Just like the old joke where someone asks for directions and is told “Well, I wouldn’t start from here,” 5G finds itself in a precarious position. Despite much hype, lots of investment, and multiple years of deployment, most industry bodies and analysts point to the minimal impact that 5G has had on margin and revenue growth for telcos.
So, is there a future for 5G?
To answer that, it pays to look back at why 5G’s initial deployment phase has not delivered on its promise. I put that down to three key reasons:
1. The Monetization Gap
Working for a monetization vendor, what struck me time after time in discussions with various telcos was how monetizing the significant investments being made in 5G was often cast as a “next phase” requirement. The early focus, seemingly, was on mobilizing all hands in a “build it and they will come” belief. Little thought was given to a strategic monetization plan, resulting in a continuation of the “messages, megabytes, and minutes” revenue model carried over from 4G. Not enough thought was applied to creating “powered by 5G” plans to differentiate 5G from 4G. As a result, consumers were confused about 5G’s value over 4G and were unwilling to pay a premium for it.
2. The Need for Speed?
Connectivity alone is a fungible commodity; yet, having invested in some cases billions of dollars in new 5G infrastructure, the single most marketed capability for this new major investment was speed. This, years after 4G marketing and positioning had shown that speed was a mere commodity, highly unlikely to sustainably increase margin and ARPU and, ultimately, to be traded on price. Those operators that thought they could command a premium for 5G speed quickly realised they could not.
3. NetCo or ServCo?
This is part of a broader discussion and I don’t want to stray into issues around structural separation, which is better left for another day. My observation here centers on the psyche of the different approaches. A NetCo builds out the best network it can in terms of coverage and performance; the network is its offer. A ServCo looks to build out connected services and applications that utilize key network assets to meet a specific customer need. Crucially, one starts inside-out with the network first, the other looks outside-in and starts with the business/consumer need. Maybe what we witnessed in the initial deployment phase of 5G was the result of an overly NetCo-led approach and not enough ServCo focus.
The Key Role of Telco Commercial Teams
Having said all that, I believe 5G still has a bright future. As I pointed out in my introduction, however, it needs to start from a different place, and quickly. The catalyst for that new start is the arrival of the 5G standalone core which, in many ways, is what 5G should have been four or five years ago. But — and it’s a big but — throwing more technology at the challenge alone simply perpetuates the NetCo results of the initial deployment phase. No, the arrival of the standalone core heralds an opportunity for a radical re-think.
The commercial teams in telcos (e.g., marketing, line of business, product, digital strategy) will determine whether the next period—the commercial innovation phase of 5G — will be looked back on as the successful major turning point in this technology’s lifecycle or simply a continuation of the challenges witnessed in the initial deployment phase. Why do I say that? Because the success of this commercial innovation phase depends on an inverted focus. With B2B expected to be a significant portion of 5G’s future opportunity space, this phase of 5G must be led by a focus on solving real business issues and challenges. Specifically, it requires a ServCo focus defined by language centered on business outcomes, service level agreements (SLAs), and sustainable monetization. (If this concept intrigues you, I also wrote a blog and authored a report on outcome-based pricing that delve into this topic in more detail.)
Commercial teams are pivotal as they’re in the best position to analyze customer and market opportunities and define market offerings that are outside-in by nature, reflecting the real business requirements of specific verticals or horizontal segments. Alongside that lies the crucial need for detailed engagement with their networks and IT team counterparts to ensure they are not getting ahead of their skis in terms of deployment reality.
Finally, there is an “art of the possible” engagement opportunity with key digital monetization vendors such as MATRIXX Software, that brings widespread operator engagement and experience to the table, often acting as a bridge between commercial and technology teams.
Bringing The Opportunity to Life. An Example.
Let’s consider a retail mall owner that wants to bring a whole new digital experience to their indoor and outdoor mall area and provide that as a service to both their customers and their retail tenants. Their ultimate business goal is increased footfall and revenue. Part of this experience includes a new digital retail concierge facility, a mixed reality meet-and-greet lounge, offer comparisons across their site, targeted geo-advertising, and in-store visual equipment. To ensure this is delivered at a consistently high quality, the retailer wants a complete, self-contained network environment with zero not-spots. Existing macro cellular coverage and inconsistent Wi-Fi won’t fit the bill.
Looking at this from an outside-in perspective, the main business challenge to solve is the guaranteed provisioning of localized coverage across indoor and outdoor areas of the mall at a specified level of performance — both are needed to help meet the consistency and performance needs outlined by the retail owner.
Achieving that requires a commitment to 100% localized coverage with a performance guarantee of (for example) sub-second screen load time for any localized application, combined with actionable location awareness data from anywhere in the mall. Wrapping that into an SLA with penalties as well as opportunities for revenue sharing and upselling provides the basis for what the customer is looking for and helps balance the business risk for the telco. The offer could be monetized on a pay-as-you-use basis with a zero bill-shock guarantee, an active device basis with an incremental top-up buffer, or a monthly subscription basis. Any SLA breaches could be covered with real-time dynamic pricing adjustments, time-based rebates/credits, or subscription period extensions. Delivering that with an integrated and seamless macro sliced/private 5G cellular network combined with a Wi-Fi 6/7 network using techniques such as OpenRoaming or ATSSS (Access Traffic Steering, Switching, and Splitting) closes the technology and business loop.
This is just one summary example, yet it clearly illustrates that driving a sustainable return on the investments that have already been made in 5G and are still to come will become the defining project for telcos for the remainder of the decade through 2030. Yes, it will require a reset in mentality, a re-thinking of the approach, and a re-energizing of the opportunity.