This is a guest blog by Mark Newman, Chief Analyst at ConnectivityX.
When digital mobile communications systems launched in the early 1980s, they were initially adopted by business users rather than consumers. This was a function of price rather than utility and, since those early years, most innovation and new service capabilities have benefited consumers rather than business users. As a result, mobile operators have principally become consumer-centric organisations, generating between 70% and 90% of revenues from the consumer market.
But with 5G, the industry’s focus is flipping back to the business market. Most of the use cases under evaluation for 5G are – at least from the perspective of the operator – B2B. This is not to say that consumers will not be the beneficiaries of 5G. Rather, the connectivity will be provided by enterprises and municipal bodies, who will embed 5G in new and existing products and services.
To make these use cases a reality, mobile operators will have to fundamentally change their relationship with, and their understanding of, enterprise users. Few businesses today integrate cellular services into their corporate network environments. Corporate mobile contracts tend to offer their (internal) users the same level of services and functionality as consumers, albeit with pricing elements designed to reflect specific usage requirements (for example, discounted international roaming).
Few businesses build – or have built – private cellular networks for their office buildings or campuses. This is despite the fact that modern building techniques and materials are making it increasingly difficult for signals from public mobile networks to penetrate walls and windows. In many cases neither the mobile operator nor the enterprise seem to have sufficient incentive to address poor indoor coverage. Solutions such as distributed antenna systems (DAS) and small cells tend to be expensive (for the enterprise) to install and mobile operators often struggle to see the business case for paying for, or contributing to, the cost of indoor coverage despite the fact that it will inevitably drive traffic levels.
The capabilities and characteristics of 5G make it more compelling for both operators and enterprises to improve indoor, or on-campus, mobile connectivity. Many enterprise CIOs are starting to think about how to deploy IoT capabilities within their offices and campuses. The softwarisation of the mobile network, and the ability to build customised solutions using network slicing, will allow 5G operators to offer enterprise CIOs the flexibility and programmability that they need for corporate solutions. And 5G’s inherent characteristics in terms of speed and latency means that it can be an alternative to costly fiber installations.
But the challenges of building enterprise capabilities should not be underestimated. First, there needs to be a process of education, or re-education, in their relationship with mobile communications and mobile operators. Then, those operators which do not have a track record of delivering corporate telecoms network solutions, need to decide where they want to play in the value chain and with whom they need to partner.
Before heading down this enterprise path, 5G operators need to be entirely clear about what they want to achieve both strategically and financially. Some operators are seeking to build additional competencies beyond connectivity and to transition into ICT service providers. Others may see 5G purely as a connectivity play. It is too early to say which of these approaches is likely to be more successful – one plays to telecoms operators’ core competencies but is limited in terms of revenue potential (connectivity) while the other opens up new revenue streams but in highly-competitive markets where telecoms operators have not traditionally had a strong presence (ICT services).
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