Private and vertical cellular networks: Threats and opportunities

For the report chart pack download the additional file on the left

5G is catalysing demand for customisation

The arrival of 5G has catalysed a huge amount of interest in enterprise, government and “vertical” use-cases for cellular networks. Cellular technology is becoming ever more important and applicable for businesses, for diverse use-cases from factory automation, to better hospitality guest-services, to replacement of legacy two-way radios.

Some of this fits in with STL’s view of the Coordination Age, and the shift towards connectivity becoming part of wider, society-level or economy-level applications and solutions. However, in many ways it is more of an evolution of traditional enterprise use of private wireless solutions, but updated with newer and more-performant 5G radios. The future battleground is whether such coordination requires external services (and thus SPs), or whether the capabilities are best-delivered in-house on private networks.

For various reasons of cost, performance, accountability or guaranteed coverage, there is a drive towards greater customisation and control, often beyond that currently deliverable by traditional MNOs.

However, there is significant confusion between three things:

  • Mobile network services and applications sold to, or used by, industrial and enterprise customers
  • Mobile networks optimised, extended or virtualised for industrial and enterprise requirements
  • Mobile networks built exclusively for, or owned by, industrial companies and other enterprises

This report is a joint exercise between STL Partners and affiliate Disruptive Analysis, which has covered this sector in depth for almost 20 years. Its founder Dean Bubley runs workshops on private cellular and neutral-host networks, as well as undertaking private projects and speaking engagements advising operators, vendors, regulators and investors on business models, spectrum policy and market dynamics.

What is a private mobile network?

This report primarily focuses on the third category – private mobile networks – although there is some overlap with the second, especially when techniques like network-slicing enter the discussion. There are different models of “private” too – from completely standalone networks that are entirely isolated from public mobile networks, to ones which use some dedicated infrastructure / management, alongside shared radio- or core-network elements provided by an MNO. They can be nationwide networks (for example, for utility grids), or highly localised, such as to a factory or hotel.

There are also various hybrids and nuances of all of this, such as private networks where certain functions are installed by, outsourced to, or managed by, telcos. It may be possible for users or devices to roam between private and public networks, for instance when a truck leaves a logistics facility with a local private network, and switches to the telco while it’s on the road.

Various government bodies – ranging from police forces to local council authorities – are also interested in creating private or shared 4G / 5G networks. Over the next 3-4 years, we can expect a wide diversity of approaches, and some very vague and fluid definitions from the industry.

Three building blocks for private networks

There are three main enablers (and numerous secondary drivers) behind the private network concept:

  • Availability of spectrum
  • Small cells and distributed radios
  • The move from 4G to 5G

A critical element in this is access to suitable spectrum for creating private networks. In recent years, many governments and regulatory authorities have started to make localised mobile licences available, suitable for covering enterprise sites, or wider areas such as cities. While private Wi-Fi and other networks have long been created with (free) unlicensed spectrum, this does not give the protections against contention and interference that more formal licensing enables. Other localised spectrum licenses have been given for point-to-point fixed links, temporary outside broadcast & events, or other purposes – but not cellular networks for normal mobile users. There are also discussions ongoing about making more national or wide-area spectrum available, suitable for mobile use in certain specialised verticals such as utilities.

Small cells and other types of enterprise-grade radio network (RAN) equipment are critical building- blocks for private mobile infrastructure, particularly indoors or on small/medium campus sites. They need to be low-cost, easy to install and operate, and ideally integrated with other IT and networking systems. While small cells have been around for 20 years or more, they have often been hard to deploy and manage. We are also seeing further innovation around distributed/cloud RAN which further increases the options for campus and in-building coverage systems.

5G – or more accurately the 5G era – changes the game in a number of ways. Firstly, IoT use-cases are becoming far more important, especially as analogue equipment and business processes become more connected and intelligent. Secondly, 5G brings new technical challenges, especially around the use of higher-frequency spectrum that struggles to go through walls – which highlights the paradox of telcos providing public network services on private property. Finally, with the advent of cloud-based and virtualised functions such as core networks, it is becoming easier to deploy and operate smaller infrastructures.

Some of the specialised skills requirements for building/running cellular networks can be reduced with automation, although this is still a significant obstacle for enterprises. This will drive significant demand for new tiers and types of managed services provider for private cellular – some of which will be satisfied by telcos, but which will also targeted by many others from towerco’s to systems integrators to cloud/Internet players.

It is worth stressing that this concept is not new. Private cellular networks have existed in small niches for 10-20 years. Railways have a dedicated version of 2G called GSM-R. Military squads and disaster- response teams can carry small localised base stations and controllers in their vehicles or even backpacks. Remote mines or oil-exploration sites have private wireless networks of various types. The author of this report first saw cellular small-cells in 2000, and worked on projects around enterprise adoption of private 2G as early as 2005.

Private and vertical cellular networks: Threats and opportunities aims to clarify the concept of “private” networks. It explores the domain of business-focused cellular networks, where the enterprise has some degree of ownership or control over the infrastructure – and, sometimes, the radio network itself. The report then sets out the motivations and use cases for private networks, as well as the challenges and obstacles faced.

This report is a joint exercise between STL Partners and affiliate Disruptive Analysis, which has covered this sector in depth for almost 20 years. Its founder Dean Bubley runs workshops on private cellular and neutral-host networks, as well as undertaking private projects and speaking engagements advising operators, vendors, regulators and investors on business models, spectrum policy and market dynamics. Please see deanbubley.com or @disruptivedean on Twitter for details and inquiries.

Table of contents

  • Executive Summary
  • Introduction
    • Public vs. non-public networks
    • Private network vs. private MVNO vs. slices
  • Motivations & use-cases for private networks
    • Business drivers for private cellular
    • Technical use-cases for private cellular
    • Industrial sites & IIoT
    • Enterprise/public in-building coverage
    • Neutral host networks (NHN)
    • Fixed 4G / 5G networks
  • Regulatory & spectrum issues
    • Other regulatory considerations
  • Building private networks – technology
    • Architectural choices, technology standards & industry bodies
  • The emerging private networks value chain
  • Conclusions & Recommendations
    • How large is the private network opportunity?
    • Challenges and obstacles for private networks
    • What is the implication for traditional telcos and MNOs?
    • Telcos’ relationship to project scope

Mobile Advertising and Marketing: Operator and Market Growth Strategies 2010

Summary: The potential of mobile marketing has long been understood and yet unfulfilled. This new report gives our forecasts, plus how Telcos can make the most of the powerful assets available to them to take a valuable role in this market before it is too late. Report extract included.

Context: Mobile Advertising is Hot – Again

With Google’s planned acquisition of AdMob and the launch of Apple’s iAd advertising platform, mobile is back in fashion. But where is the real value in this market and what’s the best role for telcos?

A new Telco 2.0 Executive Briefing report, of which there is an introductory extract below, summarises the current status of Telco-enabled marketing channels, and Operators’ opportunities to grow the market. It was produced, in part, as context for the Telco 2.0 Use Case analysis for the Use Cases Report and the standalone Executive Briefing Mobile Advertising and Marketing: Text-based Local Search Use Case. Our original analysis on this topic is the 100+ Page Telco 2.0 Strategy Report – How to make the Telecoms Advertising Channel work a systematic approach to making it work for brands and profitable for telcos.

The report provides our forecast of the development of the market, and in particular on the near term opportunities for messaging based formats. [NB There will be more on both telco-enabled marketing and consumer data at the 9th Telco 2.0 Brainsrorm in London, April 28-29, 2010.]

Key Advertising Strategy Questions

Mobile advertising has long been touted as a major new revenue stream for the telecommunications industry. The role of fixed operators in online advertising has, so far at least, proved to be limited. Because the mobile device can be traced to an individual, however, mobile operators have substantial information about customers that is of potential value to marketers and advertisers.

So far, however, material mobile advertising revenue has proved to be elusive for operators because they have focused on a vertically integrated strategy that involves making money from advertising inventory that they own and control such as on-portal banner advertising. The problem with this is that the portion of inventory that they control is a small and diminishing portion of the total mobile advertising opportunity. We outline this issue in the chart below as well as the key questions facing operators in terms of increasing their addressable market in mobile advertising.

Can the Telco industry extract value from mobile advertising?

mob%20ad%20opp%20chart%20april%202010.png

The report described here analyses the current strengths and weaknesses and near-term opportunities of mobile advertising. In addition, some customers may also wish to consider participation in our Syndicated Research project, in which we will:

  • further explore differences between the major advertising formats: messaging, banner, video/TV, search, games and widgets
  • produce three different business models for the future mobile advertising and marketing ecosystem
  • map different advertising formats effectiveness in each business model
  • analyse how value would flow through each system as well as forecast potential transaction volumes and prices
  • explore how these different models will be deployed in different geographies within Europe and the US and the factors which will drive their uptake

For more information please see Defining the Telco 2.0 Ecosystems or email Chris Barraclough at contact@telco2.net.

Mobile Advertising Report Extract – Introduction

We’ve been here before: Lots of media attention

The mobile advertising and marketing hype appears to be starting up once again.  A few headlines illustrate the point:

  • ‘Like It Or Not, Mobile Advertising Is Coming’[1]
  • ‘Mobile phones a bright spot for Advertising’[2]
  • ‘Mobile Advertising – The Next Big Thing in Travel Marketing’[3]
  • ‘Mobile web adspend expected to reach $2B a year by 2014’[4]
  • ‘Mobile marketing has potential to grow in Asia Pacific, says MMA’[5]

Things have been quiet for a while after the great promises made for mobile advertising in 2006 but media interest is clearly picking up. 

The economic crisis and greater mobile marketing maturity

Mobile marketing is back in the spotlight for a couple of reasons:

1.     The global recession has focused marketers on media campaigns that have a demonstrable return on investment.  As it has become harder to generate sales, so marketing budgets have moved towards activities that can be shown to directly influence the customer’s purchase decision.  For example, in the UK online search advertising grew three times as fast as display advertising between 2007 and 2008 despite already being three times the size.

Figure 1: Internet search and display advertising sectors in the UK

 

Size, £ Millions
Growth
Format

2007
2008
£ Millions
%
Search

1,619
1,987
368
23
Display

592
637
45
8
Source: Internet Advertising Bureau

SMS advertising (including coupons and vouchers) is the biggest mobile segment and has similar characteristics to online search and traditional ‘direct response’ marketing in that an immediate customer action is sought and measured.  Display can, theoretically, do this too (by measuring clicks) but has tended to be used for raising awareness about a brand or product. 

Many companies have, therefore, turned to mobile to maximise sales during these tough times. High profile campaigns of this sort include Coca Cola, who ran a campaign in the UK in May and June 2009 with digital vouchers for free bottles of Fanta, Sprite and Dr. Pepper being sent to the mobile phones of around 100,000 targets. Recipients of the voucher simply had to text ‘YES’ and their date of birth to a specific number and would instantly receive a text with a code enabling them to redeem the voucher. Participating retailers would key the code into their Paypoint terminal (used for paying utility bills and toping up prepay mobile accounts) which would register the redemption. The use of Paypoint enabled Coca Cola to both monitor redemption rates real-time (87% over the course of the campaign) and pay the retailer within seven days.

Figure 2: Coca Cola’s SMS campaign for 10,000 stores and 100,000 consumers

Fig%202%20Coca%20cola%20SMS%20campaign%20Apr%202010.png

Source: www.presscentre.coca-cola.co.uk

2.     The mobile marketing and advertising market is maturing:

a.     There is greater demand from end users for mobile media:

  i.          The rise in flat rate data plans has increased the volume of media consumed on devices and removed the issue of subscribers potentially being charged to receive marketing and advertising;

   ii.          Mobile devices continue to become more sophisticated – more and more phones now have browsers.  This is important:  the volume of  smartphones in the market is directly correlated to web browsing adoption and usage and to data plan take-up;

   iii.          The combination of i. and ii. above has resulted in a substantial increase in mobile browsing in key markets.  Such browsing increased by 52% in the US from November 2007 to November 2008 and by 42% in the largest European markets (UK, France, Spain, Germany and Italy) according to comScore;

   iv.          SMS marketing has reached critical mass in the last eighteen months.  For example, in the US SMS marketing accounted for 60% ($192 million) of the $320 million spent on mobile advertising in 2008 (according to emarketer.com). Similarly, a survey in the US by the Direct Marketing Association in July 2008 found that 70% of consumers had responded to a text ad over a two month period:

Figure 3: Percentage of responders to a mobile offer

Fig%203%20Ad%20report%20percentage%20bar%20chart%20Apr%202010.png

Source: Direct Marketing Association

b.    There has been more industry-wide activity from the operator and advertising communities:

  i.          The Mobile Marketing Association has developed a mobile advertising code of conduct and guidelines and the Direct Marketing Association has also developed guidelines and ‘help notes’ to standardise mobile approaches for marketers;

  ii.          At the time of publication, the GSMA mobile metrics programme is on the cusp of delivering a complete and standardised picture of mobile internet usage in the UK (and later Germany) so that marketers have a 360º view of audience behaviour across mobile and can plan and buy campaigns accordingly;

c.     There has been more effort and activity (including acquisitions) from individual operators seeking to capitalise on this new revenue source, including:

  i.           In late 2007, Telefonica and Vodafone took minority stakes in Amobee a provider of solutions for operators to deliver ad-funded content and services;

  ii.          Vodafone Egypt bought the digital media agency Sarmardy Communication (Sarcom) in August 2008;

  iii.          In August 2009, Orange bought Unanimis, the digital media aggregator to extend its advertising reach;

  iv.          In May 2009, Vodafone announced that it had successfully rolled out mobile advertising to 18 markets in 18 months.  Services include incoming voice/text alerts, branded applications and location-based advertising.;

  v.          Microsoft paid Verizon Wireless around $600m in early 2009 for the right to supply local internet search and mobile advertising services to Verizon’s customers.

This increased activity, of course, leads observers to beg the question ‘why is mobile deemed to be so valuable and where does it fit into the wider marketing mix’?

Mobile as a part of the Marketing Mix

A framework for customer marketing

Traditionally the ‘marketing mix’ has been described in terms of the four levers that marketers can change to drive the success of their product or service: Product, Place, Price and Promotion (the ‘4 P’s).  More recently, advertising agency Ogilvy has suggested that these should be revised to the ‘4 E’s’ to reflect the impact of digitalisation: Experience (instead of Product), Everyplace (Place), Exchange (Price) and Evangelism (Promotion).

However, to understand the role that mobile can play for marketers it is perhaps more helpful to focus on the customer adoption process for a product or service and explore how mobile can enhance the interventions made by marketing during this process.  Again, there are several models exploring how customers first become aware of a product through to the time they are loyal customers.  We have amalgamated several approaches into 6 A’s: Awareness (& Interest), Assessment, Attempt, Adoption, Advocacy and Abandonment (outlined below).

Figure 4: The 6 A’s of a Customer Lifecycle

Stage

Description

Typical customer engagement

Awareness (& Interest)

Making the customer aware of (and interested in) a brand or product or service.

TV, Radio, Billboards, Internet banners

Assessment

Customer evaluates product or service against substitutes.

In-store, comparison websites, peer reviews

Attempt

Customer trials product or service.

In-store promotion, Direct mail, Internet search

Adoption

Customer regularly uses product or signs up for service.

Store, Direct mail, Telesales, Website

Advocacy

Customer is loyal and promotes product or service.

Refer-a-friend, social media viral growth

Abandonment

Customer stops buying product or does not renew service.

Telemarketing, Direct mail

Source: STL Partners/Telco 2.0

Mobile is a particularly interesting medium for marketers because it is ubiquitous and delivers a message to an individual that virtually guarantees their attention.  If marketers can deliver a relevant message or offer to the individual according to their 6 A’s stage via mobile, then they have a good chance of inducing a positive response.  And mobile can also provide a response channel for the individual enabling them to transact directly using the handset.  Of course, the quid pro quo of using a personal medium like mobile for marketing is that there is a real risk of upsetting customers who feel intruded upon or, worse, spammed.  We discuss this in more detail in the sections below on customer data and customer privacy.

Mobile advertising and marketing formats

The range of formats available on mobile also means that marketers can engage with customers in different ways through the lifecycle.  Other media have relatively few formats.  TV, for example, has traditionally been dominated by the commercial break although, more recently, direct TV sales channels and product placement within programmes have increased from a low base.  Mobile, by contrast, has a wide range of formats.

The key formats outlined in the body of the report are: SMS, MMS, Mobile Internet Banners,Apps & Widgets,QR Codes, Mobile TV & Video, Ad-Funded Content, Mobile Search.

The Relative Strengths of Telco-Enabled Marketing Media are Analysed in the Report

Picture1.jpg

Source: Telco 2.0 Mobile Advertising Growth Strategies Report

To read the rest of the report, covering…

  • The strengths and weaknesses of the various forms of mobile media
  • Applicability: How mobile supports customer engagement
  • Media Richness is inversely proportional to Reach
  • Mobile marketing forecasts by advertising format
  • Operator-centric vs ‘OTT’ approaches
  • Customer data and metadata
  • Customer Privacy: issues and approaches
  • The Operator as service provider or service enabler

…and including…

Figure 1: Internet search and display advertising sectors in the UK

Figure 2: Coca Cola’s SMS campaign for 10,000 stores and 100,000 consumers

Figure 3: Percentage of responders to a mobile offer (March & April 2008)

Figure 4: The 6 A’s of a Customer Lifecycle

Figure 5: Important mobile advertising and marketing formats

Figure 6: Blyk Connexions case study example

Figure 7: Arsenal Mobile: for fans of the mighty Gunners

Figure 8: Mobile marketing and advertising applicability: summary

Figure 9: SMS/MMS marketing: currently the most important format

Figure 10: US Mobile Advertising Market, $ Millions

Figure 11: Lots of data but not necessarily complete, accessible, shareable

Figure 12: Sense Networks’ clustering of users based on their location patterns

Figure 13: Customer data approaches for five example services

Figure 14: Technical approaches to addressing privacy

Figure 15: The two-sided Telecoms business model opportunity

Figure 16: Core Telco 2.0 principles followed in this use case

Figure 17: Telco 2.0 ‘Use Case’ Methodology

…Members of the Telco 2.0TM Executive Briefing Subscription Service and the Dealing with Disruption Stream can download the full 33 page report in PDF format here. Non-Members, please see here for how to subscribe, here to buy a single user license for for £995, and here to buy a license for up to 5 people for £1,450. Corporate-wide licenses are also available – please email contact@telco2.net or call +44 (0) 207 247 5003.

Special Offer

We reommend that non-member readers looking for a comprehensive overview of new Telco Business Models enabling advertising and marketing also consider the Telco 2.0 Briefing report Mobile Advertising and Marketing: Text-based Local Search Use Case and the special report Can Telcos Unlock the Value of their Consumer Data? Each report is available individually for single, group and corporate users, and a also in a package of all three reports at a 33% discount – £1,900 for a single user and £2,900 for all three reports for 5 users. Please email contact@telco2.net or call +44 (0) 207 247 5003 for more on these packages and interest in corporate-wide licenses.

Footnotes:


[1] www.informationweek.com

[2] www.inquirer.net

[3] www.travelmole.com/stories/1138044.php

[4]www.fiercemobilecontent.com/story/mobile-web-adspend-expected-reach-2b-year-2014/2009-08-25

[5] www.velti.com/index.cfm?page=1411&articleID=19334292