Industry Thought Leadership

5G Monetization Challenges - Internal and External

April, 2019
Joseph Abou Rjeily
Corporate Strategy & PMO Director

Alfa

5G deployment is accelerating rapidly but the implications are much wider than just the network. One of the most important challenges is to put in place the systems and processes to monetize 5G and the new services and business models it enables. One of the most frequent questions we get from our Business Support System (BSS) customers is “how do we plan for 5G monetization?”.

The first 5G deployments are expected to go live within the next few months. 5G is promising to enable many disruptive functionalities, such as:

  • Ultra-low latency communication (URLLC),
  • Enhanced Mobile Broadband with high bandwidth/throughput (eMBB),
  • Fixed Wireless Access (5G FWA)
  • Network exposure that will allow new levels of programmability in telecom core networks.

5G will make it possible for communications service providers to improve their business in various ways. Just as 4G shook up the landscape, whereby data packages became more important than voice and SMS packages, 5G brings opportunities for communications service providers to offer new services.

Internal Operators challenges: Optimal Monetization Systems
Digital Service Providers (DSPs) recognize the strategic importance of 5G and have either started to make significant investments to deliver network upgrades over the next decade or are getting ready to do so.

Even though DSPs are pursuing their efforts to deploy 5G, it is still unclear for them how to monetize the 5G investments.

While faster mobile broadband and fixed wireless access (FWA) are expected to generate more opportunities to the Mobile Operators, the potential of other consumer services such as Artificial Intelligence, Network Exposure and low latency applications remains uncertain.

The uncertainty related to the new use cases that 5G will support is reflecting on the Digital Service Providers (DSPs) strategies. DSPs are unsure about the right direction that will enable the monetization of the 5G services. The existing monetization systems have limited capacity to scale or support new use cases. Operators currently feel the urgency to understand the implications of the emerging use cases and to define their systems strategy toward embracing modern cloud-based monetization platforms.

The DSPs monetization engines are key success factors to the success of 5G use cases. The DSPs challenge consists of having to design new monetization systems without being aware of the use cases that these systems will need to support. This is inducing complexities and delays to the transformation of the monetization systems to ensure they remain future-proof.

When Apple introduced the App Store on July 10, 2008 with 500 apps, it ignited a cultural, social and economic phenomenon that changed how people work, play, meet, travel and so much more. Over the past decade, the App Store has created a safe place for users of all ages to get the very best apps and a vibrant app economy for developers of all sizes, from all over the world, to thrive.

In a similar way, 5G Core can bring disruption to the network level by opening up the mobile network’s operating system and exposing core network capabilities to external parties, so they can program their applications to use mobile connectivity and edge computing. No one can predict the implications of such openness on the DSP’s network capabilities.

DSPs are under pressure to develop business cases that will provide reasonable returns on their 5G investments. The 5G monetization is fraught with challenges there is no clarity over the applications and use cases that will steer the 5G revenues.

External Market Challenges: Use Cases profitability and relevance
The first wave of 5G opportunities is expected to address the consumers market that will be led by early adopters who will sign up for higher data speeds and upgrade to 5G-ready smartphones.

The next wave will focus on the enterprise markets that is relatively new segment for many DSPs today, but is promising more opportunities than the consumer market. From wave to wave, the DSPs are expecting to build clarity over the enterprise use cases they should pursue.

5G supporters are advocating that 5G will unlock incremental opportunities that will fundamentally transform many industries: Agriculture, Construction, Utilities, Media/Entertainment, Healthcare, Transportation, Finance/Banking, retail…. Those opportunities are expected to revolutionize the way we do things and announce a 4th industrial revolution.

The 5G success will be determined by its impact on society. This is driven, not only by the relevance of the use cases that will address verticals and industries, but also on the capabilities of the DSPs to monetize their investments and the network suppliers to finance their research and development. Any 5G use case should balance the interests of all involved parties, similarly to how:
2G enabled Mobile voice Communications for people and businesses and secured high revenues and profits to the manufacturers and MNOs,
3G availed Mobile Broadband and created new revenues streams to the Telco industry players
4G steered network traffic from Voice to Data, allowing the mobile application business to thrive over the Operators networks. It exponentially grew data traffic and congested Operators pipes while it opened new revenue streams for operators and suppliers based on IoT.

Conclusion:
If 5G use cases are not lucrative to DSPs as they are expected to be impactful on the industries they serve, the 5G uptake might take longer than hoped. 5G profit margins should be able to finance research and development that will lead to creating new patterns or killer applications.

The Telecommunications industry, since 2G in early 90s, was always resourceful in finding the way to over achieve forecasts and fuel its own growth. The current uncertainty over the optimal DSPs monetization systems, coupled with the unclarity over the 5G applications and use cases that will fuel the operators profitability, are only temporary. The Mobile industry should be able to have better visibility over the internal and external challenges after the commercial 5G networks become operational and start exploring the potentials of the verticals and industries.

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