massively from the combination of these technologies with amazing 5G capabilities including network slicing, as a means to digitally transform both their operations and business models.
However, in the “connectivity only” space, the only real differentiator is price. If CSPs rely on price as their principal 5G monetisation strategy, they risk repeating the same mistakes that they made with 3G and 4G.
For CSPs, successfully monetising 5G involves listening to business customers and properly understanding their business and operational challenges. CSPs can then work with different partners to identify and develop complete, end-to-end services and solutions that use mobile connectivity in combination with other technologies to meet these challenges.
The good news is that with 5G, CSPs have a significant advantage over start-up competitors. Enterprise CIOs will not be relying on raw start-ups to deliver highly secure and resilient 5G-based products and services they need to run mission critical processes within their business.
A recent global study found that worldwide, businesses don’t expect CSPs to just be a 5G connectivity provider. It points to CSPs’ advantages when it comes to buying solutions from them, including their technical knowledge and expertise of 5G: ability to manage complex programs: and – most importantly - ability to orchestrate an ecosystem of partners. Furthermore, when asked if they thought CSPs have more of a role to play in the 5G era than just providing communications and connectivity, businesses everywhere emphatically agreed that they did. These same businesses are very open to working with CSPs: over 92 percent worldwide said they’d consider purchasing new services and solutions from their CSP.
Contrasting attitudes between CSPs and enterprises worldwide
The study also uncovered a significant contrast in attitudes to 5G between CSPs, and enterprises and SMBs.
Worldwide, 75 percent of large enterprises and SMBs think that 5G will be important to their business. In Europe, over 90 percent of businesses surveyed believe CSPs should have a bigger role than just providing communications and connectivity. Almost seven in ten want CSPs to offer 5G solutions that combine connectivity with features and technology from third party partners.
In contrast, the majority (seventy three percent) of European CSPs still pin their 5G hopes on their old 4G mass consumer market business model and connectivity only services for enterprise. Only a quarter (26 percent) of CSPs in Europe believe their 5G role will extend beyond simple connectivity to selling solutions and orchestrating ecosystems to create brand new services and solutions.
It’s a similar story in Asia. 92 percent of Asian businesses surveyed would consider buying new technology solutions from CSPs. Of this figure, 64 percent want CSPs to extend beyond pure 5G connectivity to work with partners to create solutions, such as smart manufacturing.
In contrast, two-thirds of Asian CSPs see their future role as to supply either 5G connectivity only or infrastructure solutions like adding cloud or security. Only a third envisage providing complete end-to-end solutions that combine 5G connectivity with technology and applications from third party partners.
In North America, however, the situation is different. CSPs and businesses both agree that CSPs should take a lead in developing 5G-enabled new enterprise solutions that serve the needs of customers sitting in very different vertical industry markets such as smart farming or smart healthcare.
Nearly all (96 percent) of North American businesses surveyed believe that CSPs should play a bigger part in enterprise solutions - including ecosystem orchestration and management of complex programs to deliver them. More than three-quarters of North American CSPs agree and see the creation of vertical solutions with ecosystems of partners as the principal opportunity for 5G.
The evidence is that around the world enterprises of all sizes are crying out to work with CSPs on creating the solutions that fulfil their 5G ambitions. The onus is on CSPs to move quickly to grasp the opportunity this presents.
Partner with technology and industry players to move up the value chain
CSPs have a major opportunity to deliver enterprises’ 5G requirements - but they must follow three steps to do so:
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First: CSPs need to get much closer to their enterprise customers. By doing so, CSPs can properly understand their needs and educate them on 5G’s capabilities and how they can be used for their advantage.
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Second: CSPs must step out of their comfort zone and be more confident to take risks on new partnerships, ideas and services.
The overarching culture of most CSPs is inherently risk-averse and dominated by rigid, centralised internal structures and processes that discourage and restrict more agile and experimental ways of working to co-create with customers and partners. Rigid installed IT systems rather than adopting platforms are another major barrier to change.
Instead, CSPs should become more open to experimentation – whether it be working with new partners, devising new services, or adopting multi-sided business models.
In particular, working closely with non-telco partners provides a valuable chance to leverage complimentary capabilities and co-create innovative new solutions that address enterprises’ stand out problems.
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Third: CSPs have to truly master the art of ecosystem orchestration. For CSPs to even be relevant - let alone successful - in the new landscape of partner ecosystems and co-created services, they must support and monetise new B2B2x business models that package up network connectivity – not only 5G, but also 4G, Wi-Fi and Fibre - with devices, applications, IoT, and AI and other technologies into completely new products and services.
More flexible charging and monetisation lets CSPs bundle and price these products and services in new ways while also dividing revenues between all the partners involved. Orchestration will be how CSPs can lead the rapid roll-out of new, more complex, partner-driven offerings and reach new lucrative vertical sectors and customers.
The clock is ticking
Many organisations are already taking it upon themselves to build their own digital solutions and ecosystems in order to solve their own pressing technology needs or to generate new revenue.
Unless CSPs get their act together and move quickly, they’ll miss out on the opportunity presented by the convergence of 5G and digitalisation. Going forward, it will be those CSPs that focus on working with digital business platforms and ecosystems partners to co-create solutions for enterprise customers who will be best placed to succeed in the 5G era.
