In 2019, Communication Service Providers (CSPs) around the world share the same strategic focus - to promote the possibilities created by 5G. 5G’s arrival promises to disrupt traditional industry value chains and reinvigorate CSP revenues and profits by giving early adopters a competitive edge for new products and services.
The challenge is where to find the early adopters and how best to facilitate disruptive new use cases. In this regard, we are bullish on 5G. However, CSPs must adapt to become “5G ready” themselves, and we’re far less bullish here. Some CSPs will adapt - but many won’t.
Initial 5G business cases mostly focus on maximizing use of existing physical and spectral assets to hold down cost whilst 5G technology matures. This illustrates the fact that the most powerful new 5G use cases are not near-term.
For example: Verizon announced the world’s first 5G fixed wireless access service in four US cities in October 2018. But cannibalizing the fixed-line market belies the fact that the new technologies for harnessing 5G’s full potential - such as light and easily wearable VR/AR - are still several years away.
5G is unlike 3G and 4G: “build it and they will come” strategies will not be successful - as there is now less demand for better network speed and on-device performance. CSPs also cannot pretend that replacing ageing 4G assets and extending existing use cases is an acceptable 5G strategy. Having the first 5G network will not yield the advantage it did for 3G and 4G.
Instead, first mover advantage lies in the new business models and use cases that will commercialize 5G in ways that customers will gladly pay a premium for. In this regard CSPs are like any digital leader; the real value lies in the business model and how it makes money, not in the technology it uses. 5G technology doesn’t offer differentiation, but its business model will.
A CSP’s 5G strategy therefore needs to fix on what it wants to be when it grows up - the mature 5G business - and not perpetuate today’s business models. 5G revenues will not miraculously materialize by doing more of the same. Critically, CSPs don’t need a 5G network to start this journey - they can start now with 4G and IoT. If operators don’t start to make the changes to commercialize 5G, they will miss out on significant new opportunities.
With this in mind, here then are three trends that CSPs must tackle if they want to thrive in the approaching 5G era:
#1: 5G will start to fail
In 2019, 5G will be a significant disappointment from a “new” revenue perspective. This is because the majority of operators are simply not yet set up to deliver on 5G commercially.
Digital business platforms will be the weapons of choice for CSPs to commercialize 5G. They bring together customers and partners into an interconnected ecosystem. By combining 5G connectivity with tools and technologies like AI/algorithms, cloud, content, devices, data, IT applications, physical assets, security, sensors and services (monetized “Anything-as-a-Service”, or “XaaS”), a platform approach facilitates the multi-sided co-innovation that’s critical to creating new digital products and services which solve genuine customer problems.
In simple terms, CSPs will use digital business platforms to enable a new wave of enterprise-focused OTTs (or xVNOs) who bring the deep industry knowledge to develop compelling new enterprise offers that harness 5G to help solve customer problems. CSPs will struggle with the industry expertise to develop these use cases on their own.
Angus Ward,
CEO, Digital Platform Solutions,
BearingPoint // Beyond
#2: Operators must become orchestrators of new enterprise services
2019 is being dubbed the year of the ‘enterprise’ by telcos and vendors alike. But enterprise services are more complex than consumer ones.
A priority for CSPs this year therefore is to collaborate with enterprise-focused partners to co-create 5G-embedded products and services for business users. Only by taking swift action to reposition themselves as orchestrators of new enterprise services supported by an ecosystem of partners, can CSPs hope to generate a return from their 5G investments. This business model change means focusing on commercializing 5G, rather than proclaiming its technology.
The majority of compelling 5G use cases sit in the enterprise space, especially in the short to medium term with IoT: most enterprises will place long-term IoT contracts over the next 2-3 years. This is why CSPs must use enterprise IoT and 4G networks today to build their new business models and capabilities, importantly creating their vertical industry partner ecosystems. It will then be much easier when 5G comes along to add it as one more xVNE service to a successful commercial model.
If they wait for 5G to arrival at scale, it will be too late. They won’t be deeply embedded within their target industries with the right partner ecosystems and platforms to create new offerings. Importantly, they will also be frozen out of the connectivity contracts awarded with 4G with limited opportunity to get into the market.
#3: Partner ecosystems will accelerate revenue growth
As CSPs become more digital, business model change is all about learning how to design solutions that are suitable for today’s consumer and enterprise markets. To do so, they must be able to combine products and services with data and content to create convenient and compelling experiences, which customers are prepared to pay for.
The range of new and additional capabilities, platforms and technologies that CSPs need in order to deliver this vision is considerable - far more than a single CSP can integrate on its own. It’s only by developing an ecosystem of partners across a range of sectors and leveraging a digital business platform that CSPs can target this ‘white space’ for services that will deliver future growth.
To do so, their partner ecosystem must be capable of generating new ideas, creating new features and services, and integrating new technologies to solve real consumer problems and offer compelling offerings.
With an innovative partner ecosystem in place, CSPs can onboard the extra capabilities, technologies and knowledge to create the products and services to drive new revenues. This can be done in quicker timescales than would be the case if they chose to “go it alone” in-house.
Finding and partnering with the right partners who can advise on where to focus efforts and resources means CSPs can build and monetize new products and services significantly more quickly.
A good example is AWS. By using AWS IoT services and AWS Marketplace, CSPs can pick and choose the modules that address their most pressing needs and expand their offerings quickly. They can then scale up these resources to accommodate extra demand and growth. It’s this level of flexibility and customisation that will be the difference between an enterprise picking one provider over another.
New year, new partners
The rapid pace of innovative digital services appearing on the market will pressurize CSPs to evolve their approach to innovation and partnerships, in order to compete properly in an increasingly crowded and cutthroat market. CSPs should not underestimate the massive competitive threat coming from digital leaders who increasingly embed connectivity into offers as part of new business models.
5G at the moment is a fifth-generation technology built on a second-generation business model. 5G may be an enabler, but it needs a new business model for enablement - and that’s what’s sorely lacking across the industry today.
In 2019, operators will need to embrace partner ecosystems in order to develop new products and services. It’s this new way of thinking that has the potential to give CSPs the means to grow at twice the rate of their rivals. For CSPs, this could be the difference in making a success of their 5G investment.
