5G FUTURE: BUSINESSMODELS FOR MONETIZATIONAuthor: Mark Newman, Chief AnalystEditor: Dawn Bushaus, Managing EditorSeptember 2019

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Contents

11Section 2: 5G’s potentialimpact on business models

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03The big picture

05Section 1: Is relying onconnectivity alone risky?

14Section 3: Consumer 5Gservices point to fixed-mobile convergence

17Section 4: 5G helps mobileoperators targetenterprises

25Additional features andresources

22Section 5: Make it happen –Strategies for developing5G business models

Consider the tough challengesoperators are facing:

Revenues are stagnant

Digital-native companiescontinue to disrupt themarket for communications

services

Despite fierce competition,regulators are not alwayswilling to allow the market to

consolidate

Cutting costs is difficult if notimpossible becausecustomers are constantly

demanding better, faster networksand services

Is telecoms broken?A research note published earlier thisyear by a leading European bank saidthat investors perceive the telecomssector to be broken and that thisperception is unlikely to shift so longas it continues to deliver poor returns.

The research note pointed to twopotential scenarios that could helpthe sector improve.

The first is network sharing,principally in the radio accessnetwork, to lower capital expenditure(CapEx). Although the authors of theresearch said they expect to seesavings on operating expenditures(OpEx) through digitization, thesegains will be offset by higher CapExresulting from sustained investment infiber and 5G. However, if multipleoperators were to use the sameinfrastructure through sharingagreements, cost savings could begreater than expected.

Secondly, the research speculated onthe possibility that the new EuropeanCommission might take a morelenient approach towards marketrationalization and separation ofCSPs’ networks and servicesbusinesses. In many Europeancountries, regulators have preventedmergers and acquisitions betweenmobile operators because of concernsthat prices would rise. Certainly,

financial markets believe that marketrationalization can lead to marketrecovery.

Can 5G help? Interestingly, there was little focus inthe research note on the potential forincreasing revenues – and noreference at all to the potential of 5G.Given that most financial analyststake a strong steer from the operatorsthemselves, this suggests thatEuropean CSPs have modest (somemight say realistic or even pessimistic)aspirations for 5G.

Our research finds that manyexecutives working for CSPs andtelecoms suppliers do not share thispessimism. This spring we conducteda survey about future telecomsbusiness models. We received 143responses from executives workingfor 64 different CSPs and 103executives working for 47 suppliers.

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e big picture

Communications service providers (CSPs) worldwide are under considerable competitive andfinancial pressure. This necessitates discussions about future business models, and for manyoperators talk quickly turns to the potential role for 5G in tapping new sources of revenue.

e big picture

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A majority of CSP respondents saidthey are at least reasonably optimisticabout their prospects for success inthe short term (one to two years) andlong term (two to five years). Indeed,about two thirds are optimistic abouttheir companies’ prospects.

Unified approachPart of the reason for respondents’optimism likely correlates to their job– more than a third work in the ITdepartment. IT staff are keenly awareof the power of software and cloud,both of which will feature prominentlyin the 5G core. However, they do notnecessarily have insight into thecommercial and financial aspects ofdelivering services.

This in itself is telling: At a time whenthe most successful companies arefusing expertise in technology andbusiness, most CSPs retain cleardivisions between the teamsresponsible for network, IT, productsand sales (consumer and enterpriselines of business) and finance. Tocompete effectively and realize thepromises of 5G, operators must adopta unified approach

This report examines the newbusiness models CSPs can use tocapitalize on 5G. Read it tounderstand:

n Whether it’s necessary for CSPs todiversify and move beyondconnectivity

n How spectrum availability, cloudcomputing and edge computingcould revolutionize business models

n Which consumer 5G use cases aremost promising

n Why early 5G pricing for consumerservices points to fixed-mobileconvergence

n Why B2B is important for 5G

n Which business models operatorsare considering for enterprises

n How the first 5G deployments aretargeting consumers andenterprises simultaneously

n Why it’s important to considerplatform business models

TM Forum, 2019

Who are the Future business model survey respondents?

mobile operators23%converged operators57%

7%

8%143

digital service providers (IoT, smart ci es, etc.)

fixed operators

CSPs Suppliers

14%OSS/BSS so!ware27%

12%cloud solu ons

network func ons

consultant or integrator

41%

respondents from 64 unique companies opera ng in 40 countries 103 respondents from 47

unique companies

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Section 1

Is relying on connectivityalone risky?

Who responded?From February through June, we surveyed CSPs and their suppliers about their visions for the future of telecoms, a futurethat in many cases will hinge on 5G. We received 143 responses from executives at 64 CSPs globally and 103 executivesworking for 47 suppliers.

About a quarter of CSP respondents said they hold management or strategy positions, while 35% work in IT. The rest weresplit among roles such as network, product management, and sales and marketing. About 10% of CSP respondents haveresponsibility for enterprise lines of business, while another 10% focus on consumer lines of business.

Communications service providers (CSPs) and their suppliers are optimistic about the futureof their businesses. They also recognize the need to diversify, but they are not sure which newbusiness models to embrace. As 5G deployment begins, many operators are evaluatingwhether to move beyond connectivity – and if so, how?

6%North America

10%La n America/

Caribbean

36%Europe and/or Russia

15%Middle East and/or Africa

27%Asia-Pacific

6%Global

Loca�on of CSP

8%Fixed operator

4%Data center/cloud provider

57%Converged operator (some combina on of mobile, fixed voice and data, and TV)

23%Mobile operator

1%Cable operator

7%Digital services provider (e.g. IoT, smart ci es)

Type of CSP

Section 1

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37%Fewer than

5 million

Number of subscribers

4%100 million to

150 million

12.5%25 million to

50 million

30%5 million to

25 million

5.5%50 million to

100 million

11%More than

150 million

Size of CSP

41%Telecoms network vendor

16%So ware (BSS/OSS) vendor

5%Systems

Integrator

11.5%Cloud services /

solu!ons provider

8.5%Consultant

7%Other

Type of supplier

Section 1

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Where will revenue come from?

CSPs Suppliers

TM Forum, 2019

26%

21%

20%

33%

15%

22.5%

20.5%

42%

A slow, gradual stagna on in revenues (and profitability) as compe on and regula on con nue to bite

Flat revenues with data and TV services compensa ng for decines in voice

Solid revenue growth from expansion into TV, IoT and ICT services

Gently increasing revenues as CSPs roll out TV services and make promising entries into the IoT/ICT services business

Fortune tellingMost CSP respondents are at least reasonably optimistic about their prospects for success in the short term (one to twoyears) and long term (two to five years), although they are less certain about the long term, with about 20% saying they arevery or reasonably pessimistic.

How op�mis�c are CSPs about the future?

1-2 years 2-5 years

TM Forum, 2019

22%

41%

10%

26%

1%

19%

41%

14%

19%

7%

Very op mis c Reasonably op mis c Reasonably pessimis c Very pessimis cNeither op mis c nor pessimis c

Section 1

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We asked this question in a morespecific way of CSPs and theirsuppliers (see graphic on page 7). Wewanted to know how they believerevenue will grow. Most respondentssaid they expect the global telecomsindustry to record either gentlyincreasing revenue or solid revenuegrowth, which is consistent withresponses to a similar question thatwe ask in all our Digital TransformationTracker surveys.

Despite the general tone of optimism,however, more than one in four CSPrespondents expect a slow, gradualstagnation in revenues, which istroubling. That vendors are moreoptimistic than CSPs generally is aconsistent finding in all our surveys.The likely reason for their optimism isthat suppliers need to make a strongcase for how their solutions can helpoperators increase revenue at a timewhen CSPs are under considerablepressure to cut spending ontechnology.

New business modelsCSPs and their suppliers continue tobe very divided over whether CSPsshould seek new business models. Wehave been posing the same questionabout business models in our surveysfor the last three years, and theiranswers remain consistent. In thissurvey, just over half of CSPrespondents said they believe thattelcos should diversify by providingend-to-end digital services orbecoming platform providers to bringthird-party services to market.

What should CSPs aspire to become?

CSPs Suppliers

TM Forum, 2019

19%

26%

23%

32%

18%

21%

32%

29%

Best-in-class connec vity providers

Mul -play operators and service providers (fixed, mobile, TV, broadband)

Pla!orm providers working with partners to bring services to market

Full digital service providers offering a range of end-to-end digital services, some mes in compe on with players such as Google and Apple

Read the latest Digital Transformation Tracker report:

Section 1

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Many telcos feel – with somejustification – that their legacy interms of people, skillsets, systems,products and business models makesit difficult, if not impossible, to evolveinto modern digital service providers.Furthermore, they need to beconvinced that telcos can successfullycombine traditional telecomsoperation, in terms of servicesprovided, with a digital business. We’lldiscuss this in greater detail in thenext sections.

Diversifying revenueIt’s fairly easy for CSPs that serve onlyone connectivity market – forexample, pure mobile operators orfixed/cable TV operators – to diversifyby expanding into other types ofconnectivity. Indeed, in assessing thelast five years of telecoms evolution,the transition to multi-play has beenthe single biggest change.

But there are plenty of otherconnectivity-based opportunities forCSPs, particularly as they roll out 5G,such as:

Leveraging 5G for fixed-mobile substitution (cord-cutting) or rolling out fixed

wireless access services usingmillimeter spectrum bands

Building and operatingprivate cellular networksfor large enterprises using

capabilities such as network slicingand software-defined networking

Connecting things ratherthan people in the internetof things (IoT)

If CSPs focus exclusively onconnectivity they may need to accepta different role in the value chain –becoming a wholesale provider orenabler rather than a service provider.They already fulfill this role in themobile virtual network operator(MVNO) business and with sponsoreddata, which is a variation on theMVNO model. But new opportunitiesin wholesale likely will appear in theB2B market (see Section 4).

Beyond connectivityMost CSPs and suppliers believe thattelcos must expand beyondconnectivity if they are to thrive, andthat revenue diversificationnecessarily means offering servicesbeyond connectivity andcommunications. CSPs look enviouslyat the growth of digital-nativecompanies – often with resentmentthat they have been the mainbeneficiaries of investment in high-speed broadband networks.

SingTel highlighted the problem duringa recent financial results presentationwhen executives asserted that“participating in the digital economy isa non-negotiable strategy.” Thecompany showed a version of thegraphic below in the presentation,noting that collectively the growth ofdigital-native companies is faroutpacing telco growth.

CSPs will need to acquire new skills orbecome resellers of third-partyservices in order to diversify beyondconnectivity. The types of servicesthey could offer include:

Content (TV, video, etc.) –traditional pay-TV isalready a mature sector for

many telcos; indeed, many are leadersin national markets worldwide.

IP voice and messaging –CSPs are rolling theseservices out slowly to

consumers (see Section 3 for moreabout consumer marketopportunities).

Systems integration andprofessional services –CSPs can target enterprise

verticals by focusing on specific usecases, but to do so they will need toacquire skills to deliver complexsolutions that include a mixture ofconnectivity and IT services with afocus on software. Today this role ismainly fulfilled by systems integratorsand professional services firms suchas IBM, Accenture, Infosys and TechMahindra or by IT software vendors.

Par�cipa�ng in the digital economy is a non-nego�able strategy

2013

Value of top 10 telcos was 70% of top internet companies

2018

Value of top 10 telcos was only 20% of top internet companies

TM Forum, 2019 (recrea on of SingTel graphic)

Section 1

New partnership modelsRather than developing their ownskills and capabilities to target newmarkets, CSPs have the option ofpartnering with companies thatalready have them. They can do thisthrough wholesale/retail relationships(for example, reselling services fromcontent providers like Netflix orSpotify), revenue sharing, or bundlingfree over-the-top services (forexample, offering a limited number ofWhatsApp messages as part of abundle).

In most cases CSPs bundle third-partyservices with their own, butsometimes they deliver their ownservices in a wholesale arrangementas is the case with MVNOs. As B2Bdigital services become morecommon, CSPs will need to exploreand pursue both approaches (seeSection 4 for more about enterpriseopportunities).

Platform business models remain anaspiration for CSPs, but identifyingexamples of where it’s happeningsuccessfully is difficult. The oneexception is perhaps the M-Pesaservice in Kenya (see panel opposite).

Leading the wayUntil examples emerge of CSPssuccessfully diversifying andembracing new business models,healthy skepticism will remain abouttheir ability to change. But startupslike Reliance Jio in India and RakutenMobile in Japan may provideinspiration because of their use ofcloud-native technologies. Thisapproach helped Jio scale incrediblyquickly to meet strong demand for itsservices which initially were offeredfor free. In Rakuten’s case, thecompany is deploying cloudextensively in the network.

While there has been much buzzabout both companies, their businessmodels don’t really differ significantlyfrom other mobile operators. RelianceJio’s model was innovative in Indiabecause it was the first operator tooffer data-centric pricing plans (andvoice for free). It also offers attractivecontent bundles and has launchedmany of its own apps. As such, itsapproach is similar to Turkcell’s.

Rakuten has yet to show its hand interms of pricing and services (itsOctober 2019 launch has beendelayed). The most likely approach for

Rakuten – and one which isconsistent with its core e-commercebusiness – would be to offerdiscounts on Rakuten Mobilepurchases (or usage) when customersmake other purchases, and vice versa.

In the next section, we’ll look at howspectrum availability, cloud computingand edge computing could help CSPsdiversify.

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Spotlight on payments for diversificationMany CSPs are experimenting withplatforms to deliver bankingservices to consumers. The typesof services they can offer includemobile payments, mobile walletsand digital commerce, whichincludes carrier billing (also calleddirect operator billing) for goodsand services.

Safaricom and Orange have beenparticularly successful at deliveringpayment services in Africa. Basedin Kenya, Safaricom is by far themost successful in the world,generating nearly a third of its totalrevenue from the M-Pesa mobilepayments service. M-Pesa hasevolved from being a purepayments service to a platformwhere customers can buy goodsand services from hundreds ofdifferent providers. There are162,000 M-Pesa agents today.Orange is most committed tobanking with its Orange Moneyservice, although total revenues, allderived from its Africansubsidiaries, account for less than1% of total group revenue.

Most operators around the worldoffer carrier billing, and a few haveidentified it as a major growthopportunity. Leaders includeJapan’s DoCoMo and SouthKorea’s SK Telecom, both of whichhave been generating revenuesfrom payments for digital goods forseveral years. Recently businesshas slowed, however, as customersmigrate to other global andnational platforms.

BT has expanded into the B2Bbanking and financial servicessector with a dedicated subsidiarycalled BT Radianz, which operatesa neutral platform for financialtrading applications.

So far there has been little activityto create 5G applicationsspecifically for banking, paymentsand commerce. However, the lowlatency of 5G and guaranteedquality of service could beexploited by traders who attachhuge value to high-speedconnectivity.

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Section 2

5G’s potential impact onbusiness models

Read TM Forum’s latest 5G report:

Spectrum availability The way the mobile industry functions,and to an extent the pricing of mobileservices, depend on the availability (orscarcity) of spectrum. 5G improvesaccess to spectrum for existingplayers, while regulators are alsoreserving some spectrum for newlocal, regional and wholesale networks.And in some countries, there isopportunity for businesses to useshared or unlicensed spectrum todevelop their own private 5Gnetworks.

It’s not clear whether spectrumabundance and liberalization willfundamentally change the mobilesector, but there is already enoughinterest in private 5G networks toassert that they will have an impact.The graphic opposite shows thepossible paths. Mobile operators coulduse network slicing and shared orleased spectrum to sell 5G services to

enterprises, or enterprises coulddecide to bypass CSPs by buildingtheir own networks or contractingwith new wholesale players.

What about consumers? While 5G is often discussed in thecontext of new enterpriseopportunities, it could be highlydisruptive to the core consumerconnectivity business as well. Thecombination of faster speeds andunlimited data plans raise the prospectof consumers using 5G as analternative to home broadband.

The availability of spectrum may giveCSPs more confidence to launchunlimited data pricing plans withoutworrying about spectrum constraints.In addition, fixed wireless accessnetworks could be a viable alternativeto fixed broadband using extremelyhigh frequencies in the millimeter bandof spectrum between 30Ghz and300Ghz. Operators could exploit thisto compete with cable operators forhome and small business broadband,and to serve remote areas where fixedbroadband has not been viable. SeeSection 3 for further discussion of 5Gconsumer business models.

Whether 5G amounts to revolution or evolution for mobile operators is a topic of hot debate.TM Forum’s recent report 5G: Evolution or revolution? argues that in the short term 5G isevolutionary, but in the long term it is likely to be revolutionary. This section looks specificallyat the potential to revolutionize business models through spectrum availability, cloudcomputing and edge computing.

Which path to 5G for enterprises?

Mobile operators use network slicing to dominate the enterprise market

New wholesale players and enterprises cut operators out of the equa�on

TM Forum, 2019

5G: EVOLUTIONAND REVOLUTIONAuthor: Mike Hibberd, Contribu�ng AnalystEditor: Dawn Bushaus, Managing EditorApril 2019

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Section 2

Cloud’s potential Cloud and software-definednetworking (SDN) could prove evenmore impactful than spectrumavailability because they give CSPs theopportunity to provide newnetworking capabilities dynamically, ondemand and at lower cost thoughnetwork slicing and IT capabilities thatenable customer self-service. Today’snetworks have been built to managetraffic at peak times, but if it werepossible to give customers the abilityto scale network resources up anddown as needed based on manyvariables, theoretically the cost ofdelivering the service would be lowerand customer experience wouldimprove.

Using network slicing and network as aservice (NaaS), CSPs hope to developnew business models for deliveringvarying levels of service to differentgroups of customers. Services could bebased on the following:

Quality of service (QoS) –refers to the technologies thatmanage data traffic by

reducing latency, packet loss and jitteron the network; in 5G, operators willbe able to manage many QoSparameters.

Throughput – 5G offerstheoretical download speedsof 10-50Gbps; early 5G

deployments have achieved averagespeeds of 100-250Mbps and peakspeeds of 1Gbps.

Latency – this is the time ittakes to connect; latency ontoday’s LTE networks is more

than 50 milliseconds, but 5G is aimingfor less than 10 milliseconds.

Capacity – in some urbanareas the capacity of mobilenetworks is stretched to the

limit, which results in degradation ofservice. With 5G, regulators are

allocating huge amounts of newspectrum to dramatically increasecapacity.

Time of day – not all peopleor applications requireconnectivity 24/7.

Location – in the B2B marketmany applications will belocation specific and thus

require connectivity with only a smallnumber of cell sites.

Security – 5G takes a verydifferent approach to securityfrom previous generations of

mobile technology in that it isembedded in the technology (forexample, all traffic is encrypted anddata integrity is protected).

So, a factory in a single locationrequiring super-fast throughput

between 9 a.m. and 4 p.m. Mondaythrough Friday would be able to buy avery different service compared to anational fleet managementorganization that needs a relativelylow-bandwidth nationwide service thatis available 24/7.

Exposing capabilitiesThe key to realizing the full potential ofnetwork slicing lies in being able toexpose the capabilities to customersso that they can manage their ownservices. This happens through CSPs’IT support systems (see below).Customers’ requirements are unlikelyto remain static over a prolongedperiod, particularly in use-case drivenenterprise markets. As such, cloudcomputing can help CSPs pass thisnetwork flexibility and elasticity on totheir end users.

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TM Forum members are exploringhow to deliver intelligentconnectivity services usingnetwork slicing, which requiresunderstanding the full lifecycle ofthe services from ordering tobilling. Part of the TM Forum OpenDigital Framework (see page 34),the Open Digital Architecture(ODA) provides a functionalarchitecture that operators can usefor end-to-end management andorchestration of 5G and otherdigital services.

Using learnings from several TMForum Catalyst proofs of concept,the ODA team is developing animplementation framework thatcan support 5G use cases. Thiswork is detailed in a documentcalled User guide for network slicemanagement.

An ongoing, award-winningCatalyst called Skynet Phase IIrecently demonstrated how CSPs

can work together to providenetwork slices connectinghospitals.

“This is where orchestration andthe OSS/BSS [operational andbusiness support system] rolesreally come into play because theyneed to make sure that the slicesare activated on-demand on twodifferent carriers, using differentways, using different agreementsand different contracts,” explainsMarco Gatti, OSS/BSS PrincipleConsultant, Ericsson. “That is quitecomplex.”

Watch this video to learn moreabout the Skynet Catalyst:

Helping CSPs deliver intelligent connectivity

Section 2

Although they are making progresstechnically in proofs of concept like theone illustrated above, CSPs are a longway from settling on pricing for servicesthat use network slicing. But it wouldseem likely that they will be able to usecloud and SDN to deliver morecustomized private network solutions.

Today, most businesses pay their mobileservice providers on a per-month/per-SIM basis, much like consumers, but 5Gand network slicing should allow forusage-based billing that considers manyvariables. See Section 4 for more onenterprise business models and NaaS.Also, an upcoming companion reportcalled 5G future: Targeting theenterprise, which will be published laterthis month, will provide more detailedanalysis of the network slicingopportunity.

Edge computingIn the short and medium term, CSPswon’t have to rely on 5G to deliver IoTservices because most of them havebuilt low-power wireless accessnetworks using LTE or othertechnologies, but latency is an issue onsuch networks. According to data frommobile analytics company Opensignal,latency on US LTE networks rangesbetween 54 and 64 milliseconds fromthe mobile device to base station.

CSPs and their suppliers believe theycan reduce the delay to just 1-2milliseconds using 5G. However, end-to-end latency is likely to beconsiderably higher, particularly if datamust travel deep into the network.Getting end-to-end latency down intosingle digits consistently and reliably willrequire edge computing.

Respondents to our survey are quitebullish about the potential for edgecomputing, especially CSPs. A full 85%of them said they believe it will enablenew lines of business by providingcloud-based service to enterprises. Thegraphic above reveals the percentage ofrespondents who agreed with thestatements shown. Interestingly, eventhough CSPs and suppliers believe edgecomputing will enable new business

models, many of them aren’t confidentabout how it will be monetized.

Possible scenariosHow and when edge computing will bedeployed is still unclear. The followingscenarios, which are not mutuallyexclusive, are all possible:

Edge computing will be dominated bythe same players thatdominate today’s public cloudmarket (Amazon Web Services,

Google, IBM and Microsoft). They willexplore an array of approaches forinstalling edge computing includingpotentially leasing facilities from CSPs.

Mobile operators will play an importantrole in edge computing. Theirprimary motivation will bedriving down costs and

increasing operational efficiency in themanagement of traffic over theirnetworks, but delivering latency-sensitive services to business users willalso be a driver. They will leverage theirown passive infrastructure to installedge computing capabilities.

Edge computing will be driven byenterprise users. Given that alarge proportion of edge-enabled applications will be in-

building, they will require 5G coverageand cloud computing on the premises.

Microsoft’s Eric Troup, Chief TechnologyOfficer, Worldwide Communicationsand Media Industries, envisionspartnering with CSPs to deliver edgecomputing capabilities to enterprises.

He talks about this in terms of the‘Intelligent Edge’, which encompassesmillions of edge devices and hundredsof edge data centers. As complexityincreases and the edge expands, telcoshave an opportunity to deliver not only5G connectivity, but also value-addedservices such as data analytics, securityand QoS guarantees.

“We are not going to compete bybuilding an edge network with 5G – wehave no plans whatsoever to do the lastmile,” Troup emphasizes. “We’re notbuilding the 5G edge. We are using it –we need it to work – but we’re notbuilding it.”

Bottom lineGiven that scenarios for the rollout ofedge computing are uncertain, makingpredictions about when or if it willhappen is risky. If 5G can deliver areduction in latency similar to thatachieved by LTE over 4G, end-to-endlatency would be about 25-30milliseconds. The question is whetherthat’s enough to spur new businessmodels.

Applications like remote surgery, dronesas a service, multi-player gaming andfinancial trading need very low latencyand will require QoS guarantees. Thiscould be challenging for in-buildingservices or for services that requirecoverage in remote areas.

In the next section we’ll look moreclosely at how 5G could affect businessmodels targeting consumers.

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Promises of edge compu�ng

85%

62%

71%

62%

41%

44%

Suppliers

It is not clear that operators will be able to mone ze edge compu ng

It will deliver cost savings to operators by enabling them to route traffic more efficiently

across their networks

It will enable development of new lines of business by providing cloud-based

services to enterprises

CSPs

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Section 3

Consumer 5G services pointto fixed-mobile convergence So far, mobile operators have struggled to come up with compelling new use cases for 5G inthe consumer market. LTE already does a decent job of streaming video, so the key tomonetizing 5G for this market lies in exploiting the enhanced reliability it offers. This sectionlooks at the potential for new 5G use cases and analyzes early pricing models, which point toa convergence of fixed and mobile networks.

In a recent blog about the differencebetween 4G and 5G, UK operator EEoffers a realistic assessment of thebenefits of 5G:

Nevertheless, there is enoughdemand for high-quality mobilebroadband services that onceincorporate 5G and a reasonable levelof coverage is achieved, the consumermarket for 5G mobile broadband willrapidly take off.

Which services?As part of our survey on futurebusiness models, we askedcommunications service providers(CSPs) which of the main consumerservices and use cases for 5G willhave the biggest impact now and inthe future. More than half ofrespondents said they believe

enhanced mobile broadband withunlimited pricing plans will be mostimpactful in the short and long term(see graphic above).

However, mobile operators will seekto bundle content with their 5Gpricing plans, just as they have withtheir higher-end LTE packages. SouthKorean telcos have been particularlyactive in this regard. SK Telecom hasacquired exclusive live e-sportscontent for its 5G users and hasuploaded a large library of virtualreality (VR) videos onto its platform.Rival operator LG Plus says thataugmented reality (AR) and VRaccount for 20% of its 5G traffic.

In practice, the availability of AR andVR content requiring 5G will bedriven by the Android and Appleecosystems. Indeed, the dominanceof these ecosystems makes itextremely difficult for operators to

compete in terms of bringing newservices and business models tomarket.

Gaming is the other consumer servicethat is tipped for success with 5Gbecause of its requirement for low-latency connectivity. Vodafone haspartnered with cloud gamingdeveloper Hatch to offer its 5Gcustomers a free three-month trialthat gives users access to more than100 mobile games (see panel on page15).

One option for operators is to createa dedicated gaming network slice thatguarantees low-latency connectivity.Finnish operator Elisa has already saidthat its prices will vary based onspeed and latency.

Unlike 3G to 4G, 5G is nota replacement for 4G. Itadds another layer to thenetwork to provide morecapacity in the busiestparts of the UK’s busiestcities.”

“Impact of 5G consumer use cases on CSPs’ businesses

53% 32% 15%

41% 39% 20%

36% 35% 30%

Enhanced mobile broadband with unlimited data pricing plans

Fixed wireless access

Virtual and augmented reality services

Big short- and long-term impact Big long-term impact Li le impact short or long term

Section 3

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Unlimited pricingWhen it comes to pricing plans forbroadband services, CSPs havealways treated fixed and mobileservices very differently. In mostcountries, fixed broadband usage isunlimited and pricing depends onspeed, regardless of usage levels.Mobile broadband prices, on theother hand, are typically based onusage. Operators have tried, butgenerally failed, to sustain a pricepremium for high-speed mobileservices.

But this is changing. The tableopposite, which shows 5G pricingplans for five early entrants, suggestsa drift towards unlimited data pricing– even if in many cases the plansinclude caveats and exemptions.Further analysis of operators’ 5Gpricing strategies reveals that:

n All launches include unlimited voiceand texts.

n In most markets 5G is available onlyfor plans with the biggest databuckets, and in some cases it isavailable only with unlimited datausage.

n Most early entrants are pricing 5Gat a significant premium over LTE.

n Some operators are bundlingcontent with 5G (for example, SKTelecom has secured exclusiverights to broadcast e-sports events).

At Digital Transformation World2019 in May, Hatch Co-founder &Chief Commercial Officer VesaJutila explained why it’s seekingpartnerships with mobile operators.

“When you stream music or movies,you can always buffer them beforeyou start, but gaming is the soleinteractive, real-time experience,”he said. “That’s why having areliable, high-quality, low-latencyconnectivity is essential for

delivering a good gamingexperience for streamingtechnology.”

He added that mobile operatorsshould take a much more active rolein optimizing network traffic, andalso giving companies like Hatchaccess to network health indicatorsso they can optimize and adaptservices to sudden changes in thenetwork environment.

Watch Jutila and other C-levelexecutives discuss the potential for5G:

$46 8GB

150GB

200GB

300GB

Unlimited

Unlimited

Unlimited

$62

$74

$104

$37 20GB

40GB

50GB

60GB

$45

$51

$57

100GB$63

$85

$95

$105

Monthly cost How much data? Plan details

Speeds decrease to 1Mbps a er data cap

Speeds decrease to 5Mbps a er data cap

$56 Unlimited

Unlimited$45

Speed 1Gbps

Speed 600Mbps

At the end of December, price will rise to $78 per month and a cap of 200GB of data

Data is unlimited un!l end of December

Always subject to thro"ling and only offers slow hot-spot speeds and 480p videoFirst 22GB of data are unthro"led; also includes 15GB of LTE hot spot and 720p video

Fastest speeds, no thro"ling

First 75GB of data are unthro"led; also includes 20GB of LTE hot spot and 720p video

Comparison of early 5G pricing plans

TM Forum, 2019

$28 Unlimited

Unlimited$31

Maximum speed 2Mbps

Maximum speed 10Mbps

Unlimited$36 Maximum speed available

Gaming needs help from CSPs

Section 3

Mobile broadbandIt is likely that most mobile operatorswill follow the trend of launching atleast one unlimited or nearlyunlimited pricing plan for 5G. Thismeans that when viewed holistically –from a capacity, performance, usecase and commercial perspective –5G is beginning to look a lot like thehigh-speed broadband business.

It is much too early to understandhow this apparent convergence offixed and mobile networks will playout. However, some potentialscenarios illustrate the implications:

Operators will be able to offer acombination of fixed and mobilenetwork connectivity with the samecapabilities, meaning that thecustomer does not need to know ifthe connection is ‘fixed’ or ‘mobile’.

If 5G and fixed broadband servicescan deliver the same capabilities, thenthere should be a strong case for aconvergence in terms of pricing. Ingeneral, consumers spend less onmobile broadband than homebroadband.

The distinction between homebroadband and mobile broadbandcould begin to blur. 5G increases thepotential for cord-cutting for thosehomes well served by 5G mobilenetworks. For example, Verizon’s 5Gmobile broadband services offersunlimited data and unlimitedtethering.

Another aspect of convergence in the5G era relates to pricing strategies.While mobile operators have pricedmobile broadband services based onvolume of data consumed (regardlessof speed), fixed broadband providersprice services based on throughput.

But in July UK operator Vodafoneannounced an overhaul of its mobilepricing which includes 5G, switchingfrom the conventional approach ofprices based on inclusive data tounlimited data usage with pricesbased on speed. This approach isalready used in Switzerland andFinland.

Lasting premium?In most early 5G launches, operatorshave priced 5G at a significantpremium over LTE. The one exceptionis in South Korea where it is 5% to10% cheaper. While South Koreanoperators are keen to start movingtraffic away from their congested LTEnetworks, operators in othercountries are under no such pressure.They are happy to test the market for5G and capture any price-insensitiveearly adopters before the marketmatures, more devices becomeavailable and competition from otheroperators arrives.

Vodafone Group CEO Nick Read gavesome interesting insight into pricingstrategies in his address toshareholders to announce thefinancial results for the first quarter of2019.

Whether 5G can sustain a pricepremium – be it just for incumbentoperators or for the market as awhole – is unclear. When CSPslaunched LTE services, they pricedthem at a premium over 3G, butwithin the first couple of yearspremiums disappeared.

Given that the performanceenhancement of LTE over 3G wasarguably greater than that from LTE to5G (for example, video streaming wasnot possible before LTE), it is difficultto see how premiums will last.Furthermore, early 5G adopters arealready having to pay a premium overLTE because of the higher cost ofdevices.

In the next section, we’ll look at how5G is impacting CSPs’ businessmodels for enterprise customers.

inform.tmforum.org 16

In the UK, we intend totarget the base with ournew Be Unlimited offers,”he said. “However, we willalso target new customers,as we are effectively achallenger in the UKconsumer market. is iswhy we’ve priced 5G atzero premium, in contrastto Germany, where we arecharging an additional €5per month on our lowerplans.”

“

inform.tmforum.org 17

Section 4

5G helps mobile operatorstarget enterprisesBusiness to business (B2B) services account for 20% to 30% of communications serviceproviders’ (CSPs’) annual revenue globally, which makes B2B a $300 billion to $450 billionbusiness. So far, this market has been dominated by fixed-line operators, but 5G could changethat, opening a huge opportunity for mobile operators to target enterprises and governmentalorganizations with not only connectivity services, but also platform-based services delivered inconjunction with partners. In this section, we look at some of the business models they areconsidering to monetize 5G.

The substantial revenue generated byB2B services is not shared equallyamong CSPs because the market isdominated by incumbent fixed-lineproviders that enjoyed a monopoly onserving businesses and governmentusers before markets were liberalizedin the 1980s and 1990s. Incumbenttelcos continue to dominate becausemost enterprise end users work infixed locations connected throughlocal area, metropolitan area and widearea networks (LANs, MANs andWANs). Indeed, our analysisconcludes that mobile connectivityaccounts for only 30% to 40% of thetotal B2B market.

However, traditional B2B revenue isunder acute pressure. For example,enterprise voice services have proveneven more vulnerable to thedisruption from IP telephony than theconsumer market. Furthermore, trafficbetween company locations is falling,while traffic to and from public andprivate clouds is surging. Currententerprise spending oncommunications does not reflect thistransition in traffic and requirements,but inevitably it will shift.

Optimism around 5GCSPs are optimistic about the bump5G could bring to B2B. In a TM

Forum survey conducted late in 2018,46% of CSP respondents said thattheir organizations generate less than10% of revenue today from B2Bservices. But overwhelmingly theyexpect B2B’s share of the market togrow rapidly over the next 5-10 years,with more than 70% saying B2B willrepresent more than 50% of revenueby 2029. It’s unclear whether thereare genuine grounds for such aseismic transformation, but therecertainly are more opportunities forgrowth in B2B than B2C market whenit comes to 5G.

CSP revenue from B2B services

0-10% More than 50%

TM Forum, 2019

46%

11%

43%

17%

11.5%

71.5%

Now Medium term Long term

Section 4

inform.tmforum.org 18

Reasons for CSPs’ bullish attitudesabout B2B include:

General excitement aboutdigitization and Industry4.0. – CSPs feel they missed

out on digitization of the consumermarket, which has been dominated bydigital native platform providers, sothey are desperate to play a leadingrole in B2B.

Industry vertical use casesfor 5G – CSPs are focusingon myriad use cases in

verticals such as autonomous cars,financial services, remote healthcareand smart cities, all of which havevarying requirements for latency,reliability, coverage and availability(see note below).

Support from keyinfluencers – suppliers andconsultants are talking up

the B2B market opportunity (anddelivering the necessary technology),which helps CSPs feel confidentabout deployment.

Current B2B modelsCSPs predominantly provide fixed andmobile connectivity and virtual privatenetworks to enterprises today. Theyalso sell and/or resell third-partyhardware, software and cloud-basedservices.

As noted in Section 2, adoption ofcloud computing is changing the B2Bmarket, blurring the distinctionbetween IT and telecoms andspurring competition among CSPs,systems integrators, softwarecompanies and cloud serviceproviders. This has resulted in

continuing growth of public cloudproviders – principally Amazon WebServices (AWS), but also MicrosoftAzure and Google.

Following are some of the businessmodels CSPs use to target enterprisesin the cloud-computing market:

Providing public cloudservices in directcompetition with AWS,

Microsoft and Google – while manytelcos have abandoned the idea ofdelivering public cloud services,Deutsche Telekom and NTT arecompeting directly with cloud-nativeproviders. Operators are also havingsuccess in some developing markets,where there are strict rules on datasovereignty and global cloudproviders don’t have a local presence.For example, China Unicom has builta large data center and cloudcomputing business that generated5.7% of its total revenues in 2018.

Bundling connectivity withthird-party cloud services –some operators are

reselling cloud services at or close tocost to protect their core connectivityrevenue. For example, CSPs all overthe world resell Microsoft 365 as partof a bundle, not because it generatessignificant profits but because it helpsas part of the relationship with B2Bcustomers.

Helping enterprisesmanage public cloudservices – this is an

emerging market where CSPs arecompeting with systems integratorsand IT managed service providers. Forexample, in 2018 Orange Business

Services acquired Basefarm, a leadingplayer in cloud-based infrastructureand services and the management ofcritical applications.

Cloud hosting – Vodafoneand Deutsche Telekom (T-Systems) have moved away

from offering their own proprietarycloud services to reselling and hostingother providers’ clouds. For example,Deutsche Telekom sells Huawei’sFusionSphere as its own brand cloudwhile Vodafone hosts Alibaba inGermany.

Creating cloudmarketplaces – some CSPshave set up cloud

marketplaces aimed at small tomedium-sized enterprises, but resultshave been lackluster, so they havescaled back the initiatives. Examplesof cloud marketplaces includedTelstra’s Apps Marketplace and MTN’scloud marketplace.

Rolling out edge computing– some CSPs are making aproactive move into the

fledgling market for edge computing;they are enthusiastic about thepotential for leveraging existing(passive infrastructure) assets. SouthKorean CSPs Korea Telecom and SKTelecom have already started todeploy edge computing as part oftheir 5G roll-outs. SK Telecomlaunched its 5G Mobile EdgeComputing Platform in March which itsays it will open to third-partydevelopers and to enterprises.

TM Forum will publish a companion report to this one later in September called 5G future: Targeting theenterprise. The report will cover in detail how CSPs intend to use technologies like network slicing and edgecomputing to target enterprises. In addition, it will explain which verticals CSPs view as most promising,through analysis of the B2B strategies of the world’s top 25 telcos using publicly available financial resultsand presentations to investors.

Section 4

Continuum of modelsWhen it comes to targetingenterprises and specific verticals,CSPs can take a variety ofapproaches, from delivering best-in-class connectivity to providing fullend-to-end services. The graphic

below shows the continuum of offersthat are possible. We outlined thefour approaches in detail in our 2018report Vision 2020: Future CSPbusiness models, but we’ve provided ashort recap below with a narrowerfocus on 5G.

Learn more about telco businessmodels:

inform.tmforum.org 19

Even if they are successful indeveloping new B2B businessmodels, CSPs won’t be able tomonetize them until there is sufficient5G coverage. This prompts animportant question: How will CSPsfactor the enterprise market into theirplans for rolling out 5G given thatmost deployments will leverage CSPs’existing LTE (and 3G/2G) networkinfrastructure, which has beendesigned for smartphones rather thanenterprise applications?

Two early 5G deployments areshowing how operators may be ableto address both marketssimultaneously. In South Korea, SKTelecom has developed what it calls a“5G Cluster Strategy”, which seeks tobuild “an advanced 5G environment

with cutting-edge ICT including AR[augmented reality], VR [virtual reality]and AI [artificial intelligence].” Thecompany is building these clusters inbusiness districts, parks and factoriesto target consumer and B2B sectorssimultaneously.

The idea is to attract new subscribersby allowing people to experiencedifferentiated services at cluster sites,and SK Telecom also hopes topromote development of 5G newservices. For example, the company isplanning to build 12 mobile edgecomputing sites for applicationsincluding manufacturing, media,finance and gaming.

In the US, AT&T is integratingenterprise market opportunities into

its 5G rollout. Speaking to investors atits interim results presentation inApril, CEO John Donovan explainedhow the company is realizingenterprise opportunities as it rolls outits network, city by city.

“We announced Chicago – RushHospital – we’re going to…doadvanced 5G in the patient intakeand ambulatory care,” he said. “Weannounced Austin as a 5G market –we’re doing Samsung roboticmanufacturing deployment, and we’rebuilding the campus out for MagicLeap to do their next-generationheadset with 5G. So, everything thatwe have done has not been toscattershot a city – it’s been designedaround the enterprise play.”

Early 5G deployments target consumers and B2B simultaneously

Divergence and diversifica�on away from core competencies

TM Forum, 2019

Connec vity As-a-service connec vity

Pla!orm End-to-end services

Section 4

ConnectivityFixed-line operators already provideseveral types of connectivity toenterprise customers, such as virtualprivate networks, LANs, MANs andWANs. WANs also are a core offeringfor mobile operators. In addition,mobile operators deliver privatenetworks by leasing spectrum toenterprise customers, but this is aniche offering.

As noted in Section 2, new rulesaround spectrum allocation in somecountries make it possible forenterprises to consider deployingtheir own private 5G networks. Anyapproach that bypasses CSPs isclearly a threat. However, manyenterprises will not be interested inmanaging and operating private 5Gnetwork and will prefer to partnerwith CSPs. We’ll discuss this potentialthreat in more detail in the 5G future:Targeting the enteprise report.

All core connectivity services typicallyinclude charges for materials (router,cabling, etc.) and subscription fees.But from the customer’s perspective,these services typically lack flexibilityin terms of pricing and ability to self-configure.

Many CSPs also offer ‘as-a-service’models (for example, network as aservice, infrastructure as a service,software as a service). These are

intrinsically linked with cloudcomputing. Rather than buying andintegrating IT software solutions,sometimes from different vendors, as-a-service models allow the enterpriseto pay for a hosted the service on amonthly basis. New releases aredelivered regularly with no disruptionor downtime.

5G and NaaSCSPs move network functionality andIT operations to the cloud (a lengthyand complex process), they will beable to expose the capabilitiesthrough application programinterfaces (APIs) to enterprisecustomers in order to deliver more as-a-service offers (see panel on page12).

Many CSPs envision offering networkas a service (NaaS) in conjunctionwith 5G because of 5G’s networkslicing capabilities. The first NaaSservices have been mostlyconnectivity-based, such as software-defined WANs, virtual customerpremises equipment and WANoptimization, all of which aredelivered over fixed networks. Butdeployment of a software-defined 5Gcore makes it feasible to deliver thisas a mobile service.

While the capability of offeringdifferentiated services using 5Gnetwork slicing is relatively well

understood, how to manage slicesand the number and kinds of newservices CSPs will be able to deliverare not. Visions vary from just ahandful of differentiated connectivityservices to fully customized servicesfor large enterprise users.

For more about network slicing, seethis report, and watch for the next5G future report later in September:

Platforms and 5GIn our Vision 2020 report weidentified two potential platformapproaches for CSPs to pursue, withmany variations and options possible:

n Enabler– CSPs expose core telcoassets (connectivity, billing,colocation, security, etc.) to third-service providers who control therelationship with customers

n End-to-end service provider– CSPsuse platforms to expand into newlines of business, such as internet ofthings (IoT), and control therelationship with customers

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Author: Tim McElligott, Senior AnalystEditor: Dawn Bushaus, Managing Editor

May 2019 | www.tmforum.org

NETWORKAS A SERVICE:ADDRESSING THE FULL ENTERPRISE OPPORTUNITY

B2B2X CSP partnering scenarios

TM Forum, 2018

XYZ Telco’s role as the B2B2X enabler

XYZ Telco’s role is to enable the partners to commercialize their offers

Scenario A: Customer rela!onships are managed end to end by partners

XYZ Telco Partner Scenario A

Content provider or distributor

End user

XYZ Telco as operator/CSP +

partners’ integrated services

XYZ Telco’s role as the B2B2X service provider

XYZ Telco’s role is to enable, aggregate and commercialize offerings

Scenario B: Customer rela!onships are managed end to end by the telco

Partner XYZ Telco Scenario B

XYZ Telco as operator/CSP

+ partners’ integrated services

End user

Content provider or distributor

Section 4

But CSPs’ progress on platforms isslow-going. In a report published inMay, consultants at McKinsey &Company identified some of the keychallenges for incumbent operators:

McKinsey notes that many telcosoften choose to collaborate withglobal platform providers like Amazonand Microsoft, but the deals carry riskof the platform provider moving in onthe partner’s core business.

TM Forum’s most recent survey aboutfuture business models delivers mixedresults. The graphic above reveals thepercentage of respondents whoagreed with the statements shown.While one in three respondents saidtheir senior management team doesnot even know what a platformbusiness model is, more than 70%said their companies are developingnetwork and IT systems with theexpectation they will support platformbusiness models in the medium tolong term.

End-to-end servicesSome CSPs are providing new digitalservices end to end, particularly in theIoT. The table below compares threeexamples, but in all cases thecompanies resulted from acquisitionsand operate largely independentlyfrom the parent companies.

No clear patterns have emerged interms of how and where thesebusinesses leverage or intersect withtheir parent companies. SK Telecomacquired SK Infosec with a view toexploiting synergies in IoT, securityand smart home, but the companystill operates as an independentbusiness.

CSPs have long debated whether new‘digital’ businesses should beintegrated into their core businesses.The main advantage of doing so isthat it allows the digital business toleverage existing sales and marketingchannels. The disadvantage is that thedigital business may lose its focus anddesire to be successful.

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Pla�orm business models get mixed reviews

TM Forum, 2019

72%

37%

29%

Our senior management doesn’t really know what a pla orm business model is or how it relates to our business

We are experimen!ng with pla orm business models but only for new lines of business with no real expecta!on that it will become a major line of business

We are developing network and IT systems with an expecta!on that they will support pla orm business models in the medium to long term

Platforms raise difficultquestions for CEOs ofincumbent companiespushing ahead with theirdigital transformations.Should they emulate thefront-runners, join forceswith them or not play at all?Not playing may seem riskyin a world where ‘platformsbeat products’. Yet buildingyour own platform, in amajority of markets whereglobal platforms are alreadythriving, may be akin toarm wrestling with abulldozer.”

“

IoT business Details

Verizon ConnectUS-based Verizon doled out $5 billionacquiring Fleetmatics, Telogis and Movildatato create its telematics business

Telus Health

One of three businesses that resulted fromTelus’ 2007 acquisition of Emergis, TelusHealth provides IT solutions to Canada’shealthcare industry

SK Infosec

SK Telecom acquired data security solutionprovider Infosec in 2018 to prepare forexpansion into 5G services for autonomousdriving, smart home and smart factory; SKInfosec is South Korea’s biggest data securitysolution provider with around $175 million inannual sales

CSPs acquiring IoT expertise

TM Forum, 2019

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Section 5

Make it happen – Strategies fordeveloping 5G business models5G networks will be built regardless of whether mobile operators develop new business modelsand lines of business. The next generation of mobile technology is needed to support thecontinuing demand for mobile broadband services and growing traffic levels. However, newbusiness cases (or lack thereof) can impact the speed of deployment and prioritization ofcoverage.In addition, 5G is a loose term. Many of the new business models covered in this report require that communicationsservice providers (CSPs) adopt network virtualization and software-defined networking and move their IT systems to thecloud. While most CSPs include this digital transformation as part of their overall 5G strategy, they are not necessarily oneand the same.

Following are some steps CSPs can take today to ensure monetization of 5G:

Appraise competencesMany 5G use cases will requirespecialized competences andcapabilities that few CSPs possess.Skills in software development, systemsintegration and professional servicesare essential for delivering large ITprojects, whether they includeconnectivity or not. CSPs either needto acquire these skills (many largeoperators are, indeed, building strongprofessional service capabilities) or bewilling to forge strong partnershipswith specialists – unless, that is, theyprefer not to take a use case-drivenapproach to 5G and focus instead onbecoming a best-in-class connectivityprovider.

Don’t dismiss connectivitySome CSPs will be able to survive, andindeed thrive, by becoming best-in-class 5G connectivity providers. Manyobservers perceive connectivity as acommodity and suggest thatdiversification is required forprofitability. This may be true forincumbent CSPs with mature fixed,mobile and broadband businesses, butothers can leverage 5G to enter thefixed broadband or enterpriseconnectivity business because 5Goffers huge improvements over legacycommunications networks in terms ofcost, flexibility and elasticity.

Embrace wholesaleCSPs often talk about their role asenablers, but many are unclear aboutwhere this capability resides within thebusiness. Logically, enablement meanswholesale, but within most CSPorganizations the existing wholesalebusiness is not set up as an engine forgrowth. Wholesale departments managetraditional interconnection, roaming andsettlement functions and look after themobile virtual network operator (MVNO)business.

But most CSPs seem to prefer the retailbusiness. For example, carrier billing,which is strictly a wholesale service, doesnot typically sit within the wholesaledivision. Similarly, monetization ofapplication program interfaces (APIs) – aline of business which could sit withinwholesale – tends to sit within the retaildivision. CSPs should elevate thewholesale division and convert it into adigital services enabler.

Section 5

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Integrate decision-makingIn successful digital organizations,technology and business decisions areso closely aligned as to be inseparable.Technology is used to create value forthe business. This is not the case withmost CSPs.

Technology tends to be carved off intoIT and network divisions and ismanaged as a cost item, while the restof the organization is set up to selltechnology that is deployed. Smaller,multidisciplinary teams with customer-facing responsibilities are needed tounderstand what customers want from5G and then to play an active role indelivery.

Learn about platformsThe survey we conducted to supportthis report points to a lack ofunderstanding within CSP board roomsabout platform business models.Indeed, developing cloud-basedplatforms to support end-to-endservices or marketplaces for consumersand enterprises requires software skillsthat most CSPs don’t have. Many CSPexecutives may believe that it’s simplynot practical to deliver these types ofservices.

But that doesn’t mean that operatorscan’t participate in platform businessesthrough partnerships with third-partyproviders. They can and should seekout opportunities to partner asplatform enablers, particularly as theydeploy 5G in the core network and candeliver differentiated connectivityservices. Given the profound impactplatforms are having on businessesacross all sectors, doing nothing andignoring them represents a derelictionof duty for any CSP executive.

Prepare for 5G disruptionIn the consumer market, multi-play andbundling has been the preferredstrategy for CSPs of all sizes, but 5Gthreatens to disrupt multi-play – or atthe very least make it much morecompetitive (and less profitable). 5G’sperformance promises to be the sameor better than performance achievedthrough digital subscriber line and fiberfacilities, which means ‘cord cutting’ islikely. Customers will be able toabandon fixed-line services in favor ofmobile, positioning mobile operatorsthat have been left out of lucrativelocal broadband markets as formidablechallengers to wireline providers.

Make premiums stickIn early 5G launches, CSPs have beenpositioning 5G as a premium service,but if history serves as a guide, priceswill drop as soon as competition heatsup. But 5G should carry a premiumbecause its performance matches fixedbroadband.

To sustain premium pricing, CSPsshould build strong content bundles for5G, potentially including non-digitalbenefits such as discounts on physicalgoods. For example, UK operator O2has a long-running loyalty programcalled O2 Priority that offers discountson many goods and services, with aspecial relationship with music andconcert venues.

Consider acquisitionsThe odds are stacked against CSPs thatwant to deliver 5G services based onuse cases in vertical markets. When Itcomes to perception and expertise,mobile operators sit a long way behindvertical market specialists (think, JohnDeere or Cargill in agriculture) andmulti-vertical systems integrators andprofessional services firms likeAccenture, IBM and Infosys. So, if aCSP aspires to become an ICT orinternet of things (IoT) provider in aspecific vertical, acquiring a firm in theright country or region may beessential.

Section 5

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Merge networks and ITWhy would a CSP deploy cloud-nativecapabilities within the network but notextend the power of those capabilitiesto customers? This is the risk operatorsface if they continue to managenetwork and IT divisions as separateorganizations.

CSPs should be single-minded in theirpursuit of delivering a better digitalexperience for customers, and thisincludes giving them self-servicecapabilities. Operators must combinesoftware-defined networking withcloud-based IT systems to deliverintelligent connectivity services. TheTM Forum Open Digital Architecture(ODA), part of the Open DigitalFramework (see page 34), provides afunctional architecture that operatorscan use for end-to-end managementand orchestration of 5G and otherdigital services.

Allow for experimentationIn addition to merging networks and IT,CSPs must adopt an Agile DevOpsculture that allows for experimentation.Digital-native companies often stressthe importance of being allowed to failfast as they seek to develop newcapabilities. Software developersworking for Amazon and Google useDevOps practices to create newservices rapidly. If the services succeed,they’re monetized; if they fail, they’reabandoned, and the team moves on todevelop the next new service.

Within CSP organizations allowing forfailure requires cultural change, but italso relies on having the right digitalsystems in place to test a new serviceor functionality and then quickly roll itout or abandon it based on the results.As CSPs begin to deploy 5G, they needto have a network and IT architecturein place to confidently try out newservices.

Additional features and resources26 | Overcoming the challenges of monetizing 5G investments with new

Digital Services

29 | Move over passive platforms! Make way for ‘ACTIVE’ Platforms

34 | TM Forum Open Digital Framework

35 | TM Forum Research reports

36 | Meet the Research & Media team

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Overcoming the challenges ofmonetizing 5G investments withnew Digital ServicesOver the last few years, the Telecom companies have experienced diminishing returns due tomarket saturation, price competition and the rise of over the top (OTT) competitors. Theirtraditional revenue generating services like SMS based messaging services or voice calls havebeen almost killed by players like WhatsApp.

On top of that, premium SMS basedVAS services from partners have diedwith the shift in IP and App baseddelivery models of those services.Obviously, data revenue has beenincreasing for most of the operatorsaround the world with the move tobetter network technologies – from3G to 4G/LTE and now with 5G.Over the last 12 months, lot ofenthusiasm has gathered around 5Gand experimental roll-outs arehappening, but, very few operatorsseem to be absolutely clear abouthow to improve their revenues withthe new 5G investments. With 5G,there are new technical enablers likehigher speed, lower latency, andnetwork slicing helping specific usecases - streaming video and AR/VRapps with high speed; drones,connected cars & remote surgerywith low latency; network slicing canbring in QoS differentiated offeringstargeted to different application andbusiness segments. The ability tosupport massive amount ofsimultaneous connections at lowerlatency will also support varied IoTuse cases and applications. The realquestion is to find out what will bethe killer applications and serviceswhich will help the operators tomonetize their investments. Keyquestion is that whether there will benew value chains emerging tosupport new business modelsenabled by 5G.

We, at Tecnotree, with 40 years ofglobal telecom experience, believethat the future monetization modelswill be based on the current pillars ofstrength of the various players:Customers (Consumers &Enterprises), Operators and Partners.

In a situation, where the nextwinning digital services are yetunknown, it is quite difficult foroperators even to start buildingthose by themselves and take the

risks. Partnering with companies whoprovide new-age digital services isdefinitely the option that theoperators can think of. It demands anecosystem to be in place with whichcontinuous innovation from themarket can be brought in front of theoperator’s subscriber base for fastergo-to-market and adoption. This isquite different from the traditionalapproach of doing business withpartners from an operator’s point ofview.

Currently, it takes a long time tointegrate & roll-out partner offeringsto the market through the operator’sown channels and Business SupportSystem (BSS). Once a partner isselected, the offering needs to becreated in a product catalog withconfigurable pricing parameters,bundling options and serviceconfiguration parameters in order toprovision the service for a customer.Next is to integrate billing andsubscription management systemsfor invoicing, collection & settlementwith the multiple partners in case ofa complex multi-party offering. Onceit is launched, apart from the needsto offer an omni-device self-serveapplication for consumers, theoperator’s sales agents would alsoneed to know about the newservices, pricing and offers. They alsoneed to be educated about how tosell the non-traditional newDigital/IoT services. Traditionally,with a very limited number of newservices launched, the operatorstried to manage it with minimumchanges in the existing BSS system.However, even if this approach hasworked to some extent in the pastwith a very limited number ofpartners, it has become a majorchallenge for the operators to roll-out new digital services on acontinuous basis with more and morepartners.

Also, looking at it from a new Digitalservices partner’s viewpoint, it’salways a go-to-market challenge forthose companies who are bringinginnovative new services to themarket. It also takes time to partnerwith an operator due to their lowerrisk-taking appetite as well as limitedexpertise in the new areas ofbusiness. However, such start-ups ornew age companies are typicallyhungry for new business and wouldwelcome faster go-to-marketpartnerships with operators, as theyhave a huge captive audience.

As such, there should be a naturaltendency between all the players tocome together and work towardsbenefiting from the capabilities ofnew 5G networks. Consumers &Enterprises are looking forward togreat new services brought to themto enrich their life and automatetheir business, while Digital Servicesand App providers are experimentingwith new services and hungry toreach more and more customers, andOperators have the reach, networkand infrastructure to sell, provision,charge & bill for the services fromthe subscribers.

The speed and agility required tocompete in the marketplace and tobring great consumer experienceswith new services mandate a veryefficient and effective Digital BSSsystem that can help the operatorsto build an ecosystem for digitallyconnected communities andempower them. The key focus ofsuch a Digital BSS system would beon the following:

1. Digital Products: In a 5G world,the BSS needs to have capabilitiesrequired to provide a self-onboardingsystem for the partners to register,create offers and push those to theoperator’s product catalog forbundling and propagating to all saleschannels. The product catalog needsto understand, capture andpropagate the provisioningparameters for the service offeringand seamlessly enable catalog drivenorder fulfilment. Idea of a singlecustomer identity is extremelyimportant across the services, sincetraditionally customers have beenidentified by the service id/MSISDNnumber in a typical CRM system.Having a single customer profile andid, allowing multiple services fromboth the operator and partner to beassociated with the customer, tomanage periodic subscriptions, try &buy models, target, re-targetcustomers for new services sales,

would require the whole customerdomain applications to behave in anew-age Digital manner, in contrastto legacy systems.

2. Digital Platform: Along with theproduct capabilities, we believe thatoperators can build a strong platformbusiness based on certain key APIsbeing opened up for consumption bypartners – be it KYC/Customerprofile APIs to partners for validationof customers, or be it billing andinvoicing APIs to allow newbusinesses like Billing-as-a-service orInvoicing-as-a-service for SMEs.Additionally, many operators whohave successfully implementedMobile Money services can open uptheir Mobile Money Wallet APIs forpartner integration. Today’s killerapps like messaging whensuccessfully deployed acrossgeographies by an operator group,can also be tomorrow’s super-app forperforming various transactions overmessaging interface. The operator’scan also create new businesses byexposing and metering those APIs forconsumption by partners.

3. Digital Delivery & Operations:While it is important to build newfunctional & platform capabilities toaddress the ecosystem needs, it is ofutmost importance to remember thatagility and speed are key to building acustomer-focused ecosystem. Thespeed of introduction of new serviceshas to match the likes of theFacebook’s and Google’s of the world– which means CI/CD to bedeployed, features, functions and UXto be A/B tested and continuouslyimproved for better customerexperience and also understanding ofcustomer behaviour to make data-driven decisions based on AI & ML.Containerisation of the software stackplays a vital role in that for providingrolling software upgrades with zerodowntime and self-healingcapabilities.

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5G based new network capabilitieswill also bring in a new opportunityfor MVNOs to succeed in their visionof becoming the AirBnb’s and Uber’sof the telecom world, whereby theywould not require the infrastructureor the services to make a business outof it. They need to just focus oncreating an ecosystem with partnerswhich delivers the best newconsumer experiences to the market,

faster than traditional telcos and havethe right software play to make all thishappen.

Tecnotree understands both theopportunities and challenges faced bythe operators with the new 5Ginvestments. In absence of a clearbusiness model for the new hugeinvestments, many of the operatorsare in a wait & watch mode, while

only a few are trying out newinnovative business models. We havebeen working hand-in-hand with ourkey customers globally to help themDigitize and Transform their ITsystems with Tecnotree Digital BSSSuite 5 which not only addresses theoperator’s need for DigitalTransformation, but also helps increating an ecosystem with partnersto create new monetization models.

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Move over Passive platforms! Makeway for ‘ACTIVE’ Platforms

In “Active” platforms, a communications service provider (CSP) creates additional value to theactors on its marketplace and to the end consumers of the goods or services on offer. Suchadditional value is offered through orchestration of the CSPs own core assets, processes andfunctionality, with that of the market actors’ goods or services thereby significantly enhancingthe overall value to consumers. CSPs that actively enrich various elements of the value chainare able to create a strong network effect, disrupting established industries and entering intoentirely new business models.This stands in stark contrast to a“Passive” platform, which is a limitedmarketplace offered by a CSP, wherethe market actors can buy and sellgoods or services and conductcommercial transactions. There is noadded value or “enrichment service”offered by the CSP. Such platformsare likely to lose out over a period oftime, as they are perceived to be amere “yellow pages” directory withsearch and match algorithms.

Following are some examples ofenrichment services CSPs can offerto enable an Active platform:

n API-enablement services –whereby a CSP, API-enables amarketplace actors’ corecapabilities. Examples: Inventory,Customer Profile, Dynamic Pricing,Order Management, ServiceManagement, Trouble Ticketing,etc.

n Offering own products andservices to demand-side andsupply-side participants. Examples:Secure API Gateways, Cloudenablement, SaaS-enablement, etc.Also, core telephony services suchas Messaging, Location services,

Enterprise Mobility enablement,etc

n CSP’s could also consider offeringturn-key B2B “as-a-service”propositions to the market actors.Examples: Billing-as-a-service,CRM-as-a-service and even“Digital Transformation as-a-Service”.

Progressive levels of digitalopportunity for a CSP to enableActive Platforms is shown below:

Future Business Modelsenabled by 5G:Before we look at future businessmodels, it may be useful to have acommon definition and understandingof a “business model”. As per thedefinition given by Teece D.J.("Business Models, Business Strategyand Innovation", Long Range Planning,):

Business models are “the design orarchitecture of the value creation,delivery and capture mechanismsemployed. The essence of a businessmodel is that it crystallizes customerneeds and their ability to pay, definesthe manner by which the businessenterprise responds to and deliversvalue to customers, entices customersto pay for value, and converts thosepayments to profit through the proper

design and operation of the variouselements of the value chain”

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Telco-poweredSMART CITYACTIVE PLATFORM

5G Network

Billing

OrderManagement

API-enablementas a Service

AI and MLas a Service

Cloud and InfraServices

IoT Platform

SecuritySolutions

IoT SystemIntegration

Smart EnergyProviders

AnalyticsasaServiceEnergyManagement

SolutionProviders

PARTNER ENABLEMENTSERVICES

Public TransportationProviders

Smart SensorManufacturers

Smart City SolutionsStartups

Government DataSource Providers

City Planners

Traffic ManagementSolution Providers

Smart GridManufacturers

Smart Home andBuilding Manufacturers

EmergencyServices

Smart SurveillanceSystem Providers

Independent AppDevelopers

Recycling and WasteManagement Experts

Smart ParkingProviders

ElectronicTechnicians

Keeping this definition in mind, wecould look at some of the “active”platform business models CSPs canoffer immediately:

1. IoT-Centric Smart City PlatformIoT-centric solutions offered by CSPsallow core network capabilities to bemonetized as a bundled B2B offering.Enriching it with an “Active Platform”business model can further aid value-creation.

A typical initiative where such asolution applies is a “Smart City”project. For an initiative of thismagnitude, a government entity willneed to collaborate with the followingtypes of participants:

n IoT device manufacturers,

n IoT platform vendors,

n System Integrators,

n Cloud service providers,

n Communication infrastructureproviders (5G), etc.

CSPs can choose to bid just for theconnectivity bit by offering adedicated 5G network infrastructurefor this initiative or play a muchbigger role of an “Active Platform”provider. Through an Active Platform,the CSP is able to put together theentire Smart City solution incollaboration with third-party vendors

and manufacturers listed above andenriches this offer with its owncommunications infrastructure. Sucha solution provides best-of-breedcombinations of goods and services,helping governments launch SmartCities faster. To offer variety, scaleand flexibility, an IoT-centric SmartCity platform offered by CSPs catersto different types of demands andbudgets. A typical IoT-centric ActivePlatform for Smart cities, offered by aCSP would look like the below image:

A Digital Marketplace can be fairlyeasily incorporated into a CSP’sexisting IT landscape as shown in thediagram above. The examples ofdemand-side and supply-sideparticipants, the goods and servicesshown in the diagram are just a subsetof entities and offerings in the digitallyconnected ecosystem. CSPs canchoose to on-board any number ofparticipants: service providers,government agencies, freelancecommunities, foreign collaborators,start-ups, product vendors, IoTcompanies etc. thereby delivering notonly utilitarian value in-terms ofefficiencies created, but also superioruser experience and the ease of doingbusiness.

2. Smart Buildings Digital HubCSPs can consider offering “buildingmanagement in a box” to facilitymanagers of large buildingestablishments such as corporateoffices, hospitals, airports, etc. Such apackage will typically include IoTdevices, building managementsoftware, Smartphone Apps, etc. alongwith installation and setup servicesoffered through certified technicians.

Most building management softwarepackages available in the market todayare not designed to inter-operate withexisting technologies such as accessdoors, alarm systems and identitymanagement systems. Though IoTplatforms exist to address this problem,significant System Integration work isrequired to get them to interoperaterobustly. This represents anopportunity for CSPs as it lends itselfto an active platform business model.The vision of a Smart Building DigitalHub, powered by a CSP, is shown inthe diagram below:

A CSP will provide a smart “BuildingManagement Digital Hub” as depictedabove, through an Active platformmodel, consisting of a toolbox of assetsoffered to the platform actors and end-consumers, by integrating its own coreofferings with that of the participants’.This bundle will include frameworkspowered by APIs and Microservices inorder to fulfil end customerexpectations.

Now let’s examine Hilton hotels as anexample to see what the customerjourney will look like. Hilton, as weknow, leads the way in developinggame-changing technologies thatenhance travel experiences for its

guests. The company is constantly onthe look-out for cutting-edge traveltechnology ideas and collaborates witha number of start-ups to providepersonalized, creative solutions toenhance guest experience.

Some of these start-ups are workingwith Hilton to build a state-of-the-artbuilding experience solution forHilton’s existing and new properties.These startups could use the SmartBuilding Digital Hub to connectstandard and non-standard buildingdevices and to access building data inreal-time. Using such an Activeplatform and the APIs offered by thehub, a startup can provide tailor-madesolutions by creating devices withOpen APIs and Analytics.

The CSP on its part will provide therequired tools and services forintegration and on-boarding onto theplatform in an easy manner through asimple drag-and-drop user interface,using rich visualization tools thatenable the entire project to emerge infront of the customer’s eyes. Themarketplace will also offer the CSP’score infrastructure capability to theparticipants, such as dedicatednetworks, industrial Wifi setups, etc.

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Digit

al M

arke

tplac

e(P

ower

ed by

Digi

t Mar

ket)

CSP’s Smart Building Active Platform

z

EcosystemAccelerators

Repository of Pre-configured Building Management APIs

IT Services for Application Integration

Configurable Microservices for common BM use cases

Adapters to common third-party Sensors

API Gateway and Rules Engine for Partners to API-enable Legacy

Consumer Community

Provider Community

Facility Managers

Building Security StaffEnergy AuditorsThird-party BMS Device Manufacturers

Third-party BMS Device Manufacturers

BMS Startups developing innovative Apps

Independent Technicians

Electrical System Integrators

Enterprise Software Vendors

Third party HVAC Manufacturers

Lighting vendors

Enriched by Third-party Providers

Smartphone/Tablet Apps

Connectors & APIs for Legacy Devices

Connectors for ERP Software

Reusable Rules for BMS

Reference Data

BMS Microservices

Legacy Device Manufacturers

Building Constructors - Hotels, Hospitals, etc

Edge Gateway Manufactures

Enterprise Software Vendors

Provided by Telco

Published by Provider Community

Core Telco Capabilities

5G / 4G dedicated Networks

Mobile Device Management

Wifi Infrastructure

SMART BUILDING DIGITAL HUB

Billing, Order Management as SaaS

QoS Guarantee

Messaging Services

IoT Platform

Accelerating your path toActive PlatformsTorry Harris provides enterprises with aready set of tools & services to easilycreate and manage active digitalplatforms. This marketplace-in-a-boxproduct, DigitMarket™, helps create asecure channel to share and monetizedata, allowing businesses to becomeplatform enablers, grow profitablepartnerships and build new channels tomarket. The components ofDigitMarket™ are as opposite.

DigitMarket™ allows easy onboardingof partners, curation of content, andcan function as a marketplace for bothphysical and digital products (such asAPIs) for enterprises and its partners.The product is vertical agnostic(although vertical templates areavailable) and can be white labeled toallow enterprises flexibility in how theywant to market their platform.DigitMarket provides a cost-effective,viable solution for enterprises toquickly build and scale a digitalplatform rather than building one fromthe ground up.

For more information, visit:www.thbs.com/products/digitmarket

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TM Forum Open DigitalFramework

Delivering the tools to go from concept to cash in just 18 daysThe TM Forum Open DigitalFramework is an interactive,continuously evolving collection oftools, knowledge and standardsthat give communications serviceproviders (CSPs) an end-to-endmigration path from legacy systemsto modular, cloud-native ITcomponents. Simply put, it is ablueprint for service providers todeliver intelligent operations fit forthe 5G era.

A prototype version of theframework is available now for TMForum members to explore. It isbeing developed through the TMForum Collaboration Program andCatalyst Program, and builds on thesuccess of the Forum’s establishedOpen APIs and the Frameworxsuite of standards. Specifically, itincludes:

n Open Digital Architecture (ODA)– an enterprise architectureblueprint, common language andkey design principles for modular,cloud-based, open digitalplatforms that can beorchestrated using AI

n Open APIs – 50+ standardizedREST-based APIs to facilitatezero-touch integration and zero-touch partnering

n Data & AI standards – anindustry-agreed data model,

together with standardsmaximizing the potential of AI toenhance customer experienceand increase operationalefficiency

n Reference implementations – aframework for assembling andvalidating ODA components inthe Forum’s Open Digital Lab,fostering the creation of aservices marketplace

n Practical guidance – guides andvideos showing how the OpenDigital Framework can be usedto transform the core businessand enable new business growth

n Foundational libraries –normalized models providing acommon language for businessprocesses and information that

simplifies and de-riskstransformation projects

The goal of the Open DigitalFramework is to help serviceproviders increase agility anddrastically reduce the developmentcycle for products and servicesfrom 18 months to 18 days. Muchof the collaborative work that ispart of the framework is alreadyavailable, but it helps to organize itand make it more accessible. Theframework is a work in progressand will improve throughcrowdsourcing.

If you would like to learn moreabout the project or how to getinvolved in the TM ForumCollaboration Community, pleasecontact Andy Tiller.

TM Forum research reports

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Trend Analysis Report

AI AND ITS PIVOTAL ROLE IN TRANSFORMINGOPERATIONSAuthor: Mark Newman, Chief AnalystEditor: Dawn Bushaus, Managing EditorDecember 2018

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Sponsored by:IO

CTIOIOIOTIOCTICTCTCTIITIO

R E D E F I N IN G T H E C T I O

Trend Analysis Report

REDEFINING THE CTIOESSENTIALS FOR THE DIGITAL AGEAuthor: Catherine Haslam, Senior AnalystEditor: Dawn Bushaus, Managing EditorNovember 2018

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Author: Tim McElligott, Senior AnalystEditor: Dawn Bushaus, Managing Editor

May 2019 | www.tmforum.org

NETWORKAS A SERVICE:ADDRESSING THE FULL ENTERPRISE OPPORTUNITY

Author: Paul Ridgewell, Contributing AnalystEditor: Dawn Bushaus, Managing Editor

May 2019 | www.tmforum.org

BL CKCHAIN: WHERE’S THE VALUE FOR TELEC MS? Author: Tim McElligott, Senior Analyst

Editor: Dawn Bushaus, Managing Editor

April 2019 | www.tmforum.org

DYNAMIC INVENTORYThe foundation of intelligent automation

5G: EVOLUTIONAND REVOLUTIONAuthor: Mike Hibberd, Contribu�ng AnalystEditor: Dawn Bushaus, Managing EditorApril 2019

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Sponsors:

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Meet the Research & Media team

© 2019. The entire contents of this publication are protected by copyright. All rights reserved. The Forum would like to thank the sponsors and advertisers who have enabledthe publication of this fully independently researched report. The views and opinions expressed by individual authors and contributors in this publication are provided in thewriters’ personal capacities and are their sole responsibility. Their publication does not imply that they represent the views or opinions of TM Forum and must neither beregarded as constituting advice on any matter whatsoever, nor be interpreted as such. The reproduction of advertisements and sponsored features in this publication does notin any way imply endorsement by TM Forum of products or services referred to therein.

Report Design:Intuitive Design UK Ltdinfo@intuitive-design.co.uk

Published by:TM Forum4 Century Drive, Parsippany, NJ 07054USAwww.tmforum.orgPhone: +1 973-944-5100Fax: +1 973-944-5110ISBN: 978-1-945220-57-9

Report Editor:Dawn BushausManaging Editordbushaus@tmforum.org

Report Author:Mark Newmanmnewman@tmforum.org

Senior Analyst:Tim McElligotttmcelligott@tmforum.org

Customer Success &Operations Manager:Ali Grovesagroves@tmforum.org

Editor, DigitalContent:Arti Mehtaamehta@tmforum.org

Global Account Director:Carine Vandeveldecvandevelde@tmforum.org

Commercial Manager,Research & Media:Tim Edwardstedwards@tmforum.org

Vice President ofMarketing:Charlotte Lewisclewis@tmforum.org

Chief Marketing Officer:Paul Wilsonpwilson@tmforum.org

For more about TM Forum’s Collaboration Community, please contact Andy Tiller