Scaling private cellular and edge: How to avoid POC and pilot purgatory

Evaluating the opportunities with private cellular and edge

The majority of enterprises today are still at the early stages of understanding the potential benefits of private cellular networking and edge computing in delivering enhanced business outcomes, but the interest is evident. Within private cellular for example, we have seen significant traction and uptake globally during 2020 and 2021, partially driven by increased availability and routes to spectrum due to localised spectrum licensing models across different markets (see this report). This has resulted in several trials and engagements with large companies such as Bosch, Ford, Rio Tinto, Heathrow Airport and more.

However, despite the rising interest, enterprises often encounter challenges with a lack of internal stakeholder alignment or the inability to find the right stakeholder to be accountable and own the deployment. Furthermore, many enterprises feel they lack the expertise to deploy and manage private networking and/or edge solutions. In some cases, enterprises have also cited a lack of maturity in the device and solution ecosystem, for example with lack of supported (or industry-grade) devices which have a 5G/LTE/CBRS capability embedded in them, or a significant inertia in the installed base around other connectivity solutions (e.g. Wi-Fi). Therefore, despite the value and business outcomes that private cellular and edge compute can unlock for enterprises, the opportunity is rarely clear-cut.

Our research is based on findings and analysis from a global interview programme with 20 enterprises in sectors that are ahead in exploring private cellular and edge computing, primarily in the industrial verticals, as well as telecoms operators and solutions providers within the private cellular and edge computing ecosystem.

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Telcos see private cellular and edge as two peas in a pod…

Telecoms operators see private cellular and edge computing as part of a larger revenue opportunity beyond fixed and public cellular. It is an opportunity for telcos to move from being seen as horizontal players providing increasingly commoditised connectivity services, to more vertical players that address value-adding industry-specific use cases. Private cellular and edge compute can be seen as components of a wider innovative and holistic end-to-end solution for enterprises, and part of the telcos’ ambition to become strategic partners or trusted advisors to customers.

We define a private cellular network as a dedicated local on-premises network, designed to cover a geographically-constrained area or site such as a production plant, a warehouse or a mine. It uses dedicated spectrum, which can be owned by the enterprise or leased from a telco operator or third party, and has dedicated operating functions that can run on the enterprise’s own dedicated or shared edge compute infrastructure. Private cellular networking is expected to play a key role in future wireless technology for enterprise on-premises connectivity. Private cellular networks can be configured specifically to an individual enterprise’s requirements to meet certain needs around reliability, throughput, latency etc. to enable vertical-specific use cases in a combined way that other alternatives have struggled to before. Although there are early instances of private networks going back to 2G GSM-R in the railway sector, for the purpose of this report, we focus on private cellular networks that leverage 4G LTE (Long Term Evolution) or 5G mobile technology.

Figure 1: Private cellular combines the benefits of fixed and wireless in a tailored way

benefits of private cellular

Source: STL Partners

Edge compute is about bringing the compute, storage and processing capabilities and power of cloud closer to the end-user or end-device (i.e. the source of data) by locating workloads on distributed physical infrastructure. It combines the key benefits of local compute, such as low latency, data localisation and reduced backhaul costs, with the benefits of cloud compute, namely scalability, flexibility, and cloud native operating models.

Figure 2: Edge computing combines local and cloud compute benefits to end-users

benefits of edge computing

Source: STL Partners

Within the telecoms industry, private cellular and edge computing are often considered two closely interlinked technologies that come hand-in-hand. Our previous report, Navigating the private cellular maze: when, where and how, explored the different private cellular capabilities that enterprises are looking to leverage, and our findings showed that security, reliability and control were cited as the most important benefits of private cellular. In many ways, edge compute also addresses these needs. Both are means of delivering ultra-low latency, security, reliability and high-throughput real time analytics, but in different ways.

…but this is not necessarily the case with enterprises

Although the telecoms industry often views edge computing and private cellular in the same vein, this is not always the case from the enterprise perspective. Not only do the majority of enterprises approach edge computing and private cellular as separate technologies, addressing separate needs, many are still at the early stages of understanding what they are.

There is oftentimes also a different interpretations and confusion of terminology when it comes to private cellular and edge compute. For example, in our interviews, a few enterprises describe traditional on-premises compute with local dedicated compute facilities within an operating site (e.g. a server room) as a flavour of edge compute. We argue that the key difference between traditional on-premises compute and on-premises edge compute is that with the latter, the applications and underlying infrastructure are both more cloud-like. Applications that leverage edge compute also use cloud-like technologies and processes (such as continuous integration and continuous delivery, or CI/CD in short) and the edge infrastructure uses containers or virtual machines and can be remotely managed (rather than being monolithic).

The same applies when it comes to private cellular networking, where the term ‘private network’ is used differently by certain individuals to refer to virtual private networks (VPNs) as opposed to the dedicated local on-premises network we have defined above. In addition, when it comes to private 5G, there is also confusion as to the difference between better in-building coverage of public 5G (i.e. the macro network) versus a private 5G network, for a manufacturing plant for example. This will only be further complicated by the upswing of network slicing, which can sometimes (incorrectly) be marketed as a private network.

Furthermore, for enterprises that are more familiar with the concepts, many are still looking to better understand the business value and outcomes that private LTE/5G and edge compute can bring, and what they can enable for their businesses.

 

Table of Contents

  • Executive Summary
  • Introduction
    • Evaluating the opportunities with private cellular and edge
    • Telcos see private cellular and edge as two peas in a pod…
    • …but this is not necessarily the case with enterprises
    • Most private cellular or edge trials or PoCs have yet to scale
  • Edge and private cellular as different tracks
    • Enterprises that understand private cellular don’t always understand edge (and vice versa)
    • Edge and private cellular are pursued as distinct initiatives
  • Breaking free from PoC purgatory
    • Lack of stakeholder alignment
    • Ecosystem inertia
    • Unable to build the business case
  • Addressing different deployment pathways
    • Tactical solutions versus strategic transformations
    • Find trigger points as key opportunities for scaling
    • Readiness of solutions: Speed and ease of deployment
  • Recommendations for enterprises
  • Recommendations for telco operators
  • Recommendations for others
    • Application providers, device manufacturers and OEMs
    • Regulators

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Telco plays in live entertainment

Enhancing live entertainment

Live entertainment spans everything from a handful of people enjoying stand-up comedy in a pub to a football match attended by 100,000 fans. Although there are many different forms and formats of live entertainment, they share three inter-related characteristics – immediacy, interactivity and immersion. The performers make things happen and people tend to react, by clapping, shouting, singing or gesticulating at the performers or by interacting with each other. A compelling event will also be immersive in the sense that the spectators will focus entirely on the action.

For telcos, live events present specific challenges and opportunities. Simultaneously providing millions of people with high quality images and audio from live events can soak up large amounts of bandwidth on networks, forcing telcos to invest in additional capacity. Yet, it should be feasible to make a return on that investment: live events are an enormously popular form of entertainment on which people around the world are prepared to spend vast sums of money. This is a market where demand often outstrips supply: tickets for top tier sports events or music concerts can cost US$150 or more.

With the advent of 5G and Wi-Fi 6E, telcos have an opportunity to improve spectators’ enjoyment of live events both within a venue and in remote locations. Indeed, telcos could play a key role in enabling many more people to both participate in and appreciate live entertainment, thereby helping them to enjoy more fulfilling and enriching lives.

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The opportunities to use new technologies to enhance live events

Live entertainment

Source: STL Partners

More broadly, telecoms networks and related services have become fundamental to the smooth running of our increasingly digital economy. Our landmark report The Coordination Age: A third age of telecoms explained how reliable and ubiquitous connectivity can enable companies and consumers to use digital technologies to efficiently allocate and source assets and resources. In the case of live entertainment, telcos can help people to make better use of their leisure time – a precious and very finite resource for most individuals.

This report begins by providing an overview of the live entertainment opportunity for telcos, outlining the services they could provide to support both professional and amateur events. It then considers the growing demand for high-definition, 360-degree coverage of live events, before discussing why it is increasingly important to deliver footage in real-time, rather than near real-time. Subsequent sections explore the expanding role of edge computing in facilitating live broadcasts and how augmented reality and virtual reality could be used to create more immersive and interactive experiences.

This report draws on the experiences and actions of AT&T, BT, NTT and Verizon, which are all very active in the coverage of live sports. It also builds on previous STL Partners research including:

Contents

  • Executive Summary
  • Introduction
  • Opportunities to enhance live entertainment
    • Amateur entertainment – a B2C play
  • Delivering high-definition/360-degree video
    • New broadcast technologies
    • Real-time encoding and compression
    • Traffic management and net neutrality
  • Real real-time coverage and stats
    • More data and more stats
    • Personalised advertising and offers
  • Edge computing and the in-event experience
    • Refereeing automation/support
    • In-venue security and safety
    • Wi-Fi versus 5G
  • Augmented reality – blurring the lines
  • Conclusions
    • Tech can enrich people’s experience of live events
    • The role of telcos
  • Index

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SK Telecom’s journey in commercialising 5G

SK Telecom (SKT), Verizon and Telstra were among the first in the world to commence the commercialisation of 5G networks. SK Telecom and Verizon launched broadband-based propositions in 2018, but it was only in 2019, when 5G smartphones became available, that consumer, business and enterprise customers were really able to experience the networks.

Part 1 of our 3-part series looks at SKT’s journey and how its propositions have developed from when 5G was launched to the current time. It includes an analysis of both consumer and business offerings promoted on SKT’s website to identify the revenues streams that 5G is supporting now – as opposed to revenues that new 5G use cases might deliver in future.

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At launch, SKT introduced 5G-specific tariffs, that coupled large data allowances with unique apps and services designed to ensure data consumption and demonstrate the advantages of 5G access. 5G plans were more expensive than 4G plans, but the price of 5G data per MB was less than that for 4G to tempt customers to make the switch.

SKT’s well-documented approach to 5G has been regarded as inspirational by other telcos, though many consider a similar approach out-of-reach (e.g. for other telcos, coverage issues may limit their ability to charge a premium, or 5G-value-adding services may be lacking).

This report examines the market factors that have enabled and constrained SKT’s 5G actions, as it moves to deliver propositions for audiences beyond the early adopters and heavy data users. It identifies lessons in the commercialisation of 5G for those operators that are on their own 5G journeys and those that have yet to start.

5G performance to date

This analysis is based on the latest data available as we went to press in March 2021.

There were 10.9 million 5G subscribers in South Korea at end-November 2020 (15.5% of the total 70.5 million mobile subscriptions in the market, according to the Ministry of Science and ICT) and network coverage is reported to be more than 90% of the population (a figure that was already quoted in March 2020). Subscriber numbers grew by nearly one million in November 2020, boosted by the introduction of the iPhone 12, which sold 600K units that month.

SKT’s share of 5G subscribers was 46% (5.05 million) in November, to which SKT added a further 400K+ in December, reaching 5.48 million by the end of 2020.

The telco took just four and a half months to reach one million 5G subscribers following launch, significantly less than it had taken with 4G, which had attained the same milestone in eight months following 4G’s commercial launch in 2011.

SKT quarterly 5G subscriber numbers (millions)

SK Telecom 5G subscribers

Source: STL Partners, SK Telecom

SKT credits 5G subscriber growth for its 2.8% MNO revenue increase in the year to December 2020, however the impact on ARPU is less clear. An initial increase in overall ARPU followed the introduction of higher priced 5G plans at launch, but ARPU has fallen back slightly since then, possibly due to COVID-19 economic factors.

SKT total ARPU trend following 5G launch

SK Telecom 5G ARPU

Source: STL Partners

In its 2020 year-end earnings call, SKT reported that it was top of the leader board in South Korea’s three customer satisfaction surveys and in the 5G quality assessment by the Ministry of Science and ICT.

As a cautionary note, Hong Jung-min of the ruling Democratic Party reported that 500K 5G users had switched to 4G LTE during August 2020 due to network issues, including limited coverage, slower than expected speeds. It is unclear how SKT was affected by this.

 

Table of Contents

  • Executive Summary
    • Recommendations
    • Next steps
  • Introduction
  • 5G performance to date
  • Details of launch
  • Consumer propositions
    • At launch
    • …And now
  • Business and enterprise propositions
    • At launch
    • …And now
  • Analysis of 5G market development
    • What next?
    • mmWave
  • Conclusion
  • Appendix 1

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