Apple Glass: An iPhone moment for 5G?

Augmented reality supports many use cases across industries

Revisiting the themes explored in the AR/VR: Won’t move the 5G needle report STL Partners published in January 2018, this report explores whether augmented reality (AR) could become a catalyst for widespread adoption of 5G, as leading chip supplier Qualcomm and some telcos hope.

It considers how this technology is developing, its relationship with virtual reality (VR), and the implications for telcos trying to find compelling reasons for customers to use low latency 5G networks.

This report draws the following distinction between VR and AR

  • Virtual reality: use of an enclosed headset for total immersion in a digital3D
  • Augmented reality: superimposition of digital graphics onto images of the real world via a camera viewfinder, a pair of glasses or onto a screen fixed in real world.

In other words, AR is used both indoors and outdoors and on a variety of devices. Whereas Wi-Fi/fibre connectivity will be the preferred connectivity option in many scenarios, 5G will be required in locations lacking high-speed Wi-Fi coverage.  Many AR applications rely on responsive connectivity to enable them to interact with the real world. To be compelling, animated images superimposed on those of the real world need to change in a way that is consistent with changes in the real world and changes in the viewing angle.

AR can be used to create innovative games, such as the 2016 phenomena Pokemon Go, and educational and informational tools, such as travel guides that give you information about the monument you are looking at.  At live sports events, spectators could use AR software to identify players, see how fast they are running, check their heart rates and call up their career statistics.

Note, an advanced form of AR is sometimes referred to as mixed reality or extended reality (XR). In this case, fully interactive digital 3D objects are superimposed on the real world, effectively mixing virtual objects and people with physical objects and people into a seamless interactive scene. For example, an advanced telepresence service could project a live hologram of the person you are talking to into the same room as you. Note, this could be an avatar representing the person or, where the connectivity allows, an actual 3D video stream of the actual person.

Widespread usage of AR services will be a hallmark of the Coordination Age, in the sense that they will bring valuable information to people as and when they need it. First responders, for example, could use smart glasses to help work their way through smoke inside a building, while police officers could be immediately fed information about the owner of a car registration plate. Office workers may use smart glasses to live stream a hologram of a colleague from the other side of the world or a 3D model of a new product or building.

In the home, both AR and VR could be used to generate new entertainment experiences, ranging from highly immersive games to live holograms of sports events or music concerts. Some people may even use these services as a form of escapism, virtually inhabiting alternative realities for several hours a day.

Given sufficient time to develop, STL Partners believes mixed-reality services will ultimately become widely adopted in the developed world. They will become a valuable aid to everyday living, providing the user with information about whatever they are looking at, either on a transparent screen on a pair of glasses or through a wireless earpiece. If you had a device that could give you notifications, such as an alert about a fast approaching car or a delay to your train, in your ear or eyeline, why wouldn’t you want to use it?

How different AR applications affect mobile networks

One of the key questions for the telecoms industry is how many of these applications will require very low latency, high-speed connectivity. The transmission of high-definition holographic images from one place to another in real time could place enormous demands on telecoms networks, opening up opportunities for telcos to earn additional revenues by providing dedicated/managed connectivity at a premium price. But many AR applications, such as displaying reviews of the restaurant a consumer is looking at, are unlikely to generate much data traffic. the figure below lists some potential AR use cases and indicates how demanding they will be to support.

Examples of AR use cases and the demands they make on connectivity


Source: STL Partners

Although telcos have always struggled to convince people to pay a premium for premium connectivity, some of the most advanced AR applications may be sufficiently compelling to bring about this kind of behavioural shift, just as people are prepared to pay more for a better seat at the theatre or in a sports stadium. This could be on a pay-as-you-go or a subscription basis.

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The pioneers of augmented reality

Augmented reality (AR) is essentially a catch-all term for any application that seeks to overlay digital information and images on the real-world. Applications of AR can range from a simple digital label to a live 3D holographic projection of a person or event.

AR really rose to prominence at the start of the last decade with the launch of smartphone apps, such as Layar, Junaio, and Wikitude, which gave you information about what you were looking at through the smartphone viewfinder. These apps drew on data from the handset’s GPS chip, its compass and, in some cases, image recognition software to try and figure out what was being displayed in the viewfinder. Although they attracted a lot of media attention, these apps were too clunky to break through into the mass-market. However, the underlying concept persists – the reasonably popular Google Lens app enables people to identify a product, plant or animal they are looking at or translate a menu into their own language.

Perhaps the most high profile AR application to date is Niantic’s Pokemon Go, a smartphone game that superimposes cartoon monsters on images of the real world captured by the user’s smartphone camera. Pokemon Go generated $1 billion in revenue globally just seven months after its release in mid 2016, faster than any other mobile game, according to App Annie. It has also shown remarkable staying power. Four years later, in May 2020, Pokemon Go continued to be one of the top 10 grossing games worldwide, according to SensorTower.

In November 2017, Niantic, which has also had another major AR hit with sci-fi game Ingress, raised $200 million to boost its AR efforts. In 2019, it released another AR game based on the Harry Potter franchise.

Niantic is now looking to use its AR expertise to create a new kind of marketing platform. The idea is that brands will be able to post digital adverts and content in real-world locations, essentially creating digital billboards that are viewable to consumers using the Niantic platform. At the online AWE event in May 2020, Niantic executives claimed “AR gamification and location-based context” can help businesses increase their reach, boost user sentiment, and drive foot traffic to bricks-and-mortar stores. Niantic says it is working with major brands, such as AT&T, Simon Malls, Starbucks, Mcdonalds, and Samsung, to develop AR marketing that “is non-intrusive, organic, and engaging.”

The sustained success of Pokemon Go has made an impression on the major Internet platforms. By 2018, the immediate focus of both Apple and Google had clearly shifted from VR to AR. Apple CEO Tim Cook has been particularly vocal about the potential of AR. And he continues to sing the praises of the technology in public.

In January 2020, for example, during a visit to Ireland, Cook described augmented reality as the “next big thing.”  In an earnings call later that month, Cook added:When you look at AR today, you would see that there are consumer applications, there are enterprise applications. … it’s going to pervade your life…, because it’s going to go across both business and your whole life. And I think these things will happen in parallel.”

Both Apple and Google have released AR developer tools, helping AR apps to proliferate in both Apple’s App Store and on Google Play.  One of the most popular early use cases for AR is to check how potential new furniture would look inside a living room or a bedroom. Furniture stores and home design companies, such as Ikea, Wayfair and Houzz, have launched their own AR apps using Apple’s ARKit. Once the app is familiar with its surroundings, it allows the user to overlay digital models of furniture anywhere in a room to see how it will fit. The technology can work in outdoor spaces as well.

In a similar vein, there are various AR apps, such as MeasureKit, that allow you to measure any object of your choosing. After the user picks a starting point with a screen tap, a straight line will measure the length until a second tap marks the end. MeasureKit also claims to be able to calculate trajectory distances of moving objects, angle degrees, the square footage of a three-dimensional cube and a person’s height.

Table of contents

  • Executive Summary
    • More mainstream models from late 2022
    • Implications and opportunities for telcos
  • Introduction
  • Progress and Immediate Prospects
    • The pioneers of augmented reality
    • Impact of the pandemic
    • Snap – seeing the world differently
    • Facebook – the keeper of the VR flame
    • Google – the leader in image recognition
    • Apple – patiently playing the long game
    • Microsoft – expensive offerings for the enterprise
    • Amazon – teaming up with telcos to enable AR/VR
    • Market forecasts being revised down
  • Telcos Get Active in AR
    • South Korea’s telcos keep trying
    • The global picture
  • What comes next?
    • Live 3D holograms of events
    • Enhancing live venues with holograms
    • 4K HD – Simple, but effective
  • Technical requirements
    • Extreme image processing
    • An array of sensors and cameras
    • Artificial intelligence plays a role
    • Bandwidth and latency
    • Costs: energy, weight and financial
  • Timelines for Better VR and AR
    • When might mass-market models become available?
    • Implications for telcos
    • Opportunities for telcos
  • Appendix: Societal Challenges
    • AR: Is it acceptable in a public place?
    • VR: health issues
    • VR and AR: moral and ethical challenges
    • AR and VR: What do consumers really want?
  • Index

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Reliance Unlimit: How to build a successful IoT ecosystem

Reliance Unlimit’s success so far

Unlimit, Reliance Jio’s standalone IoT business in India, established in 2016, understood from the start that the problem with the IoT wasn’t the availability of technology, but how to quickly pull it all together into a clear, affordable solutions for the end customer. The result is that less than four years later, it has deployed more than 35,000 end-to-end IoT projects for a prestigious portfolio of customers, including Nissan Motor, MG Motor, Bata, DHL, GSK and Unilever. To meet their varying and evolving needs, Unlimit had built a IoT ecosystem of almost 600 partner companies by the end of 2019. Of these, nearly 100 are fully certified partners, with which Unlimit co-innovates solutions tailored to the Indian market.

The state of the IoT: Balancing cost and complexity

In 1968, Theodore Paraskevakos, a Greek American inventor and businessman, explored the idea of making two machines communicate to each other. He first developed a system for transmitting the caller’s number to the receiver’s device. Building on this experiment, in 1977 he founded Metretek Inc, a company that conducted commercial automatic meter reading, which is essentially today’s commercial smart meter. From then, the world of machine to machine communications (M2M) developed rapidly. The objective was mainly to remotely monitor devices in order to understand conditions and performance. The M2M world was strongly telecommunications-oriented and focused on solving specific business problems. Given this narrow focus, there was little diversity in devices, data sets were specific to one or two measurements, and the communications protocols were well known. Given this context, it is fair to describe first-generation M2M solutions as a siloed, with little – if any – interaction with other data and solutions.

The benefits and challenges of the IoT

The purpose of the Internet of Things (IoT) is to open those silos and incorporate solution designers and developers into the operating environment. In this evolved environment, there might be several applications and solutions, each delivering a unique operational benefit. Each of those solutions require different devices, which produce different data. And those devices require life cycle management, the data needs to be analysed to inform better decisions, and automation integrated to improve efficiency in the operational environment. The communication methods between those devices can also vary significantly, depending on the environment, where the data is, and the type of applications and intelligence required. Finally, all this needs to run securely.

Therefore, the IoT has opened the silos, but it has brought complexity. The question is then whether this complexity is worth it for the operational benefits.

There are several studies highlighting the advantages of IoT solutions. The recent Microsoft IoT Signals publication, which surveys over 3000 decision makers in companies operating across different sectors, clearly demonstrates the value that IoT is bringing to organisations. The top three benefits are:

  • 91% of respondents claim that the IoT has increased efficiency
  • 91% of respondents claim that the IoT has increased yield
  • 85% of respondents claim that the IoT has increased quality.

The sectors leading IoT adoption

The same study highlights how these benefits are materialising in different business sectors. According to this study – and many others – manufacturing is seen as a top adopter of IoT solutions, as also highlighted in STL Partners research on the Industrial IoT.

Automotive, supply chain and logistics are other sectors that have widely adopted the IoT. Their leadership comes from a long M2M heritage, since telematics was a core application of M2M, and is an important part of the supply chain and logistics process.

The automotive sector’s early adoption of IoT was also driven by regulatory initiatives in different parts of the world, for instance to support remotely monitored emergency services in case of accidents (e.g. EU eCall). To enable this, M2M SIMs were embedded in cars, and only activated in the case of an accident, sending a message to an emergency centre. From there, the automotive industry and mobile network operators gradually developed a broader range of applications, culminating in the concept of connected cars. The connected car is much more sophisticated than a single emergency SIM – it is an IoT environment in which an array of sensors is gathering different data, sharing that data externally in various forms of V2X settings, supporting in-vehicle infotainment, and also enabling semiautonomous mobility. Sometime in the future, this will mature into fully autonomous mobility.

The complexity of an IoT solution

The connected car clearly represents the evolution from siloed M2M solutions to the IoT with multiple interdependent data sources and solutions. Achieving this has required the integration of various technologies into an IoT architecture, as well as the move towards automation and prediction of events, which requires embedding advanced analytics and AI technology frameworks into the IoT stack.

High level view of an IoT architecture

Overview of IoT architecture

Source: Saverio Romeo, STL Partners

There are five levels on an IoT architecture:

  1. The hardware level includes devices, sensors, gateways and hardware development components such as microcontrollers.
  2. The communication level includes the different types of IoT connectivity (cellular, LP-WAN, fixed, satellite, short-range wireless and others) and the communication protocols used in those forms of connectivity.
  3. The middleware software backend level is a set of software layers that are traditionally called an IoT platform. A high-level breakdown of the IoT platform includes a connectivity management layer, a device management layer, and data management and orchestration, data analytics and visualisations layers.
  4. The application level includes application development enablement tools and the applications themselves. Those tools enable the development of applications using machine-generated data and various other sources of data –all integrated by the IoT platform. It also includes applications that use results of these analytics to enable remote and automated actions on IoT devices.
  5. Vertically across these levels, there is a security layer. Although this is simplified into a single vertical layer, in practice there are separate security features integrated into IoT solutions at each layer of the architecture. Those features work together to offer layer-to-layer and end-to-end security. This is a complex process that required a detailed use of security-by-design methodology.

The IoT architecture is therefore composed of different technological parts that need to be integrated in order to work correctly in the different circumstances of potential deployment. The IoT architecture also needs to enable scalability supporting the expansion of a solution in terms of number of devices and volume and types of data. Each architectural layer is essential for the IoT solution to work, and they must interact with each other harmoniously, but each requires different technological expertise and skills.

An organisation that wants to offer end-to-end IoT solutions must therefore make a strategic choice between “in-house” IoT architecture development, or form strategic partnerships with existing IoT technology platform providers, and integrate their solutions into a coherent architecture to support an IoT ecosystem.

In the following sections of this report, we discuss Unlimit’s decision to take an ecosystem approach to building its IoT business, and the steps it took to get where it is today.

Table of contents

  • Executive Summary
    • Four lessons from Unlimit on building IoT ecosystems
    • How Unlimit built a successful IoT ecosystem
    • What next?
  • The state of the IoT: Balancing cost and complexity
    • The benefits and challenges of the IoT
    • The sectors leading IoT adoption
    • The complexity of an IoT solution
    • The nature of business ecosystems
  • How Unlimit built a successful IoT business
    • So far, Unlimit looks like a success
    • How will Unlimit sustain leadership and growth?
  • Lessons from Unlimit’s experience

A3 for telcos: Mapping the financial value

What is analytics, AI and automation worth to telecoms operators?

This report is the second in a two-part series mapping the process and assessing the financial value of automation, analytics and artificial intelligence (AI) in telecoms. In the first report, The value of analytics, automation and AI for telcos – Part 1: The telco A3 application map, we outlined which type of technology was best suited to which processes across a telco’s operations.

In this report, we assess the financial value of each of the operational areas, in dollar terms, for an average telco. Based on our assessment of operator financials and operational KPIs, the figure below outlines our assumptions on the characteristics of an “average” telco used as the basis for our financial modelling. The characteristics of this telco are as shown below, with a slight skew towards developed market operator characteristics since this is currently where most industry proof points used in our modelling have been implemented.

The characteristics of an average telco

characteristics of an average telco

Source: STL Partners, Charlotte Patrick Consult

The first report in the series analysed how each A3 technology could be applied similarly across different functional units of a telecoms operator, e.g. machine learning or automation each have similar processes in network management, channel management and sales and marketing.

Evaluating AI and automation use cases in four domains

To measure financial impact, this report returns to a traditional breakdown of value by functional unit within the telco, breaking down into four key areas:

  1. Network operations: Network deployment, management and maintenance, and revenue management
  2. Fraud: Including services, online, and internal fraud risks
  3. Customer care: Including all assisted and unassisted channels
  4. Marketing and sales: Understanding customers, managing products, marketing programs, lead management and sales processes.

Through an assessment of nearly 150 individual process areas across a telecoms operator’s core operations, we estimate that A3 can deliver the average telco more than $1 billion dollars in value per year, through a combination of revenue uplift and opex and capex savings, equivalent to 7% of total annual revenues.

As illustrated below, core network operations management accounts for by far the greatest proportion of the value.

The relative value of automation, AI and analytics across telco operations

The relative value of AI, automation and analytics across telco operations

Source: STL Partners, Charlotte Patrick Consult

This likely still underrepresents the total, long term potential value of A3 to telcos, since this first iteration does not model the value of A3 processes in areas less unique to telecoms, including supply chain, finance, IT and HR. No doubt that even within the core area of operations, there are potential process areas that have yet to be discovered or proven, and which we have overlooked in our initial attempt to model the value of A3 to telcos. Meanwhile, this is focused purely on telco’s internal operations so also excludes any potential revenue uplift from new A3-enabled services, such as data monetisation or development of AI-as-a-service type solutions.

That said, operators cannot implement all of these processes at once. The enormous challenge of restructuring processes to be more automated and data-centric, putting in place the data management and analytics capabilities, training employees and acquiring new skills, among many others, means that while many leading telcos are well on their way to capturing this value in some areas, very few – if any – have implemented A3 across all process areas. As a benchmark, Telefónica is an industry leader in leveraging automation and AI to improve operational efficiency, and in 2019 it reported total operational savings of €429mn across the entire group. While this is primarily focused on customer facing channels, so likely excludes the value of A3 in many network operations processes, for instance energy efficiency which is delivering significant value to Telefónica and others, it suggests there remains lots of value still to capture.

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Methodology

The financial modelling for the value of A3 was done through an individual assessment of each of the 150+ process areas to understand the main activities within that area of operations, and how automation, analytics and/or machine learning and other AI technologies could be used within those activities. From there, we assess the value of integrating these technologies to existing operational functions to make them more efficient and effective. This means that we do not attribute any additional value to telcos from implementing new technologies that include A3 as a core element of their functionality, e.g. a multi-domain service orchestrator, implemented as part of software-defined networking.

Our bottom up assessment of each process is also validated through real-world proof points from operators or vendors. This means that more speculative areas of A3 application in operators are calculated to offer relatively limited value. As more proof points emerge, we will incorporate them into future iterations.

Table of contents

  • Executive Summary
    • Where is the largest financial benefit from A3?
    • What should telcos prioritise in the short term?
    • How long will it take for telcos to realise this value?
    • What next?
  • Introduction
    • Methodology
  • Breaking down the value of A3 by operational area
    • Network, OSS and BSS
    • Fraud management
    • Care and commercial channels
    • Marketing and sales
  • Conclusions and recommendations

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5G: ‘Just another G’ – yet a catalyst of change

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5G: Cutting through the hype

This briefing document is being published in June 2018. This report does not re-hash the familiar background story to 5G – the original specifications, the much-ballyhooed early thoughts on use cases, nor the breathless rhetoric about how it is going to change the world (or in the risible words of one hyperbolic tech CEO, “be more important than electricity”). Neither is it a hatchet job decrying the whole exercise as worthless. Instead, it looks at the factors acting as brakes and accelerants for 5G, and how they may affect the overall ecosystem’s evolution.

What is needed, however, is a way to cut through the spin – especially where it is aimed at policymakers and investors, who often latch on to simple but unrealistic stories. Some of the most absurd ‘5G-wash’ hyperbole emanates from Brussels and Washington DC, and in the run up to the next World Radio Congress in 2019 (where spectrum allocations are debated) it is critical that rationality and critical thought prevails over glossy lobbying. It is harmful to us all if 5G hype means it ends up overshadowing worthy parallel developments in satellite communications, private wireless and other technologies that also deserve attention, spectrum or subsidised research projects.

It is understandable that many in the industry ‘talk up their own book’, especially given consolidation and profitability concerns in the vendor space. The 2018 market for telecoms infrastructure is expected to decline, and there are huge hopes at Ericsson, Nokia and Huawei that 5G can help turn it around in 2019–20. But that is not an adequate excuse to exaggerate. Neither is it an excuse to mislabel and market diverse other technologies (advanced versions of 4G, Wi-Fi and so on) as ‘5G’ – although such egregious duplicity is one of the few certainties here. It is probably enhancements and capacity additions for 4G that will prove the biggest moneyspinners over the next 12–24 months.

The next 24 months for 5G

In theory, the next 24 months should be when it all happens for 5G. Early demonstrations and trials have been well publicised, including various global cities’ testbeds and the South Korean Winter Olympics in Pyeongchang. Almost every week yields new press releases, lauding everything from medical diagnosis (NTT DoCoMo) to self-driving snowploughs (Telenor). It is unclear how much any of these shiny announcements actually accelerate real, commercial deployments – or real business models.

This period is also a critical juncture for standards, starting with the formalisation of the first phase of standards at the June 3GPP meeting (Release 15), leading up to the full ratification of 5G as the official IMT2020 technology by the International Telecoms Union (ITU ) in 2020.

Much of the technology media is trying to pitch the development and deployment of 5G as a race, either between countries or individual operators. The first fixed-wireless deployments are under way, while the earliest mobile devices are expected by the year end (probably portable 5G/Wi-Fi hotspot modems). 2019 should see a flurry of early launches and the first 5G-capable smartphones becoming available.

Yet those forms of 5G broadband – fixed or ‘enhanced mobile’ – are hardly novelties, despite the gigabit speeds and low latencies promised. In many ways, they risk being overshadowed by continued evolution of 4G networks, which is occurring in parallel.

There are also plenty of IoT-type demonstrations, whether for delivery drones, autonomous vehicles or automated industrial machinery. Yet these seem much less real for now – the value-chains are far from clear, and often they will need networks to be built in new locations, rather than reusing existing towers and backhaul. It also isn’t obvious that large enterprises are willing to pay much for such connectivity, and whether they’ll be happy with ‘slices’ of MNO-controlled networks or if they want to own them outright.

There remain many hard-to-answer questions about 5G’s emergence:

  • Will global consumers switch to 5G phones en masse in 2021–22 or more from 2023–24?
  • Will today’s mobile operators consolidate further or will there be an explosion of new niche providers targetting verticals or specific uses?
  • Is there a ‘race’ between countries to deploy 5G, and if so, why? Do arguments about 5G ‘leadership’ really translate to economic benefit and jobs, and if so, for whom?
  • Will the US, Japan, South Korea and maybe China take a significant lead on 5G, or is it more about geopolitical grandstanding in the Trump/Xi age, and helping national-champion vendors and operators gain a reputational boost?
  • Will 5G, NFV, SDN and edge computing work in true synergy, or will delays or limitations in one area have knock-on impacts on the others?
  • What are the unexpected practical ‘gotchas’ for 5G that might add friction, cost or delay to deployment, or complexity to operations? Is fibre availability for backhaul a critical prerequisite?
  • Does 5G pose an opportunity for new niche suppliers of technology – for example in small cells – or will thinning margins and price pressure from operators and open source force many aspirant vendors out of the market?
  • Will ‘verticals’ and IoT really matter for 5G, and if so will telcos view enterprises more as customers, partners or even suppliers and competitors? Which industries are realistic opportunities for 5G’s new capabilities for low latency or ‘massive IoT’?
  • Who, if anyone, will make a profit from 5G-enabled networks, devices, services and embedded capabilities?

The truth is that many of these questions cannot be definitively answered today, despite the emphatic nature of a lot of industry comment. Here, we present some scenarios and especially look at the idea of pre-requisites: what needs to be done first, for 5G to be successfully deployed or monetised? There are potential bottlenecks ahead, as well as opportunities.

Hopefully, we have plotted the roadmap, even if the industry cannot ‘drive autonomously’ yet.

The rest of this report is structured into the following sections:

  • 5G positive signals – standards, trials and enthusiasm
  • 5G cautions – prerequisites, questions and complexities
  • Verticals – huge opportunity or more market fragmentation and competition?
  • Timelines and practicalities

Think of this report as a weather forecast. 5G will be much like the UK climate: patchy clouds, with rays of sunshine and the occasional storm. The summer will be late but warm, but you’d best pack a 4G or Wi-Fi umbrella just in case.

And just as with weather, trying to do long-range forecasts is very risky. There’s a good chance that circumstances will prove you wrong. But despite that, we have some qualitative predictions stretching out to 2026, at which point we expect to be bombarded with 6G hype, alongside 5G reality.

5G positive indicators: reasons to be happy!

In many ways, the development of 5G is going remarkably well, especially compared to some of the partisan inter- and intra-technology standards warfare of the past.

In the recent past we have seen:

  • Approval by 3GPP of the first New Radio (NR) specifications in December 2017, for Non- Standalone mode, which means that 5G NR can be deployed using the existing 4G core networks.
  • Early engagement by the cellular industry with various industries’ representatives, notably automotive, manufacturing and healthcare. A number of joint bodies have been set up, with the objective of defining ‘vertical’ and especially IoT-centric requirements and testbeds.
  • A timeline for silicon and device availability that aligns much better with that for networks than was the case with 3G or 4G.
  • A whole range of cool demonstrations in Pyeongchang at the South Korean Winter Olympics in early 2018.
  • Research labs for 5G set up around the world.
  • High awareness of 5G among governments, businesses and media, even if it is often over-hyped,as that is hardly unusual for new technologies.
  • An ongoing procession of spectrum auctions for frequencies suitable for 5G, and ready availability of test licences.
  • Good (albeit uneven) progress in adjacent mobile areas such as NFV, SDN, edge computing, cloud RAN, network slicing, automation of processes, AI and so forth.
  • Continued growth of 4G usage, and likelihood of capacity constraints driving the need for future upgrades.
  • Commendable work by both large and small vendors in creating early equipment, and approaching target speeds and latencies more closely than many observers (including the author) thought were probable.
  • Some good early results from trials, especially of high-frequency mmWave networks, which show decent propagation properties and even indoor penetration – albeit through glass, not solid walls – exceeding the (admittedly low) expectations. For instance, AT&T has tested for weather resistance of its mmWave 5G trials – important as some have expected rain or snow to have an impact on propagation.
  • The effectiveness of MIMO (multiple-in, multiple-out) antennas appears to negate some of the poor notional radio properties of midband spectrum in the 3–4GHz range as well. Essentially beam-forming and beam-steering allows radio ‘spikes’ to concentrate power towards actual users’ positions (including indoors), rather than radiating uniformly and thus wastefully.
  • No major fights (yet) over IPR and costly patent licences.
  • Encouraging forecasts from some analysts (not published by us, so we won’t quote them) and trade associations about 5G subscriptions and related services.

Early trial results and 5G deployment plans

While many operators and international laboratories and organisations are testing 5G, a few of the experiments stand out.

Probably the most high profile have been the various South Korean initiatives that took place during the Pyeongchang Winter Olympics, and Verizon’s work on fixed-wireless access in the US. KT and SKT showed various approaches to 5G-connected cars, novel camera footage from 5G-connected drones, real-world usage of mmWave radios and numerous other showcases. Korea is expecting to see launches of commercial 5G services around March 2019.

Verizon announced at the end of 2017 that it was aiming to light up a handful of cities – Sacramento, California most notably – by the end of this year. More details have become clearer recently: initially it will launch fixed 5G for mostly residential users, with mobile variants following around six months afterwards. Samsung has had its 28GHz-band routers approved for both indoor and outdoor use in the US, and these are expected to feature in Verizon’s early offerings. (STL Partners is writing a separate briefing report digging more deeply into Verizon’s 5G strategy, which includes an estimate of its huge investment into fibre for back/fronthaul).

(Mobile launches usually lag fixed-wireless services, as they need more coverage, more testing and a lot more complexity around cell-to-cell handoffs. And within mobile uses, it is usually easier to provide simple devices such as modems or cellular/Wi-Fi hotspots, as phones and voice access require even more work.)

AT&T is being aggressive with its ‘proper’ 5G rollout, as well as its controversial “fake” branding of advanced 4G as ‘5G Evolution’. It is intending to launch standards-based 5G, capable of supporting mobile devices (initially mobile Wi-Fi hotspot ‘pucks’) in at least 12 cities by the end of 2018.

AT&T started demonstrating and testing pre-5G technology in late 2016, including an enterprise trial in mmWave bands, together with Intel. In June 2017, it extended the trials to residential users in Austin, Texas, doing video streaming over fixed-wireless access. This was followed by a small-business fixed- wireless trial in Waco, Texas, which generated good results including 1.2Gbps throughput speeds and 9–12 millisecond latencies. That said, it seems less enthusiastic than Verizon about the general fixed- wireless opportunity1, especially given the backhaul fibre investment needed.

Telco operators that are well advanced on 5G plans include:

  • Japanese operators: NTT DoCoMo, KDDI and SoftBank have all been running multiple trials, for a wide variety of use cases and deployment scenarios. All are expected to have networks up and running in time for the 2020 Summer Olympics. NTT in particular has been very visible, signing contracts with vendors including Nokia and NEC.
  • Chinese operators: Spurred on by its government and Huawei as national champion vendor, all three telcos are deploying significant test networks, in a total of 16 cities across the country. Importantly, the regulator has shown commitment to issuing 5G spectrum in large tranches, and also seems to be encouraging infrastructure both between the operators and also China’s electricity grid operator. Chinese operators have also been quite aggressive on other key technical enablers such as AI/automation and network slicing.
  • Sprint and T-Mobile US: Both operators had previously been talking up 5G, but this has taken on a new perspective since the announcement of their potential merger. T-Mobile’s plan to use 600MHz spectrum for 5G is fairly unique and points to a possible nationwide network much earlier than its peers. Sprint’s hoard of 2.5GHz frequency is also extensive and could be a key differentiator given that the US has been slower to release 3.5–4.5GHz ‘midband’ spectrum than other markets. If their merger goes ahead (possibly a big if, given previous regulatory reluctance) the new T-Mobile may try to do for 5G what Verizon did for 4G – use it as a competitive differentiator to gain market share. It may face challenges getting devices supporting its unique 600MHz band, though – a similar problem that plagued it with the early days of 4G.
  • Deutsche Telekom: Aligning with its US arm, the domestic German arm of DTAG is perhaps the most vocal early enthusiast for 5G in Europe, deploying a growing test network in Berlin in particular. It is also getting its backhaul house in order, deploying tens of thousands more fibre kilometres annually.
  • Telstra: In Australia, local operator Telstra has launched a number of trials, including 5G for fixed-access backhaul to some publicly available Wi-Fi hotspots on the Gold Coast.
  • Spark: In New Zealand, local operator Spark has signalled an intent to deploy 5G (probably for fixed wireless) as early as possible, if it can get spectrum.
  • MTN: One of the few notable developing market 5G trials is that by MTN in South Africa, with Huawei.
  • India: The Indian government has signalled that it expects to announce its overall 5G strategy in June 2018. Although some are talking of 2020, it seems unlikely to gain a broad deployment fast, given economic limitations, especially driven by the 4G rollout and subsequent price war and consolidation between operators.

There are some notable absentees from this list. The UK has various government and MNO-sponsored trials, but little commitment by the telcos to move towards commercial launches yet. The Scandinavian operators, early on 3G and 4G, also seem more diffident this time. So too are the smaller countries in developed Asia; Singapore and Taiwan are also (comparatively) lagging the timelines that might be expected, again reflecting caution over business case.

In the Middle East, Ooredoo, Etisalat and STC have all been keen to be early to market with demo networks, but it’s unclear whether that will translate to broader, rapid deployments.

5G Spectrum

As always with new mobile networks, one of the input requirements is suitable radio spectrum. Generally, 5G seems to be doing fairly well in this regard. Many countries have started initial awards or have them planned for the next year or so.

Various European countries are releasing 3.5GHz ‘mid-band’ spectrum, while the US has earmarked both 600MHz (which T-Mobile has large amounts of) and 28GHz as priorities. Japan’s early focus is on 4.5GHz. In addition, there is a strategy by many operators to progressively switch off old 2G and 3G networks, and ‘refarm’ the bands for 5G.

The general expectation is that 5G will require a combination of three broad sets of frequencies:

  • Low-band, mostly below 2GHz, for wide-area coverage and good indoor penetration
  • Mid-band between 3GHz and 6GHz, for densified, mostly urban networks, probably with complex MIMO antennas
  • High-band above 6GHz, and probably mostly from 20–40GHz, although some are speaking of 90GHz or even higher for local usage.

Notably, many markets are not waiting for the official seal of approval from ITU and its World Radio Congress at the end of 2019, which was supposed to define the first set of ‘harmonised’ 5G frequencies (more accurately, IMT2020). A second set is expected, based on ITU’s ridiculously leisurely process, to be ratified only in 2023. Instead of this timeline, many regulators are either pre- guessing the outcomes (fairly uncontroversial for the 3.5GHz band) or just ignoring them (such as 28GHz in the US and South Korea). We wrote about 5G spectrum in early 2017, discussing this in more depth.

Watch a replay of the free webinar with the report’s authors – (Wednesday 8 August, 4pm BST)

5G is becoming real

In other words, 5G is becoming ‘real’, it’s getting a lot of interest and investment, and the basic technology enablers seem to work, at least in the lab and limited field trials. There are plenty of suggested use cases, and even if some of them prove far away or unrealistic, there should be some that make it through the funnel, plus others that are unanticipated.

That said, there is a cliché that states that any parts of a sentence or speech before the ‘but’ should probably be ignored.

Contents of the 5G report

  • Executive Summary
  • Introduction
  • 5G positive indicators: reasons to be happy!
  • Early trial results and deployment plans
  • Spectrum
  • Summary – the good news!
  • But what are the obstacles to 5G?
  • Densification and network sharing
  • In-building coverage
  • A lack of 5G business models
  • 5G-specific models in a hybrid-network world?
  • Devices and silicon
  • Other issues and concerns
  • Verticals: customers, partners or competitors?
  • Overview
  • Operator networks for verticals? Or private 5G?
  • Thoughts on specific verticals
  • Vendor attitudes to verticals and private networks
  • Timelines and practicalities
  • 5G in name only?
  • Conclusions

Figures:

  • Figure 1: 5G predicted timeline, 2018–2026
  • Figure 2: Who are the 5G bulls and bears?
  • Figure 3: 5G antennas may be larger and heavier than 4G equipment
  • Figure 4:  Multiple dimensions for future wireless networks’ use cases and requirements
  • Figure 5:  Creating private 5G networks involves significant complexity for enterprises
  • Figure 6: Predicted 5G relevance to verticals, 2023-25 timeframe
  • Figure 7:  Numerous applications of machine learning and AI for 5G networks
  • Figure 8: Overall 5G predicted timeline, 2018–26

Big data analytics – Time to up the ante

Introduction

Recent years have seen an explosion in the amount of data being generated by people and devices, thanks to more advanced network infrastructure, widespread adoption of smartphones and related applications, and digital consumer services. With the expansion of the Internet of Things (IoT), the amount of data being captured, stored, searched and analysed will only continue to increase. Such is the volume and variety of the data that it is beyond traditional processing software and is therefore referred to as ‘big data’.

Big data is of a greater magnitude and variety than traditional data, it comes from multiple sources and can be comprised of various formats, generated, stored and utilised in batches and/or in real-time. There is much talk and discussion around big data and analytics and its potential in many sectors, including telecommunications. As Figure 1 shows, analysis of big data can give an improved basis upon which to base human-led and automated decisions by providing better insight and allowing greater understanding of the situation being addressed.

Figure 1: Using Big Data can result in richer data insights

Source: STL Partners

This report analyses how telcos are pursuing big data analytics, and how to be successful in this regard.  This report seeks to answer the following questions:

  • When does data become ‘big’ and why is it an important issue for telcos?
  • What is the current state of telco big data implementations?
  • Who is doing what in terms of intelligent use of data and analytics?
  • How can big data analytics improve internal operational efficiencies?
  • How can big data be used to improve the relationship between telcos and their customers?
  • Where are the greatest revenue opportunities for telcos to employ big data, e.g. B2B, B2C?
  • Which companies are leading the way in enabling telcos to successfully realise big data strategies?
  • What is required in terms of infrastructure, dedicated teams and partners for successful implementation?

This report discusses implementations of big data and examines how the market will develop as telco awareness, understanding and readiness to make use of big data improves.  It provides an overview of the opportunities and use cases that can be realised and recommends what telcos need to do to achieve these.

Contents:

  • Executive Summary
  • Big data analytics is important
  • …but it’s not a quick win
  • …it’s a strategic play that takes commitment
  • How is ‘big data analytics’ different from ‘analytics’?
  • Opportunities for telcos: typically internal then external
  • Market development and trends
  • Challenges and restrictions in practice
  • What makes a successful big data strategy?
  • Next steps
  • Introduction
  • Methodology
  • An overview of big data analytics
  • Volume, variety and velocity – plus veracity and value
  • The significance of big data for telcos and their future strategies
  • Market development and trends
  • Challenges and restrictions
  • Optimisation and efficiency versus data monetisation
  • Telcos’ big data ecosystem
  • Case studies and results 
  • Early results
  • Big data analytics use cases
  • Examples of internal use-cases
  • Examples of external use cases
  • Findings, conclusions and recommendations

Figures:

  • Figure 1: Using Big Data can result in richer data insights
  • Figure 2: The data-centric telco: infusing data to improve efficiency across functions
  • Figure 3: Options for telcos’ big data implementations
  • Figure 4: Telco’s big data partner ecosystem
  • Figure 5: The components of a telco-oriented big data

Network slicing: The greatest thing since sliced bread?

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The Network Slicing research project was sponsored by HPE. This report and the analysis it contains were independently produced by STL Partners.

Service providers continue to face a decline in revenue

STL Partners has written for some time about the significant pressure faced by communications service providers (CSPs), both from operator rivals and players in adjacent sectors. Traditional telecoms revenue streams such as voice and messaging are shrinking, and as a result operator growth is slowing. Figure 1 shows that the average year-on-year revenue growth rate for 68 major telecoms groups worldwide has fallen since at least 2010.

Figure 1: 68 major telecoms groups – aggregate telecoms revenue, 2009-16

Source: Company accounts; STL Partners analysis

Much of this decline is fuelled by the impact of new competition: digital players such as Google, Facebook (including Whatsapp), Microsoft (including Skype and Skype-for-business) and Netflix, who are equipped to provide their own digital services, including voice- and messaging-enabled applications, without the headache of maintaining capital-intensive network infrastructure. It is now widely acknowledged that voice minutes and SMS bundles will continue to decline as a revenue stream as other players can offer the same, or better, capabilities ‘over-the-top’ to consumers and organisations for much less or free.

Data is not enough to ensure future growth

Of course, in order to use these new digital services, organisations and consumers do need network connectivity and, as a result, data consumption levels have shot up. Currently, the only players able to offer data connectivity are the communications service providers themselves, and therefore many have pointed to data as the primary source of new revenues which might offset the gap left by the decline in voice and messaging. In developed markets, in particular, some operators hope that it may be possible to ‘premiumise’ data services and drive higher average revenues per user (ARPUs). We do not believe that the evidence supports this and anticipate that plummeting data connectivity rates ($/MB) will neutralise growth in volumes resulting in low or no net growth in revenues.

In many developed markets, intense competition and strict regulation restricts the ability of operators to resist data price decline and squeeze more out of customers. Figure 5, for example, shows that despite mobile data consumption in the United Kingdom growing 243% between 2013 and 2015, ARPUs actually fell 4.5% over the period. More data, it is clear, does not automatically translate into more money.

 Figure 5: UK mobile ARPUs and data volumes, 2013-15

Source: STL Partners, Ofcom

In Figure 6 below, we show our revenue forecast for a telecoms operator offering converged fixed and mobile telecoms services to both enterprise and consumer customers in a developed market. In this conservative estimate, data revenues grow slightly, but not enough to offset voice and messaging revenues falling by half.

Figure 6: Forecast revenues for converged telco in advanced market

Source: STL Partners analysis

It is STL Partners’ belief that the path to sustainable telecoms growth lies not just in better monetising connectivity, but rather in telcos developing new capabilities of their own, continuously innovating and launching new products and services that more readily meet the needs of their customer base. It is only by doing so, and by leveraging new technology and network assets where possible, that telcos will be able to truly compete with digital players. In essence, communications service providers must either evolve to overcome commoditisation or to embrace it. Either way, they cannot continue business as usual.

Virtualisation and slicing: enablers for change?

STL Partners has written previously about Telco Cloud, a concept in which telcos redefine themselves by adopting cloud business platforms and practices (similar to internet and content players), alongside virtualisation of their core assets. This could lead to increased service agility, and the ability to create new, network-integrated services. In turn, this could drive new revenue growth.

Network virtualisation is still at an early stage, but its adoption is increasingly seen as inevitable. Operators worldwide are already deploying NFV/SDN technology, some setting ambitious virtualisation targets over time. The forthcoming 5G standards, as well as IoT technologies, are being developed with virtualisation in mind, and technology vendors are increasingly evolving their software offerings. If managed effectively, virtualisation could be the catalyst for the transformation towards the digital service provider.

One way in which virtualisation might enable this change is through the concept of ‘network slicing’, under which network operators would be able to operate multiple logically separate virtual networks over a single network infrastructure. This paper examines what network slicing might look like in practise, and what that could mean for CSPs.

Slicing: a vision for fundamental transformation

Defining slicing is not about the ‘what’, it’s the ‘how’

Network slicing is a term that has been discussed quietly in the industry for some time, but it has gained prominence more recently in parallel with the industry’s developing new 5G standards. Slicing has recently become the focus of a public disagreement between industry players involved in driving 5G standards. In essence, one group of operators and vendors are keen on accelerating New Radio (NR) standards in 5G, whereas another group see this as potentially undermining future standards in end-to-end slicing. A related debate also exists within operators between the core network and radio access teams, but that is neither new, nor surprising. These debates are not about slicing, since most parties appear to broadly agree on its potential, but more about how 5G will be introduced: as an evolution of 4G or as a completely new network.

A few considerations

In recent years, network slicing has also gained prominence as a way of creating unified 5G networks, which cover multiple very-different use-cases with a single infrastructure. Turning a necessity into a virtue, this technical “fix” is now being seen as a possible basis for extra capabilities and new services. However, many of the benefits could – and should – be achievable before 5G.

While network-slicing can in theory extend all the way through core networks and down to the radio connection, it is still subject to the laws of physics: if there is no coverage, poor RF propagation, or limited overall capacity, there is a hard limit to what performance can be guaranteed. There are also boundaries at the device, 3rd-party server/cloud interface, or where other networks interconnect, which mean that “end-to-end control” doesn’t always mean an entire system.

It’s important not to fall into the trap of thinking that because we have a slicing “hammer” that all problems start to look like “nails”. Telcos have many other approaches to future service creation and revenue expansion, that lie outside the core network. Content partnerships, vertical-industry solutions, in-home automation and new forms of connectivity all offer opportunities. If network-slicing does not reach its aspirations, there are still plenty of other options for the industry to prosper.

Independently of the 5G debate, slicing can be considered part of a wider trend (in both fixed and wireless networks) towards a more software-centric infrastructure leading to more flexible networks. As more network resources become virtual (rather than physical), operators could readily allocate resources to a particular ‘network slice.’ Hence, slicing is arguably really about the orchestration of operator assets and how an operator is able to effectively manage its network.

This vision affirms that the ‘one size fits all’ model will not applicable for the future where a diverse set of requirements will need to addressed with more customised services: from (enhanced) mobile broadband (eMBB), to ultra-low latency types (uRLLC), to low-power machine-type communications for IoT devices (mMTC).

Taking the work done by industry organisations, such as The Next Generation Mobile Networks (NGMN) Alliance , 5G Americas and the Open Networking Foundation (ONF) into consideration, STL Partners has developed the following definition for network slicing as the basis for this paper:

‘Network slicing is a mechanism to create and dynamically manage functionally-discrete virtualised networks over a common infrastructure’

 

  • Executive Summary
  • Introduction
  • Slicing: a vision for fundamental transformation
  • Defining slicing is not about the ‘what’, it’s the ‘how’
  • How slicing could enable growth
  • New services from network slicing
  • Evidence of the demand for slicing
  • Examples of new services
  • The slicing business models
  • So, where is the money?
  • Scenarios for the telco of the future
  • The scenarios imply different business models and ways of making money…
  • How slicing might work in practice
  • Key challenges to achieving slicing
  • Early 5G trials and proofs of concept
  • The evolution to slicing
  • A tricky transition with major obstacles to address
  • Conclusion

 

  • Figure 1: Benefits of network slicing
  • Figure 2: How might (operator) assets translate into demand for slices?
  • Figure 3: ‘External’ slicing business models
  • Figure 4: 68 major telecoms groups – aggregate telecoms revenue, 2009-16
  • Figure 5: UK mobile ARPUs and data volumes, 2013-15
  • Figure 6: Forecast revenues for converged telco in advanced market
  • Figure 7: With slicing, networks can be adapted to customers and applications
  • Figure 8: Diagram of slicing
  • Figure 9: Network slicing compared with existing technologies and services
  • Figure 10: Potential benefits of network slicing for network operators
  • Figure 11: Google Chrome’s release channels – a model for network development?
  • Figure 12: How operating models could change under network slicing
  • Figure 13: How might (operator) assets translate into demand for slices?
  • Figure 14: Example 1 – Emergency Services VMNO
  • Figure 15: Example 2 – Low Power IoT Service
  • Figure 16: Example 3 – Pop-up Network
  • Figure 17: Example 4 – Global Streaming Service
  • Figure 18: Example 5 – Smart Meters
  • Figure 19: Example 6 – Renewable Energy
  • Figure 20: Example 7 – Mining
  • Figure 21: Slicing Business Models
  • Figure 22: Mapping out the scenarios
  • Figure 23: Where will revenues come from?
  • Figure 24: Traditional telco cost structure and operating model is set up to operate networks not innovate in services
  • Figure 25: Under the slicing scenarios, the cost structures shift accordingly
  • Figure 26: Challenges identified from interview programme
  • Figure 27: Phases of network transformation for slicing future

Voice & Messaging 2.0: New API Use Cases

Summary: ‘Communications-Enabled Business Processes’ (CEBP) are a key application for voice and messaging APIs. This Briefing Report illustrates three new real world examples of integrating communications into end-user business applications using web services to access telco APIs. (February 2010, Foundation 2.0, Executive Briefing Service)

Overview

‘Communications-Enabled Business Processes’ (CEBP) is an optimisation technique used by business process designers that involves integrating real time communications such as voice messaging, online chat and SMS with existing software frameworks. It is a developer / end-customer application of telco APIs in Telco 2.0 business models.

API%20Voice%20Maturity%20Feb%202010.png
The Maturity Path of Voice APIs

In general, enterprise CEBP projects do not create new business processes or areas of business. Instead, they extend existing legacy applications making them more efficient and faster, and very often with higher overall quality.  As a powerful addition, CEBP projects provide business metrics allowing managers to optimise processes in real time. From a technology perspective, CEBP is a blend between two normally disparate worlds: the real-time, arcane and difficult technology of the telephone and the thorny, legacy filled and customised enterprise software.

Three New ‘Use Cases’

This report describes three distinct CEBP implementations and opportunities:

  • an in-store feedback service
  • a decision support application
  • a resource tracking opportunity

The in-store feedback service uses phones and text messaging to collect comments and complaints from retail customers using any cell phone.  The decision support application provides mobile and remote decision makers the information they require to make critical business decisions without having to be at their desk. The resource tracking opportunity shows how phones can be used to monitor and manage the use of enterprise resources quickly, easily and at scale.

Telco 2.0 ‘Take-Out’

  • The field of ‘Communications-Enabled Business Processes’ (CEBP) represents an important near-term market opportunity for telcos building business models that develop core voice and messaging APIs.
  • Building a successful Developer Programme is critical to the successful application of CEBP because of the wide variety of enterprise customers and processes to which it is applied.
  • The three detailed ‘Use Cases’ described in this report illustrate some of the many opportunities for Telecoms Operators and others to create new value in the enterprise market by building the appropriate ecosystem of APIs, Developer Programme (technical and commercial support), and Developer Community.

Introduction

The term Communications Enabled Business Process (CEBP) is relatively new, but the need is as old as business itself. CEBP is an optimisation technique used by business process designers that involves integrating real-time communications such as voice messaging, online chat and SMS with existing software frameworks.

In general, enterprise CEBP projects do not create new business processes or areas of business. Instead, they extend existing legacy applications making them more efficient and faster, and very often with higher overall quality. In addition, CEBP techniques allow managers to measure business processes in real time, providing visibility into key business metrics that would be otherwise unavailable. From a technology perspective, CEBP is a blend between two normally disparate worlds: the real-time, arcane and difficult technology of the telephone and the thorny, legacy-filled and usually customised enterprise software.

Using CEBP techniques, system integrators and enterprise developers can realise productivity gains typically unavailable using other technology approaches, providing strong motivation for them to invest in such projects. Of course, dynamic connections between businesses and customers using phones are not new; the existing contact centre market is huge and mature.

CEBP is the next natural step in the development of this market, driven by advances in Internet and integration technologies, and can be viewed as roughly equivalent to the movement away from computer punch cards towards tape drives and hard disks: instead of requiring human beings to be present for every interaction, some business to human communications can be automated.

To read the full Executive Briefing report, covering…

  • The Evolution of Enterprise Business Processes
  • Voice: the Universal User Interface
  • CEBP 1.0 – and its Limits
  • The Rise of CEBP 2.0
  • Corn and the food-chain: a Metaphor for Voice
  • In-Store Feedback – ‘Use your Mobile Now’
  • How CEBP addresses current retail store limitations
  • Key Benefits of the service to consumers and retailers
  • Implementing the In-store Feedback Solution
  • Building the In-Store Feedback business case
  • Immediate Decision Support
  • How CEBP addresses current system limitations
  • Key Benefits to Managers and Business Analysts
  • Implementing the Service
  • Building the Business Case
  • Resource Tracking
  • Problems Solved and Business Case Drivers
  • How it Works
  • Real World Implementations
  • Telco 2.0 Conclusions & Recommendations

Members of the Telco 2.0 Executive Briefing Subscription Service can download the full Executive Briefing report here. Non-Members, please  email contact@telco2.net or call +44 (0) 207 247 5003.

Full Article: Use Cases for Telco 2.0 – making it tangible

Telco 2.0 Use Case Project – Draft Approach, Oct 2008

Background
It has been well-documented, by us and others, that telcos continue to frequently find themselves on the wrong side of rapid changes in consumer behaviour, technology evolution and regulatory reform. This cocktail of adversity demands a fundamental re-think of the role and position of the telco in the value chain, moving away from the traditional one-dimensional service model to something more suitable to the new landscape.

In the recent Telco 2.0 report, “The 2-Sided Telecoms Market Opportunity: Sizing the Platform Play, we defined the new opportunity for telcos and put forward some very detailed ideas and illustrations of how this might work in practice. We determined that the new opportunity for telcos, which we estimated at $125bn in incremental revenue terms (which builds on $250bn of potential incremental revenues from new wholesale platforms, see this report), lay in repositioning the business to serve as an enabling platform for transactions between upstream and downstream customers. We further identified four key definitional aspects to a platform created for a “two-sided” business model:

1.It is a catalyst enabling two or more parties to contract directly using the platform;
2.It does not directly participate in the contract;
3.Its value is in helping parties to contract more easily, more efficiently, and more effectively, by reducing transaction costs and friction;
4.Its value comes from scale, on at least one side of the market, which then drives usage on the other side.

Furthermore, we identified seven key areas of service capability where telcos can claim a range of strategic assets vital to constructing a value-added services platform strategy to capture the two-sided market opportunity:

1.Identity, authentication and security;
2.Advertising, marketing services, and business intelligence;
3.E-Commerce sales;
4.Order fulfilment, offline;
5.Order fulfilment, online;
6.Billing and payments;
7.Care and support

In each of these areas, telcos possess assets, in many cases traditionally underused, which are uniquely placed to develop a successful platform business. These include trusted authentication mechanisms, customer and billing relationships (both consumer and enterprise), customer data and meta-data, voice and messaging APIs, and experience in quality of service delivery.

Use Case Project plan

The use-case project (which will culminate in a major report in November) will isolate real-world examples from each area of service capability wherein the telco can fill (or, indeed is already filling) a void in a transaction space to reduce friction, in the process forming the final piece of a platform business which can be replicated in other industry verticals. On our current report roadmap, sample use cases would include the following:

1.) Identity, authentication and security – Despite evidence of growing consumer reliance upon online transaction spaces, telco upstream customers in the commerce arena continue to encounter challenges in identifying/authenticating customers and preventing fraud.

Online gambling site Betfair, for example, is constrained by a legal requirement to confirm the nationality and age of players, with a high cost of compliance ($22 per registered user) and unacceptably lengthy process. Telcos possess customer meta-data which may form the basis of an authentication mechanism to reduce these costs and remove friction from transactions.

Mobile operators already perform some interventions to prevent minors from accessing adult content on their handset, and so probably already have many of the relevant assets and process in place. Such a platform could be repurposed for other industry verticals, and also potentially be developed into a subscription service for end users.

2.) Advertising, marketing services, and business intelligence – Advertisers continue to struggle with shifts in media consumption and consumer behaviour which demand a new approach to targeting and performance metrics. Marketers want to target users with the right offers and measure the success of their marketing campaigns as this allows them to demonstrate marketing ROI.

Whether it be online advertising or via traditional video/IPTV platforms, telcos have valuable customer relationships and meta-data which can be harnessed to more effectively target and measure, opening up new markets in the process.

3.) E-Commerce sales – Innovative content and applications developers often find it difficult, if not impossible, to penetrate the walls of telco HQs, and telcos are not typically structured to deal smoothly with small suppliers or partners.

A number of operators have wished to enrich the suite of services and applications available across its properties, without committing to their own expensive development programme. Instead, one or two leading players are creating a developer environment, exposing APIs to allow third parties to showcase services and applications on its network. If these are successful, they can then be commercialized across the operators’ entire footprint on commercial terms agreed with the developer.

4.) Order fulfilment, offline/customer care – Real-world order fulfilment, customer care, and credit management are fraught with complexity and unnecessary costs, which telcos have the tools to mitigate. A major catalogue company has been looking to streamline its customer interaction routine to make deliveries and credit collection transactions more efficient. It has employed a solution sourced from a specialist software company, and realized efficiency gains, as well as lower debt insurance costs as an added benefit.

Telcos have extensive corporate customer bases on managed service offerings often tied to internal network and data management. By more closely aligning the offering to specific business processes, in partnership with innovative players in the space, telcos have the ingredients to create and market a platform which could be deployed widely across multiple industry verticals, in some cases generating incremental sales from existing customers.

5a.) Order fulfilment, online/content delivery assurance – Investment banks face significant challenges in managing data effectively on their trading systems in an era of extremely high volume electronic trading, wherein even tiny amounts of latency/congestion can invalidate large volumes of transactions.

The systems integration arm of a large telco was awarded the managed service contract for an international bank, but has needed to partner with small, early stage company to find a solution. As the solution is proven, the telco will end up with a managed services platform which can be marketed across the industry, with a trusted reference client for validation.

5b.) Order fulfilment, online/content delivery assurance – Terrestrial broadcasters in Japan are faced with competitive pressures from P2P and over-the-top video applications, while currently being barred by regulation from offering linear programming over the web. As a result, they have been relatively slower than some of their overseas peers to develop an internet presence.

In cooperation with consumer electronics players, they have now taken their first step forward, in anticipation of a change in regulation, by forming a consortium to bring time-shifted, on-demand content to networked televisions using Japan’s enviable broadband access infrastructure for distribution.

For local access providers, the associated network load may be an increasing source of pain, but an affiliate of a major local telco, which manages the CDN behind the consortium, is a leader in P2P research, and is potentially capable of deploying a network cache element on the platform.

In so positioning itself, the telco affiliate might be in a position to generate revenue both from upstream (broadcasters) and downstream (local access companies) customers, as well as facilitating a localized advertising platform in which all could take a revenue share.

6.) Billing and payments – Social networking sites and virtual worlds face numerous challenges in billing and payments, particularly when their target demographic group may not yet be part of the conventional banking system.

On fast growing social network, focused on a particular demographic, derives significant revenues through the sale of virtual goods, with payment typically tendered via SMS. However, telcos have customer and billing relationships beyond the mobile arena which may also be harnessed to create alternative payment mechanisms, rather than leaking such opportunities to the likes of Wallie or Paysafecard.