5G Services monetization
Business models in 5G/6G mobile communicationsMobile networks have become the backbone for the digitalization of society, making mobile network operators (MNOs) one of the key players of the modern digitalized society. One of the modern tools for making sense of and communicating digitalization is the business model, which explains how a business creates and captures value as a process. For MNOs, the traditional business model has been to monetize mobile connec-tivity for consumer and corporate end users—bundled with dealership of digital content and/or equipment, also installed—and differentiated by the quality of service, coverage, or data rates/quotas, based on exclu-sive use of spectrum. The business models employed by MNOs to offer ubiquitous mobile connectivity radiate their impact on all current digital services. Without connectivity, no digital content could be sent or received. Without the abundance of content, digital context services such as search engines or combined data, user, and location information would be of low value; and commerce plat-forms would lack merchandise. Additionally, without connectivity, the value of artificial intelligence cannot be realized. However, the above-described primary business models of the mobile network operators will be disrupted by the fifth generation of mobile communications (5G) currently being introduced. Adding to the enhanced mobile broadband of the present 5G tech-nology, the increasing softwarization and cloudification of 5G networks will help in future to serve the varying needs of new types of users such as machines, autonomous vehicles, drones, robots, and communities in critical and massive machine-to-machine communications, also using shared spectrum. With a service-centric approach, 5G was originally defined through three technical usage scenarios: enhanced mobile broad-band (eMBB), ultra-reliable low-latency communications (URLLC), and massive machine-type communications (mMTC) (ITU-R, 2015). With higher frequencies and higher bandwidth, 5G means smaller cell sizes that enable local and private 5G networks for different verticals that have specific requirements, also indoors. Consequently, it has been argued that the whole MNO-centric ecosystem, its stakeholders, and the business models therein will change in future 5G, giving the floor to a variety of new operator concepts.Indeed, the term, ‘telecommunications service provider,’ as used for mobile network operators providing telecommunications services, is subject to specific regulatory rights and obligationsthat might not exist in all cases of local networks and may vary between countries. Consequently, in this chapter, we use the generic term mobile operator when discussing future business models. These disrup-tive changes call for exploring and understanding what 5G and later 6G will mean in the mobile communications business model context and what the implications are for the business model content, structure, and governance. Concept of the business modelTheoretically, the concept of a business model is deeply rooted in the strategic management field and therefore, the evolution of the busi-ness model definition reflects the increasing importance of the strategic components of business models. Strategic manage-ment research enriched the business model discourse with the concepts of opportunity, value, and advantage, wherein a business model serves as a vehicle for a coherent implementation of strategy. For instance, it is defined a business model as “a concise representation of how an interrelated set of decision variables in the areas of venture strategy, architecture, and economics are addressed to create sustainable competitive advantage in defined markets.” A strategy and tech-nology orientation are fundamental in the business model research field and several attempts have been made to bridge the divide. It is explained the concept of a business model as “the heuristic logic that connects technical potential with the realization of economic value.” The phenomenon of platformization and the emer-gence of platform business models have further integrated the strategic and technological roots of the business model concept.Overall, the business model has become a contemporary paradigm for exploring and exploiting different business-related ideas and concep-tualizations. Even in the absence of a commonly accepted definition, the extant literature depicts the business model as a boundary-spanning, multi-purpose, and futures-oriented vehicle for designing, doing, and making sense of digital business (Zott et al., 2011). For example, it is seed business models as addressing how firms do business, how this is interpreted, or how a business model could be represented through formal conceptualizations. However, regard-less of the lack of a common definition, there are an abundance of business model templates and tools that can be used to describe and design business models. The business model scholars appear to be unan-imous that the primary function of a business model is to explore and exploit a business opportunity. In turn, the opportunity sets the logic for the organization of the value-related processes. Together, the opportunity and value processes set the stage for formulating compet-itive advantage. In turn, the sustainability of competitive advantage is contingent upon its replica-bility. Additionally, digitalization and proliferation of the ecosystemic approach in the business model literature have brought business model scalability into the discussion.Regulation, technology, and businessThe traditional way to look at businesses in mobile communications has been to explore the changes in the regulative and technological domains, both having a significant impact on business decisions, espe-cially the business models employed by the operators. Spectrum and competition regulations have played a pivotal role regarding the business models applied by operators, either allowing, delimiting, or protecting/safeguarding certain business models. Tech-nology, in turn, has been the business model enabler and a driver for competitive edge and competition with new and improved services, while also ‘pushing’ the operators to innovate and diversify their offer-ings. However, up to the fourth generation of mobile communications (4G) networks, the primary business models applied by leading operators have remained surprisingly unchanged, although they have been seriously challenged by the content-owning, cloud-based over-the-top (OTT) Internet giants. Being challenged by the OTTs, many operators’ margins and revenue have started to deteriorate. As operators are struggling with whether and how to innovate their business models in practice, the question arises as to what kind of an approach would be appropriate to understand future operators’ business models in 5G and 6G and what these novel business models would look be. As new forms of operators are expected to emerge in future, it is crucial to map the factors according to which the emergence of these operators and their respective business models could be outlined. Business models for 5G mobile operatorsIn the mobile communications context, it is presented a business framework comprising the dimensions of the value proposition, architecture, network, and finance. As one of the early works on this topic, the paper followed the traditional business model approach of the time. The classification of connectivity, content, context, and commerce business models (4C) made for the internet 2.0 business modelshelps to characterize mobile communications businesses. Within mobile communications, the 4C typology of business models can be interpreted as nested layers, where the lower layer busi-ness models of connectivity and content are required as enablers and value levers for the higher layers of the business models, the context and commerce, to exist. Traditionally, MNOs have offered connectivity in a mass-produced mode, with price, data rates, quotas, or coverage as differentiation. Additionally, some opera-tors have started to offer bundled content—such as entertainment—or equipment as a dealer. Personalized or tailored services such as context (i.e., location-based, service-specific, or data-based) or commerce (i.e., platform-enabled ubiquitous services) business models have often been separated from the connectivity business. The only exception to tailored services have been big enough industrial customers with vertical-specific needs, and these have often been served in collaboration with network equipment vendors, network constructors, and service integrators. There also exist operators that specialize in servicing industrial customers and their IoT (internet-of-things) needs. Mobile networks can be regarded as connectivity platforms or ecosys-tems, depending on the perspective. Technically a platform can be divided into a centralized core and geographically distributed access networks. The core network takes care of the services and billing, while the access networks—which can currently comprise several tech-nology generations from 2G up to 5G—provide the radio access from a variety of user devices to the networks. With 5G, mobile plat-forms are increasingly becoming combined or converged with various digital platforms of cloud services and OTT internet service providers, while enabling platform ecosystems or the sharing economy. This relationship between business models builds on platforms, and several researchers have addressed the networked or ecosystemic nature of the business environment. Business model innovation toward 6GThe compound effects of various technology enablers, emerging regula-tory delimitations, and integrated triple bottom line economic, environ-mental, and social sustainability on business models call for a discussion of business model innovation in 6G. Currently, 6G is still in the research phase. However, 6G has been envisioned as a general-purpose technology platform or infrastructure that necessitates ecosystemic innovation, as no single firm can alone develop it. Up to now, the telecommunications industry has followed the define-standardize/implement-deploy/use cycle of technology generation commercialization based on standard releases.For business model innovation—especially related to finding scalable business opportunities—this implies new societal and environmental requirements, regulations, and stakeholders to be considered at each of the stages and releases of technology. For sustainable value creation, the diverging field of standardization and new integrated technologies with diverse development trajectories and competing implementations set increasing pressures for foresight-based strategies for technology deploy-ment and use. Further, for replicating the technology-based competitive advantages in different markets or customer segments, the ubiquitous mobility of 6G sets demands for novel kinds of collaboration. Already today, regulation and sustainability go hand in hand influ-encing mobile operators’ business models in two ways. First, policy-makers are concerned about the energy efficiency of mobile networks. In times of increasing energy costs, the need to make 5G and 6G more energy efficient is an economic motivator for mobile operators to save costs, especially operating expenses (OPEX), but also to reduce CO2 emissions. Although the ICT industries have been so far excluded from CO2 compensation requirements, it could be considered that in future this may change. Further, there are increasing concerns regarding the electromagnetic fields (EMF) caused by mobile communications and the consumption of critical and rare raw materials, that indirectly and directly set demands and limitations on business model innovation. Additionally, the critical role of mobile communications sets demands on developing and maintaining the security and resilience of networks to ensure societal sustainability. Trustworthiness via security considera-tions needs to cover all the aspects of cybersecurity, including resilience against attacks, preservation of privacy, and ethical, safe application of automation to network operations and applications. For the same reason, regulations related to strategic autonomy and sovereignty have been introduced in many countries.
The telecom industry is under pressure to provide seamless, fast, and reliable 5G connections and has made and is still making large investments to meet the demands. By the end of 2023, it would have been launched by more than 80 countries and in 200+ networks around the world. It continues to be rolled out globally and is gradually integrating new features. The 2nd 5G wave is taking shape in 2023Q3. Since early launches in 2018, 5G has been widely adopted in advanced wireless markets. 5G adoption is increasing in less advanced markets and becoming mainstream in advanced markets. Although the 5G roll-out is well underway in 2023Q2, Europe still lags somewhat behind its global peers. In Europe, 5G accounts for only 2.5% of total mobile connections, compared to 14.2% in North America and 28% in the China/Japan/Korea region. However, 5G investment is increasing as part of a concentrated effort to enhance European digital autonomy. The European telecom sector achieved a record capital expenditure (CapEx) of €56.3bn in 2021, up from €52.5bn in 2020 and €51.7bn in 2019, respectively (European Telecommunications Network Operator’s Association, 2023). This reflects increased investment in fibre and 5G networks. However, delays in 5G network roll-outs and the implementation of EU objectives within member states may be contributing factors to the digital divide in the region.[DigiHub: https://nordregioprojects.org/digihub/]
In this context, the term vertical refers to a specific industry or sector enabled by the deployment of 5G networks and related technologies.
- High Initial Investment: Deploying a 5G network involves significant capital expenditure for network infrastructure, including new base stations, new backhaul links, and new hardware/software at the core network. This high initial investment can be a significant burden and might delay the return on investment.
- Interoperability and Standardization: Ensuring interoperability between network elements and aligning with global standards is a significant challenge. With 5G being a new technology, standards are still evolving, which can lead to compatibility issues.
- Regulatory Challenges: Regulations surrounding 5G technology, spectrum usage, data privacy, and security can also pose a challenge. The legal framework for 5G is still in flux in many areas, making it difficult to plan for the long term.
- Technology Complexity: 5G technology requires significant expertise and skilled personnel. This complexity can lead to operational challenges, especially in the early days of 5G deployment.
- Security: With more connected devices and increased data transfer rates, security becomes a significant concern. Ensuring the security of 5G networks and the data that travels over them is crucial but challenging.
- Value Proposition and Customer Willingness to Pay: Convincing customers of the value of 5G services and getting them to pay a premium can be demanding. Operators need to clearly communicate the benefits of 5G and provide services that customers find valuable enough to pay for.
- Competition: With many operators and other businesses looking to capitalize on 5G, competition can be fierce. Staying ahead requires continuous innovation and the ability to adapt quickly to changes in the market.
- Network Slicing Management: While network slicing presents new monetization opportunities, it also comes with challenges. Operators need to manage multiple virtual networks, each with its own requirements, which can be a complex task.
- Data Management: 5G networks generate a massive amount of data. Managing this data, ensuring its privacy, and using it to generate insights can be challenging.
- New Business Models: With new technology comes the need for new business models. Figuring out how to monetize the unique capabilities of 5G—like ultra-low latency or massive machine-type communication—requires innovative thinking and might involve a certain level of trial and error.
What Other Major Factors Affect 5G Monetization?
- High Initial Investment and Return Time: Deploying 5G networks demands significant capital expenditure, creating a substantial initial financial burden and potentially delaying return on investment.
- Operational Challenges: The complexity of 5G technology and the requirement for highly skilled personnel can lead to operational challenges. Management of multiple network slices and massive data handling are some of the complexities involved.
- Regulatory and Security Concerns: Operators have to navigate evolving global standards, ensure interoperability, and handle changing regulations related to 5G and data privacy. Additionally, the enhanced connectivity of 5G raises significant network and data security concerns.
- Customer Acquisition and Retention: Conveying the value proposition of 5G services to customers, dealing with their willingness to pay, and managing competition requires strategic planning and continuous innovation. Establishing new business models to capitalize on 5G's unique capabilities is both an opportunity and a challenge.
How will Operators come out with a proper solution to fix this issue?
- Partnering and Collaborations: Operators can form strategic partnerships to share the cost and risk of 5G deployment. This can include infrastructure sharing, joint ventures, or partnerships with tech companies for technology and expertise.
- Invest in Training: To address the challenge of 5G's technical complexity, operators can invest in extensive training programs for their personnel, develop a workforce skilled in 5G technology, and attract talent with expertise in 5G.
- Security Measures: Operators can work closely with cybersecurity firms to create robust security protocols and systems, use advanced AI and machine learning tools to detect and prevent security threats, and invest in secure hardware and software.
- Value-Added Services: To enhance customer willingness to pay, operators can focus on developing unique, value-added services that leverage 5G's capabilities. For example, high-definition streaming services, AR/VR experiences, IoT services, etc.
- Use of Advanced Network Management Tools: To manage the complexities of 5G networks, including network slicing, operators can use advanced network management tools. These tools can automate many tasks and make managing and monitoring the network easier.
- Regulatory Compliance and Advocacy: Operators must ensure they fully comply with all regulations. They can also engage in advocacy to help shape favourable policies. I'd like to point out that hiring a team of experts who understand the regulatory landscape can help in these efforts.
- Data Analytics: Operators can invest in big data analytics and AI tools to manage and analyze the large amounts of data generated by 5G networks. These tools can help operators gain valuable insights and create new revenue streams.
- Gradual Deployment: Instead of a massive, simultaneous rollout, operators could consider a gradual deployment. Operators can start recouping some of their investments by focusing first on areas with the highest demand or potential for revenue.
Network slice lifecycle
The life cycle of a network slice can be divided into five phases (modeling and design, ordering, instantiation, runtime operation, and decommissioning). A key step in the instantiation phase that is often overlooked is the slice feasibility check! The feasibility check takes place for the end-to-end slice and for each subnet slice instance (RAN, transport, and core). The 3GPP standards tell us what the slice feasibility check is, but how this is implemented is left up to each individual vendor of network-slicing software.Network slicing is a key component of operators’ 5G strategy, enabling them to move away from simply charging by the megabyte. Instead, they can charge for highly differentiated slices of network capacity, moving their value propositions beyond connectivity to support a wide range of use cases for enterprises and consumers.The basic idea is to sell dedicated, differentiated services to customers that guarantee certain parameters such as data throughput and latency, all while using the same underlying infrastructure. The slices are logically distinct networks with unique characteristics, but all share the same underlay (comprising physical and virtualized network functions).Slices might be established on a permanent basis or might be temporary for a specific user session. The three main slice types envisioned by standards setters were dubbed enhanced mobile broadband (eMBB), ultra-reliable low-latency communications (URLLC), and massive machine-type communication (mMTC). Other slices will be variations on these key themes with service-levelagreements (SLAs) guaranteeing the performance characteristics that are important to each specific use case (e.g., data rate and latency). Slices may also have different security characteristics reliability, or quality measures (e.g., jitter). The SLA may also specify the proportion of users or time for which the performance measures must be met (e.g., 99% or 99.999%).By tailoring services to specific customer segments, communications service providers (CSPs) aim to capture pricing premiums to boost their revenue. Customer segments could be consumer oriented (e.g., mobile gaming), enterprise (e.g., a wide-area private network), industrial (e.g., vehicular communications), or wholesale (e.g., MVNOs).
Operators are still grappling with the complexity of dynamic network slice lifecycle management. Network slices will have many different parameters that must be mapped to an ever-changing network underlay that spans multiple domains (RAN, transport, core). While network slicing in transport networks and the packet core is relatively straightforward, the RAN is more challenging given its heterogeneity: multiple vendors, technology generations, and frequency bands.
Management of non-public networks (NPN)
NPN, also referred to as a private network, is a network that is intended for the non-public (or private) use. Whilst the concept has been implemented in previous generations, 5G specifications support various configurations of NPN. It can be deployed in a variety of configurations where both virtual and physical network elements can be utilized. It includes the concept of private network, which is an isolated network deployment that does not interact with a public network. While there are many possible configurations of NPNs, 3GPP defines two major categories of NPNs: Standalone Non-Public Network (SNPN) and Public network integrated NPN (PNI-NPN).For these use cases, the NPN may provide three benefits in terms of performance:- NPN brings optimized coverage for the owner as the network is deployed for the owner's purpose and not for the public in general.
- the local presence of some network entities reduce physical distance and number of network hops required for the use case, reducing the latency of NPN.
- the local presence reduces uncertainty of network operation, as the disruption (e.g., outage, fault) of the corresponding entities can be managed/resolved inside.
- E2E fault management
- Management of NPN service customer
- Resource isolation demand for Smart Grid Utilities
- SLA monitoring and evaluation
