Related Expertise: Telecommunications Industry Consulting and Strategy, Digital, Technology, and Data
The Mobile World Congress (MWC) is interesting because it highlights where the action is—or where some in the industry think it will be. MWC is about the future. It’s a marketing and sales-oriented event, and for a week in Barcelona, optimism and excitement take precedence over current challenges. This year, 5G, SDN/NFV (software-defined networks/network function virtualization), and the Internet of Things (IoT) were the center of attention, along with a little virtual reality. Here’s a quick summary of the buzz at MWC and a look at what that buzz might—and might not—mean for telcos.
According to multiple participants, long-awaited 5G networks are around the corner. Some North American and Asian telcos are targeting 5G availability in the 2018–2020 time frame. The Olympic Games set to take place in South Korea and Japan during 2018 and 2020 are acting as a catalyst for 5G network development. At MWC, network vendors and telcos, in partnership, held demos of 5G technology.
There is no single definition of 5G technology yet; 5G involves many advances, among them “millimeter wave” and “massive MIMO [multiple-input and multiple-output] deployment.” There are no global standards either. Establishing such standards is the first step toward making a technology commercially viable, but the standards-setting process takes time. The International Telecommunication Union is expected to finalize 5G standardization between 2017 and 2019, so it might be more accurate to think of the Olympic Games as a “prelaunch” target for the technology.
The business rationale for 5G is not entirely clear. No tested and verified business model currently exists for telcos offering 5G, and any real market development before 2020 seems unlikely. Nevertheless, many pioneer telcos and vendors have established partnerships to build a momentum for 5G—at least a half-dozen were announced in Barcelona—so it may be time for other telcos to start thinking seriously about potential verticals, services, and partnerships. The big questions about 5G for telcos are related to monetization and costs. What new services and vertical markets might telcos play in? More important, what will 5G offer consumers, and why should consumers care?
SDN and NFV solutions have moved out of their trial phase. Many telco infrastructure and IT vendors have announced new products, partnerships, and ecosystems in this area. A North American telco announced that 5% of its network is already virtualized, and expressed confidence that this percentage will increase to 30% by the end of 2016.
Aside from a lower total cost of ownership (TCO), prospective benefits of SDN/NFV for telcos include a shorter time to market and the flexibility to deliver services via software over any hardware. Several vendors at MWC promoted their software-based solutions’ impact on both capital and operating expenses. Ericsson, partnering with Netronome, demonstrated TCO up to 80% lower for its SDN/NFV applications. Coriant demonstrated an SDN-enabled multilayer interworking and synchronization solution capable of delivering operational savings of up to 75%. When choosing their SDN/NFV partner(s), telcos should benchmark TCO to multiple solutions and analyze the TCO impact of each solution on their networks.
Telcos need to build a roadmap for moving their legacy networks to SDN/NFV in multiple steps. They should think about the transition to SDN/NFV from an end-to-end customer delivery perspective, including, for example, its impact on network operations organization and on outsourced managed services involving multiple vendors.
Few people doubt that advanced 5G networks will someday provide the foundation for a broad range of IoT applications and services, including mobile health, autonomous cars, industry 4.0, smart homes, smart cities, and telehaptic control. Facilitating the interconnection of an estimated 30 billion to 50 billion devices by 2020 and enabling mission-critical services can be achieved only by means of flexible, scalable 5G networks that offer end-to-end low latency.
Leading suppliers have already unveiled a range of IoT products and services, even as they invest in developing future technologies. Nokia and Ericsson are offering telcos IoT cloud-based analytics solutions and IoT object identification and management platforms. Nokia displayed a remote connectivity management platform solution for telcos. The company told us that this platform is currently used to manage 800 million IoT and smart devices.
The visions are bold but, again, the time frames are uncertain. Telcos should consider several questions in connection with the Internet of Things:
MWC also shines light on what’s not happening in the mobile world. Missing in 2016 was any significant buzz about tablets and wearables. Tablets were barely visible at device makers’ booths, and VR headsets upstaged smartwatches (although this is partly because Apple, which dominates the smartwatch market, does not participate in MWC). That said, Apple competitors Samsung, HTC, and LG heavily promoted VR as their new-wave opportunity for growth and market domination. Facebook, Samsung, and other players such as HTC and Sony are doubling down on virtual reality. Less than two years after his $2 billion acquisition of Oculus, Mark Zuckerberg announced a partnership between Facebook and Samsung on a Gear VR product using Oculus software. It remains to be seen how much the consumer uptake will be, and whether VR is a true game-changer or just another attempt by mobile-device vendors to lift their smartphone business. In the short to medium term, VR probably won’t create a major change in business for telcos.
The key implications of MWC 2016 for telcos are twofold. On the one hand, MWC provided clear evidence that operators need to combine their network and IT strategy agendas. The line between telecom and IT networks will undoubtedly blur as SDN/NFV and 5G emerge. On the other hand, future business ideas for telcos were both plentiful and varied. For some telcos, these novel ideas may allow their business models to catch up with competition from “over-the-top” rivals. For some others, these ideas are a way to conduct breakthrough testing to demonstrate technical leadership.