The Business Case of 5G, the telecommunication operators’ fight with OTT and the new competitive landscape.

The telcos industry life cycle is at a stage where the enjoyment of steady revenue growth has come to a standstill, the price war amongst operator intensifies, investments in new technology are at its peak and in a faster rate, operating cost management is a hide and see game. In this new competitive space, telco operators need to modify their genetic make-up if they are to grow and remain relevant to the consumer.

 The fact that the OTT companies were starting from a low base can only give part of the explanation. The advent of new user interfaces on mobile phones—first seen on the iPhone in 2007—started to threaten some of the services traditionally offered by operators. Messaging was among the first to go, encouraged by the marketing of the BlackBerry to corporations as a more secure means of communications, and volumes quickly rose as more messaging platforms emerged. Today, OTT companies account for more than 80 percent of all messaging traffic. And a big question mark hangs over voice. Young people hardly use their mobiles for voice calls today, except perhaps when their parents call.

The value of over-the-top (OTT) companies—the likes of Google, Apple, Microsoft, Tencent, and Alibaba—has soared. But that of most operators, whom the OTTs depend upon to connect everyone, has grown only modestly.

Operators are now in danger of missing the boat on video calls too, as interworking and roaming are not resolved. It should be as easy for operators’ customers to make a video call as it is a phone call on the network. But instead, they invariably have to revert to an OTT service, again shifting the balance of power in the OTT’s favor.

Telcos running after 5G – What is in there to get?

First of all it remains to be seen whether the substantial costs of 5G rollouts will be justified by the incremental value it will create for telcos. With the digital era dawning, operators are under substantial pressure to drive down costs and find new revenue streams to stay above water

The mobile industry is increasingly pinning its hopes on 5G to address key challenges, generate new revenues, manage exploding mobile data traffic volumes and better compete against OTT providers.

It remains uncertain whether the revenue generation possibilities from 5G will be attractive enough to justify the infrastructure cost to deploy 5G. This hope appears to be premature, however, as the economics of 5G still do not make sense, evident in the lack of a viable business case for the technology.

Although 5G has no clear business case, 5G is to become the catalyst for innovation in IoT

To prepare for 5G, mobile operators must start implementing  technologies in advance of actual 5G implementations such as gradual upgradation from 4G to 5G

5G represents a fundamental shift in communication network architectures. It promises to accelerate future revenue generation through innovative services facilitated via 5G-enabled devices, including smartphones, tablets, laptops and Internet-of-Things (IoT).

Despite the fact that this is a fundamental shift in communication network architectures, 5G will co-exist with legacy architectures well into the next decade.

The blessings of 5G

Communications backhaul

Telcos will look to replace their fiber network using wireless broadband. This will significantly drop the costs incurred in laying fiber optic cables for home broadband usage.

Healthcare

The requirement for real-time networks will be achieved using 5G which will significantly transform the healthcare industry. Use cases include live transmission of high-definition surgery videos that can be remotely monitored.

Industrial

5G will not only offer a more reliable network but would also deliver an extremely secure network for industrial IoT by integrating security into the core network architecture. Industrial facilities will be among the major users of private 5G networks.

Automotive

One of the primary use cases of 5G will be connected cars coupled with augmented reality (AR) and virtual reality (VR). Enhanced vehicular communication services will include both direct communication (between vehicles, vehicle to pedestrian, and vehicle to infrastructure) and network-facilitated communication for autonomous driving. Use cases supported will focus on vehicle convenience and safety, including intent sharing, path planning, coordinated driving, and real-time local updates.

Despite the above blessings that will came from 5G, It’s somehow clear that operators will deploy 5G, but that alone will not ensure relevance: customers are likely to take high-quality network performance for granted. What customers will notice are the kinds of services provided on the network.

Unless operators offer services that are valued, their customers may not recognize that they have any relationship at all with them, and the operators will end up as mere connectivity providers. Out of sight, out of mind.

Every operator will need differentiated content and more personalized services. These will be retention tools, and customer acquisition tools.

But regulators should not limit operators’ ability to innovate. Innovation can’t be all left to the OTT players. Operators must raise their ambitions.

Global OTTs might have the upper hand in  advanced markets, but in the emerging markets where digital services are still on the rise operators can still put up a good fight. Addressing privacy concerns might be a winning tactic. But again, collaboration will be critical. Advertisers in many markets are unlikely to be interested in the market share base of a single operator.

Telco operators will have to come together.