SHORT
CUT
FROM SUPPLIER TO STAKEHOLDER:
Monetizing high investments for 5G
5G is almost upon us. Like previous generational
changes to telecoms networks, it will
bring more mobile data, travelling faster.
But more importantly, an abundance of
new and improved services. The breadth
and potential of these services is almost
unlimited and will impact every sector.
Possible applications range from live VR
news broadcasts in the media sector, to
remote surgery in medicine, to educators
being able to create virtual classrooms in
remote areas. Ultra-reliable communication
based on low latency will also propel
the automotive industry, enabling selfdriving
cars and public transport vehicles.
Meeting the challenge
The challenge for the telecoms industry
is monetizing this 5G opportunity. Despite
accelerating levels of demand for data, and
the many opportunities for new and innovative
services, that these will bring significant
commercial benefit to operators is far
from a certainty.
Existing commercial conditions are tough
for operators: markets are saturated and
highly competitive; and OTT providers
have been busy creating freemium alternatives
to existing operator services. This has
made customers intolerant of charged services
from telecoms providers, and more
than happy to switch to the many alternatives
they now have. Meanwhile, existing
services for data have become commodified
and indistinguishable.
Evolving telecoms infrastructure to meet
5G requirements will also require considerable
capital investment, up to several
trillions USD. Not least, the number of
base stations will need to increase considerably,
since, despite all its advantages,
5G signals have a much shorter reception
range than 4G. In urban areas, the requirement
may be as much as 500 times the
existing provision.
Together, these challenges mean that successfully
creating and selling 5G services is
a critical development for operators. This
goes far beyond creating the conditions in
which 5G signals can be sent and received
which, on their own, might only provide
slender revenues. Rather, it means securing
a fundamental position in the resulting ecosystem
of services. These will require new
business models beyond those currently
employed by more traditional operators.
New business: new models
The business application layer – where
new services, currently in their infancy, are
surfaced to their users – is only one part of
the story, though an extremely important
one: this is where most customers will be
spending money. That projected spend will
justify the investment required to power
the development of everything required for
5G to exist. The second layer is beneath the
surface, where operators and other MNOs
will create the business enablement layer
of libraries of network functions and APIs,
which can be selected to provide specific
service elements for different applications.
Beneath that is the physical infrastructure
of the network – the base stations, servers,
fibre-optic cables, access nodes and customer-premises
equipment.
If operators position
themselves as among
the providers and
enablers of these
advanced new services,
then there is
enormous potential
for growth.
DR. ALEXANDER HENSCHEL
Managing Director, goetzpartners
ACCELERATING DEMAND FOR DATA
Overall monthly data traffic is expected
to reach 35 exabytes in 2020:
7 times current volumes
GLOBAL MOBILE DATA TRAFFIC,
EXABYTES PER MONTH FOR 2016-2020 1)
7
11
CAGR
+50%
17
24
35
2016 2017 2018 2019 2020
Meanwhile, IoT devices will become the
second largest type of connected device,
after smartphones
150
100
50
0
GLOBAL DEVICES AND CONNECTIONS
GROWTH, BLN 2)
115
13
62
2015
118
2016
+3%
120
123
127
131
2017 2018 2019 2020
Desktop PC Portable PC Tablet IoT Smartphone
24
60
1) Cisco VNI Mobile, 2017 2) IDC, March 2015