5G business model impact
5G is a confusing mashup of technology innovation, process re-invention and business evolution. All these elements need to come together to realize the vision.
5G business model impact
This content comes from our report, 5G Monetization: Operational Imperatives. Click here to access it. 5G is a confusing mashup of technology innovation, process re-invention and business evolution. All these elements need to come together to realize the vision. Within these three pillars of change are steps that go together to build a coherent 5G business that first enhances and then expands the traditional mobile business. CSPs are embarking on the 5G development process, moving step by step to: By cross-referencing these steps against the technology, operational and business process changes that need to take place, it is possible to begin to build the framework of a business case.
- Improve service performance
- Create new service capabilities
- Improve cost efficiency
- Support service differentiation
- Improve service creation efficiency
- Support service differentiation at scale
- Increase the sales channels and market reach
- Increase the range and variety of pricing options
Saving money is a driver
eMBB and FWA have business cases that while not set in stone have solid foundations. There are definable revenue opportunities that CSPs can model based on their own experiences. Furthermore, there are clear cost efficiencies to be achieved from 5G. Depending on the extent of cost savings vary from 40% to around 90% depending on level of virtualization. While talking about Verizon’s plans to rollout of 5G in some US cities by the end of the year, the company’s Chairman and CEO Lowell McAdam stated:
"5G will deliver 1MB of service for about one tenth of what 4G does today and that allows us to push out into markets and applications at a good cost that we’ve never been able to do before.”
Finding new revenue
The business case for OpEx reduction is one that resonates well with investors as the risks involved are controlled. However, for operators to make a return on the billions they are investing in 5G, they know they must also find new sources of revenue. According to the second edition of Ericsson’s The 5G Business Potential report, there will be a $619 billion 5G opportunity in 2026 based on the new mMTC and uLLC scenarios. It further breaks down the total addressable market allocating: Applying the operational dependencies we have identified in this report against the known requirements of use cases from digital vertical markets clarifies the amount to which these 5G use cases depend on OSS/BSS transformation. In order to calculate the impact of OSS/BSS operations on 5G revenue potential across 12 verticals, we modeled the likely demand for differentiated services, the likely demand for dynamic variance of differentiated services and the likely demand for ecosystem enablement. Based on our analysis, it is possible to calculate that:
- 33% available if the operator provides connectivity and provisioning
- 54% if the operator takes on an enabler role
- 13% if the operator creates the services either themselves or through collaborations
IT is the business
The 5G business case is complicated, full of dependencies and unknowns, and no single use case is likely to justify the expense of nationwide 5G deployments. While CSPs and governments work with partners to demonstrate the feasibility and potential value to vertical enterprise customers, operators should also concentrate on ensuring that the capabilities that are being considered for one vertical or partner can be used for others, and that all capabilities can scale quickly. As TM Forum CEO Nik Willetts stated during his keynote presentation at Digital Transformation World:
“IT is no longer the back-office cost center of our business. Today IT is the business.”
For 5G use cases that require dynamic service creation and delivery across complex ecosystems, this couldn’t be more true.
