What Lessons Must 5G Learn to Conquer End Vertical Markets?

The cyclical nature of the telco market, with generations of technologies enabling new opportunities, means that Mobile Service Providers (MSPs) have the opportunity every few years to leverage their position in the value chain to target the newly created value. To achieve this, right now, the industry wants to find a killer app for 5G, or an easy way to win; however, this does not reflect the complexity of the emerging market.

The focus should not be on finding a killer app, but the industry should discuss how 5G can enable the MSP to offer adjacent services and products. In which end vertical markets will 5G make a difference? Which industries want to be disrupted and which ones do not embrace disruption? These questions create a complex and fragmented market formed by multiple verticals unknown to MSPs. While MSPs do not talk about it, if history repeats itself, as it often does, MSPs will eventually deliver 5G competing on pricing. Therefore, they need to think now about new areas, new services, and new business models enabled by 5G. 5G is at a crucial stage, as it needs to move from promise to reality.

The industry is treating 5G as any other past technology. Verizon launched its 5G Fixed Wireless Access (FWA) based on a proprietary standard in October 2018. The company offers its 5G FWA in Houston, Indianapolis, Los Angeles, and Sacramento. The first 3 months are free; after that period, the user will pay US$50 per month or US$70 per month depending on whether the user is already a Verizon customer or not. This is not an innovative use of 5G. MSPs must look beyond their known habits and learn how to monetize and provide services in the fragmented and often hostile vertical market world, which should be their current priority, with or without 5G. Each vertical is a separate universe that MSPs must explore.

The manufacturing space will offer specific opportunities for 5G, however, MSPs should not believe that 5G will replace the entire market and value chain. An example is provided by Programmable Logic Controllers (PLCs) and other field area equipment that work in the realm of microseconds, not Milliseconds (ms). This means that 5G with a 1 ms latency will not be good enough to guarantee that latency, and therefore, PLCs will remain a reality in the industry. Consequently, 5G will take a complementary role at a plant level connecting data from multiple equipment, but not controlling the machines.

The energy utility industry is an example of a different vertical market. In this segment, among the 5G features, massive Machine Type Communication (mMTC) and Ultra Reliability and Low Latency (URLLC) are often highlighted as key features supporting 5G’s leading role in this industry. This is because renewable energies filtering through the smart grid increase the need for integrated monitoring and control of the grid with a connected and automated substation to orchestrate an increasingly complex supply and demand of energy. In this case, 5G can help boost low-cost connections and increase the connected devices; however, this can also be done by Long-Term Evolution (LTE), and consequently, the question remains: should MSPs target the utility space with 5G or not?

In the energy space, 5G could help address the industry’s needs, but it will not solve the two main issues that have slowed the expansion of cellular technology in this space: coverage and network control. Private LTE can help MSPs address, at least partially, these obstacles, while also supporting the expansion of the number of connected devices, while guaranteeing low latency. MSPs should discuss how to expand their private LTE offering in this space, rather than thinking about 5G. This example shows that the key lesson that MSPs must learn in end vertical markets is not to be blinded by selling a technology, but to use an array of offerings to sell a solution.

MSPs and the industry must learn first and then sell. In the manufacturing market, a few players are taking the right approach and are fostering a dialogue aimed at aligning the needs of the industry with the offering of the telco world. In early December 2018, the 5G Alliance for Connected Industries and Automation (5G-ACIA), an alliance composed of Operational Technology (OT) and Information and Communications Technology (ICT) companies with an interest in the role and opportunity for 5G in manufacturing, announced having received the Market Representation Partner (MRP) status in the 3GPP. This is a further step for the 5G-ACIA essential, on one side, to ensure that the wider ICT community understands the needs of the manufacturing industry, and on the other side, to influence the development of the technology. This latter point could be done by developing a radio channel model for factory environments or working on the definition and prioritization of industrial 5G architecture and validation of 5G systems for the industries. This shows that 5G needs to be tailored to the needs and priorities of the industry, and that this is a necessary step for the success of the technology in this and other vertical markets.

What is important for MSPs is not 5G per se, but rather, it is determining the needs of vertical markets and how MSPs understand and address them with their current portfolios. Positioning 5G on a pedestal as a holy grail serving any use case in any market will result in MSPs missing current enterprise opportunities. 5G will not win over markets, but will build on top of current activities undertaken by MSPs in end vertical markets.

Before selling 5G, MSPs must learn and secure a place in the vertical market, for instance, via private LTE, a technology that should be meant to provide clear results of the benefits (and challenges) of cellular technology, and a standard ecosystem supporting the needs of end vertical markets. More often than not, private LTE can tackle the needs in terms of mobility, security, low-latency communication, reliability, ecosystem, etc., so it should be prioritized now over 5G to help MSPs gain market traction in these new segments. Private LTE opens the door for 5G to further enhance additional services delivered by the MSP and its partners.

By the time they deploy 5G, MSPs must have clear innovative business plans. Bold MSPs should invest significant time, resources, and money into selected vertical markets to lead their digitization and later accelerate them with 5G. This is a risky move, but essential if they want a proactive and not a reactive position in emerging market opportunities.