Ericsson held its analyst day in London last week. High up in The Shard, (surrounded by grey clouds, torrential rain and strong winds) we learnt about Ericsson’s new vision for 5G and the wider ecosystem that it could support. As a metaphor for the challenges that Ericsson is currently facing the setting for the meeting was apt.

5G will be an evolution not a revolution

At the event, Ericsson presented a clear and focused vision for 5G. Gone were the “5G will solve everything” statements of the past and in their place were clear, pragmatic and phased goals for 5G. The immediate 5G business case (for Ericsson and the CSPs) is now about the evolution of LTE with 5G New Radio. This 5G evolution will support a CSP in delivering the continued growth of consumer data volumes in an environment of flat revenue growth. In particular, this evolution will not require a change in the existing CSP business model.

5G can be an opportunity for growth for CSPs

Ericsson’s vision for 5G, as a longer-term engine for new services and CSP growth was also showcased at the event. Ericsson predicted up to 36 percent additional CSP revenue growth with IoT and further opportunities with distribution of cloud nearer the network edge.

Ericsson presented its IoT Accelerator platform, which provides a framework, enabled by 3GPP connectivity, in which IoT developers, device manufacturers and the CSPs can collaborate to create new services.  Ericsson’s distributed cloud showed the potential for a CSP to enable dynamic distribution of computing from centralized cloud through to placement at the network edge.

In both the IoT accelerator and distributed cloud, Ericsson clearly showed strong technical capabilities that could enable CSP growth. However, this opportunity is clearly limited by two challenges.

IoT and edge cloud still lack clear business models

Firstly, there is a lack of a coherent business model that would allow Ericsson, the CSP and third parties to monetize IoT or edge cloud value. A number of highly valuable IoT proof-of-concepts were discussed during the day. However, Ericsson had found turning these into commercial deployments was problematic, even with a willing customer. The challenges of satisfying multiple companies, with complex relationships, and conflicting  business models stopped commercial roll out.

CSPs still lack a global reach for services beyond connectivity

Secondly, the fragmentation of CSPs globally makes the creation of global IoT and edge cloud value-added-services, over and above network connectivity, problematic. A global player in IoT or distributed applications is looking for a global provider or market place. CSPs and their suppliers, like Ericsson, need to address this.

Ericsson has the opportunity to solve these challenges if it addresses 5G business model innovation as strongly as technical innovation. Its recent joint work with BT, on the business benefits of network slicing, points in this direction.

Appledore Research has recently completed a research report on the opportunity for CSPs at the edge.

We will be exploring the economic model for edge computing in future research.

Image courtesy of Gunnarsson

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