MNOs may have failed to land some of the major private industrial 5G contracts so far, especially in Germany, but that is just the tip of the enterprise wireless iceberg. There is still time to make a major impact, but MNOs need to determine their best strategy, taking account of their strengths and target market, which will vary between regions and sectors.
It is true the private cellular field is now several years old, with roots in 4G, but most of the early adopters were confined to sectors such as mining, emergency services and military, where the benefits were particularly compelling in environments where wired connections were not an option and WiFi was not usually capable of providing the required coverage, performance or security.
Then the major industrial giants came in as 5G became an option, with many of them bypassing MNOs and working directly with infrastructure providers, systems integrators, and in some cases the hyperscalers.
Nokia, of the major infrastructure providers, has targeted private 5G most strongly and some successes there have compensated for more lackluster performance in public 5G. But Nokia was also looking at the longer term, having sized the potential market for private LTE and 5G at 14.5m venues when unveiling its digital automation cloud (DAC) package over a year ago. This total, according to Nokia, included 10.7m industrial or manufacturing plants, 3.3m warehouses, and 50,000 transport hubs, along with unspecified thousands of power stations, water utilities and mines.
There may be some consensus over these raw numbers, but analysts are divided over the associated potential revenues, although this may reflect differences over estimated timing of deployments. It may also be a result of different methods of analyzing deployments at various stages of their lifecycles, which can range from the initial network construction to the subsequent operation and management.
Whatever the case though, it is clear the private enterprise wireless field is going to grow faster than the public 5G sector from a lower base, eventually becoming comparable in scale. That is spelled out in recent reports such as ‘Advanced Private Wireless Forecast: 5G and WiFi 6E’, from RAN Research, the analytics arm of Rethink Technology Research. There is a growing consensus that within around 15 years by the middle of the next decade, spending on private and enterprise networks will overtake that on public cellular, which may be well after 5G infrastructures have been upgraded to 6G but nonetheless within the horizon of strategic planning.
The question then, for MNOs, is what they should be doing now to ensure they can take a major stake, even if they will have to share this field with new players including the hyperscalers. Some MNOs have already come to this conclusion they must collaborate with hyperscalers, as has Verizon in its partnership with AWS, announced in April 2021, involving provision of private edge computing) on customer premises. This uses AWS Outposts, a service designed for customers to run a subset of AWS services on fully managed hardware located in their own data center.
This underlines a likely direction of travel among Tier 1 telcos towards provision of managed capabilities, or NOCs (network operation centers), distributed close to potential enterprise customers. This is obviously an expensive exercise and so only justifiable where there is sufficient scale of prospective enterprise customers close by.
Some operators have been moving this way, sometimes but not always in partnership with hyperscalers. In Europe, both Vodafone and Telefónica are enjoying some success here, especially in their domestic markets.
Vodafone began deployment of a private 5G network at UK energy utility Centrica mid-2020, for real time monitoring of plant both inside and out. Around the same time Ford started using a Vodafone 5G private network at its electric car making plant in the county of Essex to alert workers to gas emissions or equipment failures.
Meanwhile Telefónica has taken a similar route to Verizon in the USA, in this case choosing Microsoft as its hyperscaler partner. Its digital business holding company Telefónica Tech announced, in May 2021, an agreement with Microsoft on Azure Private Edge Zone. This involves integration of Telefónica’s private 5G connectivity with Microsoft’s edge computing capabilities on customer premises, aiming to accelerate adoption of smart factories, exploiting intensive computing and artificial intelligence to facilitate business decision-making without critical data leaving enterprise premises, according to the two companies.
Telefónica’s focus on enterprise networks has landed one big scalp in Germany where some major manufacturers have so far eschewed MNOs in their private networking plans. Mercedes-Benz has been installing private 5G networks in its manufacturing facilities in Germany in partnership with Telefónica and its O2 mobile arm.
Mercedes claimed this private 5G network in Sindelfingen was the world’s first specifically designed to aid automotive manufacturing. The company will operate this network itself and help optimize data linkage across connected machines to track assembly line products in real time, but at least Telefónica is providing connectivity. The company indicated that going private in partnership with a telco still met its key business objectives, namely need for better agility and shorter response times in the manufacturing process than it considered possible with a public network. Also, with data stored internally it was preferable not to connect to a public network.
Telefónica has also embarked on deployment of regional NOCs in Spain, Brazil, the UK and Germany to manage private 5G networks for nearby enterprises. This raises the challenges of deciding when and where it makes commercial sense to establish NOCs, in this case starting in areas where there are major manufacturers, aiming to develop specialist expertise in specific fields which many MNOs have failed to embrace so far.
Quoted in Enterprise IoT Insights, Carlos Carazo, CTO for IoT and big data at Telefónica Tech, said: “Telefónica is developing specific NOCs for the end-to-end technical operation of customers’ private networks. There are private network solutions based on public networks that can be managed from general purpose NOCs. But when solutions are private and customized, dedicated and specific operations teams are required.”
Telefónica perhaps has an edge here over MNOs such as Vodafone that grew up as pure-play MNOs and began offering complementary fixed line services more recently, often through acquisition of cable TV operators. Established all-round telcos like Telefónica have already deployed fixed line NOCs in many cases and these can be upgraded to embrace wireless as well. In some such cases, operators already have engineers on customer sites for troubleshooting and management, so they are well placed to score in private 5G.
There are, however, new complexities and different issues to be addressed within the orbit of private 5G, compared with fixed line networks. One of those is around Open RAN, which on the one hand provides opportunities for cost savings and greater flexibility through being able to cherrypick vendors for different components and tailor architectures to specific requirements. But this also brings complexity in design and deployment, since there is no longer a clear demarcation where the core is connected to small cells and then onto devices. With Open RAN, the key components such as RU (radio unit) and DU (distributed unit) are sourced and deployed separately with various configuration options between centralized and edge deployments. That, again, is an opportunity for MNOs to harness skills honed in public networks.