Unleash enterprise revenues with 5G ecosystems

By 2030, businesses will be spending $4.5 trillion per year on 5G-enabled technologies. CSPs with a vertically-focused, ecosystem-based business model stand to reap the biggest share.

When enterprise leadership teams get together this year to plan their future business strategy, 5G may not be top of mind at the boardroom table. It may not even get a mention.

But whether the C-suites know it or not, 5G will be a key enabler of their digital transformation plans: from factory-floor automation to supply chain management, and from ensuring workforce safety to improving employee training and collaboration.

A $4.5 trillion opportunity by 2030

Such is the power of the fifth-generation cellular network that Nokia Bell Labs estimates it will underpin a $4.5 trillion of worldwide ICT spending by 2030.

It’s a big pie, and communications service providers (CSPs) could be in for a decent slice of it. But monetizing 5G through enterprises won’t be as straightforward as it is for consumer markets. To avoid losing out on the biggest opportunities, CSPs will need to move up the value chain and engage with enterprise customers at a business level. That in turn will mean building vertical expertise and working with an ecosystem of partners to offer tailored solutions for specific use cases.

For CSPs used to selling business connectivity as a horizontal service, that’s a big shift out of their comfort zone. But they don’t have to build an ecosystem overnight, according to Jason Elliott, Head of CSP Solutions and Partner Marketing at Nokia.

“Broadly speaking, there are four approaches that CSPs can use to monetize their 5G investments through enterprise customers,” he says. “We’re likely to see different CSPs choose different models depending on their own resources, expertise and business strategy.”

Four broad 5G monetization models

'5G main street'

Enhanced enterprise mobility

The simplest approach is to position 5G as a must-have upgrade for workforce mobility. For seasoned road warriors and newly-hybrid workers alike, 5G can bring enhanced video calling and superfast data transfer to smartphones, tablets and laptops.

With IDC predicting that 75% of frontline workers will be enabled with mobile devices and connectivity by 2022, there’s certainly an opportunity here – and many CSPs have set up business-focused subsidiaries to try to capitalize on it.

How big of an opportunity is a different matter. This kind of “business as usual” approach isn’t likely to move the needle – especially if it leads to the same kind of race to the bottom as in consumer markets, where 5G offers have been heavily discounted in a bid to win market share.

“CSPs need to offset declining consumer revenues and getting into price wars over enterprise 5G plans won’t help,” says Elliott. “To capture the enterprise opportunity, CSPs must set their sights higher – either by developing additional propositions around workforce mobility and security, or finding other ways of monetizing their 5G investments, or both.”

Some CSPs see 5G fixed wireless access (FWA) as a new path to revenue from enterprises embracing remote and hybrid workstyles. In Saudi Arabia, for example, Zain is using its new 5G network to offer FWA to corporate customers, while T-Mobile’s WFX offer is targeted at businesses that want to provide home workers with a dedicated high-speed connection, away from video-streaming, game-playing family members.

Enterprise services were the only source of revenue growth for half of the operators analyzed by the GSMA in 2020, as consumer revenue is stagnating or declining.

'Your 5G, your way'

Private wireless networks

Bigger returns will come from giving businesses a competitive edge rather than just better connectivity. In asset-intensive industries like mining, manufacturing, ports and utilities, that edge is increasingly coming from automating physical operations and making faster decisions through AI.

Many such Industry 4.0 transformations require assured high-speed performance and ultra-low latency in environments where Wi-Fi struggles. This is typically the case in ports, warehouses and factories where there is either a lot of machinery causing radio interference, or a lot of devices to connect and manage over a large area - both indoors and out.

These are ideal candidates for private 5G networks, a market that IDC predicts will be worth $5.7bn by 2024 for the infrastructure alone. CSPs are already in on the action: Verizon’s private 5G deal with Associated British Ports will underpin a digital transformation at the Port of Southampton, while KATCH in Japan has created a new private 5G offering for manufacturers in the Aichi Prefecture.

While enterprises have more experience with Wi-Fi, they do not have experience with 5G, and this creates opportunities for CSPs. At the very least, private 5G requires spectrum, which CSPs can lease to customers. It also requires new infrastructure, which CSPs can resell, which also brings further opportunities to advise on network design and build or take it on as a consulting project.

While these tend to be one-off transactions, regular recurring revenue can come from managing the network for the customer. “In the early days of private 5G, most companies will opt to leave it to the experts: the operators who also run the public 5G networks,” says Deloitte. Cloud-based automation makes this a scalable endeavor, enabling CSPs to manage many private networks simultaneously and thus multiply the revenue opportunities.

It may also pave the way for revenue from more specialized service offerings. “Managed private 5G will bring CSPs into close contact with their enterprise customers, providing deep insight into the customer’s business,” says Elliott. “That could suggest new, specific applications of 5G that CSPs can also position and sell to other customers with similar needs, creating a virtuous cycle.”

'A slice of 5G heaven'

Network slicing for industries

For CSPs willing to push further out of their comfort zone, a third monetization opportunity lies in leveraging a powerful capability of 5G: end-to-end network slicing.

While end-to-end slicing is technically possible with 4G/LTE, 5G’s virtualized core makes it much easier to create and manage dedicated slices of the public network. These can be sold to individual enterprises or specific industry sectors on a Network as a Service (NaaS) delivery model.

“Slices could be a very appealing option for enterprises that want the performance guarantees and privacy benefits of a private 5G network, but not the CapEx costs or maintenance overheads of installing and managing their own infrastructure,” says Elliott. “A slice could either be a permanent arrangement, or a temporary augmentation delivered on demand when the customer needs extra bandwidth or coverage.”

Another opportunity lies with enterprises that need ultra-low latency over a wider area than can be served by a private 5G network. In Austria, for example, operator A1 has created an end-to-end slice (of its 4G network, with 5G to come) for the state railway operator, ÖBB, to enable real-time feedback loops between individual trains and the train control center.

A1 sees slicing as just one way it can monetize its 5G investments. “5G will bring us many new use cases and opportunities,” says Alexander Stock, A1’s CTO. “In our case, we have started the journey with network slicing, as we see demand from business customers like ÖBB to take away the burden of building and maintaining complex campus networks.”

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A1 Austria pilots end-to-end network slicing

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In Saudi Arabia, meanwhile, Mobily is using slicing to provide high-performance FWA connections to priority business customers. It’s a service that’s easy to set up and manage with automation, and it can command premium tariffs by meeting customers’ specific SLA requirements and traffic needs.

“Network slicing will enable mobile operators to rapidly provide, manage and assure services within minutes,” says Mobily CTO Alaa Malki. “Each slice can have different network performance, quality, routing and security capabilities as well as Key Performance Indicators for service assurance.”

'Together in 5G dreams'

Ecosystem-based innovation

While network slicing plays to CSPs’ network management strengths, the most lucrative opportunities will come from providing not just 5G connectivity, but entire solutions based on the new capabilities that 5G enables.

For a manufacturer, high-speed 5G connectivity could enable high-definition video streaming of production machinery in operation, for example. But the business value for that customer doesn’t come from the video streaming per se: it comes from using AI to analyze the video for slowdowns or stoppages, which in turn triggers an automatic adjustment to production line speed and an alert to a human operator.

That’s where the $4.5 trillion identified by Bell Labs comes into play. This huge market opportunity includes AI-powered solutions to make sense of – and act on – the data flooding in from millions of 5G-connected devices. That’s the key to digital transformation for many enterprises, enabling faster, more efficient and more responsive operations.

CSPs are well placed to address the connectivity part of the equation. But there’s a risk that if they don’t aim their sights higher than that – and soon – even that opportunity could be denied.

“Only one in five early enterprise 5G deals are CSP-led,” says Angus Ward, CEO of BearingPoint. “What’s deeply concerning is that some of these early deals, such as the ones we see in automotive, cut out CSPs entirely – even connectivity is being provided by other suppliers.”

“To maximize the revenue opportunity, CSPs will need to move up the value chain, offering not just the underlying connectivity, but also valuable, differentiated software and hardware solutions,” says Elliott. “That’s going to mean forging new partnerships and joining emerging, or co-creating new, ecosystems.”

Whether CSP-led or not, the key to success for these new partner ecosystems will be the ability to provide solutions that meet a specific vertical need – such as factory automation, smart building management, remote robotic control or supply chain tracking.

As we’ll explore in a future article, that won’t just be a case of bringing relevant partners together, but of making their solutions easy to access, consume and combine for enterprise customers. Capitalizing on the ecosystem opportunity requires nothing less than wholesale business re-invention, something many CSPs are still reluctant to contemplate.

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So, how to monetize 5G?

The winning solution requires CSPs to move incrementally, but quickly, towards an ecosystem model.

Going from providing horizontal connectivity to participating in (or even leading) a vertically-focused ecosystem isn’t something many CSPs can do overnight. TM Forum describes it as “a hugely ambitious goal that requires CSPs to move well beyond the connectivity services upon which they have built their businesses.”

But the ecosystem path is unquestionably the route to successful 5G monetization. “CSPs that can orchestrate such a complex web of relationships will be capable of capturing a greater share of the market,” says Evan Kirchheimer of Omdia, pointing out that taking the ecosystem route means CSPs “will not be relegated to being one of many connectivity providers competing solely on price.”

On the upside, it doesn’t all have to be done at once. CSPs could move towards an ecosystem model by first testing the waters with managed private 5G networks and then pushing the boundaries with vertical network slicing. The insights and expertise gained from those models can then guide decisions about which verticals to focus on and which ecosystems to join.

But with hyperscalers and startups also eyeing the $4.5 trillion 5G pie, and CIO’s evaluating Industry 4.0 transformation partners, they’re decisions that need to be made sooner rather than later. Especially because when the enterprise C-suite get back in the boardroom to sign off on their future business strategy and digital technology suppliers, CSPs will want a seat at the table.