In a wide ranging question and answer session last week, Marcus Weldon, Nokia CTO discussed the state of play in 5G. It was pleasant to have a very realistic, “warts and all“, appraisal of the current state of play in 5G and the CSP’s 5G opportunity. This blog highlights some of the key topics covered.

5G consumer market

The majority of CSPs are expecting no sustainable ARPU increase based purely on connectivity from the introduction of 5G in the consumer segment.  The expectation is that, if the market evolves like LTE, there could be 6 months of 5G price advantage before it’s killed by price competition (as has already happened with EE in UK). The best that some CSPs can expect is some small blip increase in market share from the introduction of 5G.  Instead, CSPs regard 5G mobile broadband as a platform from which to up-sell other new value-add digital services to consumers.  This is a key driver of the current 5G market momentum, including the operators with whom Nokia has signed 48 commercial deals.

5G enterprise market

Given the limited opportunity in consumer, Nokia expects one big opportunity for CSPs to be in the area of industrial automation; with 5G supporting new applications in transport, manufacturing, logistics, utilities and mining. Nokia is anticipating that 5G will be deployed for enterprise both as private networks, sold direct to enterprise or via CSP, and complemented by slices of CSP public networks for field area connectivity outside of industrial campuses. With this in mind, Nokia highlighted its fast growing enterprise business group, with over 80 enterprise customers deploying private LTE/4G+ networks across all industrial segments. Marcus noted that the expertise from these deployments are providing Nokia significant insights on the real needs of different industrials verticals, helping drive ecosystem development. Nokia is terming this approach SPaaP – Service Provider as a Partner; with insight and experience gained through direct enterprise engagement supporting operators to repeat similar solutions with their customers.

Whether CSPs will play in managing private networks is still very much an open question. However, Marcus highlighted the need for orchestration of capability between private networks and public networks as an opportunity for CSPs, whether or not they manage the private network.

Appledore questioned this assumption.

“Are we in danger of seeing the enterprise opportunity through telco eyes?”

As the major parts of industry automation applications are likely to be mainly on the private network, with limited need and interaction with the public network, is there a danger that the enterprise sees limited value in the CSP beyond the continued provision of commoditised bandwidth.

Nokia acknowledged that there was a challenge here, and that, potentially, some of the enterprise might not see the value of a cross orchestrated private public network. On the flip-side, smaller enterprises, that want the benefits of private wireless, may not have the IT skills to deploy and run them. This would clearly be an area where CSP and other players, such as system integrators, would definitely have an opportunity. Still the current CSP focus on owning whole use cases was possibly taking CSPs in the wrong direction here. However, Nokia believed that underneath all industry verticals there are core value propositions that CSPs can provide:

  • Edge Cloud
  • Security
  • Wide Area connectivity
  • Slicing
  • Hyper-locality (Where is it; What is it doing)

These do not address the whole problem. But even if they are only 10% of what is estimated to be a $2 trillion market that remains a large opportunity. CSPs also have an opportunity to be a better, more resilient and cheaper providers of 5G private networks and the associated edge cloud to the enterprise (see our recent report on Edge Cloud).

Elephants in the room

In concluding the session, Marcus highlighted what he saw as the real risk of telcos falling behind AWS and Azure (and the rest of the cloud providers) in the edge cloud market. He felt that CSPs understood this risk intellectually but were not necessarily managing this in practice. Amazon and Microsoft have clear ambitions in this market and CSPs need to decide on their strategy for edge cloud and whether it is a critical foundation for CSP value creation going forward.