IoT and 5G: Opportunity for service providers to transform

The confluence of 5G and IoT represents an opportunity for service providers to break free from their present-day reality of stagnating revenues and declining.
IoT, 5G, Service provider, ITU, Mobile data, Mobile video, Mobile broadband

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Since the invention of industrial electrical engineering, no manufactured electronic device has overshadowed the cellular mobile phone in terms of popularity. According to the International Telecommunications Union (ITU), 6.8 billion people had access to cell phones in 2013. This is more than those who had access to toilets, according to the United Nations.

Significant growth rates in shipments of connected mobile devices including smartphones and tablets is continuing to drive the usage of video as a preferred content. This is fueling the growth of mobile data transfer rates. Mobile video traffic already accounts for 60% of total mobile data traffic. By 2021, 78% of the world’s mobile data traffic will be video, and this will be further accelerated by 5G mobile technologies.

Along with video traffic, the volume of mobile data traffic will expand by another seven times, reaching nearly 12 billion mobile devices and connections and generating 49 Exabytes of mobile traffic by 2021. At this point of inflexion, we will see the industry transitioning to 5G mobile technologies.

However, at the present rates of mobile video usage and adoption, a new digital infrastructure will need to be created to support high definition video, ultra-high definition video and rich media telecom.

Supporting infrastructures of cloud-based applications, storage, and the next generation of the internet are also required. Other than consumer demand for mobile video content, it also has benefits in multiple and diverse business-to-business use-case scenarios.

However,  service providers investing in such large-scale compute infrastructures to support mobile video content need to be able to build viable business and monetisation models to generate returns on their investments. This is especially pertinent given that as global internet bandwidth has been growing over the past few years, global telecommunication revenues continue to face downward pressures.

Fast growing demands for mobile connectivity and broadband content are challenging service providers on all fronts. On one hand they are seeing digital and IP based services cannibalising topline growth from legacy revenue streams, pushing the legacy services to enter flat mature phases and then starting to decline. On the other hand, service providers are being compelled to invest in next generation technologies to deliver fast growing and scalable, mobile connectivity and broadband content services, using very early stage business and revenue models.

ITU latest report reveals that mobile broadband subscriptions have grown more than 20% annually in the last five years and are expected to reach 4.3 billion globally by end 2017.

The report also indicates that, in most developing countries, mobile broadband is more affordable than fixed-broadband services.

While growth is being driven by mobility, internet access and video content, for many service providers it is insufficient to compensate for declining legacy revenues. Digital and IP based services have much lower prices points than their legacy counterparts, due to technology efficiencies. And while their volumes continue to scale impressively, their associated top line revenues remain depressed compared to legacy revenue streams.

Service providers therefore need to build innovative revenue models to generate sufficient returns on the compute investments they are making to replace legacy revenue streams. For service providers the biggest challenge remains the viability of their current business model and the task of discovering, building, and migrating to a transformed and more relevant one.

The confluence of Internet of Things (IoT) and 5G mobile technology by 2020 represents an opportunity for service providers to start afresh with radically transformed business models. The development of 5G and IoT ecosystems will fuel each other and drive their further adoption forward.

While the global drivers for 4G mobile adoption have been fast growing connected device shipments and mobile content access, for 5G, it will be IoT and awareness of user, location and content across the network.

By 2019, connections into the Internet of Things will surpass smartphones, tablets and PCs combined and, by 2021, account for 638 million modules compared to 381 million for all other devices. The IoT will add an expected 50 billion connected devices to the internet by 2020. This will include sensors and devices in every type of consumer, industrial, urban and rural environment.

In addition, smartphones will grow from 29% of mobile devices globally in 2014 to 40% by 2019, while the total number of devices and connections will grow from 7.4 billion in 2014 to 11.5 billion by 2019. This unprecedented growth rate in the number of connected devices will require high levels of reliability, performance, scalability and security, built into the supporting service provider networks.

The IoT uses virtual and cloud infrastructure, intelligent edge services and the distributed computing model, to generate data insights into these billions of devices. By successfully integrating IoT into 5G mobile technology networks, service providers can commercially exploit the availability of data insights from each of these billions of devices.

The confluence of 5G and IoT therefore represents an opportunity for service providers to build new and more relevant business models and generate additional returns on their digital and compute investments.

In reality, 5G mobile technology represents the next step in the digital transformation journey for service providers and their installed base of subscribers and users.

5G mobile technology represents an opportunity for service providers to provide innovative services by combining different types of connectivity platforms into a unified delivery network service. 5G is therefore not just about higher speeds or new technology platforms, but also ability to integrate these new platforms more cohesively while delivering innovative services based on data insights.

Since the launch of mobile virtual network operators and mobile internet access, there has not been much innovation in the business models of service providers. While there have been attempts to build new models around content and Wifi-only access, these have been insufficient to veer dramatically from the existing models of Wifi-at-home and wifi-at-office access, as well as mobile video content services. Future possibilities lie in the integration of virtual and augmented reality content and gaming services into 5G networks, and 5G based internet access.

5G mobile technology is expected to drive an exponential growth in data traffic. Development of 5G mobile technology standards is being driven by use cases that require higher scalability, mobility, wider coverage, capacity, performance, lower latency, affordability, and vertical market specialisation. This is required since the average traffic per 5G connection is expected to be higher by 5x relative to a 4G connection.

On the flip side, the biggest inhibitor for the roll out of 5G mobile technology based networks remains the absence of use-cases and innovative business models for service providers, that cannot be supported on existing, advanced 4G mobile technology based networks. According to Groupe Speciale Mobile Association (GSMA), another setback for service providers in the adoption of 5G mobile technology, will be the continuous drop in the average revenue per user, as the roll out happens.

This will happen due to the wide spread usage of mesh-based, low power, wide area networks to support IoT. Mesh-based networks complete most of the transactions at the edge of the network in an automated fashion, rather than hopping across the network or between multiple service provider networks, thereby reducing the opportunity to increase the revenue per customer transaction.

Notwithstanding the pros and cons of 5G mobile technologies and the IoT, service providers as an industry will need to come together to ensure that the next generation of platforms still under development, can interoperate and deliver the expected level of innovative services to move forward from the present-day reality.

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