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6 December 2019

MNOs face dumb-pipe IIoT futures, as Bosch and Siemens branch out

As we predicted, the industrial big-boys are bypassing the MNOs in their IIoT ambitions, and there’s no shortage of companies who would be happy to help. Nokia and Ericsson are even twisting the knife in the MNOs, but a plethora of suppliers will be able to take advantage of the growing penetration of open source software and hardware in the cellular supply chain, thanks to the availability of private spectrum licenses and the use of unlicensed spectrum in cellular networks.

This is far from a death sentence for the MNOs, but they have to face up to the fact that the once-hyped Industrie 4.0 market, which was going to be a goldmine for the MNOs, has little overlap with the MNO’s core business. The industrial types don’t want national applications, have little interest in roaming, and are interested in LTE and 5G networks in very dense local networks.

To this end, LTE and 5G are effectively just more powerful versions of WiFi, which they can run in the spectrum that they have paid to have exclusive use of, for their mission-critical applications – in private networks that alleviate many of the security concerns associated (in their minds at least) with public networks. Non-critical applications can make use of the unlicensed spectrum availability, which is a growing resource globally – especially as broadcast TV spectrum becomes less important to national regulators.

For factories, distribution centers, mines, power plants, and manufacturing lines, there is little need for the national coverage offerings of the MNOs. But this does not mean that the MNOs can’t be valuable partners to the industrial types and the companies that will serve them – they just have to work out where they can prove their worth.

The German communications regulator, Bundesnetzagentur (BNetzA), recently decided to allocate private LTE licenses in the 3.7 GHz to 3.8GHz band, and Bosch was straight through the door – applying for select locations in Germany. BNetzA is prioritizing Industrie 4.0 applications, as well as agricultural and forestry. A 60 MHz license for a 10km2 area can cost as little as €120 annually.

Rolf Najork, Bosch’s board member responsible for industrial technologies, said that “private campus networks offer a maximum of security and independence. 5G speeds up industrial manufacturing processes. By establishing local 5G networks, we will be able to take a significant leap forward in our ambitions to create the factory of the future.”

Bosch is initially planning on covering its Renningen research base and its main Stuttgart-Feuerbach plant, scheduled to begin in 2020. As you will infer from Andreas Muller, a Bosch Researcher and the chairman of the 5G Alliance for Connected Industries and Automation (5G-ACIA), Bosch feels that the MNO options available are not suitable.

“Campus networks allow us to decide for ourselves what architecture and security features best suit our needs, and what equipment we will use to implement them. And we know who has access to specific components and data,” adding that the campus network reduces business risks and preserves data sovereignty.

It wasn’t much more than a week until fellow German industrialist Siemens followed suit, aiming to deploy private cellular networks at six of its ‘digital’ factories. Both Bosch and Siemens were showing off 5G-based demonstrations at Smart Production Solutions, an event in Nuremburg. Bosch was showcasing Time Sensitive Networking (TSN), while Siemens was demonstrating a driverless transport system. Qualcomm was, unsurprisingly, involved in both.

As Caroline Gabriel, Rethink’s Research Director, put it in Wireless Watch, MNOs are still battling publicly against any policies to earmark airwaves for industrial players and new entrants, claiming that this will drive up the cost of spectrum for the national mobile broadband networks that will underpin so many new consumer and business activities. In private, of course, there are discussions about how to strategically accommodate this new reality.

But many enterprises are interested in cellular connectivity to support their digitalization and  IoT programs, but their requirements are often poorly aligned with MNOs’ priorities. Operators may balk at the stringent service level agreements (SLAs) which accompany mission-critical networks; enterprises do not trust MNOs ever to prioritize their requirements, for low latency perhaps, or high availability, over the needs of consumer broadband.

The clash between MNO and enterprise views of spectrum policy, and of the best way to enable industrial 5G, is particularly loud in Europe, and is seen in sharp relief in Germany. Operators like Vodafone and Deutsche Telekom have led the lobbying against carving up spectrum between many sectors and providers; while many large enterprises – especially in Germany, the cradle of Industrie 4.0 – have been vocal in pushing for a new creative approach to enabling private cellular.

But behind the vocal political statements, the German operators, like their counterparts elsewhere, are exploring new models and partnerships that might finally make the enterprise cellular business profitable for them. Sharing the load of building out networks, especially in-building, could enhance the 5G case for many MNOs, if they can identify the right allies. The MNOs do have advantages still, notably their expertise in radio planning and their national mobile coverage, and they have the opportunity to build on those assets by investing in cloud infrastructure, especially harnessing their sites at the network edge, as DT is doing with its new EdgeAir platform.

But the old attitudes need to change, and MNOs need to start looking at themselves as players in complex value chains with many interlocking relationships – not as they have been in the past, at the top of the rather simple mobile broadband food chains. The need to redefine their role is epitomized by their representative body, the GSMA, which often seems to have a harder time than many of its members in accepting that times have changed and that the definition of a mobile operator has changed too. New companies, from manufacturers like Hon Hai to cloud providers like Rakuten, will gain access to spectrum and emerge as ‘new MNOs’. Rather than resisting this trend, successful MNOs will work hard to form new alliances.