With 3G and 4G, connectivity has been a uniform offering independently of the device or target customer. 5G slicing, by contrast, holds the potential to offer varying levels of connectivity characteristics (e.g., Service Level Agreements (SLAs), bandwidth, latency) for different devices, use cases, and applications. The expectation is that enterprises will pay a premium for 5G slices that guarantee SLAs for diverse services as opposed to uniform offerings. Furthermore, enterprises have differentiated requirements for isolation and security. This is especially important given that for connected ‘things’ (e.g., dumb IoT terminals), cost and time to market are typically prioritized over security. According to global technology intelligence firm ABI Research, 5G slicing revenue is expected to grow from US$309 million in 2022 to approximately US$24 billion in 2028, at a Compound Annual Growth Rate (CAGR) of 106%.
“5G slicing adoption falls into two main categories. One, there is no connectivity available. Two, there is connectivity, but there is not sufficient capacity, coverage, performance, or security. For the former, both private and public organizations are deploying private network slices on a permanent and ad hoc basis,” highlights Don Alusha, 5G Core and Edge Networks Senior Analyst at ABI Research. The second scenario is mostly catered by private networks today, a market that ABI Research expects to grow from US$3.6 billion to US$109 billion by 2023, at a CAGR of 45.8%. Alusha continues, “A sizable part of this market can be converted to 5G slicing. But first, the industry should address challenges associated with technology and commercial models. On the latter, consumers’ and enterprises’ appetite to pay premium connectivity prices for deterministic and tailored connectivity services remains to be determined. Furthermore, there are ongoing industry discussions on whether the value that comes from 5G slicing can exceed the cost required to put together the underlying slicing ecosystem.”
5G Slicing can potentially replace a large part of current private networks and dedicated connectivity services. Further, it enriches hyperscaler cloud services with guaranteed connectivity offers while reusing a large part of existing cellular assets. The initial driving force behind 5G slicing uptake is Fixed Wireless Access (FWA) for the enterprise domain. For example, ABI Research observes that there are more than fifty-five 5G slicing Proof of Concepts (PoCs) and commercial tests from Ericsson, Huawei, Nokia, and ZTE. These engagements give the industry the insight to match up an emerging technology such as 5G slicing to new strategic opportunities and high-value use cases depending on the market. In the Middle East, for example, CSPs deploy a separate core network (hardware-based slices) for mission-critical services. In Europe, the tendency is for CSPs to deploy slices for mission-critical services on top of existing consumer networks. There is, in other words, a mixed market. But the common denominator is how to unlock growth in the enterprise domain at scale and based on end-to-end standardization.
“First, it is key for the industry to push for consistency and uniform practices across multiple domains. With 5G slicing, the industry should focus on convenience rather than performance, user experience rather than feature sets, and flexibility rather than rigidity. Ultimately, the core of the 5G slicing ‘dream’ is a business goal, not just a technology goal. It involves taking a quantum leap forward in how business is conducted within the industry and by the industry’s customers. In contrast to 3G and 4G, with 5G, the industry should focus on value not from technology per se but rather from the strategic leap forward it can enable. Consequently, a cautious approach is required so that the industry finds in 5G slicing a reasonable basis for taking actions that predictably and positively affect vendors’ and CSPs’ revenues,” Alusha concludes.
These findings are from ABI Research’s 5G Network Slicing: Technical and Commercial Considerations application analysis report. This report is part of the company’s 5G Core & Edge Networks research service, which includes research, data, and analyst insights. Based on extensive primary interviews, Application Analysis reports present in-depth analysis on key market trends and factors for a specific technology.
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