By David Erlich - Directeur Conseil, Sofrecom - January 11, 2020
The purpose of this paper is to review the conditions to make B2B 5G a commercial success for network operators. Before moving to the next generation, let’s have a look on how some 4G promises in B2B have been met, seen from an operator’s perspective.
In line with B2C, B2B video usage has become the 4G blockbuster. CISCO estimates that globally, internet video will constitute 73% of all mobile business internet traffic by 2022. However, for B2C, monetization of 4G for business has reached its limits. Average mobile service revenues per user have been stagnant.
One of the other promises of 4G was VoLTE. With VoLTE, operators ambitioned to compete against pure “over the top” communication players through differentiators based on a better user experience. In implementing unified communication services at the core of the mobile network bundled with connectivity, there was an ambition to conquer significant positions within the enterprise telephony and unified communications space. The value proposition is that the end users benefits from an optimized and better use of telephony, messaging and collaboration services, when they are provided by a network operator.
However, these advantages did not prevent pure communication players, including actors such as RingCentral or Microsoft, to develop OTT services very successfully, taking advantage of ever increasing quality the 4G underlying network. Some operators even decided at last to launch their own OTT services.
The first lesson is that technical quality differentiators are not enough to succeed. Other factors such as go-to-market, marketing and user interface proved to be decisive.
On the IoT/M2M side, cellular solutions (including NBIOT and LTEM) have resisted the alternate non-licensed networks. So, 4G has been able to provide network foundations to the development of connected objects. But from an operator perspective, the development of IoT value beyond connectivity is not a continuity of his regular business. Challenges appear with the fragmentation of technical ecosystems, and multiplication of use cases/verticals. “One size fits all” approach is not adapted, and operators need to choose within multiple business verticals such as smart parking, smart metering, etc.
The second lesson is that verticals are not sold like connectivity. An operator has to transform its model and rethink how its key assets and differentiators play within the value chain.
4G allowed the development of some B2B use cases, but did not revolutionize so far the way operators sold mobile services to enterprise. How will 5G change that situation?
The main 5G new features can be grouped in three categories: enhanced mobile broadband, ultra-low latency and massive IoT.
5G enhanced broadband capabilities can benefit to portable devices such as smartphones and tablets but also aim to enhance or replace fixed infrastructure, both for wide area networks (WAN) and local area networks (LAN).
On the WAN area side, fixed wireless access (FWA) opportunity is under scrutiny. This will be a key technology for the digital inclusion, both increasing the number of connected customers and available data rate. But this will not introduce in itself necessarily new usages. FWA and fiber may be offered through identical packages, targeting primarily B2C and small businesses. This represents new revenue streams through the extension of broadband customer base, and opportunities for mobile player to enter fixed business.
On the other hand, campus coverage solutions (including private mobile networks) will at first compete against established WiFi solutions. But 5G opens new possibilities, for example, guarantying SLA on some critical processes for Industry 4.0 or operating in large areas. These solutions will target big customers including port authorities, airports, owners of industrial assets such as plants, mines, refineries. The approach and the value proposition are not based on connectivity, but on cost of ownership or improvement of business processes.
Low latency capabilities will allow the advent of a new range of usages. For B2B this will encompass the critical IoT requirements. Health/telemedicine and autonomous vehicles are the most advertised use cases especially when coupled with very high broadband. For some of these offers, new ways of selling might be invented. For example, a car user may not buy the imbedded infotainment systems directly from a network operator. The patient of a hospital will not be the direct customer of the network operator neither.
The B2B opportunity for 5G might be the one of the machines. But for telcos, to sell services to machines is obviously very different than selling to humans. Machines are embedded within business processes. The weight of the connectivity in the full solution can also be very small.
In many aspects, 5G B2B new opportunities are a follow up of the IoT revolution. Operators already know that this will require a transformation of their go-to-market, as well as their margin scheme, where skills will matter more than Capex. Operators have developed more and more capabilities to integrate additional services beyond connectivity. That “service” revenues represent up to 30% of the B2B revenues of many telcos.
In conclusion, 5G opportunities serving enterprises are not only a technological challenge for telecom operators, but also an acceleration of the trend to move on the full range of IT services. Because this transformation is underway, 5G is more likely to be very different from 4G as far as B2B is concerned.