Network slicing – solid business case or commercial non-starter?
Network slicing is a concept that’s been on the cards for some time. With the growing development of 5G and cloud architectures, the technology is on the brink of deployment.
Network slicing offers operators a way to provide premium services to multiple customers from fields as diverse as public safety, industrial automation and healthcare. In fact, network slicing is currently being tested by Nokia in real industrial environments.
A prominent trial is currently being run by the Hamburg Port Authority, Deutsche Telekom and Nokia to test key aspects of 5G across an industrial area of 8,000 hectares in the Port of Hamburg. 5G network slicing will be tested with use cases like traffic lights management, data processing from mobile sensors and virtual reality.
Meanwhile at Mobile World Congress 2018, Nokia and BMW demonstrated the creation of a slice in a run-time environment for automobiles, while maintaining other slices, such as public safety, running with specific Service Levels Agreements.
Investigating the commercial reality: techno-economic modelling
The functionality of network slicing is being tested and proven by such trials, but what has not received much attention is the underlying economics. What new revenue could be generated? What are the costs? Is there a sound business model?
In short, do the numbers add up?
To answer such questions, Bell Labs Consulting ran an exhaustive analysis. The team focused on comparing the operating and capital costs, as well as the potential revenue that a tier one operator could expect from three different network set-ups:
- A single virtualized network - the conventional one-size-fits-all network
- Customized, dedicated virtualized networks
- End-to-end network - comprising a single virtualized network, with slices for customers with specialized requirements
The details of the analysis can be found in our newly published White Paper here.
Every 1% increase in premium customers, leads to 3% increase revenue
Network slicing enables premium customers to be targeted. An early lesson from the modelling work is how critical it is for the operator’s sales teams to understand deeply the value of 5G network slicing. Sales must be dedicated to finding customers with both the specialized requirements and an appreciation of the benefits of a service based on network slicing, indicating they would be willing to pay a premium price.
The analysis shows that only end-to-end network slicing can realistically address many customer segments because the costs scale in line with the demand, making them commercially viable.
The work also shows that every 1 percentage point increase in customers requiring tailored connections, results in a 3 percentage point increase in revenue for the operator.
1000’s of network slices in sight?
But (there’s always a but), as the number of slices becomes large, network slicing risks sharply higher operational costs because of the complexity of managing the multiple slices and customers. This needn’t be a show-stopper however, as implementing automation effectively brings down the operational costs, enabling an operator to address more customers profitably. With full automation, the overall costs of even high numbers of network slices becomes acceptable. Automation keeps operational costs under control.
Network slicing can deliver premium revenue & optimized TCO
Finally, the accurate preparation of network slices and their operation is critical to ensure premium services are supported by the network. Nokia 5G Services provide the expertise and processes to achieve this goal. Nokia know-how in network planning, expertise in network management software and tools, combined with Bell Labs Consulting modelling will provide the optimal design.
The model analysis provides some fascinating insights into the viability of network slicing - and I encourage you to read the whitepaper for a clear breakdown on the revenue and cost impact. But the final message is positive: Approached in the right way with the network slices being planned and optimized properly, and by targeting the right potential customers with unmet needs, network slicing can deliver premium revenue, while ensuring the total cost of ownership is optimized.
The business case is solid.
Download our new whitepaper here: Unleashing the economic potential of network slicing, and check in here to learn more about ‘Techno-economic modelling in Nokia’.
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