There are ways to make money from 5G, says Hani Zein.
Over the next few years, telecom operators will devote enormous investment to the deployment of 5G networks. To succeed, they must learn from their experience with 4G, from which they struggled to create sufficient revenue to justify their investment and which resulted in shareholder returns that declined at 10% year-over-year throughout the 4G era. To make a successful transition to 5G, operators think more imaginatively about monetisation opportunities, and they should not expect customers to pay more for data.
Operators anticipate several benefits from 5G, believing it will create new revenue streams, reduce costs, and improve the customer experience. However, they face significant obstacles in monetizing the new technology. Public awareness of 5G is much lower than it was with 4G, while companies such as Apple and Samsung have yet to introduce the upgraded handsets compatible with 5G services. Moreover, research by PwC indicates that many customers will be reluctant to pay a premium for the better service offered by 5G.
To achieve the necessary return, operators need to target new use cases that 5G technology makes possible, identifying those services and experiences that consumers, businesses, and public bodies will want. Such use cases go beyond fixed wireless access that allows mobile operators to compete against fixed-line incumbents, rather they also offer fixed broadband providers the potential to reduce costs. After establishing these use cases, operators need to determine the best value propositions. One promising approach is to provide 5G services to other businesses, which then sell them as part of their customer offerings. This means moving away from the traditional business-to-business (B2B) and business-to-consumer (B2C) models towards B2B2X (business-to-business-to-third party). With B2B2X, operators work with B2B partners and share the rewards.
For example, a third party such as a cloud provider of video-streaming service might include the 5G connectivity sourced from the operator as part of its own offering. The third party would pay the operator for the use of the 5G network either through a usage charge or a share of the ultimate revenue.
The relationship can work the other way round too. The operator could create new digital propositions to sell to its own customers by bundling third-party products, such as AR/VR services and equipment, with its core connectivity. Under this model, the operator could offer its customers a data plan that incorporates VR gaming, including a VR content subscription and a headset. Some operators have already reached agreements with over the top (OTT) service providers to buy their services and then sell them on to their own customers.
Operators must decide together with their partner which of them should deal directly with the customer. If the third party has a strong reputation and track record for the particular product or service being marketed, then the operator should not insist on dealing directly with the customer. For example, an original equipment manufacturer (OEM) may well have a stronger brand than an operator when it comes to selling an automated, real-time production solution to factories.
However, if the use case is related closely to the operator’s capabilities, then the operator should control the customer relationship. An operator’s strengths in distribution, service delivery and billing, for example, would position it well to sell AR/VR experiences over the 5G network directly to customers.
The chosen strategy will only succeed if operators possess the right commercial, operational, and technical capabilities, of which four will be particularly important.
First, operators must build the most efficient 5G network. There must be sufficient spectrum across various bands, while automation and simplification will make the operation efficient. Operators must also decide whether to share networks with other companies to reduce the costs of deploying 5G.
Second, they need to become more innovative, introducing new services, pricing models, and partnership agreements much faster than previously. They must use data analytics and artificial intelligence to develop services that customers want.
Third, operators must excel in testing use cases, and demonstrating the benefits for particular industries. They should also establish product management, and sales and marketing functions to serve those specific industries.
Fourth, they should emphasise collaboration, forging close relationships with OEMs, OTT players and content providers to make the most of the monetisation opportunities from 5G.
When contemplating the new era of 5G, operators should force themselves out of the 4G mindset. If they are to achieve the best possible return from their costly 5G investment, they must work with partners to develop the products and services that their customers want. With the right network, and a culture of innovation, collaboration and dedicated service, 5G can yield substantial rewards for operators.