Special Report: Making 5G cost-effective
We write a great deal in Wireless Watch about the new services and business models that could be enabled by 5G, once they are deployed in a ‘true 5G’ manner, with the cloud-based core and the advanced connectivity and management capabilities of the most recent, and emerging, 3GPP standards releases. However, it will take time for most operators to develop brand new revenue streams, especially in enterprise sectors where they may have a limited existing role in the value chain, or where demand for 5G services is only just materializing.
In the meantime, examples round the world show that any premium from consumer and mobile broadband 5G services is small or shortlived, and the new network is often most important as a marketing tool to increase market share; or to drive users to higher usage levels (which then, of course, need to be supported with extra capacity and quality of service). All this means that, for all operators in the short term, and many for the lifetime of 5G, the key objective is to reduce the cost of supporting all that broadband data. That will only be intensified by the current global economic crises, which will increase staff and energy costs, in particular, while reducing many customers’ spending power.
Time-honored approaches of pressurizing suppliers to reduce equipment prices, or compromising on quality of service, will clearly not be sufficient. This was highlighted in the most recent Rethink survey of mobile and converged operators, which questioned over 80 senior executives about network migration and investment plans up to 2027. Cost-efficiency had risen to the top of their strategic concerns again, having been ousted, in the past three years of the survey, by revenue and supply chain issues. And the approaches to reducing short-term and medium-term 5G costs were very varied, with most executives expecting to use at least three (and sometimes all) of the following measures, many of which are highlighted in analyses in this issue:
- Using increasingly advanced AI/machine learning techniques to predict traffic patterns and allocate resources precisely; to increase intelligent automation of network operations and so reduce staff costs; to support smart energy systems; to automate customer service; to reduce maintenance costs and physical site visits through preventive maintenance. The important area of traffic prediction is further analyzed below.
- Moving to a software-as-a-service (SaaS) model for an increasingly wide range of IT and network functions, something that Nokia claims can reduce TCO by 25% in fixed and mobile networks.
- Going a step beyond SaaS to full network-as-a-service (NaaS). This is often seen among smaller operators or those in emerging markets, which have particularly tight cost constraints. Inventive NaaS models are one area where supply chain disruption may occur – perhaps more clearly than in conventional RAN build-outs, despite the efforts of the Open RAN ecosystem to lower barriers to entry for new suppliers. The example of NuRAN’s cooperation with MTN is interesting and analyzed below.
- There are also the more cloud-based interpretations of NaaS, with AT&T’s decision to hand over its 5G core and supporting cloud to Microsoft Azure marking a milestone that has led, according to the telco (see below) to some misunderstanding. Cost reduction is certainly not the only motivation here, but is one of the targeted KPIs, but AT&T is also clear that these benefits should not come at the expense of network control.
- Of course, opening up the supply chain to more competition, particularly to a wider range of solutions and price points in the radio unit and RAN network functions, is a key element of many strategies to reduce TCO, even if a fully open multivendor supply chain in the macro network will take some years to emerge (if it does).
- And of course, the new economic pressures of the early 2020s will lead to many executive reshuffles and changes of leadership as telcos seek new ideas. BT’s current reorganization, which sees high profile chief architect Neil McRae departing (see below), is sure to be just one example.
Overall, a combination of accelerated cloudification and automation, with traditional changes to internal organization and to relations with suppliers, will start to produce the leaner telcos that will be essential to the global 5G success story. Many operators will find limited short-term scope, however, for significant transformation and will look for cost reductions in increased sharing of networks and other assets; and in M&A deals to increase economies of scale and huddle together for warmth amid the deepening economic chill.