A proposal was recently put forward in the US that its 5G networks should be built and maintained by the US government. In part, this recommendation was made with the view of mitigating espionage risk by Chinese network equipment providers. However, another reason for this recommendation was that the sheer cost of rolling out a nationwide 5G network may not be justifiable based on the potential returns any single operator will be able to generate.
For previous generations of network technology, including the most recent 4G networks, each provider has rolled out their own nationwide network. While there are instances of tower sharing and leasing as well as wholesale agreements, for the most part the operators own their network infrastructure.
The challenge is that for 5G to deliver on its promises of low latency (sub 10ms) and high bandwidth, the number of cells required per km represents a 10-fold increase on the current density. This results in much high capex requirements for telcos and is likely to reduce their willingness to deploy the infrastructure to less populated areas which unfairly penalizes residents in these parts with slower connectivity speeds.
If government takes responsibility for rolling out the 5G network, this would reduce capex wastage by providing a single 5G network across the country instead of multiple operators deploying their own overlapping networks. Some fear that this will lead to an inefficient government market place that stifles competition, exactly the kind of utility telecom the US government broke up in 1984.
However, there are precedents that suggest government sponsorship of infrastructure can in fact lead to more competition. In efforts to provide high quality broadband with nationwide coverage, governments have already taken steps to launch government supported networks known as national broadband networks (NBNs). Singapore has one of the most successful implementations of an NBN in which the government drove the development of passive and active infrastructure through incentives and fostered a highly transparent and competitive retail market. This model has led to some of the lowest broadband prices in the world. Completing the public to private sector initiative, the entity that owned and wholesaled the passive infrastructure was IPO’d in 2017.
Can 5G business case work without some form of network sharing?
While 5G standards are still being finalized, the business case for 5G is unlikely to stack up without the sharing of networks – passive and active components. Even if government ultimately does not take on the task of building out 5G networks, there appears to be a strong business case for operators to go beyond tower sharing and consider sharing radio access and backhaul to minimize their individual capex. Should either of these scenarios materialize, Telcos will no longer compete on network availability or core connectivity services (since all will be identical) but rather on digital services and operational cost efficiencies.
In this scenario of shared 5G networks, how can telcos differentiate their services?
Telcos will need to leverage new technologies and tap into emerging consumer trends to offer services that deepen consumer engagement with their services in a cost-efficient manner.
Below we have outlined emerging technologies and trending services that telcos should consider offering to build differentiation in an era of shared infrastructure:
AI – AI will lead to both cost efficiencies by automating internal processes and delivering better customer experiences, both important areas for telcos to improve at. One area already gaining momentum is AI supported customer service channels. Through AI powered solutions’ that can better sort and respond to natural language queries, operators will be able to reduce issue resolution time thereby improving customer sentiment toward their brand while also saving costs
Digital ecosystem apps – Pioneered by Wechat and now appearing around the world, digital ecosystem apps offer customers a single app to manage their daily needs from voice and messaging communications to ordering transport, groceries and meals to making payments. With mobile carriers enabling subscribers’ mobile lives, a well-designed app with strong partners can leverage their subscriber base for easy access and drive deeper engagement
Video Content – The proliferation of OTT video apps is leading to a tyranny of choice for consumers and the inconvenience of needing and using too many apps to watch content. While telcos have so far struggled with their own standalone OTT video apps, they are well positioned to offer an aggregator platform that curates other apps onto one platform and facilitates single billing through direct carrier billing.
Indeed, these technologies/services are not mutually exclusive – Digital ecosystem apps may well include video services which in turn leverage AI.
We believe telcos should partner with digital service providers rather than use a “build it ourselves” approach, which they have tended to adopt in the past.
How will telcos achieve 5G success?
In summary, the key to telcos’ 5G success will lie in successful collaboration – with other telcos on infrastructure and with emerging digital players for innovative digital services.