Tag: VR

Making the metaverse useful

The metaverse: A double edged sword

For the telecoms industry, the metaverse is something of a double-edged sword. If it were to take off in the way its proponents advocate, the metaverse could generate far more traffic than today’s telecoms networks could cope with. It would also require very low latency connectivity that could require telcos to make major investments in edge computing capacity. Yet, if the metaverse proves to be a mirage – as many critics now claim – telcos could find themselves with a lot of excess capacity.

If people rarely use 3D environments, then it is hard to justify residential connections with a throughput of more than 100Mbps – a single 4K video stream only needs 25Mbps. Although a family of four could conceivably be watching four 4K streams at once, in most scenarios, an average throughput of 50Mbps will likely be sufficient.

Yet in many developed markets, such as France, average download and upload speeds on fixed-line networks are now well over 100Mbps. The global averages are lower – 42Mbps downlinks (10Mbps uplinks) for mobile networks and 79Mbps (35Mbps uplink) for fixed networks, according to Speedtest. But even these global averages are more than enough to streamline 2D content.

Median throughput speeds in developed markets

Source: Speedtest

In simple terms, most fixed-line networks in developed markets are now too good for 2D, but not good enough to live stream 3D/virtual reality (VR). If the online environment remains predominantly 2D (Netflix and Zoom calls in 4K, for example), fibre-to-the-home (FTTH) connections will be overkill. If the online environment goes predominantly 3D (with much of it live streamed), then FTTH will be crucial, supplemented by edge compute, 5G mid-band/mmWave and Wi-Fi 6 and Wi-Fi 7, particularly in the business market where the metaverse could be used for important applications, such as collaborative design and training staff.

When the concept of a metaverse rose to prominence 2021, the telecoms industry was understandably energised – here was a major new driver of demand. Since then the mood has changed. There is growing cynicism as commentators highlight the formidable technical challenges involved in creating compelling 3D experiences. They rightly note that most people will not want to spend a great deal of time immersed in a clunky virtual world in which the graphics are either low resolution or fail to respond quickly enough to eye and head movements.

With interest rates rising and investors getting more cautious, some major players in the technology, media, and telecom (TMT) sector have cooled on the metaverse concept – Disney disbanded its metaverse division in March 2023, not long after Microsoft (reportedly) closed down its industrial metaverse unit. Meanwhile, both investors and the media are getting very excited about the potential of generative AI – artificial intelligence systems, such as ChatGPT, that can quickly produce content and code, potentially boosting productivity.

In the broader TMT community, the consensus seems to be that the metaverse is going to be a big part of the future but is not a near-term priority. In a late October 2022 survey of 767 TMT executives by KPMG International, six out of ten respondents said the metaverse will have a “huge impact” on consumers and businesses. At the same time, the majority said their companies are investing less than 5% of the total technology budget on the metaverse.

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Generative AI: Friend or foe?

With generative artificial intelligence (AI) in the spotlight, many tech companies are positioning themselves to benefit from the interest and hype around that technology. Some commentators believe the rise of generative AI will draw resources away from the metaverse. But that is a rather narrow perspective – they are actually complementary concepts. The metaverse is essentially an application, while generative AI (like connectivity) is a foundational technology that will be used for many, many purposes, such as writing the code that will help build virtual worlds and ultimately a broader metaverse.

In fact, the rise of generative AI will surely make the construction of a metaverse more cost-effective. Moreover, much of the negative commentary misses the fact that many mini-metaverses are being widely used today. The success of Fortnite, Roblox, Zwift and other multiplayer online games and fitness platforms demonstrate that people like interacting with (and competing with) each other in a 3D environment. Although these environments are currently self-contained and will continue to be for some time to come, they may become interoperable in the future, just as organisational networks gradually connected to the internet. For the digital economy, the metaverse is the logical end point for a journey that the tech and telecoms industry started more than a decade ago with the advent of digital twins.

Still, some of the scepticism is justified. Clunky and expensive technology means metaverse-hosted events are unlikely to be a satisfactory substitute for attending a concert, sports fixture or play in person during this decade. There will need to be major advances in VR technology before most people will want to spend more than a few minutes wearing a fully enclosed headset.

But that does not mean the metaverse is not going to have a major impact in the medium-term. From planning and design to education and training, there are many practical and valuable applications for 3D virtual environments, which can be visited and manipulated without the expense and risks that would be associated with real in-person visits. Crucially, these applications do not necessarily require the user to spend a lot of time (or even any time) wearing an enclosed headset. In fact, most practical use cases do not need to be immersive – users could just navigate a 3D environment on the screen of their laptop or TV (similar to the way in which people play Fortnite or Minecraft).

Fortnite shows that metaverses do not necessarily need VR

Source: Fortnite

By enabling people to “travel” cost-effectively through time and space, virtual environments can help boost productivity and efficiency. While a VR meeting may offer little beyond a Zoom call, 3D simulations that enable users to view and manage the real world in real-time clearly have value – digital twins are gaining traction and becoming increasingly sophisticated, as explained in the STL Partners report: Digital twins: A catalyst of disruption in the Coordination Age.

The combination of 360-degree 8K cameras, 5G or Wi-Fi 6 connectivity and real-time stitching software has made it feasible to transmit live footage of a real-world environment from multiple viewpoints to a remote location. These cameras are small enough to be mounted in a wide variety of locations and viewpoints (see figure below) and can easily be moved around by robots and drones.

Furthermore, the cost of this equipment is falling. High-definition 360-degree cameras equipped with Wi-Fi can cost as little as US$100. Models with a built-in cellular connection and good optics will cost more. For example, the weather-proof Farmstream 360-degree camera, which is equipped with 4G and a 30x optical zoom, costs £350 in the UK (that is £50 more than the Wi-Fi version of the same camera). Designed for use on farms, the online retailer advises buyers that they will typically spend £6 per month on data and potentially upwards of £10 per month in very busy periods (for example during lambing or calving). For telcos, that represents incremental revenue.

8K 360-degree cameras are small enough to be widely used

Source: Insta360 website

Table of Contents

  • Executive Summary
  • Table of Contents
  • Table of Figures
  • Introduction
    • The metaverse: A double edged sword
    • Generative AI: Friend or foe?
    • The advantages of interoperability
  • Practical consumer applications
    • The role of telcos
    • Virtual reality: To be deployed judiciously
  • Use cases for live virtual environments
    • Training for activities and tasks
    • Education
    • Designing/managing a building
    • Speciality shopping
    • Virtual tourism
    • Live events
  • The movers and shakers
    • Meta’s strategic pivot towards mixed reality
    • Roblox: User-generated 3D
    • Microsoft prepares for a new computing platform
    • Nvidia: Riding the automotive transition
    • Apple intervenes
    • Google: Making maps more immersive
    • Siemens: Manufacturing in the metaverse
  • China seeks to build on the IoT
  • Conclusions

Related research

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MWC 2023: You are now in a new industry

The birth of a new sector: “Connected Technologies”

Mobile World Congress (MWC) is the world’s biggest showcase for the mobile telecoms industry. MWC 2023 marked the second year back to full scale after COVID disruptions. With 88k visitors, 2,400 exhibitors and 1,000 speakers it did not quite reach pre-COVID heights, but remained an enormous scale event. Notably, 56% of visitors came from industries adjacent to the core mobile ecosystem, reflecting STL’s view that we are now in a new industry with a diverse range of players delivering connected technologies.

With such scale It can be difficult to find the significant messages through the noise. STL’s research team attended the event in full force, and we each focused on a specific topic. In this report we distil what we saw at MWC 2023 and what we think it means for telecoms operators, technology companies and new players entering the industry.

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STL Partners research team at MWC 2023

STL-Partners-MWC23-research-team

The diversity of companies attending and of applications demonstrated at MWC23 illustrated that the business being conducted is no longer the delivery of mobile communications. It is addressing a broader goal that we’ve described as the Coordination Age. This is the use of connected technologies to help a wide range of customers make better use of their resources.

The centrality of the GSMA Open Gateway announcement in discussions was one harbinger of the new model. The point of the APIs is to enable other players to access and use telecoms resources more automatically and rapidly, rather than through lengthy and complex bespoke processes. It starts to open many new business model opportunities across the economy. To steal the words of John Antanaitis, VP Global Portfolio Marketing at Vonage, APIs are “a small key to a big door”.

Other examples from MWC 2023 underlining the transition of “telecommunications” to a sector with new boundaries and new functions include:

  • The centrality of ecosystems and partnerships, which fundamentally serve to connect different parts of the technology value chain.
  • The importance of sustainability to the industry’s agenda. This is about careful and efficient use of resources within the industry and enabling customers to connect their own technologies to optimise energy consumption and their uses of other scarce resources such as land, water and carbon.
  • An increasing interest and experimentation with the metaverse, which uses connected technologies (AR/VR, high speed data, sometimes edge resources) to deliver a newly visceral experience to its users, in turn delivering other benefits, such as more engaging entertainment (better use of leisure time and attention), and more compelling training experiences (e.g. delivering more realistic and lifelike emergency training scenarios).
  • A primary purpose of telco cloud is to break out the functions and technologies within the operators and network domains. It makes individual processes, assets and functions programmable – again, linking them with signals from other parts of the ecosystem – whether an external customer or partner or internal users.
  • The growing dialogues around edge computing and private networks –evolving ways for enterprise customers to take control of all or part of their connected technologies.
  • The importance of AI and automation, both within operators and across the market. The nature of automation is to connect one technology or data source to another. An action in one place is triggered by a signal from another.

Many of these connecting technologies are still relatively nascent and incomplete at this stage. They do not yet deliver the experiences or economics that will ultimately make them successful. However, what they collectively reveal is that the underlying drive to connect technologies to make better use of resources is like a form of economic gravity. In the same way that water will always run downhill, so will the market evolve towards optimising the use of resources through connecting technologies.

Table of contents

  • Executive Summary
    • The birth of a new sector: ‘Connected technologies’
    • Old gripes remain
    • So what if you are in a new industry?
    • You might like it
    • How to go from telco to connected techco
    • Next steps
  • Introduction
  • Strategy: Does the industry know where it’s going?
    • Where will the money come from?
    • Telcos still demanding their “fair share”, but what’s fair, or constructive?
    • Hope for the future
  • Transformation leadership: Ecosystem practices
    • Current drivers for ecosystem thinking
    • Barriers to wider and less linear ecosystem practices
    • Conclusion
  • Energy crisis sparks efficiency drive
    • Innovation is happening around energy
    • Orange looks to change consumer behaviour
    • Moves on measuring enablement effects
    • Key takeaways
  • Telco Cloud: Open RAN is important
    • Brownfield open RAN deployments at scale in 2024-25
    • Acceleration is key for vRAN workloads on COTS hardware
    • Energy efficiency is a key use case of open RAN and vRAN
    • Other business
    • Conclusion
  • Consumer: Where are telcos currently focused?
    • Staying relevant: Metaverse returns
    • Consumer revenue opportunities: Commerce and finance
    • Customer engagement: Utilising AI
  • Enterprise: Are telcos really ready for new business models?
    • Metaverse for enterprise: Pure hype?
    • Network APIs: The tech is progressing
    • …But commercial value is still unclear
    • Final takeaways:
  • Private networks: Coming over the hype curve
    • A fragmented but dynamic ecosystem
    • A push for mid-market adoption
    • Finding the right sector and the right business case
  • Edge computing: Entering the next phase
    • Telcos are looking for ways to monetise edge
    • Edge computing and private networks – a winning combination?
    • Network APIs take centre stage
    • Final thoughts
  • AI and automation: Opening up access to operational data
    • Gathering up of end-to-end data across multiple-domains
    • Support for network automations
    • Data for external use
    • Key takeaways

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The three telco Metaverse strategies

The Metaverse offers opportunities beyond connectivity for telcos

The Metaverse is the increasingly accepted term for a set of interconnected virtual worlds. One way to think about the Metaverse is to see it as a 3D version of the world wide web in which organizations operate their own virtual 3D worlds, rather than 2D web sites. Represented by avatars, visitors to a virtual world can interact with other users or with avatars controlled by artificial intelligence. The term Metaverse entered the popular consciousness when Facebook renamed itself Meta in October 2021.

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The renaming of Facebook sparked a surge of interest in the Metaverse

Source: Google Trends

Whereas the existing Internet is essentially a 2D digital overlay of the world, composed of text, voice, images and video, the Metaverse will provide a 3D digital overlay. This is the way Nvidia’s CEO Jensen Huang, portrayed the Metaverse in a speech in November 2021. As a leading provider of graphics chips, Nvidia is thinking deeply about how to build a business case for the Metaverse, which could drive rapid growth in demand for its products.

For a fully immersive experience, the Metaverse will need to be accessed through virtual reality (VR) headsets, but it could also be explored by moving through 3D environments using a conventional handset, laptop or television. Indeed, it is important to stress that the fortunes of the Metaverse won’t necessarily depend on the fortunes of VR. Hundreds of millions of people already play video games in 3D, interacting with each other, without wearing headsets.

The Metaverse looks set to host both entirely fictional virtual spaces where people can socialise, play and enjoy entertainment, as well as simulations of the real world, where people can test new product designs, learn new skills or watch concerts and sports events they can’t attend in person.

The first part of this report considers how the Metaverse could create value and the obstacles that lie in its way. It also outlines the strategies of Improbable, Meta (formerly Facebook), Microsoft and Nvidia – four companies developing many of the key enabling technologies.

The second part explores the Metaverse strategies of telcos. Broadband networks and related telco services are fundamental to the smooth running of digital environments today, and will be the building blocks of the Metaverse. We believe that telcos could play a coordination role that will help prevent the Metaverse from fragmenting into silos that are unable to interoperate with each other.

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 Metaverse, telcos can help people and businesses to interact and transact with each other safely and securely in 3D environments.

As it considers the opportunities for telcos, this report draws on the experiences and actions of SKT, Telefónica and Verizon, which are each deploying strategies to help coordinate the development of the Metaverse.

Table of Contents

  • Executive Summary
  • Introduction
  • What is the Metaverse for?
    • The lure of the virtual road
    • Corporate worlds take over from web sites
    • Dominance or democracy?
    • The non-fungible flexibility paradox
    • Facebook pursues metamorphosis
    • Microsoft has most of the pieces
  • What will the Metaverse mean for telcos?
    • Recreating the real world is challenging
    • Traffic implications for telcos
    • Opportunities for telcos
    • SK Telecom – the full stack standard bearer
    • Telefónica looks to play coordination role
    • AT&T and Verizon – connectivity plus edge
  • Conclusions
  • Index

Related Research

 

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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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SK Telecom: Lessons in 5G, AI, and adjacent market growth

SK Telecom’s strategy

SK Telecom is the largest mobile operator in South Korea with a 42% share of the mobile market and is also a major fixed broadband operator. It’s growth strategy is focused on 5G, AI and a small number of related business areas where it sees the potential for revenue to replace that lost from its core mobile business.

By developing applications based on 5G and AI it hopes to create additional revenue streams both for its mobile business and for new areas, as it has done in smart home and is starting to do for a variety of smart business applications. In 5G it is placing an emphasis on indoor coverage and edge computing as basis for vertical industry applications. Its AI business is centred around NUGU, a smart speaker and a platform for business applications.

Its other main areas of business focus are media, security, ecommerce and mobility, but it is also active in other fields including healthcare and gaming.

The company takes an active role internationally in standards organisations and commercially, both in its own right and through many partnerships with other industry players.

It is a subsidiary of SK Group, one of the largest chaebols in Korea, which has interests in energy and oil. Chaebols are large family-controlled conglomerates which display a high level and concentration of management power and control. The ownership structures of chaebols are often complex owing to the many crossholdings between companies owned by chaebols and by family members. SK Telecom uses its connections within SK Group to set up ‘friendly user’ trials of new services, such as edge and AI

While the largest part of the business remains in mobile telecoms, SK Telecom also owns a number of subsidiaries, mostly active in its main business areas, for example:

  • SK Broadband which provides fixed broadband (ADSL and wireless), IPTV and mobile OTT services
  • ADT Caps, a securitybusiness
  • IDQ, which specialises in quantum cryptography (security)
  • 11st, an open market platform for ecommerce
  • SK Hynixwhich manufactures memory semiconductors

Few of the subsidiaries are owned outright by SKT; it believes the presence of other shareholders can provide a useful source of further investment and, in some cases, expertise.

SKT was originally the mobile arm of KT, the national operator. It was privatised soon after establishing a cellular mobile network and subsequently acquired by SK Group, a major chaebol with interests in energy and oil, which now has a 27% shareholding. The government pension service owns a 11% share in SKT, Citibank 10%, and 9% is held by SKT itself. The chairman of SK Group has a personal holding in SK Telecom.

Following this introduction, the report comprises three main sections:

  • SK Telecom’s business strategy: range of activities, services, promotions, alliances, joint ventures, investments, which covers:
    • Mobile 5G, Edge and vertical industry applications, 6G
    • AIand applications, including NUGU and Smart Homes
    • New strategic business areas, comprising Media, Security, eCommerce, and other areas such as mobility
  • Business performance
  • Industrial and national context.

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Overview of SKT’s activities

Network coverage

SK Telecom has been one of the earliest and most active telcos to deploy a 5G network. It initially created 70 5G clusters in key commercial districts and densely populated areas to ensure a level of coverage suitable for augmented reality (AR) and virtual reality (VR) and plans to increase the number to 240 in 2020. It has paid particular attention to mobile (or multi-access) edge computing (MEC) applications for different vertical industry sectors and plans to build 5G MEC centres in 12 different locations across Korea. For its nationwide 5G Edge cloud service it is working with AWS and Microsoft.

In recognition of the constraints imposed by the spectrum used by 5G, it is also working on ensuring good indoor 5G coverage in some 2,000 buildings, including airports, department stores and large shopping malls as well as small-to-medium-sized buildings using distributed antenna systems (DAS) or its in-house developed indoor 5G repeaters. It also is working with Deutsche Telekom on trials of the repeaters in Germany. In addition, it has already initiated activities in 6G, an indication of the seriousness with which it is addressing the mobile market.

NUGU, the AI platform

It launched its own AI driven smart speaker, NUGU in 2016/7, which SKT is using to support consumer applications such as Smart Home and IPTV. There are now eight versions of NUGU for consumers and it also serves as a platform for other applications. More recently it has developed several NUGU/AI applications for businesses and civil authorities in conjunction with 5G deployments. It also has an AI based network management system named Tango.

Although NUGU initially performed well in the market, it seems likely that the subsequent launch of smart speakers by major global players such as Amazon and Google has had a strong negative impact on the product’s recent growth. The absence of published data supports this view, since the company often only reports good news, unless required by law. SK Telecom has responded by developing variants of NUGU for children and other specialist markets and making use of the NUGU AI platform for a variety of smart applications. In the absence of published information, it is not possible to form a view on the success of the NUGU variants, although the intent appears to be to attract young users and build on their brand loyalty.

It has offered smart home products and services since 2015/6. Its smart home portfolio has continually developed in conjunction with an increasing range of partners and is widely recognised as one of the two most comprehensive offerings globally. The other being Deutsche Telekom’s Qivicon. The service appears to be most successful in penetrating the new build market through the property developers.

NUGU is also an AI platform, which is used to support business applications. SK Telecom has also supported the SK Group by providing new AI/5G solutions and opening APIs to other subsidiaries including SK Hynix. Within the SK Group, SK Planet, a subsidiary of SK Telecom, is active in internet platform development and offers development of applications based on NUGU as a service.

Smart solutions for enterprises

SKT continues to experiment with and trial new applications which build on its 5G and AI applications for individuals (B2C), businesses and the public sector. During 2019 it established B2B applications, making use of 5G, on-prem edge computing, and AI, including:

  • Smart factory(real time process control and quality control)
  • Smart distribution and robot control
  • Smart office (security/access control, virtual docking, AR/VRconferencing)
  • Smart hospital (NUGUfor voice command for patients, AR-based indoor navigation, facial recognition technology for medical workers to improve security, and investigating possible use of quantum cryptography in hospital network)
  • Smart cities; e.g. an intelligent transportation system in Seoul, with links to vehicles via 5Gor SK Telecom’s T-Map navigation service for non-5G users.

It is too early to judge whether these B2B smart applications are a success, and we will continue to monitor progress.

Acquisition strategy

SK Telecom has been growing these new business areas over the past few years, both organically and by acquisition. Its entry into the security business has been entirely by acquisition, where it has bought new revenue to compensate for that lost in the core mobile business. It is too early to assess what the ongoing impact and success of these businesses will be as part of SK Telecom.

Acquisitions in general have a mixed record of success. SK Telecom’s usual approach of acquiring a controlling interest and investing in its acquisitions, but keeping them as separate businesses, is one which often, together with the right management approach from the parent, causes the least disruption to the acquired business and therefore increases the likelihood of longer-term success. It also allows for investment from other sources, reducing the cost and risk to SK Telecom as the acquiring company. Yet as a counterpoint to this, M&A in this style doesn’t help change practices in the rest of the business.

However, it has also shown willingness to change its position as and when appropriate, either by sale, or by a change in investment strategy. For example, through its subsidiary SK Planet, it acquired Shopkick, a shopping loyalty rewards business in 2014, but sold it in 2019, for the price it paid for it. It took a different approach to its activity in quantum technologies, originally set up in-house in 2011, which it rolled into IDQ following its acquisition in 2018.

SKT has also recently entered into partnerships and agreements concerning the following areas of business:

 

Table of Contents

  • Executive Summary
  • Introduction and overview
    • Overview of SKT’s activities
  • Business strategy and structure
    • Strategy and lessons
    • 5G deployment
    • Vertical industry applications
    • AI
    • SK Telecom ‘New Business’ and other areas
  • Business performance
    • Financial results
    • Competitive environment
  • Industry and national context
    • International context

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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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What edge developers want from telcos now

There is a clear opportunity for telcos to support edge application developers

STL Partners has been writing about edge computing since 2015. We’ve published reports including Edge computing: Five viable telco business models and Telco edge computing: Turning vision into practice. Although this is relatively nascent in the telecoms industry, the domain is maturing rapidly. Discussions are now centring around the “how” and the “when” rather than the “if” and the “why”.

In order to drive these conversations forward, telcos need to listen and learn from developers who will, eventually, be making use of their edge computing capabilities. There are developers who are deeply engaged with the issue of edge computing, seeing it as a game-changing capability for their own solution. But, they also have strong messages they want the telecommunications industry to hear. They have their own requirements and expectations for how edge computing should work. They want clarity around what capabilities it will have, how their application will work on the edge and how they will be charged for its usage. This paper looks to give several application developers at the forefront of edge computing development a platform to address the telecoms industry.

For our interview programme we have focused on four key industries:

  • AR/VR applications
  • Drones
  • Location based services
  • Video and application optimisation

The focus for this paper is on application developers who primarily serve enterprise markets. However, there is real opportunity and applicability for applications running at the edge in the consumer market as well. In particular, some of the AR/VR applications discussed are currently industry focused but could and will eventually be used by consumers as well.

Our hope with this paper is that it will stimulate discussions within the edge computing community as a whole, including all key stakeholders. We also pull out the key practical implications for telcos in terms of business models, the technology they should look to be developing and the partnerships they may wish to establish.

 

The promise of industry 4.0 is being discussed broadly, and has been for several years. Much of the promise of increased productivity and reduced waste comes from the automation of processes that have typically required routine, often physical, human intervention. STL Partners has evaluated some of these use cases at length, as well as forecasting the value they can bring to the industry, in an upcoming report focused on the manufacturing industry.

However, there is also much promise in applications that, rather than replacing humans, look to increase their safety, efficiency and productivity. And this kind of use case can span outside of manufacturing, into industries such as mining, utilities, construction, architecture and beyond. One of these use cases is using AR/VR/MR (mixed reality) technology to overlay information for workers. This can span from simpler applications such as improving people management through applications that provide information on the order of tasks that should be performed to more complex applications like using augmented reality to visualise 3D CAD models. Benefits of these kinds of solutions include:

  1. Increased productivity of workers. For example, instead of needing to refer to manuals or instructions before returning to the task at hand, instructions can be overlaid on smart glasses so they can be referred to as the task is being completed.
  2. Increase productivity of experts. VR/AR applications can essentially upskill cheaper labour either through the additional information they can receive through the application or through the ability to more closely collaborate with experts who are not physically in the same place as them.
  3. Tasks performed with more accuracy. If workers can be upskilled through the use of overlaid information, then they are less likely to need to redo tasks because mistakes have been made.
  4. Better health, safety and compliance. Overlays on the smart glasses can warn workers of hazards and enable them to more safely handle challenging situations. Where video is stored, compliance to health and safety standards can be proven.

UAV/drones: Struggling to scale

Forecasts for the drone market have been optimistic in predicting take-up of the technology across different industries. There are proven cases of how drones can deliver benefits across different sectors, for example:

  • Delivering packages, such as Amazon’s Prime Air
  • Monitoring critical infrastructure, such as bridges and utility lines
  • Surveying land and the condition of crop in agricultural settings

Outside of delivery, most drone use cases centre on the ability to capture data that has historically been costly, time consuming or dangerous to do so and make sense of it by creating meaningful maps or interpret the data to identify anomalies. For example, France-based start-up Donecle is enabling automated aircraft inspections through drones to improve efficiencies and reduce the time planes spend in the hangar. Software companies such as Pix4D, DroneDeploy and Bentley are the market leaders for providing photogrammetry tools to translate imagery from drones into practical models.

However, adoption is slower than expected. This is partly due to the nascency of the technology; most drones are limited to 30 minutes of flight time, which restricts the amount of data that can be collected in a single session. Regulation for commercial use is inhibiting use, by putting constraints on how large the drone is, when it can fly and how high, as well as mandating the need for pilot qualifications to fly drones.

Ultimately, the challenge is that, until there is a way to continuously collect data and monitor assets/infrastructure, industries and governments will not be able to access the true benefit of using drones. To make a real economic difference, drones must enable a significant volume of data that is not currently accessible. The current model relies on an individual to manually programme the drone to fly and collect the data, then connect it to a PC, to transfer the data and finally upload it to the photogrammetry software to extract insights. Atrius, a start-up we interviewed who is developing data centre units to enable autonomous drones, likened this to using a bucket to collect oil from an oil field and driving back to the refinery to process it into fuel rather than using a pipeline. Instead of using manual processes, data collection and transformation from drones needs to be autonomous – from the drone knowing when to set off and where to go, to interpreting the data and distributing it to the relevant recipients and systems.

Video and application optimisation

The way in which content, video and applications are optimised to improve performance, scalability and security has evolved. This is due to a number of reasons:

  • Application and web page content is increasingly personalised and dynamic – caching static content at the edge is not sufficient.
  • Real-time video streaming is growing in entertainment, as well as enterprise/government applications (e.g. police body cameras) – performance here cannot be improved by moving the content closer to the end-viewer, video has to be optimised as it is captured.
  • Content is being enriched with augmented reality – for example overlaying live statistics on players when streaming a basketball game.

This is driving a need for edge computing and the ability to run workloads closer to the end user, rather than simply cache content or applications in a CDN. Two of our case studies come from this domain, although have very different propositions: the start-up Section provides a platform deploying workloads for developers at the edge and Smart Mobile Labs’ solutions optimise real-time video streaming.

Location-based services

Location-based services leverage information about a user’s location in order to provide targeted information, advertising or offers. Radius Networks provides these types of solutions for the retail and fast food industry. Specifically, they enable solutions such as:

  • Table service. Often used in fast food restaurants, when a customer has ordered they are given a beacon and can go and sit at a table. Staff are able to track the customer and bring their food to them when it has been prepared.
  • Curbside pickup of groceries. When a customer orders groceries in advance and drives to the store to pick it up, their location can be tracked in order for staff to be ready to hand them their order as soon as they arrive in the carpark. This ensures minimum wait time while also minimising the amount of time food is taken out of optimal storage conditions such as a fridge or a freezer.
  • Asset tracking. Assets such as products or machinery can be tracked throughout a store. This can ensure expensive stock or items are not lost and can help with logistical difficulties such as locating a specific package or item in a large warehouse.

There are current technical limitations that come with location-based services, but Radius Networks believes that edge computing can help solve them.

This report looks at the four use case categories in depth, including the types of services application developers are offering, why they need edge computing, and the opportunity for telecoms operators.

Table of contents

  • Executive Summary
  • Introduction
  • AR/VR for industry
    • Application introduction (AR/VR for industry)
    • 1000 Realities: Edge computing for remote AR assistance
    • Light: edge for heavy duty computing with CAD models
    • Arvizio: edge for dynamic collaboration between remote parties
    • Challenges and implications for telcos
  • UAV/drones
    • Commercial drones are struggling to achieve wide scale adoption
    • Enter edge computing: enabling autonomous drones
    • Atrius’ experience: edge is necessary, and the network is key
    • Challenges and implications for operators
  • Video and application optimisation
    • The changing nature of video and application optimisation
    • Benefits of the telecom edge
    • Edge use cases in video / application optimisation
    • Challenges and implications for operators
  • Location-based services
    • There are current technical limitations that come with location-based services – and edge can help solve them
    • Edge computing and location-based services: how it works
    • Challenges and implications for operators
  • Monetisation opportunities for telcos
  • Conclusions: practical next steps for operators

AR/VR: Won’t move the 5G needle

Introduction

This report explores the potential impact of virtual reality (VR) and augmented reality (AR) on the lives of consumers. It considers how quickly these technologies will go mass market and the implications for telcos, including those with their own entertainment proposition and those operators whose networks act as a conduit for other companies’ content.

Widespread use of VR and/or AR could fuel another major step-change in the traffic travelling over telecoms networks. All VR apps and many AR apps will require vast amounts of data to be processed to render the necessary digital images. In short, telecoms operators could and should benefit from mass-market adoption of VR and AR.

In the consumer market – the primary focus of the research stream for which this report was written – the promise of VR and AR is that they will transform digital entertainment and communications. In the 2015 report Amazon, Apple, Facebook, Google, Netflix: Whose Digital Content is King?, STL Partners identified the rise of increasingly immersive games and interactive videos enabled by VR and/or AR as one of the six key trends that could disrupt the entertainment industry.

If it lives up to its hype, VR could blur the line between live entertainment and the living room. The ultimate promise of VR is that people will be able to enjoy a movie or sports event from the inside, choosing from multiple viewpoints within a 360-degree video stream, potentially placing themselves in the midst of the action. For example, a consumer could use VR to “sit” next to the conductor at a classical music concert or alongside a manager at a football match, and hear every word he or she utters. They may even be able to experience a sports event from the perspective of an athlete by streaming live footage from mini-cameras mounted on helmets or other attire. Although still very expensive, VR production technology is already being used to create immersive games and interactive movies, as well as interactive documentaries and educational programmes.

Developing in parallel with VR, AR calls for digital graphics to be superimposed on live images of the real world. This can be used to create innovative new games, such as the 2016 phenomenon 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.

This report draws the following distinction between VR and AR

  • Virtual reality: use of an enclosed headset for total immersion in a digital 3D world.
  • Augmented reality: superimposition of digital graphics into the real world via a camera viewfinder, a pair of glasses or onto a screen fixed in the real world.

Note, an advanced form of AR is sometimes referred to as mixed reality. 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.

The net effect is that both live and living room entertainment could become much more personalised and interactive, particularly as bandwidth, latency, graphics processing and rendering technology all improve.

In time, mixed-reality services are likely to become almost universally 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. Engineers, for example, will use the technology to identify individual parts and detect faults, while consumers will rely on AR to retrieve information about whatever they are looking at, whether that be the route of an approaching bus, the menu of a nearby restaurant or the fat and salt content of a ready meal.

Contents:

  • Executive Summary
  • Takeaways for telcos
  • Introduction 
  • Progress and immediate prospects
  • VR: Virtually there?
  • Augmented reality springs back to life
  • 4K HD: Simple, but effective
  • Technical requirements
  • Image processing
  • Sensors and cameras
  • Artificial intelligence
  • Developer tools
  • Bandwidth and latency
  • Costs: Energy, weight and financial
  • Timeline for VR
  • Timeline for AR
  • 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?
  • Timelines and Forecasts
  • Conclusions for telcos
  • Opportunities for telcos

Figures:

  • Figure 1: Fantasy roleplaying title Skyrim VR has won praise from gaming critics
  • Figure 2: The definition of six degrees of freedom for VR
  • Figure 3: On paper, the Oculus Go looks impressive
  • Figure 4: Users of Ikea’s catalogue can see what furniture will look like in their room
  • Figure 5: A 3D holographic image of a sports event can appear in a living room
  • Figure 6: Google Lens can retrieve information about a shop or building you are looking at
  • Figure 7: How 3D sensors can map a room or an outdoor area in real time
  • Figure 8: Edge computing and telco cloud can get latency low enough for VR apps
  • Figure 9: The likely timeline for immersive VR with a wireless headset
  • Figure 10: The bulky Magic Leap One will be wired to a belt-mounted computer
  • Figure 11: Smart Sunglasses need to be chunky to fit in all the necessary tech
  • Figure 12: The timeline for live 3D holographic projections using wireless AR headsets
  • Figure 13: How AR and VR will develop over the next five years

Edge computing: Five viable telco business models

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This report has been produced independently by STL Partners, in co-operation with Hewlett Packard Enterprise and Intel.

Introduction

The idea behind Multi-Access Edge Computing (MEC) is to make compute and storage capabilities available to customers at the edge of communications networks. This will mean that workloads and applications are closer to customers, potentially enhancing experiences and enabling new services and offers. As we have discussed in our recent report, there is much excitement within telcos around this concept:

  • MEC promises to enable a plethora of vertical and horizontal use cases (e.g. leveraging lowlatency) implying significant commercial opportunities. This is critical as the whole industry is trying to uncover new sources of revenue, ideally where operators may be able to build a sustainable advantage.
  • MEC should also theoretically fit with telcos’ 5G and SDN/NFV deployments, which will run certain virtualised network functions in a distributed way, including at the edge of networks. In turn, MEC potentially benefits from the capabilities of a virtualised network to extract the full potential of distributed computing.

Figure 1: Defining MEC

Source: STL Partners

However, despite the excitement around the potentially transformative impact of MEC on telcos,viable commercial models that leverage MEC are still unclear and undefined. As an added complication, a diverse ecosystem around edge computing is emerging – of which telcos’ MEC is only one part.

From this, the following key questions emerge:

  • Which business models will allow telcos to realise the various potential MEC use cases in a commercially viable way?
  • What are the right MEC business models for which telco?
  • What is needed for success? What are the challenges?

Contents:

  • Preface
  • Introduction
  • The emerging edge computing ecosystem
  • Telcos’ MEC opportunity
  • Hyperscale cloud providers are an added complication for telcos
  • How should telcos position themselves?
  • 5 telco business models for MEC
  • Business model 1: Dedicated edge hosting
  • Business model 2: Edge IaaS/PaaS/NaaS
  • Business model 3: Systems integration
  • Business model 4: B2B2X solutions
  • Business model 5: End-to-end consumer retail applications
  • Mapping use cases to business models
  • Some business models will require a long-term view on the investment
  • Which business models are right for which operator and which operator division?
  • Conclusion

Figures:

  • Figure 1: Defining MEC
  • Figure 2: MEC potential benefits
  • Figure 3: Microsoft’s new mantra – “Intelligent Cloud, Intelligent Edge”
  • Figure 4: STL Partners has identified 5 telco business models for MEC
  • Figure 5: The dedicated edge hosting value
  • Figure 6: Quantified example – Dedicated edge hosting
  • Figure 7: The Edge IaaS/PaaS/NaaS value chain
  • Figure 8: Quantified example – Edge IaaS/PaaS/NaaS
  • Figure 9: The SI value chain
  • Figure 10: Quantified example – Systems integration
  • Figure 11: The B2B2X solutions value chain
  • Figure 12: Quantified example – B2B2x solutions
  • Figure 13: Graphical representation of the end-to-end consumer retail applications business model
  • Figure 14: Quantified example – End-to-end consumer retail applications
  • Figure 15: Mapping MEC business models to possible use cases
  • Figure 16: High IRR correlates with low terminal value
  • Figure 17: Telcos need patience for edge-enabled consumer applications to become profitable (breakeven only in year 5)
  • Figure 18: The characteristics and skills required of the MEC operator depend on the business models