At its core, a marketplace is an entity through which buyers and sellers can effectively and efficiently transact. It provides a platform to reduce friction for the provisioning of products, services, and solutions: connecting a distributed ecosystem of suppliers with an equally distributed ecosystem of customers.
Think of Amazon, which orchestrates a B2C retail marketplace – Amazon’s marketplace has created a site in which a host of different vendors, whether regional or global, major corporate or small/medium enterprise (SME), can compete directly with one another (and in some cases directly with Amazon’s own products) to reach and serve a wide scale customer base. Using the example of Amazon, we can therefore describe four key actors within the marketplace:
Key actors in a marketplace
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Customers:Amazon’s marketplace creates a simple tool through which users can seamlessly identify, evaluate, and purchase products from a wider range of sellers. These suppliers, due to competition, must continuously innovate to create value for customers or risk competing solely on price. This provides a strong proposition combining ease, choice, and value for the customer. For smaller enterprises and for more simple services (e.g. cybersecurity, productivity software) a B2C-style marketplace works well. Amazon provides a good example of a B2C marketplace – however, for larger enterprises requiring more complex, verticalised solutions, the Amazon “one click purchasing” capability may be less appropriate. The marketplace still acts as an entity within which enterprises can identify new, innovative, solution providers and evaluate different components/vendors but may act more as a discovery mechanism – it generates a customer lead for suppliers and a vendor lead for customers. The customer will go on to engage directly with a sales team or representative within the vendor, rather than purchasing and spinning up the service directly through the marketplace. This is because the solution sales cycle is complex and requires a deep knowledge of the end customer and vertical specific expertise. To generate revenue, the orchestrator in this situation would have to create a comparative tool pricing for the use of these larger players.
Particularly for more fragmented industries with a significant number of SMEs, offering pre-integrated, out-of-the-box solutions still offers the orchestrator a strong revenue opportunity.
Suppliers: In the context of B2B, suppliers in the marketplace may offer holistic vertical solutions including end devices, connectivity, applications, infrastructure etc. or sell those capabilities as individual components. Through participation in the marketplace, these vendors gain a strong distribution channel to sell their solution. Furthermore, they can get to market with solutions much faster than a more traditional, vertically integrated route, which would require longer cycles of integration and testing between partners, more investment in marketing & sales engines, and the need to repeat the process with each channel/solution partner identified.
It also acts as a platform through which to learn more about competitors, identify or even engage potential partners, and understand more about their end customer needs and drivers. The marketplace can therefore act as a tangible entity around which the supply side ecosystem can innovate. This is through varying levels of data and insights, collected through the marketplace, which the orchestrator may allow certain suppliers to access.
Orchestrators: Orchestrators help coordinate the underlying community of suppliers and customers, defining the dimensions of the marketplace (which we will discuss further in a later section of the report). They set the parameters and objectives of the marketplace (e.g. which suppliers to onboard to the marketplace and how, which customers to target), and bring additional value to suppliers and customers through insights, supplier and customer experience, and marketing and sales engines to build scale.
As the orchestrator of the ecosystem, Amazon has leveraged these supply and demand side benefits to grow into the retail giant that we know today. It has successfully driven a flywheel to build scale with suppliers and customers, and subsequently monetised this scale through a variety of different revenue streams – we will discuss these further later in the report.
The Amazon flywheel for marketplace success
Enablers: For a marketplace to function smoothly, a flexible but resilient backbone of support systems is required. This includes everything from billing, to authentication, onboarding, fulfilment, delivery, settlement, etc. A digital marketplace can automate many of these functions, diminishing the friction of interaction between partners, vendors, and customers. Oftentimes, these enablement services will be managed by an orchestrator who has complete oversight of the marketplace. Going back to the example of Amazon, Amazon not only orchestrates the marketplace but provides enablement services to capture additional value and revenue streams. This is in slight contrast, for example, to Ebay, which orchestrates the marketplace between different sellers, but is less involved in the delivery and fulfilment of the order. There is, therefore, nuance around how much of a role the orchestrator may take in the marketplace, and whether they partner to deliver enabling capabilities or completely outsource them to others. Enablers are, however, essential for a functioning marketplace and drive simplicity and stickiness for all actors.
In summary, the marketplace brings opportunities to each of the actors within it and helps galvanise a diverse and fragmented ecosystem around a tangible construct. It enables customers to reach new suppliers, suppliers to reach new customers as well as engage new partners, and the orchestrators and enablers to drive new streams of revenue growth.
Table of Contents
Executive Summary
B2B Marketplaces: A key enabler for new growth
What is a B2B marketplace?
Marketplaces as a B2B growth driver
The dimensions of a successful B2B marketplace in healthcare
Due to the need for solution certification, a healthcare marketplace will remain more closed and centrally controlled
The healthcare marketplace will encourage participants to collaborate while excluding competitors…at first
Telcos should create value in the marketplace by driving biodiversity
Telcos have the capacity to collect valuable customer data insights but must first develop their capabilities
The guiding principles for building a marketplace: Where telcos should start
Telefónica LUCA was set up in 2016 to “enable corporate clients to understand their data and encourage a transparent and responsible use of that data”.
Before the creation of LUCA, Telefónica’s focus had been on developing assets and making acquisitions (e.g. Synergic Partners) to build strong internal capabilities around data and analytics – with some data monetisation capabilities housed within their Telefónica Digital unit (a global business unit selling products beyond connectivity, which was disbanded in 2016). Typical projects the team undertook related to using network data to make better decisioning for the network and marketing teams, and providing Telefónica Digital with external monetisation opportunities such as Smart Steps (aggregated, anonymised data for creation of vertical products) and Smart Digits (provision of consent-based data to the advertising industry).
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Creating the autonomous LUCA unit made a statement that Telefónica was serious about its strategy to offer data products to enterprise customers. Quoting from the original press release, “LUCA offered three lines of products and services:
The Business Insights area brings the value of anonymous and aggregated data on Telefónica’s networks for a wide range of clients. This includes Smart Steps, which is focused on mobility analysis solutions for more efficient planning. For example, to optimise transport networks and tourist management in cities, or in the case of a health emergency, in helping to better understand population movements and in limiting the spread of pandemics.
The analytical and external consultancy services for national and international clients will be provided by Synergic Partners, a company specialized in Big Data and Data Science which was acquired by Telefónica at the end of 2015.
Furthermore, LUCA will help its clients by providing BDaaS (Big Data as a Service) to empower clients to get the most out of their own data, using the Telefónica cloud infrastructure.”
The following table shows a timeline from the origins of LUCA in the Telefónica Digital business unit through to its merger into the Telefónica Tech AI of Things business in 2019 – illustrating the progression of its products and other major activities.
Timeline of Telefónica’s data monetisation business
Source: STL Partners, Charlotte Patrick Consult
Points to note on the timeline above:
Telefónica stood out from its peers with the purchase of Synergic Partners in 2015 (bringing in 120 consultancy headcount). This provided not only another leg to the business with consulting capabilities, but also additional headcount to scope and sell their existing product sets.
Looking at the timeline, it took Telefónica two years from this purchase and the establishment LUCA to expand its portfolio. In 2018, a range of new, mainly IoT-related capabilities, were launched, built up from existing projects with individual customers.
Telefónica has added machine learning to its products across the timeframe, but in 2019 the development of NLP capability for use in Telefónica’s existing products, and an internal data science platform, were then productised for customers (see below discussion about its Aura product set).
As the number of products has expanded, the number of partnerships has also expanded, bringing specific platforms and capabilities which can be combined with Telefónica’s own data capabilities to provide added value (examples include CARTO which creates geographic visualisations of Telefónica’s data).
Looking at changing vertical priorities:
Telefónica has always been strong in the advertising sector, starting with products from O2 UK in 2012. The exact nature of what it has offered has changed over time and some capabilities have been sold, however, it still has a strong mobile marketing business and expects it data to become of more interest to brands/media agencies as the use of cookies diminishes across the next few years.
The retail sector offers opportunity, but has been challenging to target over the years. Although Telefónica has interesting data for retail companies, creating replicable products is challenging as the large retailers each have differing requirements and working with small cell data in-store can be expensive. The product set is therefore currently being simplified, as the pandemic has also reduced demand from retailers.
One of Telefónica’s key capabilities which is not clearly displayed in the timeline is the provision of services to the marketing teams of the various verticals it targets. These include analytics products which Telefónica has developed from its internal capabilities and other functionality such as pricing tools.
The formation of Telefónica Tech
In 2019, Telefónica LUCA became part of the newly formed, autonomous Telefónica Tech business unit. The organisation is split into two business areas: cybersecurity & cloud, and the assets from Telefónica LUCA combined with the IoT unit. The goal of Telefónica Tech is to:
Enable the financial markets to clearly see revenue progression. Telefónica’s stated aim is for sustained double digit growth, which it achieved with year-on-year growth of 13.6% in 2020, although the IoT and Big Data segment only grew 0.8% y-o-y in 2020, due to the impact of COVID-19 on IoT deployments, especially in retail. Showing signs of recovery, in H121 revenue growth in the IoT and Big Data segment rose to 8.1% y-o-y, and to 26% y-o-y for the whole of Telefónica Tech.
Coordinate innovation, particularly around post-pandemic opportunities such as remote working, e-health, e-commerce and digital transformation
Take advantage of global synergies and leveraging existing assets
Ease M&A and partnerships activity (it already has 300 partners to better reach new markets, including relations with 60 start-ups across products)
Build relationships with cloud providers (it has existing relationships with Microsoft, Google and SAP).
To better leverage existing assets, Telefónica LUCA was integrated with Telefónica’s IoT capabilities to create a more unified set of capabilities:
IoT is seen as an enabling opportunity for AI, which can bring added value to Telefónica’s 10,000 IoT customers (with 35 million live IoT SIMs worldwide). Opportunities include provision of intelligence around “things” (for example, products to analyse sensor data) and then the addition of Business Insight services (i.e. analysis of aggregated, anonymised Telefónica data which adds further insight alongside the data coming from IoT devices).
AI is now often a commodity discussion with C-Level prospects and Telefónica wishes to be seen as a strategic partner. Telefónica’s AI of Things proposition offers an execution layer and integration experts with security-by-design capabilities.
Combining capabilities provides sales teams with an end-to-end value proposition, as the addition of AI is often complimentary to cloud transformation projects and the implementation of digital platforms.
There is a growing ecosystem in IoT and data which will generate more opportunities as both IoT solutions and ML/AI solutions mature, although it is not a straightforward decision for Telefónica on how to compete within this ecosystem.
Table of contents
Executive Summary
How successful has Telefónica been in data monetisation?
A3 capabilities operators can offer enterprise customers
In this research we explore the potential enterprise solutions leveraging analytics, AI and automation (A3) that telcos can offer their enterprise customers. Our research builds on a previous STL Partners report Telco data monetisation: What’s it worth? which modelled the financial opportunity for telco data monetisation – i.e. purely the machine learning (ML) and analytics component of A3 – for 200+ use cases across 13 verticals.
In this report, we expand our analysis to include the importance of different types of AI and automation in implementing the 200+ use cases for enterprises and assess the feasibility for telcos to acquire and integrate those capabilities into their enterprise services.
We identified eight different types of A3 capabilities required to implement our 200+ use cases.
These capability types are organised below roughly in order of the number of use cases for which they are relevant (i.e. people analytics is required in the most use cases, and human learning is needed in the fewest).
The ninth category, Data provision, does not actually require any AI or automation skills beyond ML for data management, so we include it in the list primarily because it remains an opportunity for telcos that do not develop additional A3 capabilities for enterprise.
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Most relevant A3 capabilities across 200+ use cases
Most relevant A3 capabilities for leveraging enterprise solutions
People analytics: This is the strongest opportunity for telcos as it uses their comprehensive customer data. Analytics and machine learning are required for segmentation and personalisation of messaging or action. Any telco with a statistically-relevant market share can create products – although specialist sales capabilities are still essential.
IoT analytics: Although telcos offering IoT products do not immediately have access to the payload data from devices, the largest telcos are offering a range of products which use analytics/ML to detect patterns or spot anomalies from connected sensors and other devices.
Other analytics: Similar to IoT, the majority of other analytics A3 use cases are around pattern or anomaly detection, where integration of telco data can increase the accuracy and success of A3 solutions. Many of the use cases here are very specific to the vertical. For example, risk management in financial services or tracking of electronic prescriptions in healthcare – which means that a telco will need to have existing products and sales capability in these verticals to make it worthwhile adding in new analytics or ML capabilities.
Real time: These use cases mainly need A3 to understand and act on triggers coming from customer behaviour and have mixed appeal to telcos. Telcos already play a significant role in a small number of uses cases, such as mobile marketing. Some telcos are also active in less mature use cases such as patient messaging in healthcare settings (e.g. real-time reminders to take medication or remote monitoring of vulnerable adults). Of the rest of the use cases that require real time automation, a subset could be enhanced with messaging. This would primarily be attractive to mobile operators, especially if they offer broader relevant enterprise solutions – for example, if a telco was involved in a connected public transport solution, then it could also offer passenger messaging.
Remote monitoring/control: Solutions track both things and people and use A3 to spot issues, do diagnostic analysis and prescribe solutions to the problems identified. The larger telcos already have solutions in some verticals, and 5G may bring more opportunities, such as monitoring of remote sites or traffic congestion monitoring.
Video analytics: Where telcos have CCTV implementations or video, there is opportunity to add in analytics solutions (potentially at the edge).
Human interactions: The majority of telco opportunities here relate to the provision of chatbots into enterprise contact centres.
Human learning: A group of low feasibility use cases around training (for example, an engineer on a manufacturing floor who uses a heads-up augmented/virtual reality (AR/VR) display to understand the resolution to a problem in front of them) or information provision (for example, providing retail customers with information via AR applications).
Table of Contents
Executive Summary
Which A3 capabilities should telcos prioritise?
What makes an investment worthwhile?
Next steps
Introduction
Vertical opportunities
Key takeaways
A3 technology: Where should telcos focus?
Key takeaways
Assessing the telco opportunity for nine A3 capabilities
Verizon case study
Details of vertical opportunities
Conclusion
Appendix 1 – full list of 200 use cases
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This report introduces a new sizing model for digital healthcare that reflects the recent impact of the COVID pandemic on the sector, with the goal of identifying the new opportunities and risks presented to operators and others attempting or considering investment in the market. A key finding is that market development has been accelerated four years ahead of its prior trajectory, meaning that players should significantly reassess the urgency and scale of their strategic application.
STL Partners has long argued that if telecoms operators want to build new businesses beyond connectivity, they will need 1) clarity on which customer needs to address and 2) long term commitment to investment and innovation to address them. Adding value farther up the value chain requires significant new skills and capabilities, so we believe telecoms operators must be deliberate in their choice of which customers they want to serve, i.e. which verticals, and what they want to do for them. For more detail, see STL Partners’ report How mobile operators can build winning 5G business models.
We believe that healthcare is a vertical that is well suited to telecoms operators’ strategic scope:
Healthcare is a consistently growing need in every country in the world
It is a big sector that can truly move the needle on telcos’ revenues, accounting for nearly 10% of GDP globally in 2018, up from 8.6% of GDP in 2000 according to WHO data
It operates within national economies of scale (even if the technology is global, implementation of that technology requires local knowledge and relationships)
The sector has historically been slower than others in its adoption of new technologies, partly due to quality and regulatory demands, factors that telcos are used to dealing with
Improving healthcare outcomes is meaningful work that all employees and stakeholders can relate to.
Many telcos also believe that healthcare is a vertical with significant opportunity, as demonstrated by operators’ such as TELUS and Telstra’s big investments into building health IT businesses, and smaller but ongoing efforts from many others. See STL Partners’ report How to crack the healthcare opportunity for profiles of nine telecoms operators’ strategies in the healthcare vertical.
Our research into the telecoms industry’s investment priorities in 2021 shows that the accelerated uptake of digital health solutions throughout the COVID pandemic has only shifted health further up the priority list for operators.
Figure 1: Digital health is among telcos’ top investment priorities in 2021
However, few operators have put their full effort into driving the transformation of healthcare delivery and outcomes through digital solutions. From our conversations with operators around the world, we believe this is in large because they are not yet fully convinced that addressing the challenges associated with transforming healthcare – fragmented and complex systems, slow moving public processes, impact on human lives – will pay off. Are they capable of solving these challenges, and is the business opportunity big enough to justify the risk?
Taking a cautious “wait and see” approach to developing a digital health business, launching a couple of trials or PoCs and seeing if they deliver value, or investing in a digital health start-up or two, may have been a viable approach for operators before the COVID pandemic hit, but with the acceleration in digital health adoption this is no longer the case. Now that COVID has forced healthcare providers and patients to embrace new technologies, the proof points and business cases the industry has been demanding have become a lot clearer. As a result, the digital health market is now four years ahead of where it was at the beginning of 2020, so operators seeking to build a business in healthcare should commit now while momentum and appetite for change is strong.
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How is COVID changing healthcare delivery?
The first and most significantly affected area of the digital health landscape throughout 2020 was virtual consultations and telehealth, where almost overnight doctors shifted as many appointments on to phone or video calls as possible. For example, in the UK the proportion of doctor’s visits happening over the phone or video rose from around 13% in late 2019 to 48% at the peak of the pandemic in April-June 2020, while US based virtual consultation provider Teladoc’s total visits tripled between Q219 and Q220, to 2.8mn.
By necessity, regulatory barriers to adoption of virtual consultations were lowered. Other barriers, such as insurers or governments not reimbursing or underpaying doctors for virtual appointments, and organisational and culture barriers among both patients and providers also broke down. The knock on effect has been acceleration across the broader digital health market, in areas such as remote patient monitoring and population level analytics. (See more on the immediate impact of COVID on digital health in STL article How COVID-19 is changing digital health – and what it means for telcos)
The key question is how much of an impact has COVID had, and will it last over the long term? This is what we aim to answer in this report and the accompanying global database tool. Key questions we address in this analysis are:
How much has COVID accelerated adoption of digital health applications?
What are the cost savings from accelerated uptake of digital health following COVID?
Which digital health application areas have been most affected by COVID?
Beyond the COVID impact, what is the total potential value of digital health applications for healthcare providers?
Which digital health application areas will deliver the biggest cost savings, globally and within specific markets?
To answer these questions we have built a bottom-up forecast model with a focus on the application areas we believe are most relevant to telecoms operators, as illustrated in Figure 2.
Figure 2: Five digital health application areas for telcos
Source: STL Partners
We believe these are most relevant because their high dependence on connectivity, and needs for significant coordination and engagement with a broad range of local stakeholders to succeed, are well aligned with telecoms operators assets. See this STL Partners article for more detail on why these application areas are good entry points for telecoms operators.
NB We chose to omit the Personal health and wellness application area from our bottom-up model. It is a more generic and global application area than the others, dominated by players such as Google/Fitbit and Apple and with little integration thus far into formal healthcare services. While it is nonetheless an area of interest for telecoms operators, especially those that are seeking to build deeper relationships directly with consumers, it is a difficult entry point for telecoms operators seeking to build a healthcare business. This global and consumer focused nature of this application area also means that it is difficult to find reliable local data and quantify its value for healthcare systems.
What are these forecasts for?
Telecoms operators and others should use this forecast analysis to understand the potential value of digital health, including:
The size of the digital health opportunity in different markets
The market size for new applications across the four areas we modelled (remote patient monitoring, virtual care and telehealth, diagnostics and triage, data and analytics)
The relative size of the opportunities across the four application areas in different countries
The pace of digital health adoption and market growth in different countries and application areas
In other words, it shows how big the overall digital health market is, how fast it is growing, and which application areas are most valuable and/or growing fastest.
In a follow-up report, we will expand on this analysis to assess how much of this value telecoms operators specifically can capture.
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Related webinar: How will 5G transform transport and logistics?
In this webinar, we share learnings from 100+ interviews and surveys with industry professionals. During the presentation we will look to answer:
How will 5G accelerate digital transformation of the transport and logistics industry?
What are the key 5G-enabled use cases and what benefits could these deliver?
What must change within the industry to unlock this transformation?
What is the role for telcos – how can they work with industry leaders to increase adoption of 5G and build new revenues beyond core communication services?
In October 2019, STL Partners published research highlighting the benefits 5G-enabled use cases could unlock for industries. Our forecast predicted a potential $1.4 trillion increase in global GDP by 2030 across eight key industries.
In this short paper we look to update these numbers and explore new insights and conclusions based on two key factors:
STL Partners has produced new research on the impact of 5G on the transport and logistics industry. This has led to more granular insight on the unique benefits and use cases for this vertical.
COVID has changed the global landscape. It has increased demand for some 5G use cases, such as remote patient monitoring or video analytics solutions that determine if the public are respecting social distancing, but has also brought about economic uncertainty. We reflect these nuances in our updated figures.
5G enabled use cases could increase GDP by $1.5 trillion by 2030 – an increase from our original forecast
Source: STL Partners
5G’s impact on transport and logistics: Fresh analysis and new use cases
In 2019, we deep-dived into the 5G opportunity within two key verticals: healthcare and manufacturing. We have since performed a similar deep-dive on the transport and logistics industry, consisting of primary research with experts in the industry. We interviewed 10 enterprises, solutions providers, and members of 5G testbeds who were focused on transport and logistics, as well as surveying 100+ individuals who work in the industry to test the impact they predicted for three key 5G use cases. We will shortly be publishing a full report on these findings in detail.
We have revised our estimation on the impact of 5G on the transport and logistics industry. In 2019, we predicted 5G enabled use cases could increase the GDP value of the transport and logistics industry by 3.5% in 2030. We now believe the impact could be as high as 6%, though importantly some of these benefits are indirect rather than direct.
New forecasts show a bigger impact to the transport and logistics industry
Source: STL Partners
The three 5G-enabled solutions newly explored in detail in our study were:
Real-time routing and optimisation: Sensors collect data throughout the supply chain to improve visibility and optimise processes through real-time dynamic routing and scheduling;
Automated last 100 metres delivery: Using drones or automated delivery vehicles for the last ‘hundred yards’ of delivery, where the delivery van acts as a mobile final distribution point;
Connected traffic infrastructure: Smart sensors or cameras are integrated into traffic infrastructure to collect data about oncoming traffic and trigger real-time actions such as rerouting vehicles or changing traffic lights.
Benefits from these use cases include fewer traffic jams, more efficient supply chains, less fuel required and fewer accidents on the roads.
COVID has changed the landscape and appetite for 5G services
COVID-19 has caused a global economic slowdown. There has been a widespread fall in output across services, production, and construction in all major economies. Social distancing and nationwide lockdowns have led to a significant fall in consumer demand, to business and factory closures, and to supply chain disruptions. The pandemic’s interruption to international trade has far exceeded the impact of the US-China trade war and had a major impact on national economies. Lower international trade, coupled with a precipitous fall in passenger air travel, has also caused the air industry to enter a tailspin.
Table of Contents
Preface
The 5G opportunity: Updated forecast on value to verticals
5G’s impact on transport and logistics: Fresh analysis and new use cases
Increased productivity through more efficient roads: An impact beyond transport and logistics
COVID has changed the landscape and appetite for 5G services
COVID has impacted the GDP of every country – and outlook for recovery is still unclear
Operators’ 5G strategies and roll out have also been impacted
Appetite for 5G-enabled healthcare services has been accelerated
Monetisation of telco data has been an area of activity for the last six years. However, telcos’ interest levels have varied over time due to the complexity of delivering and selling such a diverse range of products, as well as highly variable revenue opportunities depending on the vertical. Telcos’ appetite to pursue data monetisation has also been heavily impacted by the fortunes of other new telco products, in particular IoT, owing to the link between many data/analytics products and IoT solutions.
This report assesses the opportunity for telcos to monetise their data and provide associated data analytics products in two parts:
First, we look at the range of products and services a telco needs to create in order to deliver financial value.
Then, we explore the main use cases and actual financial value of telco data analytics products across 12 verticals, plus horizontal solutions that apply to multiple verticals.
Telco data monetisation: Calculation methodology
The methodology used to model the financial value of telco data analytics is outlined in the figure below.
The starting point for this analysis is 210 data or data analytics use cases, spread across 12 verticals and the horizontal solutions applicable to multiple verticals.
We then assess how difficult it is for a telco to address each use case, based on pre-requisite supporting platforms and solutions, regulatory constraints, etc. (shown in red). This evaluation enables us to assess how likely telcos are to develop products for each use case.
Thirdly, we assess which types of telco are able to develop the use case (in yellow). For example, telcos in a market with particularly restrictive regulation around use of personal data are simply not able to create certain products.
Finally, it is necessary to understand whether the data/analytics products created for a use case can be offered as an independent, standalone product, or more likely to be provided as a bolt-on service to another, pre-existing solution. This question is primarily pertinent in the IoT space where basic data/analytics are likely to be included in the price of the IoT service.
For products that we expect to be sold independently, we calculate the potential revenue based on estimated pricing for the type of data product, where known, and likely volumes that a telco will sell in a year.
For data analytics products closely linked to IoT, we attach no monetary value.
Calculation methodology for the feasibility and value of telco data monetisation use cases
Source: STL Partners, Charlotte Patrick Consult
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Viewing the data
Underlying the analysis in this report is a database tool including a detailed assessment of each of the 210 data monetisation use cases we have identified, with numerical analysis and charting capabilities. We know many of our readers will be interested to explore the detailed data, and so have made it available for download on the website in the form of an Excel spreadsheet.
Full use case database and analysis available on our website
Source: STL Partners
Table of Contents
Executive Summary
Introduction
Calculation methodology
What is this market worth to telcos?
Creating products for data monetisation
Telco products for the ecosystem
Data and analytics for IoT
Use of location in data monetisation
Maximising value in different verticals
Advertising and market research
Agriculture
Finance
Government
Insurance
Healthcare
Manufacturing
Real estate and construction
Retail
Telecom, media and technology
Transportation
Utilities
Horizontal solutions for all verticals
Conclusion and recommendations
How to pick a winning project
Index
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The world has been talking about connected healthcare – the use of in-home and wearable systems to monitor people’s condition – for a long time. Although adoption to date has been piecemeal and limited, the rapid rise in the number of elderly people is fuelling demand for in-home and wearable monitoring systems. The rapid spread of the Covid-19 virus is putting the world’s healthcare systems under huge strain, further underlining the need to reform the way in which many medical conditions are diagnosed and treated.
This report explores whether telcos now have the appetite and the tools they need to serve this very challenging, but potentially rewarding market. With the advent of the Coordination Age (see STL Partners report: Telco 2030: New purpose, strategy and business models for the Coordination Age), telcos could play a pivotal role in enabling the world’s healthcare systems to become more sustainable and effective.
This report considers demographic trends, the forces changing healthcare and the case for greater use of digital technologies to monitor chronic conditions and elderly people. It explores various implementation options and some of the healthcare-related activities of Tele2, Vodafone, Telefónica and AT&T, before drawing conclusions and recommending some high-level actions for telcos looking to support healthcare for the elderly.
This executive briefing builds on previous STL Partners reports including:
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Why healthcare needs to change
During the twentieth century, life expectancy in most countries in the world rose dramatically. This was down to advances in medical science and diagnostic technology, as well as rising awareness about personal and environmental hygiene, health, nutrition, and education. Average global life expectancy continues to rise, increasing from 65.3 years in 1990 to 71.5 years in 2013. In some countries, the increase in lifespans has been dramatic. The life expectancy for a Chilean female has risen to 82 years today from 33 years in 1910, according to the World Health Organization (WHO).
Figure 1: Across the world, average life expectancy is rising towards 80
Source: The UN
Clearly, the increase in the average lifespan is a good thing. But longer life expectancy, together with falling birth rates, means the population overall is aging rapidly, posing a major challenge for the world’s healthcare systems. According to the WHO, the proportion of the world’s population over 60 years old will double from about 11% to 22% between 2000 and 2050, equivalent to a rise in the absolute number of people over 60 from 605 million to an extraordinary two billion. Between 2012 and 2050, the number of people over 80 will almost quadruple to 395 million, according to the WHO. That represents a huge increase in the number of elderly people, many of whom will require frequent care and medical attention. For both policymakers and the healthcare industry, this demographic time bomb represents a huge challenge.
Rising demand for continuous healthcare
Of particular concern is the number of people that need continuous healthcare. About 15% of the world’s population suffers from various disabilities, with between 110 million and 190 million adults having significant functional difficulties, according to the WHO. With limited mobility and independence, it can be hard for these people to get the healthcare they need.
As the population ages, this number will rise and rise. For example, the number of Americans living with Alzheimer’s disease, which results in memory loss and other symptoms of dementia, is set to rise to 16 million by 2050 from five million today, according to the Alzheimer’s Association.
The growth in the number of older people, combined with an increase in sedentary lifestyles and diets high in sugars and fats, also means many more people are now living with heart disease, obesity, diabetes and asthma. Furthermore, poor air quality in many industrial and big cities is giving rise to cancer, cardiovascular and respiratory diseases such as asthma, and lung diseases. Around 235 million people are currently suffering from asthma and about 383,000 people died from asthma in 2015, according to the WHO.
Half of all American adults have at least one chronic condition with one in three adults suffering from multiple chronic conditions, according to the National Institutes of Health (NIH). Most other rich countries are experiencing similar trends, while middle-income countries are heading in the same direction. In cases where a patient requires medical interventions, they may have to travel to a hospital and occupy a bed, at great expense. With the growing prevalence of chronic conditions, a rising proportion of GDP is being devoted to healthcare. Only low-income countries are bucking this trend (see Figure 2).
Figure 2: Spending on healthcare is rising except in low income countries
Source: The WHO
However, there is a huge difference in absolute spending levels between high-income countries and the rest of the world (see Figure 3). High-income countries, such as the U.S., spend almost ten times as much per capita as upper middle-income countries, such as Brazil. At first glance, this suggests the potential healthcare market for telcos is going to be much bigger in Europe, North America and developed Asia, than for telcos in Latin America, developing Asia and sub-Saharan Africa. Yet these emerging economies could leapfrog their developed counterparts to adopt connected self-managed healthcare systems, as the only affordable alternative.
Figure 3: Absolute health spending in high income countries is far ahead of the rest
Source: The WHO
The cost associated with healthcare services continues to rise due to the increasing prices of prescription drugs, diagnostic tools and in-clinic care. According to the U.S. Centers for Disease Control and Prevention, 90% of the nation’s US$3.3 trillion annual healthcare expenditure is spent on individuals with chronic and mental health conditions.
On top of that figure, the management of chronic conditions consumes an enormous amount of informal resources. As formal paid care services are expensive, many older people rely on the support of family, friends or volunteers calling at their homes to check on them and help them with tasks, such as laundry and shopping. In short, the societal cost of managing chronic conditions is enormous.
The particular needs of the elderly
Despite the time and money being spent on healthcare, people with chronic and age-related conditions can be vulnerable. While most elderly people want to live in their own home, there are significant risks attached to this decision, particularly if they live alone. The biggest danger is a fall, which can lead to fractures and, sometimes, lethal medical complications. In the U.S., more than one in four older people fall each year due to illness or loss of balance, according to the U.S. Centers for Disease Control and Prevention. But less than half tell their doctor. One out of five falls causes a serious injury, such as broken bones or a head injury. In 2015, the total medical costs for falls was more than US$50 billion in the U.S. Beyond falls, another key risk is that older people neglect their own health. A 2016 survey of 1,000 U.K. consumers by IT solutions company Plextek, found that 42% of 35- to 44-year-olds are concerned that their relatives aren’t telling them they feel ill.
Such concerns are driving demand for in-home and wearable systems that can monitor people in real-time and then relay real-time location and mobility information to relatives or carers. If they are perceived to be reliable and comprehensive, such systems can provide peace of mind, making home-based care a more palatable alternative for both patients and their families.
Table of contents
Executive Summary
Barriers to more in-home healthcare
Introduction
Why healthcare needs to change
Rising demand for continuous healthcare
The particular needs of the elderly
Shift to value-based care
Demands for personalised healthcare and convenience
How healthcare is changing
Barriers to more in-home healthcare
Implementation options
Working with wearables
Cameras and motion sensors
The connectivity
Analysing the data
How telcos are tackling healthcare
KPN: Covering most of the bases
Tele2 and Cuviva: Working through healthcare centres
Vodafone and Vision: An expensive system for Alzheimer’s
Telefónica’s Health Moonshot
AT&T: Leveraging a long-standing brand
Conclusions and recommendations
Recommendations
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The Coronavirus pandemic is an unprecedented event in our lifetimes. As well as the virus’s impact on health, shock and fear have rippled across the world. Everyday life is changing almost everywhere, with major impacts across the economy. It is having many of the same effects as a new world war, albeit a war against a common invisible enemy.
At the start of every world world war, people in the UK thought it would be over by Christmas. Coronavirus won’t be over by Christmas (December) 2020. Unchecked. Each person with COVID-19 infects about 3 people, on average. This means it is hugely infectious and can (re)infect populations rapidly. Hopefully, better healthcare treatments will be developed fast, and in time a vaccine too – though the World Health Organisation (WHO) believes this will take at least a year, and longer to immunise the population.
On this basis, unless several miracles happen, we think the world is likely to be dealing with some form of social distancing and other preventative and curative measures for a while. Given what we know today, here is our initial take on what telcos are doing now – and what they should do next, including four scenarios to help envisage a range of possibilities amid the current uncertainty.
Telcos and vendors can and should now do some great things
Telecoms is an essential service in today’s world. The initial focus of telcos has inevitably been on the short term crisis response: keeping the network working, adapting to new and changing patterns of customer behaviour, and trying to keep their employees and customers safe. Beyond that, telcos have been offering additional services and help to customers, and we outline some of the measures taken so far in this report (summarised below).
Beyond that, telco leaders must keep thinking and planning ahead. As a sector it is in a relatively strong position. Telecoms stocks are among those least impacted in the crisis, showing that shareholders see telecoms as a relatively safe haven with a more reliable future than many other sectors (e.g. travel, hospitality, etc.).
That’s not to say that all telcos will survive the crisis in the state they are in today. Some may be nationalised or struggle to finance debt or worse, though for the most part we imagine telcos will find state support where needed because of the importance of the service they deliver.
On a more positive note, the near term future will see an enhanced focus on addressing some big problems, such as accelerating the transformation of healthcare and making it and other critical functions such as logistics even more robust and resilient.
STL Partners believes that the crisis will further accelerate the evolution of the Coordination Age, as customers and governments will accept, change and learn new behaviours (such as online ordering, remote delivery, automated services, etc.) fast in the context of an environment in which they simply have to do so. The crisis will also place the importance of critical and sometimes limited resources (e.g. food, healthcare, communications) firmly in the spotlight, along with issues such as potential conflicts between the use of data and privacy.
It’s too early to say whether highly controlled economies like China will do better than less controlled ones. Yet the strengths of a coordinated response to a problem (such as how a national health service can organise and plan collectively) will become clearer, and is likely to shape regulation that prioritises desired outcomes in a more pragmatic way, potentially bringing regulated collaboration back into fashion somewhat compared to pure competition in some sectors.
True leaders think ahead
Despite all the near term focus that a crisis brings, the challenge of addressing future problems should not just be dropped. We recommend that telcos and vendors shouldn’t abandon their longer term ambitions to develop new services and solutions in order to deal with the crisis. By analogy, the countries that are doing best in the COVID-19 response today are those that were best prepared for a viral pandemic, i.e. those that have planned how to scale up testing and hospital capacity, and have previously outlined a pandemic response strategy. Likewise, the telcos that will do best will continue to offer resilient support to their communities, and develop new solutions for customer problems.
Perhaps the best that could happen is that telcos and other service providers could ultimately find this crisis a stimulant to accelerate internal and business model change. For this to happen, the change needs to come from the top, and leaders in telecoms need to set the example of looking to do everything possible to help deal with the crisis, while maintaining a strong forward looking outlook.
STL Partners will continue to research how to do that realistically in the new context. We believe that Coronavirus will change how services evolve. For example, some 5G capital investments are likely to proceed with greater caution in the near term. Our initial thoughts on this is that, rather than bin all development, telcos should use this as an opportunity to better develop their understanding of customer needs, and develop the non-network capabilities and offerings to support consumers and other sectors to prepare the ground better for when 5G does arrive.
Short-term: Some smart offers to copy
Telcos are broadly offering customer support in four ways:
Supporting healthcare, government and other critical care customers: prioritising communications and resources for first line responders and healthcare facilities, offering population movement statistics, participating in national tests, and providing other services (e.g. bulk SMS updates to patients and healthcare communities)
Business customers: support for home working such as increased capacity on collaboration services, support on business continuity
Consumer customers: quite a wide range of offers, varying from suspending data bundle usage caps, to providing free calls for pensioners, free calls to the worst hit countries, waiving roaming charges and late payment relief for COVID-19 impacted customers
Shops and customer premise visits: a range of measures to ensure customer and employee safety, including shutting shops entirely, keeping some open, and introducing social distancing
Mid term: Adjust, but don’t forget the future
For the next few months, humans will interact differently. People and businesses will want to survive, and will be keen to return to ‘normal’ – but they won’t be able to.
Thus new habits, such as home working, and work and social video conferencing, will become more deeply embedded behaviours. New support structures to care remotely for the isolated will evolve, potentially with lasting effects. Telcos will need to support these behaviours with appropriate service and capacity, and with considerate offers as they have started to do as the crisis bites. Telcos should not behave like or risk being seen as profiteers during the crisis. Such action would be wrong – and a PR disaster.
They will need to continue to focus on the needs of critical sectors such as healthcare, government, security and logistics, and maintain a close relationship with government to assist the centralised efforts to combat COVID-19 and support the pandemic relief effort.
Long term: Four possible scenarios
When the future is as uncertain as it is now, scenarios are a useful way to envisage possible alternatives and enrich planning. We’ve therefore outlined four scenarios for the recovery stage:
Scenario 1:Back to (almost) normal. A cautiously optimistic scenario in which all economies recover reasonably swiftly without much impact on the global order. Global trade recovers gradually, and activities like 5G investments are merely delayed at the outset.
Scenario 2:Fragmented recovery. A moderately pessimistic scenario in which some economies are much more significantly damaged than others. Recovery takes longer and global initiatives are less successful because of lower collaboration. 5G take-up is patchy, nation by nation.
Scenario 3:Weak and distanced. The most pessimistic scenario in which nations have become much more insular and distrustful, and economic and social recovery is much slower. Economic realities have significantly delayed 5Ginvestments in most nations.
Scenario 4:Stronger than before. The most optimistic scenario. Collaboration and cooperation are enhanced, and the broadly successful response and recovery to the crisis has refocused strategic thoughts on the importance of resilience in the long-term. 5G is close to the trajectory it would have been on before the crisis and accelerating fast.
Introduction
World War C
The Coronavirus pandemic sweeping the world in 2020 is a truly disruptive ‘black swan’ event. It is impacting people’s lives in almost every nation and will continue to do so for many years ahead.
STL Partners, like all our customers and partners, families and friends, is feeling the impact already. We are lucky enough to be able to continue to work because the nature of our work is relatively unaffected by virtual working. Many in the global economy are not so lucky, and many others have been even more directly impacted by the illness. Our thoughts and best wishes are with you all.
Our job is to try to help others make better decisions to shape the future of their businesses. We believe that COVID-19 will change the global economy in a way that will impact all previous strategies and plans. This analysis is therefore intended to help preparations and planning for the next few months and years. Yet certainty is in short supply, and the situation is changing all the time. We do not claim to have all the answers and will update our analysis when it makes sense.
The scale and speed of this pandemic is unprecedented in the lives of the few alive today under the age of 102. Even so, when the so-called “Spanish Flu” swept the world in 1918, road and air travel were relative novelties, information spread slowly and its distribution was highly limited.
Today, the virus has spread much faster – but so too has news, information and research relating to it. The primary challenges for economies and societies as a whole are:
Supporting the frontline medical battle for the lives of the severely infected.
How the available information can be used to manage the disease to best effect by governments and authorities.
How other technological and economic developments such as globalised food chains and online information and entertainment services can help to sustain the rest of the population until the virus and the fear and disruption it has brought are defeated, or at least brought under control.
Operational and financial support to maintain economies and employment wherever possible.
Coronavirus and the Coordination Age
STL Partners has written at length about the Coordination Age – our view that the world economy now needs on-demand solutions enabled by the emergence of new technologies like AI, virtualisation, 5G, etc. These solutions must deliver outcomes (e.g. in healthcare) in a resource efficient way.
This age impacts all industries, but in the forefront are healthcare and logistics, which are also those most under test by Coronavirus. Succeeding against COVID-19 will require a massive and sustained effort of coordination, in this case mostly orchestrated by governments and health authorities.
Telcos and the telecoms industry will not solve this, but they can be major enablers of success. They can also have a major role in helping societies deal with the crisis and rebuilding and reshaping themselves after it has passed. This report starts to sketch out how this might happen.
Three stages and three questions for telcos
To simplify the analysis of what could happen, we’ve split the near future into three stages, and have structured the report correspondingly:
Now: shock and lockdown. Dealing with the initial global spread of the pandemic.
Next: finding a new, temporary normal. Coping with the longer-term impacts of social isolation, healthcare, and economic damage.
After: rebuilding and reshaping. What will be the lasting changes, what will need to be rebuilt?
In each case, we outline our best views on the ‘certainties’ – or at least more certain outcomes, and explore different scenarios where uncertainty is currently prime.
Throughout, we address three questions about what actions telcos and the industry should take:
What do telcos need to do to survive?
What can telcos do to help their customers?
How can telcos help the immediate response, then rebuild and reshape society?
Now: Shock and lockdown
The problems that need to be solved
A health crisis is a hard reminder of the need to serve the greater good of our societies. We need other people and organisations to survive and thrive, especially in today’s highly globalised and connected world. In this regard, there is an over-riding responsibility for those in positions of power to direct that power in service of the integrity of society and the economy – how we exchange goods and services to maintain our lives.
In such moments, the pursuit of competitive gains which is the normal function of companies and markets becomes secondary to the overall well-being of the society and the economy that supports it. This is a fundamental – albeit temporary – suspension of ‘business as usual’.
Telcos have a long history of providing support in times of crisis, and the COVID-19 pandemic is the broadest and most systemic global crisis of our times. The fundamental functions and sectors that the industry needs to support are:
Healthcare – sustaining and protecting the healthcare system in a time of critical demand and pressure
Logistics – ensuring that supply and delivery chains are enabled to operate and deliver the goods (e.g. food and medical supplies) and services (e.g. water, power, hygiene) required for the healthy function of society
Government – ensuring that governments and responsible authorities are enabled to function and make decisions to best manage, control and mitigate the impact of the virus and the accompanying fear and disruption
General communications – ensuring that the public, businesses and others can stay in touch with each other to provide information, economic, medical and emotional support, and maintain employment.
Immediate actions
Following airline safety advice
The classic airline safety advice is to fit your own oxygen mask before attempting to help others.
We expect that telcos will be putting in place their contingency plans for dealing with the COVID-19 pandemic – though of course, the exact circumstances cannot have been foreseen.
Clearly, maintaining the core functions of telecommunications networks will be the priority – doubling down on enabling and protecting data and voice communications across the network, especially to mission-critical establishments like hospitals, and other healthcare and state facilities.
This may require operators to scale up network capacity at key points, although early data suggests most traffic growth from home-working and home-schooling may come at historical off-peak times. There is likely to be a shift from mobile to fixed broadband in many cases, with mobile use being concentrated in residential areas rather than urban centres and transport corridors. Mobile voice traffic is likely to rise substantially (in Spain, a 50% rise has been reported) as people speak to elder relatives and connect to conference calls and other services. Encouraging customers to shift usage to fixed-line telephony (which usually has extra capacity) could be wise.
Most cloud and enterprise facilities have been engineered to be highly resilient, but there is also likely to be increased demand in the distributed consumption of data in many societies as social isolation measures move populations into home-working environments and away from traditional daytime centres of communications localised on business.
How telcos can support and are supporting their customers
Many telcos are putting in place wider measures to support their customers.
Figure 1: How telcos are supporting their customers
Telco responses to Coronavirus
Source: Operator announcements, STL Partners
For healthcare, government and other critical support customers:
Prioritising connectivity for frontline healthcareresponders (AT&T, Verizon and others)
Offering bulk text upgrades to patients and healthcarecommunities (Vodafone)
Offering insights on population movements and statistics (Vodafone, Deutsche Telekom, Telefonica)
Collaborating in other hospital and healthcaretrials and programmes (China Mobile, China Telecom, TELUS)
Extending free hospital Wi-Fi (Globe)
Free-rating data on healthcaresites and apps
For these sectors and business more broadly, additional:
Conferencing lines, VPN capacity, and capacity / licenses for collaborationtools (BT)
Other home-working security(BT, NTT)
Cut price access to digital marketing services and conferencing for small businesses (Telstra)
For consumer customers, telco measures include:
Additional free data in bundles (Telefónica, Telstra, Dialog)
Removing caps on some limited data bundles (AT&T, Sprint, T-Mobile, TELUS, Telstra, Dialog)
Additional entertainmentcontent in some packages (Telefónica, TELUS, Dialog)
Free or reduced tariff calls to the countries most impacted by COVID-19(Verizon, Sprint, T-Mobile)
Free landline calls for pensioners (Telstra)
Free medical hotline service (Dialog)
Free data packages for families with school children without internet access or no data charges on educational services (Du, Etisalat, Dialog)
Waiving fees / suspension of service for non or late payment for impacted customers, or extending payment terms / credit (AT&T, Verizon, Telstra, Dialog)
Waiving all or some roamingfees for overseas customers (TELUS)
Encouraging the use of digital cash and health apps (Globe)
And in terms of shops and customer premises visits, telcos are taking a range of measures from:
Closing shops, or keeping some open to provide critical equipment (AT&T, Sprint, T-Mobile, DTAG, TELUS)
Possibly stopping or limiting customer premises visits, or continuing but with new isolation/protection procedures in place (AT&T, Globe)
NB This is illustrative and not an exhaustive or comprehensive list. Please see our blog for links to some of the companies’ policies and articles relating to them at the time of research.
STL Partners is conducting a rapid survey of telco responses which can be found here. We will be updating and freely sharing what operators tell us over the next few weeks with details of the measures used so that other telcos can review what they can copy or learn from these measures to support their customers.
Help your employees
Again, many telcos in directly impacted environments have asked employees that can to work from home. We would also hope telcos are putting in place additional health measures to protect those employees that do need to make physical contact with customers and others, such as health advice and screening.
Starting to look ahead
Which sectors will be most affected?
The impact of the COVID-19 pandemic across the economy is very hard to predict at this stage, although there are certain sectors that are clearly already under immediate pressure, such as:
Consumer leisure and mass transport: cruise lines, passenger airlines, hotels and tourism as people shun travel and self-isolate
Consumer service industries such as cafes, bars, restaurants, gyms, hairdressers
Entertainment and mass gatherings such as sporting events, festivals, conferences and events, concerts, museums.
Wider impacts are anticipated in demand for other consumer goods and services, such as cars, clothes and other non-food and everyday items, and this knocks on to the value chains of those industries too.
This pattern is evident looking at the impact on FT.com share indices over the last month in Figure 2. Indeed, of the major sectors, telecommunications was the least devalued on the 16th March when we looked at this data (a day on which there was a 10% drop in global financial indicators).
Figure 2: Financial markets rate telecoms as one of the sectors of the economy least hit by Coronavirus
Coronavirus impact on industries
NB Oil and gas sectors have recently faced additional pressures from an industry price war. Source: STL Partners, FT.com
Moody’s credit rating agency paints a similar picture of their estimated impact of the pandemic on the credit worthiness of industries by sector as shown in Figure 3.
Figure 3: Moody’s credit rating impact of Coronavirus by industry
Source: Moody’s
At this early stage it’s very hard to be sure of what the overall impact of the COVID-19 pandemic will be on each sector. But there’s certainly some consistency between the logic of what is causing the impacts, and the degree to which markets and market rate-setters are reflecting likely changes in future value.
For telcos, the questions are: how can they support all sectors effectively during the crisis, and how can they help them recover and rebuild in due course. We will explore this a little further in subsequent sections.
Table of contents
Executive Summary
It won’t be over by Christmas
Telcos and vendors can and should now do some great things
Understanding the 5G opportunity in other industries
The aim of this report is to highlight the impact that 5G will have on global GDP between 2020 and 2030. To do this, we have focused on eight industries where we feel 5G will have the largest impact. Often when 5G is discussed, the focus is on the impact it will have on the consumer market. Here, we argue that 5G will unlock significant new revenue opportunities in the enterprise space, enabling innovative use cases that are currently impossible to scale commercially (with existing technologies).
Insight from this report is explored further in the following publications:
The document was researched and written independently by STL Partners, supported by Huawei. STL’s conclusions are entirely independent and built on ongoing research into the future of telecoms. STL Partners has written widely on the topic of 5G, including a recent two-part series into the short- and long-term opportunities unlocked by 5G, and lessons that can be learnt from early movers.
Comparing apples with apples: How to compare nascent 5G with established 4G
If you compare the technological specifications for 3GPP release 14 and 3GPP release 15 (the first 5G release), you might be underwhelmed. Despite the hype that 5G will be transformative, it does not appear to be delivering much more than incremental increases in speed and reliability. But, of course, 4G is now a mature form of connectivity (having been in-life for 6+ years) whereas 5G is still nascent.
To compare apples with apples, it makes sense to compare 5G release 16, where capabilities such as ultra-reliable low-latency and network slicing are being added, with LTE today.
Mature 5G benchmarked against the capabilities of mature 4G
Source: ITU, Nokia, ublox, gps world
Of course, these figures represent a best-case scenario occurring in a laboratory environment. This is true for both the 4G and 5G numbers. It’s also true that, in reality, it will take time before we see commercialised rollout of enhanced mobile broadband (“pure 5G”) rather than enhanced mobile broadband with 4G fall-back alongside fixed wireless access. Despite this, these figures make clear that when 5G reaches maturity, it will far outstrip the capabilities of 4G, and unlock new use cases.
Our assumption is that by 2025 5G technology will be mature, enabling massive M2M / IoT use cases as well as those that require ultra-reliable low-latency communications. Several of the 5G use cases we’ll go on to explore in more detail are reliant on this technology, so it is important to acknowledge that their commercialisation is only likely to start from around 2023 and in many markets they still won’t be fully deployed in 2030.
It’s not all about LTE: 5G must be compared to all available technology
Mobile is not the only form of connectivity used by enterprises. Plenty of industries are also making use of Wi-Fi, LPWAN, Zigbee, Bluetooth and fixed connectivity as part of their overall connectivity solution. When 5G is rolled out, in some cases, it will need to integrate with these existing technologies rather than replace them. The table below summarises some of the key benefits and shortcomings of current technologies, including highlighting the sorts of situations in which industries are making use of them.
Current technologies will not be entirely replaced by 5G, but it can address some of they key shortcomings
There are clear scenarios where 5G will be superior to existing technologies and bring significant benefits to industrial users. Ultimately, in particular, 5G will enable:
Low latency and high bandwidth requirements for wireless connectivity
Massive IoT through ability to handle high cell density
Ultra-reliable and secure connectivity.
Table of Contents
Preface
Executive Summary
5G enabled solutions are estimated to add c.$1.4 trillion to global GDP in 2030
Operators must embrace new business models to unlock significant revenues with 5G
Recommendations for operators: how to capitalise on the 5G opportunity
Introduction
Background
Comparing apples with apples: how to compare nascent 5G with established 4G
It’s not all about LTE: 5G must be compared to all available technology
5G deployment: 5G will mature over the next ten years
5G will add more than $1.4 trillion to the global economy by 2030
Mobile network operator strategic options with 5G
5G alone will not change the game for operators
Strategic options for operators to add more value with 5G
5G-enabled digital transformation in healthcare
Example 5G use case: Remote patient monitoring
Implications for telcos
5G-enabled digital transformation in manufacturing
5G can create $740bn in additional GDP by 2030
Example 5G use case: Advanced predictive maintenance
Implications for telcos
Conclusions for operators: how to capitalise on the 5G opportunity
Table of Figures
Figure 1: Mature 5G benchmarked against the capabilities of mature 4G
Figure 2: Current technologies will not be entirely replaced by 5G, but it can address some of their key shortcomings
Figure 3: Forecast of 5G deployment in major regions
Figure 4: Responses from industry surveys
Figure 5: 5G will contribute ~$1.4 trillion to global GDP by 2030
Figure 6: Manufacturing, energy & extractives and media, sports & entertainment industries will see the largest upticks to their industry thanks to 5G use cases
Figure 7: In 2030, manufacturing and construction will be the largest industry sectors (in 2030)
Figure 8: High income countries will see almost 75% of the benefit of 5G in 2025, but the share is more even across all geographies by 2030
Figure 9: 4G rollout did not produce sustainable revenue increase
Figure 10: What should telcos’ role be in 5G B2B?
Figure 11: As telcos move beyond just connectivity, they can increase their share of the wallet
Figure 12: Telcos must focus efforts in specific verticals – some are already doing this
Figure 13: Global impact of 5G on healthcare across four key contact points
Figure 14: Remote patient monitoring enables wearables to send data about the patient to the hospital for monitoring
Figure 15: Estimated impact of 5G-enabled remote patient monitoring
Figure 16: The potential roles for telcos can within healthcare
Figure 17: The TELUS Health Exchange as a point of coordination
Figure 18: There is opportunity for telcos’ to play multiple roles higher up the value chain in healthcare
Figure 19: Estimated impact of 5G on manufacturing GDP (USD Billions) by use case
Figure 20: Advanced predictive maintenance enables many sensors to send data about machinery for monitoring and optimisation
The old regulatory models are less relevant for 5G
Regulators in different markets around the world have a tried and tested formula for making spectrum available for new networks and for regulating the operators that run those networks. They have successfully used this formula for 2G, 3G, and 4G.
However, 5G is different and may require a different approach for both licensing spectrum and for regulating mobile network operators’ services. As we outline in the section 5G benefits industry and society, unlike its predecessors, 5G is not simply a faster pipe which therefore benefits individual end-users. Instead, it has been designed with new capabilities that can have a profound effect on enterprises and entire industries.
These capabilities and how they compare to LTE and to other wireless technologies are outlined in the Appendix. Because 5G can create so much value to all constituents of society, STL Partners contends that the focus of governments and regulators should be in ensuring that:
It is rolled out as quickly as possible;
Regulation is sufficiently flexible and focussed to reflect the needs of different industries and of consumers;
Mobile network operators are encouraged to deliver more value to their existing customers and potentially new ones by contributing to cross-industry activity that benefit governments, enterprises, and consumers.
Put simply, our analysis suggests that the upside from rapid 5G deployment far outweighs the short-term benefits of high spectrum licensing fees. From a pure economic perspective, 5G should contribute an additional $1.4 trillion of Gross Domestic Product globally in 20301. The higher rates of employment, corporate profits, and consumer spending associated with this increased GDP will translate into significant increases in receipts of corporation and income taxes, national insurance contributions, and sales tax for governments as well as enhanced national competitiveness.
These annual inflows to the public purse will be far bigger than the one-off payment from licensing spectrum. But these benefits only accrue if 5G is deployed quickly and effectively so that its full potential is realised by industry in each market. A slow 5G rollout risks enterprises investing in workaround solutions that do not require 5G and do not generate the same value.
Spectrum licensing: Auctions vs beauty contests
A focus on short-term auction fees could be counter-productive as it may inhibit operators’ ability to invest aggressively in rolling out 5G. But as we show in graphic below, it is easy to administer, shows the regulator is ‘doing a good job’, and results in higher short-term economic benefits. We believe that governments need to look at the longer-term sustainable benefits of 5G deployment and, potentially, opt for spectrum licensing ‘beauty contests’ – in which spectrum is allocated on a detailed raft of requirements such as rollout speed and network performance – rather than auctions. Such an approach may require input beyond the telecommunications regulator. For example, the treasury, health and social welfare, business, transport and energy ministries might also be needed to evaluate whether a spectrum beauty contest offers a better social and economic return than a spectrum auction.
And it’s not all about money, globally 5G could result in 1 billion patients with improved access to healthcare globally in 20302. Governments, therefore, need to evaluate the social benefits of 5G as well as the economic ones. But managing a regulatory approach for 5G via input from different government departments is complex and may require management at the highest level.
The 5G spectrum licensing conundrum
Recognising that not all markets are the same
While we have outlined above a bias towards spectrum beauty contests over auctions for 5G, it is important to note that the right approach will vary by country. Based on what we have already seen from the 5G deployments and announcements in 2018 and 2019, there is a clear delineation between countries in their 5G rollout speed. We have segmented markets into three types in Figure 2:
Leaders: countries where all operators are pushing ahead aggressively with 5G deployment (in part owing to the role of the regulator in the way they have managed spectrum licensing);
Followers: countries where 5G rollout is patchier and many operators are reluctant to deploy 5G and are essentially doing it under duress, in other words, they worry that they will suffer if they don’t deploy and their competitors do so they do enough to be seen to be ‘keeping up’;
Laggards: (developing) countries where the current network deployment focus of operators is LTE rather than 5G.
The table below outlines reasons why segments are operating at different 5G rollout speeds and offers suggestions for how governments might wish to stimulate operator 5G investment in each segment.
5G spectrum licensing country segmentation
Table of contents
Preface
Executive Summary
How should governments regulate 5G?
The old regulatory models are less relevant for 5G
Spectrum licensing: auctions vs beauty contests
Recognising that not all markets are the same
Local vs national regulatory issues
Principles and options for 5G regulation relating to industrial IoT
5G benefits industry and society
Introduction: 5G is estimated to add c.$1.4 trillion to global GDP in 2030
Healthcare benefits
Manufacturing benefits
Telecoms industry energy efficiency benefits
Telcos (may) need encouragement to invest in 5G
Lower revenues, lower profits
5G per se won’t change the game for operators
Fast 5G network deployment needs to be encouraged
Appendix
Comparing apples with apples: how to compare nascent 5G with established 4G
It’s not all about LTE: 5G must be compared to all available technology
5G deployment: 5G will mature over the next ten years
Table of Figures
Figure 1: The 5G spectrum licensing conundrum
Figure 2: 5G spectrum licensing country segmentation
Figure 3: Managing national and local mobile networks and services
Figure 4: 5G will contribute around USD1.4 trillion to global GDP by 2030
Figure 5: Global impact of 5G on healthcare (annual cost savings USD Billions)
Figure 6: Benefits from 5G to global manufacturing (USD Billions) by use case
Figure 7: Annual global emissions from mobile networks under 4 scenarios (metric tonnes of CO2)
Figure 8: Global mobile services revenues 2009-2022 (USD Trillions)
Figure 9: Global mobile operators EBITDA margins 2007-2017
Figure 10: 4G rollout did not produce sustainable revenue increase
Figure 11: Mature 5G benchmarked against the capabilities of mature 4G
Figure 12: 5G can address some key shortcomings with existing technologies
Figure 13: Forecast of 5G deployment in major regions
This is a summary of some of the learnings from another fascinating session at the TELUS Carrier Health Summit in Toronto, May 22nd 2019. This is an annual gathering that was hosted by TELUS Global Solutions for telcos and their partners in healthcare.
Of the hosts, Fawad Shaikh, VP TELUS Global Solutions, said it ran this years’ session because it wants “to develop an alliance of like-minded telcos in health”. David Thomas, VP TELUS Health Solutions, added that “healthcare has to be delivered locally, which is a real plus for telcos. Yet we all need to gain global scale to compete, so it is a great opportunity for non-competitive collaboration.”
About sixty people from telcos and health tech companies were there this year, and the audience was global, with representatives from Latin America, N America, Europe, the Middle East, Asia and Australasia.
STL Partners presented its research on nine telco healthcare studies, and caught up with participants, including Dr Ali Parsa, CEO and founder of Babylon Health, and Mairi Johnson, its Global Partnerships Director.
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Healthcare: the problem to be solved
Healthcare is one of our favourite examples of the drive behind the Coordination Age. The explanation is simple:
The problem with healthcare in most economies is not that there isn’t great medicine and healthcare professionals. It’s getting it all delivered to the patients at the right time and at a cost that’s affordable.
This is fundamentally a coordination problem: bringing the right assets (whether physical or digital – a nurse, a treatment, or the patients’ records) together for the patient. Then maintaining the order throughout the patients’ treatment, and indeed, their lives.
All healthcare systems face multiple mounting pressures: growing and ageing populations, greater costs, skills challenges, and more pressure on funding from other sources to name a few.
There’s money in health
It’s also an area of HUGE expenditure. PWC’s Tara McCarville shared figures showing that:
Global healthcare spend is forecast to grow from $9.7 Trillion in 2014, to $18 Trillion in 2040, growing at 21% CAGR over the next 5 years.
Even so, it’s perhaps surprising that 84% of Fortune 50 companies are engaged in healthcare in some way.
Given this, it’s less surprising to note that the big tech players are seriously engaged in digital health too, with Amazon’s recent tie up with JP Morgan and Berkshire Hathaway to create the Haven Group being the most eye-catching. Others between CVS and Aetna, and Sanofi and Click Therapies involve less broadly familiar names, but are weighty nonetheless.
From a government perspective the numbers are big too. In the UK for example, which is one of the EU’s lower healthcare spenders per capita, the NHS’s annual bill is currently £154 billion, and it’s forecast to rise to £188 billion in 15 years (to 2033).
A 5% tax rise?
Without borrowing, this would lead to something like a 5% increase in overall taxation. Over 98% of UK tax funding is from ‘general taxation and national insurance’ – so mainly income tax, VAT and ongoing employment contributions. In other words, people would have to pay.
Despite the UK’s love of the NHS, a permanent 5% tax rise would draw many concerned breaths from both politicians and the public. The need to find better solutions is genuinely pressing.
(NB Try out this calculator made by the Institute of Fiscal Studies if you fancy yourself as a policy guru. To fund healthcare, would you raise taxes, cut pensions, defence, or education?)
Figure 2: The Institute of Fiscal Studies’ (IFS) Health Budget Calculator
Meeting the NHS’s future funding needs would mean a 5% UK tax rise
This report outlines key challenges within selected industry verticals, and how telcos can help resolve them with three emerging networking technologies – 5G, IoT and edge computing.
Enterprise services evolve alongside communications and information technologies
The early days of 2G/3G
Basic M2M connectivity
Early versions of private networks, bypassing the internet for sensitive data transfer
Improving mobility and capacity with 4G and fibre
Better connectivity drives demand for video-conferencing and more sophisticated UCaaS
Mobile and fixed data connectivity is powerful enough to enable greater enterprise mobility and support the shift towards cloud-based services
Different verticals increasingly require bespoke solutions for unique needs – which are easier to deliver through the cloud
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Greater flexibility and frictionless experiences with 5G, IoT and edge computing
Increasing complexity of connectivity, IoT, cloud and IT ecosystems are driving demand for flexible yet seamless solutions:
Mobile connectivity across geographies without onerous roaming charges
Seamless mobile connectivity across multiple networks and technologies, especially in remote areas
Frictionless remote set-up of IoT devices shipped directly from manufacturer to live environment
Ability to migrate to new technologies seamlessly (e.g. public sector move from TETRA to cellular)
All of the above controlled and monitored on user-friendly, cloud-based dashboards
The shift from product to service-based business models means a growing number of enterprises want to embed connectivity into their offer to customers
i.e. demand for greater control over wholesale connectivity solutions
remote maintenance, asset-tracking, etc.
5G applications will arrive at different times…
Source: STL Partners
…in the meantime, other technologies can help address enterprise needs
Source: STL Partners
The problem with 5G for enterprises
Most enterprises are not looking at 5G in isolation, but as one of many technologies that will help resolve pain points around efficiency and innovation. The Internet for Things (I4T) and edge computing are two other key technologies that many enterprises need, and which telcos could potentially provide
In the long term, STL Partners does not expect 5G connectivity on its own to deliver growth for telcos. So to grow enterprise revenues, telcos should also develop I4T and edge computing solutions
But developing expertise in 5G, I4T and edge computing will be expensive and complex to manage
Therefore, telcos should start by targeting their investments to meet specific enterprise pain points
This report helps telcos assess how to target their investments by highlighting key pain points in a selection of industry verticals, and how relevant 5G, I4T and edge computing are for solving them.
Sectors with strong demand for all three technologies hold the highest potential value, but this will be difficult for telcos to capture owing to strong competition in I4T and edge computing from other technology companies.
This report covers a selection of verticals that STL Partners has developed knowledge of through research and consulting activities: manufacturing, construction, utilities, agriculture, transport, automotive, healthcare, and sports, media and entertainment.
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Creating a healthy culture is a key component of success in any organisation. It is particularly important – and challenging – where a company is building a new business operating in a new industry that combines people steeped in an existing cultures. This was the case for TELUS Health in Canada, so we spoke to its then CEO to understand the approach it took.
Three components of ‘Culture’
Whenever we ask our clients what the biggest problem they face is, there’s an excellent chance they will say ‘changing the culture’.
Yet it’s a bit of a coverall statement: what exactly do they mean?
It’s often a bit of a mish-mash of processes, organisation, behaviours and incentives: ‘the way we do things around here’.
Some of this is formalised, through organisation, line-management, how projects are managed and so on. Other aspects are softer – how companies expect people to behave when they are at work: how much autonomy do they have, can they work from home, etc.
To put some structure to this catch-all idea, it can be useful to think about three fundamental components of culture:
Shared purpose: what are we all trying to achieve?
Common values: what do we believe we need to be like to get there?
Processes and behaviours: how do we do things round here?
Looking at these definitions makes it clear why change needs to be led from the top, and why culture change is so challenging.
It needs to be led from the top because you cannot have a credible common purpose that conflicts with what the leadership says it wants, what it values, or how the organisation acts.
Even if you have clear direction from the top, it’s still hard to change because:
Most of your organisation will start from a position of ‘this is how we previously learned to be – and now you’re asking us to be different from that?’
Culture essentially means a set of behaviours or characteristics that have been socialised, and thereby enmeshed in a complex human web of habits and expectations.
According to Paul Lepage, President of TELUS Health, “culture eats why for breakfast”, paraphrasing the quote “culture eats strategy for breakfast” in a fascinating conversation we had recently.
What Paul meant was that one of the key drivers to creating a great culture is to ensure that your team is truly engaged with your organisation’s meaning or purpose, or ‘why are we doing this?’ beyond making money.
In the case of TELUS Health, this is ‘delivering better healthcare outcomes’, and in Paul’s case at least, this idea comes over very strongly in every interaction I have had with him.
Author’s note: I was talking to Paul because I am fascinated by the role that culture plays in business success. I have known some of the team at TELUS Health for several years, and I am always struck by the quality and consistency of their culture across all the people I have met at TELUS. Andrew Collinson, Partner and Research Director, STL Partners.
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TELUS and TELUS Health: consistent internal and external KPIs
There is a notable consistency between TELUS’ results on internal measures of employee engagement, customer opinion, and commercial performance.
Employee engagement: TELUS’ overall employee engagement score consistently ranks within the top quartile and has risen steadily in recent years. TELUS was also named as one of Canada’s Top 100 Employers and Achiever’s 50 Most Engaged Workplaces in 2017.
Customer recommendation: TELUS’ customers have given it improving ‘Likelihood to recommend’ scores since 2011.
Market valuation: TELUS’ share price has also grown steadily from 2011.
Figure: TELUS’ share price has also steadily grown
TELUS Annual share price, as at end August 2011-2018
Source: Google Finance, STL Partners
Is this a coincidence, or is there a link between these results? And if it is not a coincidence, how has it achieved this, and what can others learn?
TELUS and TELUS Health
Background
STL Partners has worked closely with TELUS and TELUS Health over the last few years, analysing the healthcare division’s progress in TELUS Health: Innovation leader case study. We’ve participated in its Healthcare Summits in Toronto and come to know several of its executives over the years. The following is a brief introduction to TELUS Health from our 2017 report.
Why TELUS got into healthcare: a viable growth opportunity
Starting in 2005, led by the CEO Darren Entwistle, TELUS executives came to a consensus that just focusing on connectivity would not be enough to sustain long term revenue growth for telecoms companies in Canada, so the telco began a search into adjacent areas where it felt there were strong synergies with its core assets and capabilities. TELUS initially considered options in many sectors with similar business environments to telecoms – i.e. high fixed costs, capex intensive, highly regulated – including financial services, healthcare and energy (mining, oil).
In contrast with other telcos in Canada and globally, TELUS made a conscious decision not to focus on entertainment, anticipating that regulatory moves to democratise access to content would gradually erode the differentiating value of exclusive rights.
By 2007, health had emerged as TELUS’ preferred option for a ‘content play’, supported by four key factors which remain crucial to TELUS’ ongoing commitment to the healthcare sector, nearly a decade later. These are:
Strong correlation with TELUS’ socially responsible brand. TELUS has always prioritised social responsibility as a core company value, consistently being recognised by Canadian, North American and global organisations for its commitment to sustainability and philanthropy. For example, in 2010, the Association for Fundraising Professionals’ named it the most outstanding philanthropic corporation in the world. Thus, investing into the healthcare, with the aim of improving efficiency and health outcomes through digitisation of the sector, closely aligns with TELUS’ core values.
Healthcare’s low digital base. Healthcare was and remains one of the least digitised sectors both in Canada and globally. This is due to a number of factors, including the complexity and fragmented nature of healthcare systems, the difficulty of identifying the right payer model for digital solutions, and cultural resistance among healthcare workers who are already stretched for time and resources.
Personal commitment from Darren Entwistle, TELUS’ CEO since he joined the company in 2000. Based on personal experiences with the flaws in the Canadian healthcare system, Darren Entwistle forged his conviction that there was a business case for TELUS to drive adoption of digital health records and other ehealth solutions that could help minimise such errors, which was crucial in winning and maintaining shareholders’ support for investment into health IT.
Healthcare is a growing sector. An ageing population means that the burden on Canada’s healthcare system has and will continue to grow for the foreseeable future. As people live longer, the demands on the healthcare system are also shifting from acute care to chronic care. For example, data from the OECD and the Canadian Institute for Health Information show that the rate of chronic disease among patients over 65 years old is double that of those aged 45-64. Meanwhile, funding is not increasing at the same rate as demand, convincing TELUS of the need for the type of digital disruption that has occurred in many other sectors.
That all four of TELUS’ reasons for investing in healthcare remain equally relevant in 2017/18 as in 2007 is key to its unwavering commitment to the sector. Darren Entwistle refers to healthcare as a ‘generational investment’, saying that over the long term, TELUS may shift into a healthcare company that offers telecoms services, rather than the other way around.
TELUS Health: On leadership and culture
To get insight for this report, I spoke at length with Paul Lepage, President-TELUS Health and Payment Solutions at TELUS, on the recommendation of his colleagues, who’d told me that ‘culture’ was of deep importance to Paul. He has been instrumental in setting up TELUS Health, and holds joint responsibility for TELUS Health on the international markets with Dave Sharma, President, TELUS Partner Solutions and Senior Vice-president, Business Solutions Sales. Paul runs the operation on the ground in Canada, while Dave spearheads partnerships and international activity.
I also requested additional support material from TELUS Health, which is included in the Appendix of this report.
This report would not have been possible without their kind collaboration and openness. Nonetheless, its contents represent the opinion of STL Partners, and were not sponsored or commissioned by TELUS.
Contents
Executive Summary: For telcos and others wanting to change culture
Introduction
Three components of ‘Culture’
Culture eats ‘why’ for breakfast
TELUS and TELUS Health: consistent internal and external KPIs
Background
Why TELUS got into healthcare: a viable growth opportunity
TELUS Health: On leadership and culture
Culture = Purpose and process
Culture creates a yardstick for performance
The importance of a compelling ‘why?’
Fair Process
Diversity and talent
Measuring culture and results
Communicating, listening and reflecting is at least 50% of the job
Recruitment, partnerships and culture
The ‘why?’ must be genuine
Conclusions: TELUS Health – A consistent and compelling culture
Appendix: Prepared by TELUS Health External Communications
Figures
TELUS’ share price has increased steadily
Why is ‘why?’ important?
TELUS’ ‘Fair process’
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STL Partners were delighted to again be official partners of the GSMA for the Mobile World Congress (MWC 2018). Our team decamped to Barcelona for the week, and the following is an extract of our analysis of what we saw, heard and thought – and what telcos should do.
No big surprises, but plenty of nuance
As we expected (see MWC2018: 5 things to watch out for), IoT, 5G, NFV/SDN, edge computing and AI were the main topics of discussion, alongside telcos’ continuing struggles with the challenges of managing digital transformation and creating new revenues.
With consumers, and especially in more mature markets, telcos are fighting to retain and regain relevance with their customers, and struggling to justify why they should pay any more for data, lower latency or the insights IoT data can bring.
Hence the telco business cases for IoT, 5G, and edge computing are all eyeing the opportunity to digitalise and connect enterprise applications, sometimes hyped as ‘The Fourth Industrial Revolution’. But the enterprise market is notoriously difficult to serve due to its complex demands, so success requires a good understanding of industry-specific issues, and the business cases are hard to make.
So IoT, 5G, and edge computing are (somewhat inter-related) technologies that will initially deliver the same business benefits, i.e. helping enterprises adopt more efficient, agile and data-centric processes. AI is rather different and will have a more widespread impact in telecoms as we outline below. But each faces its own challenges.
5G: patchy to start
5G should deliver more than enterprise applications in the fullness of time. But most telcos are reluctant to step straight back into a major network capital investment cycle, and still have money to spend to meet the rising demand for 4G.
So, we think the market development of 5G will look different to the other ‘G’s, and the initial uptake of 5G will be patchy:
The US market is looking set to talk itself into a 5G war, with each operator having its own motivation to be seen as the leader in 5G. AT&T because it wants to do everything, Verizon because it has an instinct to retain its premium network tag, T-Mobile because it wants to punch all the other operators, and Sprint because it needs to find a way to differentiate. The US market is also big enough to tempt handset vendors into production – or at least into experimentation in 5G. From a PR perspective at least, the US operators’ fingers are twitching on their triggers, but it’s likely that the CFOs and shareholders will need a little more persuasion that it will work economically. This means there will probably be an initial period of ‘phoney war’ as they work out how to play it in various tests and trials, while making increasingly aggressive claims to win the opening propaganda contest.
South Korea and Japan also seem determined to head off on the 5G path, and are probably sufficiently advanced markets that are suited to taking the technology upgrade early.
Elsewhere though, the enthusiasm for 5G is a little more muted, but the enterprise applications could well make sense for reasons we discuss later in this brief report. Having said that, much of what we saw at MWC 2018 would best be described as “technology seeking a business case” – some interesting technical developments, but little coherent economic rationale that even vaguely approaches a credible business case. “If we build it they will come” may turn out to be the most pragmatic argument, so it is again initially likely to be something of a “test and pivot” approach, as operators dip a toe in the water to see what they can make work, and where, before betting more widely.
Wider new applications such as autonomous cars and AR/VR won’t move the needle until later in most markets. Autonomous cars because they won’t be able to rely on a network until it’s widespread and highly proven (see Autonomous cars: Where’s the money for telcos?), and AR/VR because it will take significant time to develop as a widespread and highly used technology (see AR/VR: Won’t move the 5G needle).
Many network vendors, notably Huawei, while hoping to bet big on 5G are sensibly taking an ‘incremental’ approach to 5G, and designing it as an add-on or upgrade to 4G or 4G+ solutions.
NB. We will soon be publishing a detailed report on our analysis of 5G’s progress.
Edge computing: the need to move beyond technology
MWC 2018 has shown that the industry is still mainly focussing on technology-focused PoCs in the area of edge computing. Key use cases that were demonstrated typically revolved around optimised video delivery, IoT edge gateways, and control of autonomous vehicles or drones.
However, it seems that the industry hasn’t got much closer to articulating viable business and monetisation models for these – technically impressive – use cases. Telcos still need to find out how to cope with three fundamental challenges and uncertainties which represent the key road blocks for success at the edge:
Commercialisation: It is – and will be for the foreseeable future – unclear which edge use cases will deliver significant commercial value to telcos (and to their customers for that matter). In addition, telcos lack clarity on which business models need to be employed to monetise individual use cases. We have addressed this issue in Edge computing: Five viable telco business models.
Operationalisation: Edge computing capabilities might be relevant for very different parts of the telco organisation – for both internal and external use cases, as well as wider efforts which are related to NFV and 5G. This calls for a certain degree of coordination within the organisation. Equally important is the need for an edge platform which ensures flexibility and speed in developing and onboarding applications.
Ecosystem orchestration: Telcos need to work out what their role in the wider distributed (multi-)cloud ecosystem should be, as edge computing is not solely a telco concept (see e.g. AWS Greengrass). This boils down to the question of who telcos should partner with and who they should compete with in the edge computing and edge cloud space. In addition, telcos are starting to acknowledge that there needs to be significant technical and commercial interoperability between operators providing edge computing capabilities to third parties. Otherwise, telcos will stumble over the usual problem of market fragmentation, which would make it unattractive for application providers and developers to offer their services through the telco edge cloud.
STL Partners is currently undertaking primary research on this topic to identify the key short-term and long-term strategic principles for telcos to overcome the above barriers and ensure commercial success at the edge. The findings will be discussed in an upcoming report.
IoT: the struggle to add value
What we saw at MWC 2018 lined up with what we said in Monetising IoT: Four steps for success. “IoT is not a quick win for telcos. The value of IoT connectivity is only a small portion of the total estimated value of the IoT ecosystem, and therefore telcos seeking to grow greater value in this area are actively moving into other layers, such as platforms and vertical end solutions.”
Telcos therefore face a conundrum in IoT. At one extreme, they can focus on the connectivity, and can do reasonably well by providing SIMs plus functionality in reporting and management. Above and beyond that, which is where the bulk of the economic value lies, industries need sophisticated and evolving solutions that integrate connectivity, applications, machines and data.
Such industry solutions need to be tailored to niche demands and limitations, such as specific regulations or legacy infrastructure. As an example, hospitals want to digitalise their operations, but they can’t afford to replace expensive medical equipment like 15-year-old MRI machines, which might not be compatible with the latest technologies and application programmes. On top of that, connecting sensitive medical data comes with sensitive data protection and security requirements. To make all this work well and securely is no small matter, and the province of some highly sophisticated specialist players, well beyond the appetite of most telcos. (NB. We discuss other possible healthcare approaches on page 8 of this report.)
To be successful at a wider level in Industrial IoT will take serious knowledge at both technical domain and sector level, and this is not easy to put together for even one industry, let alone several. It takes vision, commitment, time and investment.
NFV/SDN: grinding forward
NFV/SDN at MWC 2018 was again very much in line with our previous findings and expectations. Operators are making progress, but it is slow and piecemeal.
On the ‘progress’ side of the equation, two new open source initiatives to develop standards for RAN virtualisation were debuted at MWC: the Open RAN (ORAN) project (in which AT&T, China Mobile and Deutsche Telekom are pooling their efforts) and the Cisco-led Open vRAN initiative (vRAN and C-RAN will feature in our forward research). On the ‘piecemeal’ side of the equation, these developments only add to the sense of fragmentation in industry efforts to arrive at NFV standards and interoperability frameworks, which will be critical for realising the potential of NFV to support 5G use cases in areas such as IoT, edge computing and network slicing (as discussed above).
In our forthcoming reports on emerging NFV / SDN technology and use cases, we will build on the analysis in our recent report NFV/SDN deployment pathways: Three telco futures and attempt to show how strategic clarity about the type of telco they wish to be, and the social and economic functions they see their services as performing, is vital to inform operators’ engagement in NFV and SDN, and their selection of NFV / SDN use-cases and associated vertical markets (see discussion of expansion into new verticals below). The first of these reports will take in the MWC ‘hot topics’ of 5G, edge computing and network slicing, with subsequent analyses looking at SD-WAN / on-demand enterprise networking, and industrial and telco automation.
And of course, we are continuing to build our database of information on live, commercial deployments of NFV / SDN, the NFV Deployment Tracker, with further updates adding data on deployments in the Asia-Pacific region, the Middle East, Africa and Latin America, in addition to those recently completed for Europe and North America.
AI: Strategies taking form
AI is an exception to the other technologies because it has both
Internal applications for telcos, helping to streamline repetitive and data-intensive tasks across their businesses,
And the potential to complement external enterprise solutions.
While 5G, IoT and edge computing seem to be all about finding the use-cases, every sector and every part of telcos’ businesses, from network planning and operations, to back office functions, customer experience and product development, can be streamlined with more advanced data analytics and automation. So, it’s not surprising that all telcos are thinking about how to implement AI.
Tier 1 players such as AT&T, SK Telecom, Orange, Deutsche Telekom and Vodafone already have clear plans on what they are prioritising in the short-term, and what they want to do internally versus partner with vendors like IBM. Improving customer experience is by far the priority area right now, reflecting telcos’ desire to regain credibility with consumers, as well as the relative maturity and awareness of natural language processing within the wider field of AI/machine learning (ML).
Despite having clear ideas of what they want to do, most telcos are still in the early days of implementation. Any live telco chatbots still have limited capabilities and are only operational in one or two markets, so 2018 will be a year of scaling into new markets and channels.
The crucial initial promise of AI is to save costs across the business, and behind the highly hyped chatbot programmes there is evidence that telcos are taking steps towards using machine learning for predictive care (see our report AI in customer services: It’s not all about chatbots), back office resource planning, and network maintenance and operations.
The major question for telcos is how they should organise their AI initiatives and skills for the highest impact, and where and with whom they should partner. Right now, most telcos are taking a decentralised approach to deploying AI, so as not to stifle or hold back progress across various business units or opcos, with an aim to shift towards becoming more centralised.
Whether this is the right approach is still up for debate. We are addressing this question as part of an interview programme with telcos on their progress and strategies around AI and will publish our findings in a forthcoming report outlining the telco AI roadmap.
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Contents:
What we found at MWC 2018
No big surprises, but plenty of nuance
5G: patchy to start
Edge computing: the need to move beyond technology
Healthcare is one of the few sectors where, in every country, there is a huge and ongoing need. This demand will only rise as populations age and grow, exacerbating significant pain points relating to costs and funding models, and unmet needs. Meanwhile, the combination of cost pressures, the sensitive nature of health data and the complexity of healthcare systems have left it as one of the least digitised sectors. Thus, many telcos have identified healthcare as a sector where there is significant opportunity to drive efficiency through new services leveraging their network infrastructure and customer reach.
In some respects, telcos are well positioned to fill the healthcare sector’s needs. For example, enabling doctors to offer virtual care to patients through secure messaging or video chats, and to share electronic health records with patients and other doctors more easily, seem like low hanging fruit. However, in practice this is much more complicated; hospitals, primary care providers (general practitioners, family doctors), specialised clinics (e.g. mental health, physiotherapy) and pharmacies all store patient records in different systems (that are not necessarily digitised), and have different views on how to securely share data between each other. Every healthcare system also has a unique funding model, ranging from predominantly privately funded through insurance providers or out of pocket payments, like the United States, to single payer models like the UK, where the National Health Service accounts for more than 80% of healthcare spending, and budgets – including IT solutions – are closely tied to electoral and economic cycles.
These synergies have prompted a number of telcos to launch consumer health services or to pursue opportunities in the health IT market. Besides TELUS, AT&T, Verizon, Vodafone, Telefónica, NTT DoCoMo, Telstra, Deutsche Telekom AG and BT have all been active in healthcare. We explore their strategies and differences in comparison with TELUS’ approach on page 33. Why TELUS? This report focuses on TELUS Health, which has one of the longest and the most committed investment into the healthcare sector by a telco that we are aware of. We see it as a leading example of how telcos can build a business in healthcare, as well as in other sectors that are not instinctively linked to telecoms.
To put the Canadian healthcare market, which TELUS entered ten years ago, into context:
Canada’s healthcare system is fragmented between 13 provincial/territorial systems and the federal level.
The payer model is split between the government (70%) for necessary hospital and physician services and private insurers (30%) for supplemental care and drug prescriptions.
Healthcare spending accounted for 11.1% of GDP in 2016, on par with other developed countries globally.
The huge geographical distances mean that the 19% of Canadians living in rural areas have very limited access to specialist care.
Adoption of electronic medical record (EMR) systems among family doctors and specialised clinics started from a low base of 20% in 2006, rising to 62% in 2013 and 80% by 2017.
Why TELUS got into healthcare: a viable growth opportunity
Starting in 2005, led by the CEO Darren Entwistle, TELUS executives came to a consensus that just focusing on connectivity would not be enough to sustain long term revenue growth for telecoms companies in Canada, so the telco began a search into adjacent areas where it felt there were strong synergies with its core assets and capabilities. TELUS initially considered options in many sectors with similar business environments to telecoms – i.e. high fixed costs, capex intensive, highly regulated – including financial services, healthcare and energy (mining, oil).
In contrast with other telcos in Canada and globally, TELUS made a conscious decision not to focus on entertainment, anticipating that regulatory moves to democratise access to content would gradually erode the differentiating value of exclusive rights.
By 2007, health had emerged as TELUS’ preferred option for a ‘content play’, supported by four key factors which remain crucial to TELUS’ ongoing commitment to the healthcare sector, nearly a decade later. These are:
Strong correlation with TELUS’ socially responsible brand. TELUS has always prioritised social responsibility as a core company value, consistently being recognised by Canadian, North American and global organisations for its commitment to sustainability and philanthropy. For example, in 2010, the Association for Fundraising Professionals’ named it the most outstanding philanthropic corporation in the world. Thus, investing into the healthcare, with the aim of improving efficiency and health outcomes through digitisation of the sector, closely aligns with TELUS’ core values.
Healthcare’s low digital base. Healthcare was and remains one of the least digitised sectors both in Canada and globally. This is due to a number of factors, including the complexity and fragmented nature of healthcare systems, the difficulty of identifying the right payer model for digital solutions, and cultural resistance among healthcare workers who are already stretched for time and resources.
Personal commitment from the CEO, Darren Entwistle. TELUS’ CEO since he joined the company in 2000, Based on personal experiences with the flaws in the Canadian healthcare system, Darren Entwistle forged his conviction that there was a business case for TELUS to drive adoption of digital health records and other ehealth solutions that could help minimise such errors, which was crucial in winning and maintaining shareholders’ support for investment into health IT.
Healthcare is a growing sector. An ageing population means that the burden on Canada’s healthcare system has and will continue to grow for the foreseeable future. As people live longer, the demands on the healthcare system are also shifting from acute care to chronic care. For example, data from the OECD and the Canadian Institute for Health Information show that the rate of chronic disease among patients over 65 years old is double that of those aged 45-64 (see figure 3). Meanwhile, funding is not increasing at the same rate as demand, convincing TELUS of the need for the type of digital disruption that has occurred in many other sectors.
That all four of TELUS’ reasons for investing in healthcare remain equally relevant in 2017 as in 2007 is key to its unwavering commitment to the sector. Darren Entwistle refers to healthcare as a ‘generational investment’, saying that over the long term, TELUS may shift into a healthcare company that offers telecoms services, rather than the other way around.
Contents:
Executive Summary
Healthcare can be a viable investment opportunity…
…But there are risks
Introduction
Why TELUS got into healthcare: a viable growth opportunity
How TELUS got into healthcare: buying a way in
Overview of the Canadian healthcare system
The payer model
Access to healthcare and demographics
TELUS’ objectives and evidence of success in healthcare
Build a new revenue stream
Synergy: supporting telecoms revenues
Differentiate brand among consumers
Drive better health outcomes
Understanding TELUS Health’s strategy
TELUS Health’s three step strategy
eHealth market challenges: how is TELUS responding?
Comparing TELUS with other telcos: a deeper dive
Lessons for other telcos
Challenges of the digital health market
Healthcare is a long-term play
Healthcare matrix: mapping the healthcare sector for telcos
Figures:
Figure 1: Snapshot of TELUS Health business
Figure 2: Public vs. private healthcare services in Canada
Figure 3: Rate of chronic disease rises dramatically among seniors
Figure 4: TELUS Health’s reach in the healthcare market
Figure 5: TELUS Health is outpacing TELUS in revenue growth
Figure 6: TELUS Health’s contribution to TELUS revenues
Figure 7: Healthcare investment contributes to improving customer loyalty
Figure 8: How do consumers feel about TELUS?
Figure 9: TELUS vs. other Canadian telcos’ consumer brand score and rank
Figure 10: BC pilot of HHM shows reduction in hospital admissions
Figure 11: TELUS acquisitions
Figure 12: Methodology for building collaborative solutions
Figure 13: List of collaborative solutions and end-users
Figure 14: Roadmap for eClaims solution
Figure 15: Roadmap for PharmaSpace solution
Figure 16: Roadmap for Mobile EMR solution
Figure 17: Patient engagement is central to TELUS Health’s target growth opportunities
Figure 18: Home health monitoring overview
Figure 19: Results of HHM trials across two health authorities in British Colombia
Figure 20: Healthcare in TELUS ad campaigns
Figure 21: Sample of TELUS Health investments and partnerships
Figure 22: Telco digital health strategies
Figure 23: Healthcare Matrix scoring criteria
Figure 24: Where are telcos’ strengths in digital health?
With the ever-increasing amount of data collected by smartphones, fitness monitors and smart watches, telcos and other digital players are exploring opportunities to create value from consumers’ ability to capture data on many aspects of their own health and physical activity. Connected devices leverage inbuilt sensors and associated apps to collect data about users’ activities, location and habits.
New health-focused platforms are emerging that use the data collected by sensors to advise individual users on how to improve their health (e.g. a reminder to stand up every 60 minutes), while enhancing their ability to share data meaningfully with healthcare providers, whether in-person or remotely. This market has thus far been led by the major Internet and device players, but telecoms operators may be able to act as distributors, enablers/integrators, and, in some cases, even providers of consumer health and wellness apps (e.g., Telefonica’s Saluspot).
High level drivers for the market
At a macro level, there are a number of factors driving digital healthcare. These include:
Population ageing – The number of people globally who are aged over 65 is expected to triple over the next 30 years , and this will create unprecedented demand for healthcare.
Rising costs of healthcare provision globally – Serving an aging population, the increase globally in lifestyle and chronic diseases, and rising underlying costs, is pushing up healthcare spending – while at the same time, due to economic pressures there are more limited funds available to pay for this.
Limited supply of trained clinicians – Policy issues and changes in job and lifestyle preferences are limiting both educational capacity and ability to recruit and retain appropriately trained healthcare staff in most markets.
Shift in funding policy – In many countries, funding for healthcare is shifting away from being based on reimbursement-for-events (e.g., a practice or hospital is paid for every patient visit, for each patient they register, for each vaccination administered), to a greater emphasis on ‘value-based care’ – reimbursement based on successful patient health outcomes.
Increased focus on prevention in healthcare provision – in some cases funding is starting to be provided for preventative population health measures, such as weight-loss or quit-smoking programmes.
Development of personalised medicine – Personalised medicine is beginning to gain significant attention. It involves the delivery of more effective personalised treatments (and potentially drugs) based on an individual’s specific genomic characteristics, supported by advances in genotyping and analytics, and by ongoing analysis of individual and population health data.
Consumerisation of healthcare – There is a general trend for patients – or rather, consumers – to take more responsibility for their own health and their own healthcare, and to demand always-on access both to healthcare and to their own health information, at a level of engagement they choose.
The macro trends above are unlikely to disappear or diminish in the short-to-medium term; and providers, policymakers and payers are struggling to cope as healthcare systems increasingly fall short of both targets and patients’ expectations.
Digital healthcare will play a key role in addressing the challenges these trends present. It promises better use and sharing of data, of analytics offering deep insight on health trends for individuals and across the wider population, and of the potential for greater convenience, efficacy and reach of healthcare provisioning.
While many (if not most) of the opportunities around digital health will centre on advances in healthcare providers’ ICT systems, there is significant interest in how consumer wellness and fitness apps and devices will contribute to the digital health ecosystem. Consumer digital health and wellness is particularly relevant to two of the trends above: consumerisation of healthcare, and the shift to prevention as a focus of both healthcare providers and payers.
Fitness trackers and smartwatches, and the associated apps for these devices, as well as wellness and fitness apps for smartphone users, could open up new revenue streams for some service providers, as well as a vast amount of personal data that could feed into both medical records and analytics initiatives. The increasing use of online resources by consumers for both health information and consultation, as well as cloud-based storage of and access to their own health data, also creates opportunities to make more timely and effective healthcare interventions. For telcos, the question is where and how they can play effectively in this market.
Market Trends and Overview
The digital healthcare market is both very large and very diverse. Digital technologies can be applied in many different segments of the healthcare market (see figure below), both to improve efficiency and enable the development of new services, such as automated monitoring of chronic conditions.
The different segments of the digital healthcare market
Source: STL Partners based on categories identified by Venture Scanner
The various segments in Figure 1 are defined as below:
Wellness
Mobile fitness and health apps enable consumers to monitor how much exercise they are doing, how much sleep they are getting, their diet and other aspects of their lifestyle.
Wearable devices, such as smart watches and fitness bands, are equipped with sensors that collect the data used by fitness and health apps.
Electronic health records are a digital record of data and information about an individual’s health, typically collating clinical data from multiple sources and healthcare providers.
Information
Services search are digital portals and directories that help individuals find out healthcare information and identify potential service providers.
Online health sites and communities provide consumers with information and discussion forums.
Healthcare marketing refers to digital activities by healthcare providers to attract people to use their services.
Interactions
Payments and insurance – digital apps and services that enable consumers to pay for healthcare or insurance.
Patient engagement refers to digital mechanisms, such as apps, through which healthcare providers can interact with the individuals using their services.
Doctor networks are online services that enable clinicians to interact with each other and exchange information and advice.
Research
Population health management refers to the use of digital tools by clinicians to capture data about groups of patients or individuals that can then be used to inform treatment.
Genomics: An individual’s genetic code can be collated in a digital form so it can be used to understand their likely susceptibility specific conditions and treatments.
Medical big data involves capturing and analysing large volumes of data from multiple sources to help identify patterns in the progression of specific illnesses and the effectiveness of particular treatment combinations.
In-hospital care
Electronic medical records: A digital version of a hospital or clinic’s records of a specific patient. Unlike electronic health records, electronic medical records aren’t designed to be portable across different healthcare providers.
Clinical admin: The use of digital technologies to improve the efficiency of healthcare facilities.
Robotics: The use of digital machines to perform specific healthcare tasks, such as transporting medicines or spoon-feeding a patient.
In-home care
Digital medical devices: All kinds of medical devices, from thermometers to stethoscopes to glucosometers to sophisticated MRI and medical imaging equipment, are increasingly able to capture and transfer data in a digital form.
Remote monitoring involves the use of connected sensors to regularly capture and transmit information on a patient’s health. Such tools can be used to help monitor the condition of people with chronic diseases, such as diabetes.
Telehealth refers to patient-clinician consultations via a telephone, chat or video call.
The wellness opportunity
This report focuses primarily primarily on the ‘wellness’ segment (highlighted in the figure below), which is experiencing major disruption as a result of devices, apps and services being launched by Apple, Google and Microsoft, but it also touches on some of these players’ activities in other segments.
This report focuses on wellness, which is undergoing major disruption
Source: STL Partners based on categories identified by Venture Scanner
Executive summary
Introduction
High level drivers for the market
Market Trends and Overview
Market size and trends: smartwatches will overtake fitness brands
Health app usage has doubled in two years in the U.S.
Are consumers really interested in the ‘quantified self’?
Barriers and constraining factors for consumer digital health
Disruption in Consumer Digital Wellness
Case studies: Google, Apple and Microsoft
Google: leveraging Android and analytics capabilities
Apple: more than the Watch…
Microsoft: an innovative but schizophrenic approach
Telco Opportunities in Consumer Health
Recommendations for telcos
Figure 1: The different segments of the digital healthcare market
Figure 2: This report focuses on wellness, which is undergoing major disruption
Figure 3: Consumer digital health and wellness: leading products and services, 2016
Figure 4: Wearable Shipments by Type of Device, 2015-2020
Figure 5: Wearable OS Worldwide Market Share, 2015 and 2019
Figure 6: Take-up of different types of health apps in the U.S. market (2016)
Figure 7: % of health wearable and app users willing to share data US market (2016)
Figure 8: Elements of the ‘quantified self’, as envisioned by Orange
Figure 9: Less than two-third of US wearable buyers wear their acquisition long-term
Figure 10: Google Consumer Health and Fitness Initiatives
Figure 11: Snapshot of Google Fit User Interface, 2016
Figure 12: Google/Alphabet’s areas of focus in the digital healthcare market
Figure 13: Apple’s Key Digital Health and Wellness Initiatives
Figure 14: Apple Health app interface and dashboard
Figure 15: Apple’s ResearchKit-based EpiWatch App
Figure 16: Apple’s current areas of focus in the digital healthcare market
Figure 17: Microsoft Consumer Fitness/Wellness Device Initiatives
Figure 18: Microsoft Health can integrate data from a range of fitness trackers
Figure 19: Microsoft Consumer Fitness/Wellness Applications and Services
Figure 20: The MDLive Telehealth Proposition, August 2016
Figure 21: Microsoft’s areas of focus in the digital healthcare market
Figure 22: Telefónica’s Saluspot: Interactive online doctor consultations on-demand
Source: The WHO
