Selling 5G based on quality, not price, puts the spotlight on B2B
A move by Vodafone in the UK market to abandon usage-based pricing for 5G and instead sell based on speed could have far-reaching implications. Perhaps most importantly, it shifts focus to the real battleground for 5G: B2B.
Nik Willetts06 Aug 2019
Selling 5G based on quality, not price, puts the spotlight on B2B
A move by Vodafone in the UK market to abandon usage-based pricing for 5G and instead sell based on speed could have far-reaching implications. Perhaps most importantly, it shifts focus to the real battleground for 5G: B2B.
When 4G mobile services hit the market seven years ago, being first to market was rewarded with significant increases in subscribers. EE, for example, lured 318,000 UK customers in the company’s first five months of operation before other operators caught up with its deployments. First-mover status proved to be a true advantage.
Now a division of BT Group, EE had hoped for a repeat performance with its recent introduction of 5G services. The company also looked to get a bump in revenue by charging a small premium for 5G. Many other operators also hoped to generate additional revenue to recoup their investment and help cover the cost of further rollout.
However, Vodafone had a different plan. The company launched its 5G services in the UK within a month of EE, announcing it would not be charging a premium. In addition, Vodafone did something else that could, or should, reset the pace of transformation in the systems that will support 5G services: It 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).
The new pricing model will likely eliminate the temporary revenue bump some competitors were hoping for with 5G. BT Consumer CEO Marc Allera said last week that BT likely will not be able to continue charging a premium for 5G, largely because of moves like Vodafone’s.
As expectations for an increase in B2C revenues fade, the burden is pinned squarely on operators’ burgeoning relationship with the enterprise market, which 5G is expected to foster.
The seemingly small change in pricing by Vodafone will drive significant change for consumers and enterprises. Shifting the differentiator to speed, based on what users actually want to do with their phones, is a consumer-centric play. Gigabytes don’t mean much to the average consumer, but how they watch Netflix and the music they stream are concepts they understand.
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. Intended or not, if successful, the change may force communications service providers (CSPs) to compete in a whole new way in a market that most are not yet ready to serve.
A recent TM Forum survey shows that CSPs currently are generating 10% or less of their revenue from B2B services, but in the long term (five to 10 years), the majority of respondents said they expect to be generating over 50% of their revenue from B2B.
When 4G mobile services hit the market seven years ago, being first to market was rewarded with significant increases in subscribers. EE, for example, lured 318,000 UK customers in the company’s first five months of operation before other operators caught up with its deployments. First-mover status proved to be a true advantage.
Now a division of BT Group, EE had hoped for a repeat performance with its recent introduction of 5G services. The company also looked to get a bump in revenue by charging a small premium for 5G. Many other operators also hoped to generate additional revenue to recoup their investment and help cover the cost of further rollout.
However, Vodafone had a different plan. The company launched its 5G services in the UK within a month of EE, announcing it would not be charging a premium. In addition, Vodafone did something else that could, or should, reset the pace of transformation in the systems that will support 5G services: It 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).
The new pricing model will likely eliminate the temporary revenue bump some competitors were hoping for with 5G. BT Consumer CEO Marc Allera said last week that BT likely will not be able to continue charging a premium for 5G, largely because of moves like Vodafone’s.
“We thought it would be logical to have a small premium for 5G, others have not seen that logic,” Allera said in a recent Mobile World Live article.
What’s the big deal?
As expectations for an increase in B2C revenues fade, the burden is pinned squarely on operators’ burgeoning relationship with the enterprise market, which 5G is expected to foster.
The seemingly small change in pricing by Vodafone will drive significant change for consumers and enterprises. Shifting the differentiator to speed, based on what users actually want to do with their phones, is a consumer-centric play. Gigabytes don’t mean much to the average consumer, but how they watch Netflix and the music they stream are concepts they understand.
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. Intended or not, if successful, the change may force communications service providers (CSPs) to compete in a whole new way in a market that most are not yet ready to serve.
With the consumer revenue bump eliminated – because which operator won’t follow suit? – there is only one place to look for new revenue: enterprise customers.
The 5G B2B opportunity
A recent TM Forum survey shows that CSPs currently are generating 10% or less of their revenue from B2B services, but in the long term (five to 10 years), the majority of respondents said they expect to be generating over 50% of their revenue from B2B.
No surprise there, you might say. After all, the majority of credible, near-term use cases for 5G are B2B centric. As more complex industries digitize, their reliance on network infrastructure only grows, as does demand for suites of digital solutions including edge compute, analytics and AI. But don’t be fooled into thinking this is a ‘blue ocean’ opportunity for CSPs – new competitors for high reliability connectivity are coming from all angles.
Many will have to answer, no. It isn’t at all clear that operators’ legacy systems can cope with billing consumers based on QoS, let alone the flexibility that will be required by enterprises. This may prevent some companies from competing altogether, which is a far bigger rallying cry to start transforming IT than any other heard so far.
CSPs will only be able to leverage the 5G enterprise opportunity if their business operating models and underlying systems and networks have the capabilities to enable, support, assure and monetize services delivered in conjunction with partners. And although their ambitions are in the right place, the level of transformation happening with many operators remains painfully slow – their ambitions are not being executed fast enough to seize and support the enterprise opportunity before them.
In May, our members launched the TM Forum Open Digital Framework to help the industry get fit to compete in the 5G era. The framework includes the Open Digital Architecture, Open APIs, reference implementations, AI standards and reference materials tied to business processes. It is a continuously evolving collection of tools, knowledge and standards to help operators seize the enterprise opportunity in 5G, supported by continuous innovation in our collaboration and Catalyst programs.
While some of the Open Digital Framework assets are in development, several fundamental building blocks are already in place. TM Forum’s Open APIs can help CSPs transform their businesses today, as Vodafone, which has been very involved in Open API development and adoption, has shown. AT&T, China Telecom, Deutsche Telekom, and Salesforce are among the latest companies to adopt the Forum’s Open APIs and sign the Open API Manifesto. More than 50 REST-based Open APIs are now being used by over 7,000 software developers at 1,200 companies.
This is progress. And while most complex enterprise 5G services are still two to three years away, eliminating the consumer revenue bump will force operators to put all their eggs in the enterprise basket to ensure growth. To address enterprise customers’ needs, CSP business leaders must answer the rallying cry, starting today.
CSPs setting their sights on the enterprise opportunity need to ask themselves some important questions: Are we capable of truly being a partner to enterprise customers? Can we offer the flexibility, speed to market, and tailoring of solutions – often with partners? Do we have the relationships and depth of understanding of our enterprise customers’ business required to really succeed?
Many will have to answer, no. It isn’t at all clear that operators’ legacy systems can cope with billing consumers based on QoS, let alone the flexibility that will be required by enterprises. This may prevent some companies from competing altogether, which is a far bigger rallying cry to start transforming IT than any other heard so far.
Seize the opportunity
CSPs will only be able to leverage the 5G enterprise opportunity if their business operating models and underlying systems and networks have the capabilities to enable, support, assure and monetize services delivered in conjunction with partners. And although their ambitions are in the right place, the level of transformation happening with many operators remains painfully slow – their ambitions are not being executed fast enough to seize and support the enterprise opportunity before them.
In May, our members launched the TM Forum Open Digital Framework to help the industry get fit to compete in the 5G era. The framework includes the Open Digital Architecture, Open APIs, reference implementations, AI standards and reference materials tied to business processes. It is a continuously evolving collection of tools, knowledge and standards to help operators seize the enterprise opportunity in 5G, supported by continuous innovation in our collaboration and Catalyst programs.
While some of the Open Digital Framework assets are in development, several fundamental building blocks are already in place. TM Forum’s Open APIs can help CSPs transform their businesses today, as Vodafone, which has been very involved in Open API development and adoption, has shown. AT&T, China Telecom, Deutsche Telekom, and Salesforce are among the latest companies to adopt the Forum’s Open APIs and sign the Open API Manifesto. More than 50 REST-based Open APIs are now being used by over 7,000 software developers at 1,200 companies.
This is progress. And while most complex enterprise 5G services are still two to three years away, eliminating the consumer revenue bump will force operators to put all their eggs in the enterprise basket to ensure growth. To address enterprise customers’ needs, CSP business leaders must answer the rallying cry, starting today.
