• ABI Research argues that telcos must change their approach
• The idea that they can make money with an “all things to all markets” approach is a myth
• Implementation approaches that have been designed for the consumer market will not serve enterprise verticals

If mobile operators rely solely on the old tried and trusted consumer/enhanced mobile broadband market to to justify 5G investment, it could take up to 15 years for them to make a return, say telecoms technology and market watchers, ABI Research.  

It calculates that it is the use cases which span vertical markets such as industrial automation, cloud gaming, private Long-Term Evolution (LTE), and smart transport systems, that will eventually become pervasive and provide a payback for the huge investment most telcos are currently embarking on with their 5G plans.

And it’s not a case of going after the enhanced mobile broadband market first and then skipping over to the verticals when and if that well dries up. 

ABI argues that this is, indeed, the course that many telcos have followed, but doing so has piled on unexpected costs and may have succeeded in boxing them into a corner. 

The problems are to do with the network densification required to provide coverage in 5G and the increase in the number of new functions demanded to provide the services.

As a result, the consumer version of 5G is coming in at a higher than expected cost, especially in OpEX, which is already increasing alarmingly and (as has been pointed out on TelecomTV before) the development of network automation - which was supposed to be implemented in line with the 5G rollout - seems to have fallen behind schedule. As a result, telcos are looking at a vast increase in complexity and soaring operational costs to go along with it, and little or no uplift in either ARPU or customer numbers to compensate. 

 “The reality is that the implementation approaches that have been designed for the consumer market will not adequately serve enterprise verticals,” writes Stuart Carlaw, Chief Research Officer at ABI Research. “The ‘build it and they will come’ approach is simply unrealistic and is one of the myths holding back the 5G market,” he maintains.     

Carlaw points out that industrial customers could potentially become the new cash cow for securing 5G ROI. The technology is positioned to be a major component of enterprise digital transformation and a reliable wireless communication platform that could create trillions in economic value across many enterprise verticals. 

However, he says, as things stand now, implementations for enterprise applications are far from optimized. As a result, MSPs have been unable to accelerate the enterprise digital transformation and unlock new business opportunities in this environment. 

“Network architecture flexibility, interoperability with legacy operational processes, cost effectiveness, network determinism, security, and reliability will be equally important for the enterprise as providing bigger pipes—a value proposition that has long resonated well within the consumer market but is unlikely to attract industrial verticals,” Carlaw points out. 

So the idea of building a 5G network capable of accommodating the needs of multiple markets and industries is a big operator fantasy, he says. 

And to be fair, it’s also an abiding fantasy for the politicians and regulators who have enforced what ABI calls the “democratisation” of 5G in the way network build-out conditions combined with high spectrum licenses have been distributed.

So what is the solution set? 

In the report, ABI says “MSPs and their technology partners need to move their business and operational processes away from just expanding network capacity, with increased performance being the sole value proposition.” And, amongst other things, it urges that operators must meet enterprise needs by “looking to deploy networks agile enough to dynamically fit enterprises’ current and future requirements, simple enough to integrate with their existing legacy technologies, and reliable enough to enable them to guarantee deterministic and consistent operations.” 

The solution advanced here is to maintain a monolithic 5G network and services structure, albeit one that has a built-in business model diversity. 

An alternative approach may be to encourage or allow greater specialisation amongst telcos. Some telcos could (perhaps jointly) build an even more consumer-oriented mobile network - one which had to meet those democratisation goals and build out to remote areas, offer affordable pricing and so on. 

Other telcos, or federations of them, could build networks from which they could deliver innovative enterprise services in enterprise areas - industrial zones, downtown and so on. 

These findings are from ABI Research’s The 5 Myths Of 5G report. This report is part of the company’s 5G Industry research service, which includes research, data, and ABI Insights.

To learn more about the misconceptions surrounding 5G’s value proposition and learn how MSPs, technology suppliers, and enterprises can actually unlock new business opportunities, download our free whitepaper, The 5 Myths Of 5G.