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It may only be a single presentation from a single company, but Shell’s indifference to the latest fads is a reminder that the telco industry has a way of over-hyping itself.
Speaking at the Private Networks in a 5G World conference in London, Johan Krebbers, Shell’s IT CTO & VP TaCIT Architecture, suggested the company has little interest in campus networks unless absolutely forced into the situation, neither in edge computing nor 5G connectivity. The 5G mis-interest should be hedged as ‘for the moment’, though it does undermine the insistence by many telcos that the enterprise segment is thirsty for next-generation technologies.
This is not to say the company is not exploring how connectivity can enhance operations, but it does place somewhat of a dampener on the buzz which is being created around the industry.
“Does it need 5G? Maybe not. But does it need connectivity? Of course, it does,” Krebbers said while discussing the projects which are being driven forward today.
Krebbers work is currently focused on using connectivity to improve the prospects of various aspects of the business. For the moment, the team is primarily focused on the manufacturing and logistics areas of operations, with a keen focus on IOT. Most of the projects are focused more acutely on data, such as predictive maintenance of assets or data-centric reservoir modelling, though many of these projects can be enhanced through solutions available today rather than the glorious next-generation technologies of tomorrow.
Again, it is worth hedging the statements here, there are of course various applications which would require the implementation of much more advanced solutions. Remote inspection of assets using drone technology will require 5G benefits such as enhanced mobile broadband and low-latency, but these are projects for the future. The most interesting elements of this presentation was the disregard for the trends which are being hyped by the telco industry today.
Krebbers said the team would rely on the public internet, not private networks, unless his hand was forced. Countries like Oman and Nigeria have poor 4G coverage therefore it is necessary to invest. Edge computing holds little interest as the team makes almost exclusive use of public cloud infrastructure and services. The team is driving towards a more predictive, not reactive, business structure which also slightly undermines the need for speed which 5G offers.
Shell is still a company which will make use of connectivity solutions, but these are not the enhanced services or products which the telcos will be searching for to generate ROI on extensive investments. In the way by which Krebber is describing Shell, the telcos sit more comfortably in the commoditised, connectivity partner column. The likes of Amazon, Google and Microsoft are more likely to find favour and fortune here.
As mentioned above, this is just a single presentation at a single conference, but it does at least somewhat undermine the extravagant confidence the telcos have in the enterprise connectivity world.
The potential to earn money is certainly there, but the telco industry needs to demonstrate speed and agility to take advantage of the private networks opportunity, and history is not on its side.
“It will be interesting to see who develops into the market,” said Ros Singleton, Chair of national research programme UK5G, at the Private Networks in a 5G World event in London.
As Singleton highlighted, the development of this segment needs to be done in collaboration, with an on-going conversation between the telco industry and the verticals. However, with these parties often speaking different languages, there will of course be hurdles.
An interesting question which is beginning to emerge is who will collect the revenues attached to the development of this segment?
Starting with the telcos, these are companies who would appear to be the logical partner, connectivity is their core business after all, but are these companies agile or innovative enough? Traditionally, this segment is very slow to adopt and accelerate new trends, but it might be forced into action through necessity.
As Antje Williams, SVP of 5G Campus Networks at Deutsche Telekom, highlighted at the Private Networks in a 5G World conference, this is one of the few areas which provides genuine and concrete ROI for 5G investments.
Few people around the world are prepared to pay for enhanced mobile broadband (eMBB), but enterprise customers are now ready to pay for private networks. Telcos can extend their core business, building networks, to new environments to drive additional revenues without having to experiment in unknown areas. 5G is not a necessity for this market, but it creates more opportunity to work with a broader range of customers.
That said, the issue for telcos is rising through the emerge of new spectrum initiatives. In Germany, regulator Bundesnetzagentur has started the process to release highly-localised spectrum licences, while in the UK, Ofcom has designated the 3.8-4.2 GHz airwaves for spectrum sharing. In both of these examples, an enterprise organisation could purchase a localised licence with the ambition of building their own networks.
This has proven to be a very unpopular initiative for some. In Germany, Vodafone’s Robert MacDougall suggested the idea of spectrum localisation has created scarcity for the MNOs, not only pushing the price up at auctions, but also impacting the long-term experience for the consumer. There are elements of logic to this point but bear in mind this is a telco which is under-threat from innovation and experimentation.
If an enterprise organization purchases spectrum, the telcos can still make money by building or managing the network on behalf of the customer. Enterprise customers are unlikely to have in-house expertise in the short-term, though the telcos are certainly not the only option partner.
Infrastructure OEMs such as Nokia, are seemingly exploring how they can work directly with enterprise customers, effectively becoming a competitor to their telco clients, while Service Integrators such as Capgemini could also fit the bill. UK5G’s Singleton also pointed out that many ICT firms already offer similar services so could expand, while the operational nuances of integrating the control room could offer momentum for niche players in each of the verticals.
In private networks, there is an opportunity for telcos to make extra cash, but it certainly is not a given.
There are some advantages of ignoring the spectrum localisation initiatives and working directly with the telcos, as Williams (Deutsche Telekom) points out. If an enterprise purchases spectrum in the 3.6-3.8 GHz airwaves there are limitations. For example, indoor connectivity, extended coverage, extreme download speeds or passing through walls. Some of these cases would require different spectrum frequencies, making the telcos broad range of licences more attractive.
Private networks are an attractive trend for the telcos, even if enterprise customers haven’t quite figured out all the details, but this is not a guaranteed win. Service integrators, infrastructure OEMs, cloud companies, ICT suppliers and niche unknowns are going to be scrapping to gain their own slice of the private networks pie.
Telecoms.com periodically invites other scribes to share their views on the industry’s most pressing issues. In this piece Ray Le Maistre, Editor-in-Chief at Light Reading, notes that with mobile operators and vendors scrambling for new business opportunities, the burgeoning wireless private networks sector could be a mini honey pot.
One of the biggest, and hardest to answer, questions asked every day at telecoms operators and vendors concerns new business opportunities – the identity of new revenue streams.
That question has been highlighted even more in the past few years as operators, in particular, seek to justify their 5G investments and develop a return on investment (ROI) plan that combines lower opex with additional revenues.
There won’t be a single answer to that question, of course: It will be a mixed bag of savings (hopefully!) and sales opportunities.
One of the more immediate revenue stream opportunities right now is wireless private networks, and the good news is that this opportunity doesn’t require 5G. Instead, the potential looks set to be enhanced by the availability of a full set of 5G standards (including the yet-to-be concluded core network specs) and the maturity of associated technology.
In the meantime, 4G/LTE has already been the cellular foundation for an increasingly thriving wireless private networks sector that, according to ABI Research, will be worth $16.3 billion by 2025 (see https://www.abiresearch.com/press/private-lte-will-be-us163-billion-opportunity-2025-and-foundation-5g-services-end-vertical-markets/).
Another market sizing prediction, this time by SNS Telecom & IT, pitches annual spending on private 4G and 5G networks at $4.7 billion by the end of 2020 and almost $8 billion by 2023.
However this plays out, there’s clear anticipation of growing investment. What’s particularly interesting, though, is which organizations might pocket that investment. That’s because enterprises and/or organizations looking to benefit from having a private wireless network have a number of options once they decide to move ahead with a private network – here are three permutations that look most likely to me:
- Build and run it themselves – technology vendors get some sales in this instance
- Outsource the network planning, construction and possibly even the day-to-day. management of the network to a systems integrator (SI) – the SI and some vendors get the spoils. It’s possible here, of course, that the SI could be a technology vendor.
- Outsource to a mobile network operator – the operator and some vendors will get some greenbacks.
For sure there will be other permutations, but it shows how many different parts of the ecosystem have some skin in the game, which is what makes this sector so interesting.
What’s also interesting, of course, is what the enterprises do with their private networks: Does it enhance operations? Help reduce costs? Create new business opportunities? All of the above?
Let’s not forget the role of the regulators in all of this. In the US the private wireless sector has been given a shot in the arm by the availability of CBRS (Citizens Broadband Radio Service) shared spectrum in the currently unlicensed 3.5 GHz band: This has given rise to numerous trials and deployments in locations such as sports stadiums, Times Square and even prisons.
In Germany, the regulator has set aside 100MHz of 5G spectrum for private, industrial networks has caused a storm and even led to accusations from the mobile operators that the move ramped up the cost of licenses in the spectrum auction held earlier this year. (See Telcos complain about auction as German regulator bags €6.5bn https://telecoms.com/497897/telcos-complain-about-auction-as-german-regulator-bags-e6-5bn/)
In the UK, Ofcom is making spectrum available in four bands:
- the 1800 MHz and 2300 MHz shared spectrum bands, which are currently used for mobile services;
- the 3.8-4.2 GHz band, which supports 5G services, and
- the 26 GHz band, which has also been identified as one of the main bands for 5G in the future.
The process to enable companies and organizations (Ofcom has identified manufacturers, business parks, holiday/theme parks and farms as potential users) in the UK to apply for spectrum will go live before the end of this year, with Ofcom believing that thousands of private networks could be up and running in the coming years.
Network infrastructure giant Nokia believes more than a dozen countries are planning to allocate spectrum specifically for private wireless networks, and that will suit the Finnish vendor just fine as it’s building a sizeable business by focussing on the specific needs of such buildouts.
It recently boasted that it already supports more than 120 private wireless networks around the world, with its customers including 24 in transportation, 35 in the energy sector, 32 in public sector and smart cities, and 11 in manufacturing and logistics. The company believes that, potentially, the number of private network base stations could dwarf the 7 million deployed by the world’s commercial mobile network operators, possibly by as much as twofold.
Nokia isn’t alone in spying this business opportunity, of course, although it has clearly built itself a solid foundation on which to build: Sweden’s Ericsson, as you’d expect, is also hot for such business, while specialists such as Redline and Federated Wireless are also chasing business.
So where is this market heading? And what are the drivers for further private network rollout? That’s something I’ll be checking into at the Private Networks in a 5G World (https://tmt.knect365.com/private-networks/) event in London (November 26-27), where the likes of Shell, Heathrow Airport, the Antwerp Port Authority and multiple major mobile network operators and technology developers will be sharing their stories.