Analysis Smartphones have changed people’s lives in a revolutionary way. The popularity of devices packed with apps for productivity, entertainment and wellbeing has seen mobile networks hit with an avalanche of data. In the last eight years, data volumes have grown 24-fold while the price per megabyte has fallen by well over 95%. Only very rarely in history has a single industry managed to cut prices by so much in such a short time.
So where to from here?
Traditional mobile-industry business models are either dying or already dead. Remember when a minute of talk-time used to cost over 30p? With current business models, getting even modest levels of revenue growth requires high levels of capital investment. Usually in the order of 10% to 15% of total revenue.
The industry has achieved a lot in the last decade. It now has a solid foundation for the future. 4G rollout, simpler business processes, mergers, network sharing and automation have seen costs fall dramatically. Data growth has moderated as smartphone ownership has peaked. There is only so much data that can be funnelled through the medium of a 5-inch screen. We can see the evidence of a new-found confidence in the industry with the rollout of new uncapped data tariffs across Europe. Industry operating margins have improved and the return on capital has returned to sustainable levels:
Time for strategic decisions
The mobile industry is now at a key pivot point, on the cusp of greatness if the right choices are made. Service providers can capture the savings offered by new technology. As low-cost operators they can build profits with high volumes. The cost per GB of data delivered continues to fall with 5G making this strategy feasible.
Alternatively, service providers can be the platform that unleashes the potential of wireless connectivity to radically change industry and society. The demand for 5G from industry is strong, even before the networks have been rolled out. This contrasts with third and fourth generation networks where the infrastructure rollout led customer demand.
5G wireless connectivity enables new products, capabilities, business models and more efficient ways of working. Smart cities offer their citizens a better quality of life. Industry 4.0 will be greener and more efficient. Renewable energy will use smart electricity grids. Connected cars allow us to get the most out of our road network and make it safer. eHealth will broaden access to health services and extend lifespans.
The question is how can service providers engage with these new industries? If they try to own the whole value chain, then customers will go their own way.
The benefits of a partnership model
Engaging with many customers in a diverse set of industries can be difficult. Cultivating a vibrant and healthy ecosystem of partners can help. Partner models blend the niche capabilities of system integrators with the technology expertise of service providers. Companies like GE, Microsoft and Cisco have had great success this way. For example, the Microsoft partner network has over 64,000 members. This has helped its Azure cloud platform to grow by over 70% per year. Annual Azure revenue now exceeds $10 billion.
The network as a platform
If the network is to become a platform for digital businesses, cloud-based thinking is needed. The old approaches to provisioning and service management won’t work in this new world. The network will need open APIs to minimise friction. A vibrant ecosystem needs open interfaces to unleash innovation. This gives partners the ability to create exciting new products and business models quickly and efficiently.
In a cloud-based system, innovators create new smart, connected products. They communicate with the product provider’s choice of IoT platform through open interfaces. Network slices ensure that the required SLAs are delivered per application. The set up and provisioning of new products happens through the API. The IoT platform then interfaces with the product provider’s own systems such as billing, sales, product line management and supply chain management. Relevant external data can be added where needed. For example, if the product controls a heating system, the latest weather data will be needed.
A bright future
Today, mobile operators have a unique opportunity. Technology advances have radically reduced costs. The possibility of exciting new business models is enticing. We are entering the smart, connected world. The era of dumb, disconnected products is ending. Technology has radically disrupted industries like finance, retail, music and entertainment. There will be lots more to come.
The old ways of thinking and management methods are becoming obsolete in a world of new technology. The next generation has been born into the smart, connected world. Telcos need to be brave to gain the trust and support of innovators. With revenue, margins and investment returns improving, and a strong demand for new 5G applications, a bright future awaits the industry.
Interested in hearing industry leaders discuss subjects like this and sharing their use-cases? Attend the co-located IoT Tech Expo, Blockchain Expo, AI & Big Data Expo, Cyber Security & Cloud Expo and 5G Expo World Series with upcoming events in Silicon Valley, London and Amsterdam and explore the future of enterprise technology.