Where is the money to make sense of 5G investments?
The investment model for 5G has an advantage over previous generations because it builds on existing mobile operator investments in cloud and IT platforms that are being made independently of 5G. Each of these have their own justifications in the pre-5G era but will have greater relevance and applicability when 5G arrives and that helps make the case for investing in 5G.
It’s clear that investing in 5G as a single-step process from beginning to end can’t be justified but a step-by-step process that involves multiple investments each of which has its own business case or justification will keep the deployment of 5G – ultimately – on track. 5G, although it has revolutionary potential in terms of the services and revenues it will enable, isn’t in itself a revolution. Instead, it’s an evolution from 4G and there are clear steps on a path from 4G to 5G, each of which can be independently costed and has its own distinct investment rationale. That’s not to suggest that mobile operators can’t start their 5G deployments from the perspective of 5G use cases and construct their journeys to 5G from that starting point rather than a 4G point of view.
These however, don’t represent the real payback mobile operators are expecting from fully-deployed and operationalised 5G. Enabling new business models, which is the real point of engaging in the evolution to 5G, is where the real money lies. These are powered by network performance, data and network slicing which enable new business models, new propositions and new, profitable revenues to be generated.
The capability enabled by network slicing of offering the network as a service, perfectly dimensioned to a specific customer applications and industries, backed by security and with guaranteed low latency and uptime backed by a service level agreement (SLA) presents a definite opportunity for new premium business streams to emerge and that’s one of the real prizes on offer for 5G success.
This easy to understand offering is far from the only fruit. Communications service providers (CSPs) of all types will also be able to monetise the data they gather about services delivered over 5G and broker that information as they enable traditional business to servitize and enable new models in old industries such as car sharing, usage-based insurance, smart home and smart grid applications.
These opportunities will be harder to handle because they are very different and complex services that are not sold on the traditional telco model of a per SIM charge. However, these require software rather than hardware investment and operators may in fact servitise themselves to gain skills here.
The main barriers will be cultural and organisational. Mobile operators will need to learn how to sell to verticals and they will have to motivate their marketing teams to target new sectors effectively using different language and techniques than in the old world of telecoms. There are many steps that need to be carefully assessed in moving into 5G and harnessing all the opportunities.
The process therefore needs to be holistically planned so all the elements of the transformation feed and flow into each other, coming together to enable new revenues. Operations, tools, processes and technologies are all required to work in harmony and this must be planned from the start which is where Nokia’s 5G Services expertise can come into play, drawing on our experiences across these domains and in real world deployments to bring all the disparate elements together and create a holistic vision of the 5G future.
Nokia 5G Acceleration Services are focused to address the 5G challenge to help CSPs define their tailored journeys to 5G.
This blog was written by Helmut Schober, who leads the 5G Services programme at Nokia, and Vikas Dhingra, a consultant at Bell Labs Consulting, now part of Nokia.