5G future: Targeting the enterprise
by Blogs & Opinions
Service providers have made huge investments in 5G, but there are still major questions surrounding its monetization. One certain opportunity lies with enterprises.
According to an industry survey conducted by TM Forum in 2019 of 143 service provider respondents, nearly three quarters said they expect to be generating more than half their revenue from B2B services in the long term. Figuring out how to tap into the enterprise market will be critical to operators' 5G success. But CSPs need to act fast, as many companies in enterprise verticals are toying with the idea of deploying their own, private 5G networks.
Service providers simply cannot afford to let that happen, especially if they are unable to charge a premium for consumer services. Failure to address the enterprise opportunity could leave operators unable to monetize their 5G investments and struggling to offer differentiated services beyond connectivity. Making this new vertical leap is no easy feat, so where should CSPs begin and what tools and ways of working must they embrace to maximize 5G ROI?
What do enterprises want from 5G?
CSPs' success in co-creating innovative 5G services with enterprise customers and capitalizing on network slicing, and multi-access edge computing (MEC) depends largely on what enterprises want to accomplish. This will also determine whether enterprises see service providers as necessary to helping them accomplish their goal.
The prospect of deploying private networks is interesting to enterprises for two primary reasons. First, private 5G networks could be key for delivering indoor 5G coverage, which will be difficult to do using 5G outdoor networks — particularly in the upper range of 5G radio spectrum. Second, private networks could be useful for upgrading aging land mobile radio (LMR) systems, currently used for person-to-person voice communication systems, such as those used by taxi services or the police.
For the enterprise, deploying its own network gives it the possibility to cut out the "middle-man" (i.e., the CSP), and allows it to take ownership of the core and radio network elements, with spectrum most likely to be unlicensed, or licensed and leased from an operator. For the service provider, private networks are an attractive opportunity to grow revenues.
The opportunity for enterprises to utilize private networks could be both a benefit and threat to service providers as any option that bypasses the service provider will have a negative impact on operators. In addition, before CSPs can capture the immense 5G enterprise opportunity, they must ensure they have made progress on their own digital transformations. This means putting the right tools in place to deliver 5G enterprise services; these include network slicing, MEC and leveraging partnerships and co-creation.
The secret slicing recipe
For many across the telecoms industry, network slicing is touted as the biggest enabler for 5G revenue generation. Network slicing provides operators with the tools to effectively divide their network into individual slices and monetize different services on a per-slice basis. Doing so means they will be able to guarantee SLA-grade services, and thus make their network proposition more attractive to enterprises reliant on performance-based services. Network slicing will also deliver enhanced network security, privacy, increased throughput, lower latency and reduction in Quality of Service (QoS)-related issues, such as jitter or delays.
While most service providers do not expect to deploy network slicing capabilities until after 2022, many are excited by its prospect – a recent TM Forum survey, entitled Future Business Models, revealed that 82% of CSP respondents are counting on network slicing to provide dedicated network and service capabilities to individual enterprises. The majority of respondents also said that they believe that private networks for the B2B market, enabled by network slicing, will have positive short and long-term impacts on their businesses.
However, network slicing alone won't be service providers' key to 5G success. CSPs will also need to leverage MEC and cocreation to deliver innovative, 5G enterprise services.
MEC shifts centralized compute and storage resources, and some applications, to distributed cloud data centers that are physically closer to end users. Processing data at the edge of the network reduces latency, improves performance and limits network congestion. From an enterprise point of view, MEC is particularly attractive for 5G applications reliant on extremely low latency, such as autonomous vehicles and remote surgery. As such, deployment of MEC facilities is likely to be driven by enterprise use cases. It is expected that manufacturing will be the biggest vertical market for MEC, reaching $194.4 million (Research & Markets report) in the Asia market alone by 2024. And CSPs are paying close attention – according to TM Forum, 85% of service providers said MEC will enable development of new lines of business, providing cloud-based services to enterprises.
But CSPs can't go on this MEC journey alone. Indeed, many will look to partnerships to enhance their existing strategies. AT&T is one such example, the North American operator has concluded deals with Microsoft, IBM, RedHat and as well as enterprise customers in a bid to advance its MEC strategy.
This is true for the entirety of CSPs' 5G monetization journey; operators must be prepared to deliver new enterprise capabilities, such as MEC and network slicing, in conjunction with partners who understand the specific needs of manufacturing companies, healthcare organizations or automakers.
That means embracing the tools to collaborate with partners to quickly and seamlessly launch new market offerings. Operators must work together to build ecosystems and partnerships that draw on individual skills, expertise and technology in a way that understands and meets enterprises' needs. Operators need to become disruptors, a-la AWS or Google, and move away from the legacy systems that are obstacles to innovation. Success will rely on shifting the perception of telcos from outdated, to fresh and new, agile players.
The 5G enterprise opportunity is there, now the onus is on service providers to embrace the right co-creation tools, embrace the powers of network slicing and MEC, and turn opportunity into revenue.
About the author
Tim McElligott is a senior analyst at TM Forum. McElligott joined TM Forum in January 2019, after working as senior analyst at Frost & Sullivan, Editor in chief of Billing & OSS World (B/OSS magazine), and senior editor at Telephony. He is currently focused on: Industry transformation and collaboration, open architectures, digital service delivery and monetization, automated service development and assurance, and network, customer, and business intelligence. More information on 5G and the enterprise market is available in his most recent report: 5G future: Targeting the enterprise.