‘Tis the Time for Consumption-Based Economics in Telecoms

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By Don Alusha | 2Q 2021 | IN-6172


Telecom Technology Economics


The telecommunications industry is probing new growth avenues that look beyond where the money is in the value chain (e.g., 3G, 4G), to where it will be in the years to come (e.g., 5G, cloud platforms, etc.). With 3G and 4G networks, commercial arrangements revolved around a CAPEX purchase business model. Communications Service Providers (CSPs) pay a specific price to own an asset. CAPEX models have a set price and, once the deal is agreed upon, vendors are guaranteed an upfront payment at the point of signing a contract. In a CAPEX model, the supply side has one stress point: winning the deal. The risk of implementing the purchased technology falls to CSPs. A key point to note is that, in general, by the time a product is adopted and used, the bulk of the budget has already been spent.

On the other hand, 5G networks are inherently predicated on software architectures. This new world of software is smaller, more focused, highly modular, and available on better economics in terms of what it offers for stakeholders. Software enables new ‘value-based’ business models which are …

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