Unprecedented hypergrowth as a result of 5G should begin around mid-decade, and to prepare, communications service providers need to ensure they have the right pieces in place to thrive, according to a new IBM study. These include corporate strategy, technological and operational processes and, of course, infrastructure.
Meeting user expectations will more frequently require the integration of connectivity and computing closer to where data resides and decisions are made, according to the study, The end of communications services as we know them.
“The expansion of related physical infrastructure, network functions and software is expected to be so great that by mid-decade it will usher in an entirely new technological era to reduce costs to a level that makes mass adoption and hyper expansion feasible,” the study said. Then ‘network cloud’ will follow in the tradition of personal computers and cloud computing as digitization’s third wave.
“This wave will converge network and cloud functions, connectivity and computing, infusing data-driven intelligence and automated decision-making into applications, forming what we call ‘intelligent connectivity’ spread throughout network tiers,” the study said.
Communications service providers must adapt
Integrating connectivity and computing near to where data resides is key, but so is the ability of CSPs to adapt to the changes. The study of 500 telecommunications executives identified a small group (14%) of high performers, which IBM defined as those expected to outperform the rest of the field on 5G and edge computing.
Fifty-nine percent of these high performers agreed they must become secure clouds infused with artificial intelligence and automation, while half of high-performing CSPs agreed they must become strategic cloud platforms blending a diverse partner ecosystem.
“If CSPs are to thrive, most will need to develop new competencies and assert themselves in new roles in value chains,” the study said. “CSPs should seek new ways to make money, beyond metering connectivity and access to data, as these traditional mainstays of CSP business models are likely to commoditize.”
Additionally, 71% of telco CEOs surveyed said cloud computing is a core technology to help deliver results over the next two to three years, while 61% viewed 5G similarly.
CSPs have much to offer in the burgeoning 5G-driven platform economy: experience, points of presence, enterprise systems, unique data and customer trust, the study said.
The so-called high-performing CSPs “seem to value the strategic importance of digital platforms, automation, emerging partner ecosystems and hybrid cloud,” the study said.
5G, digital, will propel the economy to significant growth
By 2030, 5G-driven growth will propel the portion of the economy driven by digital platforms to greater than 50% of the overall world economy, the IBM report said. To achieve this, a foundation must be in place by around mid-decade to support exponential growth in physical infrastructure and mobile data traffic for various use cases to support “tens of trillions of dollars in economic activity.”
5G is designed to support a 100-times increase in traffic capacity compared with 4G, but doing so will require higher-spectrum bands that do not travel as far as lower-spectrum bands. As a result, this will require many small cells or low-powered cellular radio access nodes with relatively short ranges, the report said.
This is reflected in the global 5G infrastructure market, which is projected to grow from around $2 billion in 2019 to around $500 billion in 2027, including more than $200 billion worth of radio access network technology, the report said.
CSPs are not focused on 5G yet
Another major finding was that most CSPs have not yet developed a 5G business case for 5G use cases. They must evaluate “how they can become essential to achieving the platform economics advantage for their customers, themselves and their surrounding ecosystems by establishing the platforms responsible for compounding value,” the report said.
Most respondent organizations “are taking a conservative business-case-driven approach—waiting for proof of demand prior to making investments,” the report said. “This could place many of them on their heels when 5G-related demand arrives in an explosion in around 2024 or 2025.”
In two years, respondents reported that only 7% of services will be uniquely enabled by 5G capabilities, and 93% will be enhancements of existing 4G services, the report said.
“Even in five years, respondents expect only 18% of services will be uniquely enabled by 5G. Most CSPs have not yet developed a 5G business case for 5G use cases. Only about half of respondents we identified as high performers have developed a business case for deployment of 5G use cases (49%), yet that’s twice as many as other CSPs.”
In contrast, the report makes the case that high-performing CSPs are preparing to become essential to value chains by focusing on four key actions:
- Thinking beyond connectivity
- Proceeding cautiously with hyperscale cloud partnerships
- Adding value to partner ecosystems
- Preparing for network hyperscale with hybrid cloud