It would seem that since the summer of 2019, barely a week has gone by without the announcement of some new development related to 5G. Actually, this may be somewhat misleading – in fact, it would probably be barely a day.
Let’s just take the UK. All the leading telcos now have a 5G play and are busy growing their 5G infrastructure, despite the general paucity of affordable 5G-compatible devices on offer in the country. In other countries, such as the US and Korea, this development been equally as rapid.
But it’s worth noting that, to date, virtually all of the growth, if not the headlines that don’t include Huawei (more about that later), have related to consumer applications. And while it is also worth noting that while there is huge growth potential for business-to-consumer (B2C) 5G services in the major markets for applications such as video streaming and e-sports, the really big bucks will flow from 5G networks once enterprise 5G has been established. The good news for the industry is that this day of business-to-business (B2B) 5G is not far off.
5G for consumers
But to get to this point, let’s spend some time looking at the B2C world and what it has done for 5G. Fundamentally, it has made the industry’s name. The initial major use cases have, to date, been successes.
There’s perhaps no more consumer-focused application than fashion, and to mark the firm’s roll-out of 5G across the UK, operator Three celebrated London Fashion Week in February 2020 with a showcase of its 5G service providing a glimpse into how the technology can transform the traditional fashion show.
Three partnered with Central Saint Martins art school to create a fully immersive 5G fashion experience, including spatial audio, haptic feedback, a 46m projection the length of the runway, and even an array of aromas, for an experience that reflected the designers’ inspirations. None of this could be done without 5G.
“5G is set to change the world for all of us and we can’t wait for our customers to start experiencing it,” said Three CEO Dave Dyson at the time of the launch.
SK Telecom in Korea also provides a great example of how 5G is changing consumer industries. The Korean operator can not only lay claim to have been the first to commercialise 5G in its own country – no small feat given the huge local competition – but it has also been developing virtual reality (VR) technologies over the past five years.
In November 2019, it announced a Virtual Social World, which it believes will be a potential driver of the popularisation of such services, allowing multiple users to engage with and create content in a virtual space. This followed the launch of streaming on-demand video services in July 2019, when it unveiled three virtual reality and augmented reality services over its 5G network to offer a more realistic and immersive experience when watching e-sports games.
And with such applications taking off, so has demand for 5G devices increased. A study released in February 2020 of 1,000 UK consumers, from communications software and service provider Amdocs, found that 35% of UK consumers were planning to buy a 5G smartphone in 2020, and that regarding consumer understanding of 5G technology, just 5% of the UK public had not heard of 5G.
That said, while just over half of those consumers claimed to know what 5G is (55%), they conceded to having only a basic understanding of its benefits over 4G. Two-fifths of the UK public claimed to have an understanding of 5G’s technical benefits, such as gigabit-speed, low-latency connectivity. The research also indicated that 5G marketing from communications service providers (CSPs) was clearly having an impact on UK consumers, with only 30% of respondents saying they had no intention of buying a 5G smartphone at all.
5G for business
The marketers have clearly done their jobs as regards 5G the brand, but as for 5G the business, SK Telecom provides another important clue as to the direction of travel and where the operators see where the real action is going to be.
The Korean telco announced in January 2020 that it had successfully accomplished the world’s first standalone 5G data session on its multi-supplier commercial 5G network, an important development in establishing its presence in 5G for the B2B arena.
And the stakes are absolutely huge for operators such as SK Telecom. A February 2020 study by recently formed research firm Omdia revealed that the wider tech ecosystem that will be created by the wider adoption of 5G products and services could lead to “enormous” opportunities for communications service providers (CSPs), with global 5G enterprise mobile subscriptions set to rise from 500,000 in 2019 to 175 million by 2024.
The report calculated that a wide range of industries are investing in private 5G networks and that about two-fifths of the enterprise 5G network deployments announced since 2016 are for manufacturing, followed by 18% in transportation and logistics.
Omdia suggested – before the effects of Covid-19 had been taken into consideration – that brands will use 5G to ease privacy fears around artificial intelligence (AI), driving revenue growth to $827bn in 2025 for edge devices and networks deployed for AI. By 2025, it said, two or three smartphones will include built-in AI capabilities, and global revenue for AI smartphones will increase to $378bn, from $29bn in 2017.
Seeking 5G use cases
The race is on to discover and support the profitable and sustainable use cases for 5G. But for Kamal Bhadada, president of the communications, media and information services (CMI) business unit at Tata Consultancy Services (TCS), the real use case of 5G is the business itself. And he says for enterprise 5G, the real work starts now.
“Enterprises need to re-architect their technology, and the re-architecture of technology will allow the true capabilities of 5G to unfold,” he argues. “5G will unlock quite a few new types of use case. Telcos now need to shift gear towards the ability to deliver not just a great experience in terms of latency and speed, but also the ability to provision it on the fly [to create] truly on-demand real-time responsive companies.”
What Bhadada is proposing is using 5G to have dynamically provisioned resources – that is, provisioning the full power and capability of the 5G networks for only set amounts of time for set tasks and set amounts of time and then de-provision once a particular workload is completed.
This is the future, he says: “Today, 5G is only at the radio level. If I have to really run services, I have to provision, de-provision, run commercial services; I need to have the architecture behind in the company, for me to be able to onboard a customer, launch a product, or combine products together for the customer to consume in real time, and de-provision it when the consumption is over, [to deliver] a true cloud-like experience.”
But how much of this potential flexible and profitable future technology is likely to happen? And when? Bhadada admits there are indeed challenges to face down and it really boils down to the strategy each telco is adopting.
“If you look at the top 30 telcos in the world, they have such a different approach to 5G. UK operators today are all about the consumer. They’re just launching the service in trial markets. It’s all about consumers,” he says.
“If you look at the US, Verizon has taken a very enterprise-centric view. It sees monetisation of the real enterprise use cases, and the real money is to be made in enterprise service, rethinking the role enterprise started, including the enterprise architectures they need to have. [For example], to support a logistic business or a container business or a shipping business, or an entertainment company or virtual reality trouble-shooting, or in a manufacturing case – how can I do trouble-shooting remotely with a camera real-time, on a turbine which is running on a plant? I send my engineer with the VR glasses, the technician is sitting at the back, and in real time they are able to say, ‘Okay, open this part now’, because they are able to see the camera and the real-time virtual collaboration happening. Those are the use cases that will make money.”
So the case for compelling 5G use cases in enterprises has been made. But how will this affect the approach taken by suppliers?
Changing CSP business models
This inevitably means that CSP business models will be based on something more subtle than just raw bandwidth and throughput as they are now. Operators could price at capacity, and indeed on latency as well as speed. Operators will sell different plans, based on the key parameters of 5G. It’s an entirely different ball game. There is also the co-existence of all services across network slices, with one service which is a different quality, and then one service with another different quality.
Bhadada believes there is another dimension to this – what he calls the four avatars. He explains: “A smart network provider is somebody who just provides a great network, at a price point, at a quality which is unmatched, so you compete on a network, and you are a best-in-class as a network operator, so nobody can [criticise] you on your operating efficiency, nobody can come to you on your quality and of your service and customer experience, as a network service.
“The second is, ‘Can I become a digital service, so I provide the network, but more importantly I provide a set of services which can be commercially used, as digital services –for example, I’ll provide security services on top of my network, which will be best-in-class home security, enterprise security service, and so on’. So, you are a digital services provider then, more than a network provider.
“The third one we see is marketplaces, whereby you provide an environment where all kinds of digital services, and also third parties, come together and get best-in-class operating in your environment. Think of it as an Apple apps model where Apple guarantees a great experience across [all apps], no matter which app you touch. So I am a marketplace as an app, I’m like an iTunes, or I’m like an App Store, I provide that as a telco, and all my digital services exist very well, so banking services will be great, payment services will be great, healthcare services will be great on my network, my service, because I have an ecosystem of all the partners, so certified, they work very well, and I make sure that consumers’ interests are protected, and at the same time consumers get great service on my ecosystems, and the ecosystem orchestrated in service.
“The fourth one is where I am really a platform, so I provide a platform [where] people [can] create services on top, so I will give data as a platform and people will monetise data and launch services to make money on it, [whether] consumers are moving from country to country, city to city. A telco becomes more of a platform provider on which people write services, and then you make money because somebody’s consuming your base architecture, just like Microsoft Azure.”
This would be a huge transition for CSPs as we know them, but for Bhadada there is only a three- to five-year window for the telcos whose competition won’t just be their peers but potentially the highly capitalised FAANG (Facebook, Amazon, Apple, Netflix and Alphabet) tech companies which may decide to play enterprise in 5G with what would be utility communications.
Barriers to 5G network roll-out
There would appear to be few gating factors to hinder 5G development, but a huge one is gaining permission to roll out the networks in the first place.
In countries such as the UK, this has to date been a thorny subject, and one still to be addressed. In August 2019, to boost 5G roll-out, the UK government announced its mobile planning consultation to investigate the potential of simplifying planning rules for masts to improve rural network coverage. The proposed amendments could mean allowing existing ground-based masts to be upgraded to 5G without prior approval and changing the permitted height of new masts to minimise the need to build more infrastructure. All of which are very necessary, says Stephen Lerner, general counsel at operator Three.
“If we’re to reach the government’s target of superfast internet for all by 2025, it needs to be made easier, both legally and financially, for operators to expand their 5G networks,” he says. “Planning permission for masts sits at the heart of this. Currently, it can take up to 18 months to secure permission to build or upgrade masts to make them 5G ready. And that is without a guarantee of success.
Stephen Lerner, Three
“To roll out 5G quickly and efficiently, permissions to enable 5G site upgrades must be fast-tracked, and for a reasonable cost to operators. As we wait for the government’s response to the consultation, we sit at a key juncture for the roll-out out of 5G in the UK. If planning permissions get expedited and simplified, the government’s 5G ambitions could be much closer to reality than any of us thought.”
And even if permission for infrastructure build-out is granted, there is then the hugely controversial issue of what technology is going into the networks. If there is one thing that the arguments surrounding Huawei and whether its technology should be restricted to radio access networks (RANs) or completely banned has highlighted, it is that there are very few companies able to supply essential communications hardware. But what are the alternatives?
To John Baker, senior vice-president of business development at cloud-native network software provider Mavenir, the UK government’s recent decision to ban Huawei technology from the core of 5G networks and with limited scope on the radio network was more about more about protecting previous investments.
“Why would you jeopardise the operation of such a large network by announcing a ban?” he asks. “The UK is in a very difficult position as it’s not just about mobile technology, it’s also about the underlying core switching fabric to get to 5G. It doesn’t mean operators will buy much more from Huawei, as they are definitely not going to be caught in a potential duopoly situation. Right now, this is a wake-up call for the industry to widen its supply base to avoid the situation happening in the US, in that the Chinese factor got worse.”
Widening supply could see opportunities also widen for Mavenir, but Baker believes a mind shift had to happen before CSPs would come around to thinking there are more alternatives than just Nokia and Ericsson to Huawei.
“Nokia and Ericsson are seen as the safe bet,” he says. “The struggle with operators, however, is that you are left with a duopoly of vendors that are getting less creative in their offerings. And these vendors are delivering closed systems – there’s no option to mix-and-match hardware and software with them, leaving a monopolistic duopoly, and less attention towards innovation and virtualisation.”
While seeing Mavenir as one of the emerging players with advanced technology solutions that are geared for 5G, Baker accepts that the company is new to RAN and it needs to be proven. He also says that such alternative suppliers are not getting the support they need form the US government. “Expansion of the vendor base for the telecommunications industry in the 5G age is not going to be a revolution, but an evolution,” he adds.
This evolution will be a slow one, according to Patrick Hubbard, head geek of network management firm SolarWinds, who argues that the infrastructure needed to deliver on 5G’s promise wasn’t yet in place and wouldn’t be widespread for a decade. While 5G’s potential is great, realising it involved getting over some obstacles.
“Though 5G will introduce new back-end complexity for organisations keen to deliver great user experiences, its larger impact will be on the way we monitor endpoints,” he says. “Guaranteeing consistent network and application performance becomes a serious challenge as the number of delivery network technologies increases. Identifying the root cause of performance issues in such fragmented networks requires additional end-to-end visibility at a time when the back-end infrastructure is becoming more opaque.”
Potential of 5G comes at a cost
So what do businesses need to do to get ready to cash in on 5G? Quite a bit still, it would seem.
Research from Accenture in February 2020 found that the future looks bright for businesses embracing 5G technology, with businesses globally recognising its huge potential. As many as 85% of respondents say they expect to use 5G to support mobile employees in the field within the next four years, up from 68% which said the same in the equivalent survey a year ago.
That said, four-fifths of respondents believe the cost of managing their IT infrastructure and applications will increase by implementing 5G technologies, and nearly a third think the upfront cost of implementing 5G will be too great. Then there are persistent fears that adopting 5G will open up the companies to security threats.
Harry Chima, Infosys Consulting
A similar survey by EY found that the number of UK businesses set to invest in 5G solutions is set to soar from the current 15% to 70% over the next three years, while 74% of UK enterprises believe 5G will enter the fabric of their business processes over the next five years. However, less than half (44%) are confident they can successfully implement 5G-based internet of things (IoT), with only a quarter (25%) indicating that they will not need a significant overhaul of their operating model to realise implementation.
Harry Chima, UK head of CIO Advisory at Infosys Consulting, concurs on the issue regarding cost. Indeed, he warns that while 5G clearly presents opportunities for businesses, it could prove to be an expensive headache.
“It’s true that one day, 5G will totally transform the way businesses operate, from faster transactions in financial services to changing the way manufacturers create and distribute their products. But this won’t happen overnight,” he notes.
“Given that many of the potential applications of 5G are still in such early phases of development, business leaders, and in particular CIOs, should question the ‘need for speed’. Meanwhile, CIOs are being tasked with creating a 5G strategy without truly knowing the opportunities, capabilities or challenges that lay ahead.
“When it comes to adoption of new technology, the early bird usually catches the worm – but this is not necessarily the case with 5G. CIOs must assess if there is a need for speed before committing to major investment in 5G. Only then can they avoid rushing blindly down the wrong path in the pursuit of speed for speed’s sake.”
And therein lies the situation, there is huge potential, but only to be realised with huge planning and no little cost to organisations. Furthermore, with geo-politics affecting the supply of enabling technology and thus affecting network roll-out, there is much less certainly around. Then there are the ongoing effects of the Covid-19 coronavirus outbreak. If these latter elements can be address or mitigated, then 2020 will truly be the year that 5G means business. And yet maybe not.
The coronavirus effect
A study by ABI Research in April 2020 found the industry’s overall shift towards global software-centric networks and operations would take a hit from the current global economic outlook and Covid-19, with telco cloud revenue from 5G core deployments set to fall short of an earlier 2020 forecast. ABI says telco cloud revenue from 5G core deployments will undoubtedly fall 20-30% short of the forecast $9bn in 2020, and that the investment shortfall in modernising telco networks may be between $2bn and $3bn in the short term.
Börje Ekholm, Ericsson
“The 5G market was growing faster than anticipated, with 2020 expected be the starting point for 5G standalone [SA] core commercial deployments in communications service providers’ [CSPs] networks,” notes Don Alusha, senior analyst at ABI Research. “But that expectation may take a little longer to materialise. That is due, in part, to the fact that Covid-19 will almost certainly derail further trials and testing to verify the processing performance and stability of 5G SA networks. In the short term, the industry may have no choice but to protect existing consumer revenue.”
A few weeks later, fellow research firm Omdia painted an even bleaker picture for the telecoms industry. As it speculated that amid the Covid-19 crisis, annual worldwide mobile communications services market revenue could total $749.7bn at the end of 2020, some $51bn less than was predicted earlier this year, it also observed that there will be severe negative economic consequences of the pandemic and likely disruption to 5G network deployment plans. This, it says, will take the form of delays in 5G network deployment and in the availability of 5G devices. Overall, Omdia believes 5G worldwide subscriptions will be 22.1% lower than it had previous forecast.
But if there was a bright spot on the horizon, it has been pointed to by comms tech provider Ericsson, which, revealed president and CEO Börje Ekholm as it announced its first quarter results for 2020, is gearing up for a post-coronavirus world with confidence in 5G. The company spent the first few weeks of May outlining its 5G strategy, especially in enterprises, revealing projects for its 5G-ready Industry Connect solution.
Ekholm says the company is already seeing early signs of service providers monetising the 5G opportunity, with positive average revenue per user trends and growing revenues in pioneering 5G markets.
“5G will unlock the potential of the fourth industrial revolution and will be the cornerstone upon which a country’s relative competitiveness is built,” he adds. “While 4G gave us the app economy, 5G will be the greatest open innovation platform ever.” A whole industry hopes that he has called this right.