Assessing the 5G enterprise relationship and opportunity

This is an excerpt from the recent TM Forum report 5G future: Targeting the enterprise. Download the report now for the full insight.

When asked what their companies should aspire to become, about half the communications service providers (CSPs) we survey consistently respond that they should aim to be either platform enablers or platform providers. Indeed, a third of CSP respondents in our recent Future business models survey said they believe their companies should become full digital service providers offering a range of end-to-end services, sometimes in competition with major cloud providers such as Amazon Web Services (AWS) and Microsoft. This is a hugely ambitious goal that requires CSPs to move well beyond the connectivity services upon which they have built their businesses. It requires far greater flexibility, a more innovative spirit and being sufficiently open to collaboration in order to deliver the diversity of services required in enterprise vertical markets.

CSPs must consider, sometimes in individual cases, whether they can accept sharing ownership in partner relationships, can take a back seat or supporting role in others, and whether they have the capacity and desire to manage customer and partner relationships. This responsibility includes service assurance, multi-party compensation, product support and more. Most CSPs are becoming comfortable partnering with other technology companies. Partnering with customers is less familiar territory, but operators seem confident they can do it. In a poll conducted at Digital Transformation World in May, more than 30% of CSP respondents said they believe they will own the customer relationships of the future. Less than 20% said they won’t, while about half said customer ownership will vary by service and industry, which indeed is most likely. Either way, the opportunity to seize the 5G enterprise market, with its unlimited potential for specialized solutions, is one CSPs cannot afford to miss. Nor do they expect to. Results from a separate TM Forum survey conducted late in 2018 show CSPs’ lofty goals for B2B services. Nearly three quarters of respondents said they expect to be generating more than half their revenue from B2B services in the long term.

Vertical leap

To identify which verticals CSPs view as most promising, we analyzed the business strategies of the world’s top 25 telcos using publicly available financial results and presentations to investors. The graphic below shows whether CSPs have a strategy targeting specific verticals.

Early 5G consumer pricing shifts the spotlight to enterprises

Early 5G consumer pricing shifts the spotlight to enterprises Targeting enterprises with 5G services could become even more important if CSPs are unable to charge a premium for consumer services. Even though 5G service should command a premium, early consumer pricing appears to indicate that mobile operators may not enjoy the revenue boost that typically results from deployment of next-generation technology. In the UK, for example, early 5G adopters such as BT’s EE and others had hoped to sustain a premium for 5G consumer services, but Vodafone threw a wrench into the plan by launching 5G without a premium, forcing others to follow suit. In addition, Vodafone introduced a pricing model that moves consumers away from consumption-based price plans to plans based on speed –in other words, quality of service (QoS).

“Foregoing a 5G premium in favor of unlimited plans based on speed is more than a way to nullify first-mover advantage and adversely affect the revenue stream for competitors,” TM Forum CEO Nik Willetts noted in a blog about 5G pricing. “Intended or not, if successful, the change may force CSPs to compete in a whole new way in a market that most are not yet ready to serve.”

However, the reality is that most enterprises aren’t ready either, and in some cases they have realized that 5G may not even be necessary for the applications they are most interested in. For example, LTE is sufficient for many IoT use cases.