5G Strategy: Why telcos should target industry verticals now

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To capitalize on the demand for 5G, telcos will need to transform network and IT infrastructures, reimagine business and operating models, and actively collaborate with both customers and partners.

Consumers are looking forward to 5G – at least those consumers who are aware of the advantages it will have. They’ll benefit from faster wireless connectivity, lower latency, greater reliability, and improved security.

But the early 5G opportunity for telcos is in industry verticals – from manufacturing to healthcare, transportation, and energy and utilities. For example, 75% of manufacturers around the world report that 5G will be a key enabler of digital transformation over the next five years. In fact, nearly as many say they’ll implement 5G within two years of its becoming available.

That’s according to a recent Capgemini Research Institute report, “5G in Industrial Operations:

But to capitalize on this demand, telcos will need to transform network and IT infrastructures, reimagine business and operating models, and actively collaborate with both customers and partners.

Networks for a New Era

5G will require network and IT transformation for telcos. First, they need to roll out a new radio network, which is both capex intensive and hardly trivial. Depending on the 5G spectrum and the density of their existing network, they’ll also require additional radio sites, and those sites will require fiber backhaul links to the backbone. And they’ll need to deploy edge nodes for a more distributed infrastructure.

Telcos have begun these implementations, but completing them will require time and investment. Many should consider infrastructure-sharing opportunities with other telcos or with third parties to alleviate costs.

But the real transformation will have to take place at the core of the network and IT infrastructure. Telcos have to put in place a software-driven architecture, because 5G is natively software-driven. They also need to leverage network virtualization, analytics, and artificial intelligent (AI) to build and orchestrate an automated, scalable and flexible connectivity factory. That’s a more complex undertaking, and it will require changes in organization, skills, and processes to achieve.

5G-Focused Business and Operating Models

Customer demand is driving the need for a more open approach to the digital ecosystem. 5G doesn’t create this reality, but it certainly will accelerate it.

Individual telcos won’t have the capabilities or resources to design and deliver end-to-end 5G-based solutions for every industry vertical. A hospital system has very different 5G requirements than a utility grid.

As a consequence, telcos will need to become enablers of digital services. They’ll need to support a broad variety of network services, analytics services, and other solutions designed for enterprise users. These services will need to be easily consumable, easily integrated by aggregators, and attractive to application developers and other service providers.

So telcos will need to become more open with their networks. That imperative will require enormous changes – in both operating models and service models. But it will be the only way to monetize network services, deliver high-value solutions, and extend business reach.

Get Ready for Co-Innovation

In our recent study, telcos reported that they anticipate 5G-driven business opportunities. But they know those opportunities call for large capital investments, and they’re unsure whether industry verticals will be willing to spend more for monetized services.

At the same time, industry verticals indicated that they understand the limitations of their existing connectivity technologies and recognize the need for more advanced network capabilities to support future use cases. They think 5G could be part of the answer. But they’re somewhat skeptical about the ability of telecom operators to meet their needs (in terms of roll-out timing, flexibility, service level agreements).

I spoke about 5G with the head of telecommunications for a large European railway company. He sees 5G use cases in all areas of the business: passenger connectivity, station connectivity, railway communications and autonomous trains, rail-line construction, and more. But he said that telcos typically offer standardized solutions that don’t meet his unique needs. As a consequence, his organization tends to develop its own custom solutions.

Some industry influencers are moving to address such gaps. Finland, for example, has made 5G a national priority for industrial competitiveness. The Finnish government has pushed for an experimentation platform to bring together the telco system, industrial companies and startups to collaborate on use cases and service models.

To make 5G a business success, telcos must embrace this kind of co-innovation – with industrial customers, systems integrators, cloud providers and with other telecommunications players such as mobile virtual network operators (MVNOs). Collaboration, in the form of experimentation platforms, lab & pilot projects, is key to design scalable solutions and models meeting customer requirements in each industry vertical- achieving wins for all parties – and transforming 5G investments into new revenue streams.

Read the Capgemini Research Institute report, 5G in Industrial Operations: How Telcos Can Deliver What Manufacturing and Asset-Intensive Companies Want.”

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