MWC Says 5G Is Here: Maybe for Consumers, but Surely Not for Verticals

At MWC19, Mobile Service Providers (MSPs) and their partners highlighted that the future for telcos and their entire ecosystem will be defined by their ability to grow their business in vertical markets. Deutsche Telekom, Huawei, Ericsson, Nokia, SK Telecom, and Intel are just few of the companies that showcased use cases for vertical markets, such as industrial automation, cloud gaming, private Long-Term Evolution (LTE), and smart transport systems at their respective MWC19 stands. 5G will play a role in vertical markets supporting innovative use cases, and accelerating MSPs’ opportunities. The conversation, however, is more complex than this and MSPs must learn the needs and the dos and don’ts of each market that they want to address. MSPs must understand vertical markets, learn about 5G, and, most importantly, combine vertical knowledge with the potential of 5G. To do so, MSPs must gain the trust of vertical markets, engage with vertical-focused players, successfully deliver solutions, and evolve their internal structure to be able to compete in a fragmented end-vertical market world.

The future telco market consists of many verticals and this opens the door for multiple technologies and strategies. Every MSP sees the lure of vertical markets, but what is still open for debate is what technologies are needed to support this stride. This is further complicated by a subtle shift in MSPs’ views, with a resurgence of interest in the consumer market and with MSPs like Telefonica now looking to select only few vertical markets in which to push their services. Besides the usual suspects, such as mobility and manufacturing, smart/precision agriculture emerged during MWC19 as a common topic of conversation with Cisco, Nokia, and Vodafone all planning to address this opportunity with their own solutions. In agriculture, using sensors, data, and connecting machinery can help increase production, optimize processes, and reduce costs. The data generated could also be used by third parties, such as banks, which could leverage that data to make data-driven decisions and improve services like loans in the agriculture or farming space.

MSPs and network vendors already have well tested and reliable technologies, such as private LTE, that can be used to deliver solutions in the vertical space. At the moment, the private LTE market is mostly driven by vendors and, in fact, in Barcelona, companies like Nokia and Sercomm showcased that there is a play for private LTE on the path to 5G in areas like logistics, energy, and manufacturing. A significant exception to this was provided during the conference by Deutsche Telekom, which discussed its dual slice campus network solution (private plus public) deployed for an OSRAM factory in Schwabmünchen (Germany). The campus network includes a public network with a dedicated antenna deployed on premises and a private LTE closed campus network. The private slice of the network has a locally deployed core network box, which is key as it uses network and spectrum assets to manage local traffic, deliver low latency, increase security, and provide the customer with control over its own subscriptions.

Private LTE is a current opportunity and MSPs and their partners must include private LTE in their portfolio, as this solution can spearhead their entrance in various end-vertical markets.

MSPs must understand that 5G needs to be part of a wider game plan that includes many pillars, such as market understanding of and readiness for 5G, their coopetition with new players, and their ability to innovate internally and deliver solutions, not just technologies.

MSPs are becoming more rational in discussing what 5G can and cannot do, which is essential, as overpromising and the lack of focus will only reduce MSPs’ opportunity to succeed in new vertical markets. This rationalization is the right step for MSPs and they must cut through the marketing hype to create solid bases for their vertical business. While it is possible to use 5G virtually everywhere, it will not make business sense to try using 5G for every possible conceivable use case. It will, however, make sense to use 5G where current technologies fall short in meeting industry demands or in unlocking new opportunities. The telco industry must understand that each vertical will adopt 5G according to its own needs in its own unique way and timing. Mobility is moving faster than other verticals and the 5G Automotive Association (5GAA) announced that LTE-Vehicle-to-Everything (V2X) for direct communication, which is the first version of Cellular V2X (C-V2X) that will continue to evolve into New Radio V2X (NR-V2X), will go commercial in 2019. In contrast, the manufacturing space, while highlighted by many MSPs as a key area of growth, is still at a very early stage in terms of MSPs’ activities and the wider industrial ecosystem’s trust in cellular technology. MSPs must continue to accelerate their engagements with end-vertical companies and associations, such as the 5GAA and the 5G Alliance for Connected Industries and Automation (5G-ACIA).

MSPs must decide how to approach these markets and whether to push for a horizontal approach or aim to seize a wider piece of the value with vertical-focused services, determining which partnerships can give them a competitive advantage. MSPs will also have to find new partners to drive digitization in those markets and learn how to compete with a new set of players with different interests and business models. While not focused on 5G, a good example of a partnership is Vodafone’s recently launched joint venture with IBM that leverages each company’s strengths and targets the digitization efforts of a few selected verticals (retail, manufacturing, transportation, utility, and agriculture).

MSPs must also use their current endeavors in 5G as a learning exercise to create a solid base for their 5G end-vertical markets’ business. MSPs and their partners will first use 5G to target the consumer market, which is the area where telcos have know-how, reach, and experience. This will include using 5G Enhanced Mobile Broadband (eMBB) to deliver faster speeds and larger bandwidth, but also 5G Fixed Wireless Access (FWA) for the fixed broadband market. This will be the first step for shifting to 5G and MSPs must use it to learn lessons about the technology and, particularly, to start exploring different business models. For instance, MSPs could start fine tuning the business model of network slicing, learning how to create and manage different slices for the media/content world, such as for streaming live events. MSPs could learn how feasible it is to deliver slicing at scale, how customers are perceiving them, what internal organizational changes must be carried out to support a slicing-based business model, and what pricing model they should use. While it is too early to judge and provide examples of what MSPs are learning from their 5G activities, the next few years will be critical for MSPs, providing lessons to boost their 5G business in vertical markets.