Monetizing 5G: Unlocking the Value of 5G for Telecom Operators in Manufacturing Sector
Executive Summary
The Global Telecom Market has experienced sluggish growth in recent years, posing challenges for operators to deliver healthy returns to investors. However, the advent of 5G technology presents a transformative opportunity for operators to explore new avenues and enhance their value proposition. In this context, the manufacturing sector emerges as a pivotal arena where 5G holds immense potential to revolutionize operations and unlock unprecedented value.
Global Telecommunication Market
The global telecommunication services market grew by 3.7% in 2022 to reach a value of $1,428.5 billion and is expected to grow merely at 2.9% CAGR from 2022-27.[2] The subscription base has exhibited slow growth in recent times resulting in a limited revenue growth rate, necessitating the need for new approaches to discover innovative business prospects.
Challenge of Balancing Investment Costs with Revenue Generation for Telecom Operators
Telecom Operators globally are facing the challenge of generating returns from the substantial initial investment needed to establish wireless infrastructure. This investment often requires significant capital and time, making it difficult for operators to realize profitability swiftly. In fact, against these large outlays, returns have been anemic across the generation (2G to 5G) ranging from 1.4% to 4.5%.
Let's look at similar capital-intensive industries like Cloud Service Providers (CSPs). They have maintained a robust Return on Assets (ROA) ranging from 17% to 20% over the past five years starkly contrasting with 2% to 3% ROA typically seen in the Mobile Network Operators (MNOs). This disparity places MNOs in a category resembling regulated entities like utilities, underscoring the challenges they face in attracting investors' confidence.
4G to 5G: A Great Leap Forward
The evolution of mobile technology has gone through four stages till now, with each generation of networks improvising on the last. Every new cohort of networks is focused on minimizing network congestion and offering speed improvements. In this regard, 5G has been evolutionary and revolutionary for the world.[4]
Features & Benefits of 5G
5G offers mainly three types of communication services or use cases:[5]
1.?????? enhanced Mobile Broadband services (eMBB)
a.?????? eMBB improves what we normally think of in terms of cellular service: fast access to data from devices such as smartphones, laptops, or vehicles for applications such as streaming video.
2.?????? Massive Machine Type Communication (mMTC)
a.?????? mMTC brings 5G support for low-power devices such as sensors and other intelligent devices that may need to last in the field or factory for years on a single battery charge. It builds on LTE standards support for such devices.
3.?????? Ultra-Reliable, Low Latency Communication (URLLC)
a.?????? URLLC is for devices that need very responsive data connections (e.g., communication between two autonomous cars on a highway seeking to avoid a collision). URLLC is supported by 5G NR (New Radio). It can therefore achieve far greater performance than LTE and is key to realizing the full potential of 5G.
5G represents the fifth major milestone for wireless communications. It ushers in a host of capabilities that range from speed to security. A 5G network can offer a peak rate 20 times higher than a 4G network. 5G network can send round trip data in less than 10 milliseconds and can reach up to five nines (99.999%) reliability. 5G networks can seamlessly hand off data to each other even when devices are traveling at hundreds of miles per hour. It also allows the unique case of network slicing which allows operators to create multiple virtual networks on a shared 5G platform.
Impact of 5G across Industries - Why Manufacturing
5G-enabled use cases will enable eight industries to add an extra $1.4 trillion to global GDP in 2030.[3] 5G is poised to have the most significant impact on the manufacturing industry due to its transformative capabilities in enhancing operational efficiency, productivity, and innovation. In the manufacturing sector, 5G can create $740 billion in additional GDP by 2030 driven by new use cases.[3] 5G can facilitate solutions that not only lower costs but also unlock new opportunities. 5G enables the transmission of far greater amounts of data in real time than ever before. This influx of data allows for the generation of insights that can mitigate major pain points in the industry, such as machine downtime, operational costs & resource wastage.
领英推荐
In Manufacturing, Private 5G (P5G) is one of the major use cases that is rapidly gaining momentum. P5G enhances production with real-time monitoring, automation, and Augmented Reality (AR)/VR. These networks allow manufacturing industries to create highly customized, reliable, and efficient communication environments.[6] A detailed comparison of why private 5G is better than alternate existing industrial connectivity technologies is given below:
Monetizing 5G: Challenges for Telecom Operators
Telecom operators are developing private 5G solutions for industry whereas manufacturers are directly partnering with network infra providers to set up smart manufacturing capabilities. For example, Vodafone Business has partnered with Ford to implement 5G connectivity in its new E:PriME (Electrified Powertrain in Manufacturing Engineering) facility in Essex. However, auto manufacturers like Toyota is partnering with Nokia to deploy a 5G-upgradable private network at its manufacturing design center in Fukuoka, Japan.
Twin challenges in both the provider and consumer of the 5G ecosystem have prevented the effective use of upcoming connectivity & digital technologies from achieving full utilization in both sectors. Monetizing 5G presents challenges for telecom operators, as they tend to be risk-averse and may hesitate to proactively approach manufacturers with private 5G solutions. Additionally, operators often lack the necessary industrial expertise and workforce to develop industry-specific solutions, hindering their ability to meet the unique demands of manufacturing clients. Meanwhile, manufacturers are increasingly bypassing telecom operators and directly collaborating with network infrastructure providers to establish private 5G infrastructure within their facilities, further complicating the operators' efforts to capitalize on 5G opportunities.
Telecoms and Manufacturers are exploring private 5G network solutions, but the ecosystem is still in the pilot phase with ongoing partnerships and trials for adoption benefits.
Partnerships and Collaboration Model: Enabling 5G Success for Telecom Operators
As the concept of private 5G enterprise networks gains traction, it's becoming evident that the future of connectivity will be a hybrid one, blending the strengths of 3G, 4G, legacy Wi-Fi, Wi-Fi 6, and 5G technologies. However, navigating the design, implementation, and management of these hybrid solutions will prove challenging for many organizations. Consequently, businesses are likely to seek assistance from service providers such as network consultants, global systems integrators, and telecom companies to guide them through the complexities of planning, deploying, and maintaining an optimal, low-latency wired and wireless infrastructure. These service firms are well-equipped to take a holistic approach, facilitating discussions among key stakeholders, conducting ROI analyses, and devising models for the successful implementation of 5G private networks or, more realistically, hybrid models. Such hybrid networks leverage 5G technology as an enabling factor for emerging business initiatives like robotics, edge computing, and real-time AI/ML applications.[7]
Private 5G networks will act as an accelerant and enabler of new businesses and operating models. They will involve a broad ecosystem and professional services to bring them to life. Enterprises will rely on these services as private 5G solutions are complex and multifaceted.
Conclusion
The convergence of 5G technology and manufacturing presents a compelling opportunity for telecom operators to drive growth, innovation, and value creation. By leveraging the transformative capabilities of 5G, operators can establish strategic partnerships, develop tailored solutions, and unlock new revenue streams in the dynamic landscape of manufacturing. Embracing this paradigm shift, telecom operators can position themselves as key enablers of digital transformation and drive sustainable success in the evolving 5G ecosystem.
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References
[2] Global Telecommunication Service Report by MarketLine
[7] IDC Worldwide Enterprise Network Consulting and Integration Services for Private 5G Networks Forecast, 2023–2026
EXL Analytics | IIM Bangalore PGP'23 | Ex-PwC India | VJTI'19
8 个月Excellent read