Private LTE/5G: What’s the opportunity?

Private cellular networks can address key enterprise needs including security, reliability, and coverage, and are expected to form an important part of wireless on-premise connectivity. Recent interest in private networks has surged due to the advent of 5G and recent developments in localised spectrum allocation (e.g. CBRS auctions in the US). However, enterprises today still face challenges when deploying private cellular. In this article, we outline findings from our research programme (full report here) that involved a survey of 200+ enterprises globally from industrial sectors including manufacturing, logistics, oil, gas and mining, as well as an interview programme with enterprises, telcos and solutions providers.

There is still a lack of understanding of what a private network is

Although private networks have existed for over a decade, there is still confusion among enterprises and systems integrators on what constitutes a private cellular network. This is in part due to a lack of understanding of the technology, but is worsened by the wide range of solutions that are being offered today that sit under the ‘private network’ banner – many of which do not conform to our definition of what a private cellular network actually is. For the purposes of clarification, we define a private cellular network as a dedicated local on-premise network (designed to cover a specific location) that uses dedicated spectrum and has dedicated operating functions (radio, core and management).

Another challenge is that the private networks being offered today are very macro-centric, and the configurations and network functions aren’t yet there for more diversified use cases and needs. For example, many networks have a downlink to uplink ratio of 3:1 or 4:1, but in the world of production and manufacturing, the uplink speed is often more crucial than the downlink speed, because machines stream production data on a regular or even constant basis.

“Downlink is very unimportant, but uplink is key. Looking at MNO deployments, you see that they don’t optimise the network for production needs.” Institute for Production Technology​

Private cellular will not replace Wi-Fi; rather hybrid networking will become the norm

Most of the enterprises we surveyed have multiple on-site networks and systems in operation. In fact, over a third of the survey respondents reported using four or more different forms of connectivity across their site operations, and we suspect this may even be an underestimate. In many cases, each different form of connectivity is linked to a specific application or use case, and consequently there ends up being a large number of systems that are highly fragmented. A high degree of fragmentation results in a high degree of complexity, higher total cost of ownership of the overall solution, and a higher ‘attack surface’ for potential security breaches.

A third of enterprises use four or more forms of on-premise connectivity

Private cellular can help to reduce this fragmentation and support multiple use cases with a single LTE/5G network. However, private cellular is not going to be the ‘be all and end all’. Wi-Fi still dominates today and will not be pushed out by private cellular – rather, hybrid networking will become the norm. Hybrid networking comprises a combination of wireless and fixed connectivity, and we are seeing increasing convergence of these solutions. For example, one manufacturing company we spoke to found that the vast majority of their use cases could be served by just 5G or industrial ethernet – 5G for the use cases requiring mobility and ethernet for the fixed use cases. For them, the key benefit of converging their connectivity solutions was flexibility, particularly with private cellular, as it gives you the flexibility to be able to redesign the layout of your operating site.

However, enterprises are still challenged by a lack of skills and expertise in enterprise-grade cellular networking. They will need to overcome this challenge in order to fully embrace private cellular.
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Securing stakeholder alignment for private cellular adoption can pose a challenge

Another challenge that enterprises face is in securing stakeholder alignment. Using private cellular networks to address multiple use cases within a single network requires alignment between different business units, teams, and/or application owners, which can inevitably act as a barrier to deployment of a private cellular network. The decision-making process can be impacted by four key factors:

• • Number of internal stakeholders involved – More stakeholders means more opinions and a greater chance of misalignment, which can draw out the decision-making process.

• • Maturity of technical or regulatory compliance required – E.g. health and safety, IT security, product quality and safety. More stringent compliance requirements will likely require involvement from multiple teams. Security in particular was cited as the number one benefit of private cellular networks by almost a fifth of survey respondents. The flip side of this is that it can pose a compliance hurdle, which shouldn’t be a problem if regulations are clear and up-to-date, but outdated or vague rules can pose a challenge.

• • The nature of decision-making processes – A centralised (formal) vs decentralised (informal) decision making process can impact the speed and ease of decision making and execution, including the ability to secure the budget for a private cellular network.

• • Unity of purpose and control – Internal stakeholders must have a shared vision, and this must take into account third-party stakeholders (e.g. suppliers, contractors, partners) who are involved in enabling specific applications.

Security is ranked as the most important benefit of private cellular

How can operators achieve success?

Telecoms operators emerged as the clear preference in terms of a lead partner for private cellular networks. However, it is worth noting that more than half of survey respondents selected other players, including IT and software vendors, as the preferred lead partner in a deployment, which indicates that there is an emerging interest in other private cellular network partners in the broader ecosystem. In order to succeed in the space, our main recommendation to telecoms operators and other network providers is to focus on selling hybrid solutions and avoid taking an approach that is too focused on selling one solution, whether private cellular, Wi-Fi or other alternatives.

Although telcos are the preferred lead partner, there is interest in other players

Ultimately, we believe that operators who take the following three steps will be best positioned for success in private cellular networking.

1. 1. Position yourself as an honest connectivity broker – Help your customers formulate their on-premise connectivity vision with as much clarity as possible. Work with them to build as much specificity and flexibility into their roadmap as possible (e.g. timeframes and milestones). Acknowledge the continued importance of hybrid connectivity and define a wider connectivity strategy that goes beyond just private LTE/5G, then help them to articulate this vision to others within their organisation to achieve better alignment.

1. 1. Work with customers to define scope (including use cases and applications) and help them build the business case – Connectivity should be seen as part of a solution to address key requirements and enable new use cases, but this requires a deep understanding of your customers’ business problems and needs. Start by taking a more consultative approach and working with your customers to figure out what use cases and applications they are looking to support and what these needs are, then help them to build their connectivity toolkit with tools best placed to serve these applications. Your role should be about rationalising and consolidating the number of interfaces and management platforms, private cellular can be a part of this but this is more about helping your customers support their current and future needs.

1. 1. Set up a sandbox or test lab as proof of value – It will be important to demonstrate the value of private cellular and prove the claimed benefits to wider stakeholders in order to drive adoption. By educating customers and driving better understanding, you increase the chances that they will buy into the benefits and adopt it within their organisation. A sandbox or test lab is a good way to prove value, particularly for larger enterprise customers – setting one up will catalyse understanding and adoption.

To learn more about our research, you can download the full report here or contact miran.gilmore@stlpartners