It’s easy to forget how new mobile technology is and how quickly the industry achieved mass adoption. Here in 2020, 96% of adults in the U.S. own a cell phone. Communications service providers (telcos) have largely achieved robust and reliable connectivity nationwide with 4G. However, with market saturation, growth is slowing dramatically. And competition has begun to drive down profits from this core service. In the meantime, wireless networking technologies have evolved over the last decade. And now, the industry has begun to invest heavily in the future of 5G.
Even without a clear understanding of all the ways it can be used, possibilities such as expanding capacity, speeding transmission, and lowering latency time seem endless, especially when it comes to helping companies make the best use of their resources. To help bring the future of 5G into focus, we partnered with STL Partners, a research and consulting firm for the telco industry, to interview 23 operators across the globe about infrastructure, software, transformational business models, and a return to growth. How can telcos innovate and achieve strong growth? Here are four key findings:
1. Application interfaces are key
In previous generations of mobile technology, standard interfaces could not be used to program the network, so developers programmed around the network. 5G has renewed and intensified interest in creating applications integrated with the networks they run over. Telcos can unlock network capabilities with software like MuleSoft to create foundational application programming interfaces (APIs).
To ensure continuous evolution, they can encode reusable APIs into an enterprise directory and allow developers and consumers to explore them and exchange ideas about them. With a sandbox to play in, they can develop and market value-added applications more directly.
2. B2B2X will drive growth
Business-to-business-to-X (B2B2X) is a business model where multiple parties (the businesses) work together to deliver new services for any type of end consumer (the X), either enterprise or individuals. The telco is one of the businesses at the center of this model. They might work with a car company to add smart features that appeal to drivers, or provide a way for multiple appliance makers to add a feature that relies on the cloud. And on the B2B2B side, the results can have an even larger impact, such as using the Internet of Things (IoT) for agriculture to better manage food supply, or smart cities that use technology to alleviate traffic congestion and streamline public transit.
This new model allows telcos to go far beyond sending signals to handsets and puts them on the path to greater profitability. But the complexity of the value chain in B2B2X models requires more openness and flexibility so that each partner makes the best use of their products or services, not to mention achieving scale.
3. Invest in 5G and uncover new markets and opportunities
Many telcos are building out 5G connectivity and infrastructure – even though the path to monetization isn’t clear. Forward-thinking companies want to be seen as pioneers with the most advanced technology. And they are imagining the many ways 5G will allow them to help consumers and enterprises.
Opportunities in the future of 5G within enterprises, both private and public sector, offer telcos entry into entirely new verticals, such as healthcare and gaming. For example, telcos can partner with providers or governments to manage and exchange health data in a secure way that protects privacy.
The infrastructure also provides ways for telcos to partner with start-ups that are innovating based on 5G solutions. End consumers will continue to benefit; the IoT means we’re able to have instant responses for everything from our cars, to voice assistants, to refrigerators, to doorbells.
4. Ecosystems are preferred over partnerships
Our research found that 30% of telcos start with the partnership business model. In these bespoke solutions, one partner brings products or services, and the other owns sales and accounts, and together they package solutions for customers.
But over time, operators will look for ways to standardize the relationships, and move toward an ecosystem approach. More than half (57%) of the telco operators interviewed by STL Partners and Salesforce said they prefer the ecosystem business model over partnerships because ecosystems standardize integrations and combine resources across participants.
More than half (57%) of the telco operators interviewed by STL Partners and Salesforce said they prefer the ecosystem business model over partnerships because ecosystems standardize integrations and combine resources across participants.5G Beyond Connectivity: Growing the B2B2X Business executive briefing
Mature telcos gravitate toward ecosystems because they can assume the role of orchestrator, choosing who can participate and defining the business environment and terms of operation.
Reliance Jio in India chose this model for its standalone business unit, Reliance Unlimit. They selected a few strategic partners for each key layer of its IoT architecture, requiring them to offer an agnostic approach and an ability to support things like usability, scalability, and openness. Reliance Unlimit kept control of the customer relationship, while partners collaborated to meet their needs. In less than four years, they deployed more than 35,000 end-to-end IoT projects for enterprises, including Nissan Motor, GSK, and Unilever.
Challenger telcos that are new market entrants also appreciate the ecosystem model. They typically join as participants in order to expand their customer base and gain market share.
Software solutions can help to quickly propel telcos forward
Telcos have paved the way for anything-as-a-service (XaaS) business models. While Network-as-a-Service (NaaS) isn’t Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS) or Infrastructure-as-a-Service (IaaS), there are valuable lessons to be learned from these “as-a-service” precursors. The patterns seem clear; build a platform (in this case, 5G and Multi-access Edge Computing, or MEC), then attract a developer community to grow your ecosystem with a marketplace of devices, applications, and services. As telcos explore new opportunities, people, processes, and enterprise culture all come into play to move business forward.
While many telcos are just starting to explore the future of 5G and the development of new revenue from B2B2X, they will discover that some solutions already exist to speed their work. A single, cloud-based platform can give them a 360-degree view of customers — both enterprise and consumers — and identify needs that the new technology can address.