Making the Impossible Possible: How CSPs Can Resolve Their Complicated Relationship with Manufacturers

While the commercial deployment of 5G for consumer markets already picked up pace during 2019, the year 2020 will be decisive for the deployment of 5G on the factory floor, with manufacturers eagerly waiting for the freeze of the 3rd Generation Partnership Project (3GPP)’s release 16 (March 2020), which will enable industrial applications of 5G through the standardization of Time-Sensitive Networking (TSN), massive Machine -Type Communication (mMTC) and Ultra Reliable Low Latency Communication (URLLC).

Furthermore, the decisions of more and more national regulators to award local spectrum to enterprises directly will result in even more enterprises (like manufacturers) considering cellular network deployment.  

Against this background, in November 2019 industrial heavyweight Siemens announced 5G deployment at its automotive show room and test center in Nuremberg in a joint effort with chipset vendor Qualcomm. Even though this deployment project focusses on bringing 5G to the Nuremberg test center factory floor, it is Siemens’ clear ambition to extend this work to third-party factories as well, thereby adding 5G connectivity solutions for industrial manufacturers to its product portfolio.

While Siemens’ considerations about including 5G products in its offering are at an early point, this is one of the first signs for the telco ecosystem that a new vendor is about to enter the stage. With more and more countries adopting flexible spectrum allocation arrangements for enterprises—as explained in the ABI Insight Will CBRS/OnGo Spur the Private LTE Market? (IN- 5666)—Siemens will be able to offer complete End-to-End Solutions (E2ES) for the industrial manufacturing audience. In doing so, they will directly compete with telco infrastructure vendors.

Furthermore, Siemens can capitalize on manufacturers’ fundamental rejection of working with Communication Service Providers (CSPs). To illustrate this, consider some of the early deployment projects of private wireless networks: To bring 5G to the floor of their “Factory 56” in Sindelfingen, Germany. German car manufacturer Mercedes is more comfortable building up a whole new team to operate the cellular network than it is siding with a CSP. Similarly, there are strong voices from the likes of Bosch or ABB, which announced they would never let a third-party CSP manage their network, even though building up a new team for network operation would result in slower time-to-deployment and would increase the necessary investment drastically.

To address this categorical rejection, CSPs need to thoroughly understand the underlying reasons brought forward by manufacturers, which mainly rest on two pillars:

1. Reliability of the Communication Service and Network Support: With newspapers reporting on consumers loosing mobile phone connection due to network problems, which often remain unresolved for 24 hours, manufacturers fear that they would face similar problems on the factory floor, resulting in a considerable revenue breakdown due to a forced production stop.
2. The Fear of Valuable Production Data Having to Leave the Factory Floor Once a CSP Is Involved in Network Operation: There is widespread belief within the manufacturing community that siding with a CSP for network operation would automatically mean using a fully public network deployment option, in which all the manufacturer’s production data would leave the factory floor and would be managed centrally by the CSP.

Even though these concerns are only partly justified, CSPs will have to address each of them. If they fail to do this, the manufacturing domain will be a lost cause for them: Either manufacturers will use alternative technologies (industrial Wi-Fi or Bluetooth, for example) or they will side with an industrial vendor like Siemens for cellular deployment.

To prevent this, CSPs themselves should adopt a “listen before talking” strategy (a borrowed and slightly amended version of the transmission principle of Wi-Fi): they should get to know manufacturers concerns (listen) first and communicate how CSPs can tackle exactly these concerns (talk) afterward.

Following from the two main concerns, this should center around two aspects:

1. How to Guarantee Reliability and Availability of the Communication Network: CSPs and telco infrastructure vendors need to ensure manufacturers that cellular network deployment on the factory floor will look different from the cellular network that consumers experience. On the factory floor, network infrastructure should include redundancies as well as emergency power supplies (such as uninterruptible power supplies, UPS) to minimize the risks of network breakdown and fallback technologies to prevent machine breakdown and production losses in case of a cellular network breakdown. Furthermore, Service Level Arrangements (SLAs) could be agreed on, allowing manufacturers to attend to some network support themselves and only refer to CSPs with more complex issues.
2. How to Allow Sensible Production Data to Remain on the Factory Floor: In targeting enterprise verticals (like industrial manufacturing), telco ecosystem players need to communicate that there are network deployment scenarios that would allow integrity of the valuable production data: This could be achieved through installing local breakouts, by offering the operation of completely isolated private cellular networks, or by combining public with private network resources.

In sum, there is a clearly conceivable path for CSPs to preserve their spot in the value chain. Addressing industrial manufacturers’ key concerns (regardless of whether they are justified or unjustified) is crucially important. Furthermore, with manufacturers starting to make all the necessary preparations for 5G deployment, CSPs need to engage with these concerns now. If they wait for too long, vendors with deep manufacturing roots and already existing business relations like Siemens or Bosch might come and eat their lunch faster than the telco players think.