Are 3GPP and the Telecoms Value Chain Relevant for Enterprise Verticals?

Deployments of 5G are starting to progress from discussion to reality, while Mobile Service Providers (MSPs) are still unclear where new revenues will come from. Surely there are discussions and aspirations for enterprise verticals that include transportation, healthcare, manufacturing, and smart cities, but no single MSP has announced—let alone deployed—a non-consumer business strategy that is not anchored in cellular connectivity. It is also not likely that 5G will revolutionize this domain in the first years of its deployment. MSPs can deploy these strategies today with 4G and the Narrowband Internet of Things (NB-IoT) but have not yet done so.

It is a formidable task for MSPs to achieve this transformation alone, especially when the current value chain depends on a linear delivery of network technology. The 3rd Generation Partnership Project (3GPP) meets and crystallizes common consensus in formal standards. Vendors create equipment, software, and associated services that are compliant with these standards, which are then deployed in today’s cellular networks. It is clear that a change in an MSP’s business model needs to start at the very beginning of this process: 3GPP itself.

3GPP has 623 company members (as of Q4 2018) and thousands of individual contributors. Despite competition and conflicting company priorities in 3GPP workings, the collective process and the host organization (the European Telecommunications Standards Institute, or ETSI) itself have become quite efficient in recognizing technical features that need to be standardized and packaged in a technical report that is used by the broader industry. This was clearly illustrated in the most recent Release 15, where several industry leaders worked together to define 5G New Radio.

However, 3GPP is becoming a victim of its own size. While the entry of non-telecom companies requires a learning curve, no enterprise vertical specialist can endure or would be interested in pursuing it without a clear path to new business in the cellular telecom market. For example, a manufacturing company is unlikely to join and actively participate in 3GPP 5G discussions purely because MSPs themselves think that they have business opportunities with 5G in smart manufacturing. As we have discussed in a previous foresight (MWC 2018: Huge Appetite for Technology Development but Very Short on Business-Level Innovation), there is appetite for technology development but no business innovation.

This is exactly the area 3GPP needs to address at the very beginning of this process and during standards design. But changing the 3GPP standardization process itself will disrupt future standard development. It is also questionable whether the 3GPP group can evolve beyond the design of connectivity-driven standards. Arguably, a new group needs to be formed (e.g., 3GPP Industries, or 3GPPi) that provides a much lower entry barrier for enterprise vertical specialists. The creation of such a group would allow easier entry for non-telecom companies into vertical-focused discussions that would provide the much-needed feedback from operator industrial clients.

Infrastructure vendors – including Huawei and Nokia – can address connectivity for enterprise vertical markets directly, but their revenue opportunities will be much bigger if mobile service providers address these new markets. Whether the enterprise business units of infrastructure vendors become larger than their network equipment groups remain to be seen. Now, infrastructure vendors are attempting to provide 3GPP technologies to enterprise verticals, in other words standardized, carrier-grade equipment in non-telecoms environments, which conflicts the purpose-built, customized requirements of many enterprise verticals. For example, manufacturing companies are interested in Open Platform Communications Unified Architecture Time Sensitive Networks (OPC UA TSN) over Ethernet, despite the obsession of the telecoms value chain for 5G in smart manufacturing. In fact, the 5G discussion is nonexistent in the smart manufacturing domain but on the other hand, no mobile service provider or infrastructure vendor are assessing whether they can be enablers for Time Sensitive Networking for the manufacturing domain. This technology example is also one of many in the manufacturing market, let alone in the broader enterprise vertical domain.

Vendors now have a choice to target enterprise verticals: embrace customization and non-3GPP technologies, including vertical specific connectivity technologies. By doing so, they can attract attention and use their scale and expertise in networking to become trusted connectivity enablers, which can then translate to upstream revenue opportunities through value added services. This may also allow them to seed enterprise verticals for when 5G will be mature – which may be a long time away. Until then, vendors should get real and grow past 3GPP – it will upset their current clients, but if the telecoms domain wants to address enterprise verticals, it needs to make hard choices, fast.