The future of 5G is vertical – provided everyone cooperates: cellcos

5G verticals
“We make money from selling SIM cards to consumers and business users. Selling networks as a service is a big challenge for us because it doesn't fit that model.” – Antje Williams – 5G executive program manager, Germany, at Deutsche Telekom, speaking at the “5G Is Now” session of the Huawei Digital Transformation Forum in Barcelona

This week’s Mobile World Congress will be inundated with messages about how 5G is here, it’s real, and it’s rolling out now. Which means the big question now isn’t when 5G technology will arrive, but how it’s ever going to make money for cellcos. According to various cellco executives speaking at a Huawei forum in Barcelona, the answer may be verticals – but it’s going to take a mindset change and serious cross-industry cooperation to make it pay.

During a 5G session at Huawei’s Digital Transformation Forum event on Sunday, Antje Williams – 5G executive program manager, Germany, at Deutsche Telekom – said 5G adoption is inevitable if only for the network efficiencies it offers that 4G can’t achieve, especially with data consumption continuing to soar. But despite the efficiency gains, she said, “our finance department is still asking us, ‘How are you going to earn that money back?’”

Industry watchers and experts like to point to advanced apps that will capitalize on 5G’s low latency and massive IoT capabilities, such as self-driving cars and real-time virtual reality. But realistically, many early adopters are looking at enhanced mobile broadband or fixed wireless access – which is essentially the same business model with a network upgrade.

One 5G business opportunity frequently cited at Sunday’s forum was targeting enterprises and verticals with network based services making use of 5G capabilities such as network slicing and greater QoS.

However, said Dr Erol Hepsaydir, head of RAN and device strategy and architecture at 3 UK, verticals have been a missing factor in the overall 5G equation.

“Historically the telecoms universe has been focused on three sectors – infrastructure, operators and devices,” he said. “Verticals are outside of that, so we need to look at how we can make that circle wider so we can include them [in 5G]. If we do that, then we can move beyond fixed-wireless access to more types of services.”

Several operators went on stage demonstrating that they are already doing just that to various degrees.

Takehiro Nakamura, VP and Managing Director of NTT DoCoMo’s 5G Laboratory, said that the cellco is already developing partnerships with verticals. “We want to make our assets useful for them to create new services.”

To that end, last month DoCoMo launched its 5G Open Partner Program to enable partners to co-create new services. Over 600 companies have already joined, Takehiro said.

DoCoMo is already working on use cases for vertical 5G apps, such as providing stadiums with synced TV broadcasts and real-time AR, remote-control construction vehicles, security-company apps, telemedicine and digital signage on vehicles.

Liu Guangyi, chief technology officer of the wireless department at China Mobile Research Institute, said that a key part of China Mobile’s 5G roadmap over the next two years includes exploration of possible vertical solutions va 5G, such as 4K video, drones, transportation, telemedicine and factories. “We are working with vertical players to develop new business models.”

Bi Qi, President of Technology Innovation Center at China Telecom, observed that it could take seven to eight years to recoup the company’s investments in 5G based on the current service model even if ARPUs stay level. “But if we can successfully target verticals, I think we can get that back sooner.”

Deutsche Telekom’s Williams agreed that 5G is the best network to enable cellcos to target various enterprise sectors at once. The challenge is that it requires a new business model that cellcos aren’t accustomed to.

“The way our industry works, we make money from selling SIM cards to consumers and business users,” she said. “Selling networks as a service is a big challenge for us because it doesn’t fit that model.”

Williams added she thinks operators do have the ability to sell such services, and they should chase that market, but success will depend on cooperation and co-innovation with customers.

3 UK’s Hepsaydir agreed that it needs to be a joint effort – not only between other operators and vertical partners, but also the regulators and standards bodies that govern each vertical.

Across town earlier in the day, Nokia CEO Rajeev Suri also touted the importance of verticals to the 5G business, specifically giving them partial credit for 5G’s faster than expected development.

“This is being driven by great interest from the vertical industry, and they’re interested because they understand that 5G is not 4G+,” Suri said at a Nokia press/analyst event in Barcelona. “It’s a different technology with a different architecture and different capabilities, and they see how it could be beneficial for their own business.”

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