5G is a Tremendous Business Opportunity For Telcos. Here's What You Need To Get Ready With a Cloud-Native Platform & Elastic Infrastructure

September 16, 2019 Patrick Pathinathan

Digital transformation is a topic on almost every organization’s mind, as disruption pours over the business terrain. New technologies in the shape of the Internet of Things (IoT), 5G mobile networks, artificial intelligence (AI), augmented and virtual reality (AR and VR), virtualization and automation are enabling new business models, new ways of offering products and services, new processes, and new ways of collaborating and competing. Digital transformation is therefore an umbrella term that covers multiple dimensions and directions.

Telecommunications companies are facing into transforming networks, business models, operations and most importantly customer experience.

Service providers all over the globe are embarking on a transformation from communications service providers to digital service providers.

While much of the focus of digital transformation is on the digital customer experience, it is quite clear that a key motivator for digital transformation—is actually to drive more revenues.                        

The scale and scope of this effort should not be underestimated as it disrupts business models, company cultures, personnel, and established deployed technologies. 

Operators are under enormous pressure to increase profitability by reducing costs and increasing revenues.                                                     

So what is the biggest barrier to competing effectively in the digital economy? 

Organizational structure and the collaboration between IT and line-of-business is often the biggest barrier. This is closely followed by legacy systems as well as demonstrating new technical platforms are required for the efficient operation of digital services. 

The new choices and far wider service portfolios set to be enabled by digital transformation will necessitate greater automation and self-service if the provision is to be done profitably. Organizations are encouraging greater adoption of self-service customer interactions.

Moving from AI and looking ahead to the challenges that operators face when moving to digital technologies such as cloud and microservices, one of the greatest challenges and is dealing with security which is the greatest concern, followed by talent and internal processes.

There is widespread understanding that cloud and microservices will drive efficiency and cost savings as part of an organization’s digital transformation.

The four biggest aspects of digital transformation facing operators are: reducing time to market, embracing virtual network functions, moving applications to the cloud, and embracing AI. 

If we look at these at a conceptual level—reducing time to market for new capabilities and increasing the amount of releases [of new products or services] per year—is that it demonstrates the need to get to market and take share quickly is understood. Operators know that if they don’t accelerate service launch, someone else will, and they could potentially lose some of the substantial opportunities inherent to the digital value chain.

The next most popular strategy was virtualizing network functions. Operators have embraced the cost-saving aspects of virtualization but also have taken on board the flexibility and agility of virtualized environments which will be vital to enabling the rapid service instantiation required in the digital era.

The third most popular is to move more applications to the cloud. Operators recognize that apps are moving to the cloud, but also see that this is an ongoing journey and the pace cannot be allowed to slack off.                        

Finally, embracing AI capabilities is one of the most important strategic elements. It indicates that while AI is seen as of future value, 12 months is too little time for it to be relevant in their business.    

Let's explore each of the transformations in a bit more detail.

Network Transformation

The ever more competitive digital economy requires that applications be delivered with unprecedented speed, scale, and agility. Service providers are deploying Network Functions Virtualization (NFV) to create new services and business models to increase service agility and flexibility and to increase network efficiency as a result of business factors, such as the ability to drive new revenue or reduce OpEx or CapEx.                     

In order for the promise of complete digital transformation to be realized, transformation in the network is a critical ingredient. Operators have been moving towards this for several years now, increasingly selecting IT-oriented technologies such as software-defined networks (SDN) for their next-generation network platforms. While still important, traditional network engineering is now changing emphasis within operators as they look to introduce new applications and services, and to run their operations in lean, flexible and agile ways.                        

There’s a two-sided approach emerging within operators that is seeing greater efforts towards virtualization with growing commitments to network functions virtualization (NFV). As this continues, IT will move towards open source systems and increased utilization of cloud platforms. For different operators in different markets, this will all happen at different paces.


The most critical reason for deploying NFV is service agility and flexibility.  What this demonstrates that, while operators see the advantages in software opex and capex reduction that NFV can bring, they recognize the real prize is in the new service revenues the technology will enable them to generate. There is a recognition that there is both short term cost-saving benefits of NFV as well as the longer-term and potentially more valuable revenue generation and profitability benefits of the technology. 

Organizations deploying NFV capabilities are also having to deal with technical challenges including packet processing performance in the data plane, the reliability and scalability of commercial off the shelf (COTS) hardware, the operation and back-end integration, troubleshooting and service assurance, cloud orchestration management, managing service failover and recovery, security, and vendor solution compliance.                        

Due to the complexity of implementing NFV capability, operators are choosing carefully where they make their initial deployments. Some are looking to emerging business areas such as the Internet of Things (IoT), which to note, IoT offerings can be provided separately from traditional services, potentially as part of a new unit. This means operators can trial and learn without damaging the core business. Customer operators need to feel confident that the solutions they invest in will deliver both today and in the future.                                                 

Beyond virtualization, operators are focused on launching new services that require digitally transformation and adoption of new technologies such as IoT. Operators are seeing increased traffic from launching IoT initiatives across the enterprise. As a result management and monetization of this is a challenge that operators are now delining with.                    

Implementation of 5G                        

Aside from virtualization, another big step for network transformation is the introduction of 5G mobile networks. These will offer greater capacity and speeds and enable further mobile services. A large proportion of operators are seeing vertical industry-specific application opportunities as the main revenue-generating opportunity. This is followed by more bandwidth, lower latency, and faster speeds. There is also caution that use of 5G within the mobile broadband market will not necessarily equate to growth in ARPU within the consumer market. 

The scale and scope of 5G preparation task and the mainstream deployment of the technology remain years away for most operators as it also requires significant capital investment. The balance is to extract greater revenues from 4G, whilst investing in 5G, requiring a large amount of CAPEX. 5G will deliver greater ability to download content at a much faster pace. How will operators be able to monetize this at the consumer level, given 4G is allowing content to be streamed at great speeds? One area that is of focus is Big Video.                     

Big Video                        

Big video is seen as one of the drivers for 5G deployment as users increasingly view even 4k and 8k video over their mobiles. Operators are challenged to support this because, even though 5G can provide adequate capacity and throughput, the monetisation model currently excludes operators.  Operators currently are being cautious because they do not wish to become the de facto providers of ultra-HD video services unless the monetization model for delivering video changes radically. 

Business Transformation

As digital transformation efforts continue, business transformation is becoming of greater importance and is affected in two dimensions. Digital transformation itself enables businesses to transform whether via developing new capabilities or by harnessing increased automation or to integrate with a wider ecosystem horizontally across multiple verticals. However, for full digital transformation to occur, business needs to transform in order to accept and commit to the investments and changes in operations and processes required to fulfill this process.                     

The Internet of Things (IoT) is gathering momentum in advance of digital transformation and is an integral part of business transformation initiatives. It also is reliant on connectivity, although that is not necessarily provided by mobile operators. Closely-related, the next most widely targeted use case is productivity apps, followed by collaborative working including such things as augmented reality (AR).

Operational Transformation                        

So far I have talked about technical transformations that are needed to enable digital transformation but the software and hardware—whether virtual or physical—is only part of the enablement equation. Operators must also transform their operations—shifting their skills bases into new areas and altering the company’s culture even further away from their recent heritage of being network operators. Core network engineers still have vital roles to play but these are changing and need to be augmented with IT awareness to enable engineers to operate virtual infrastructure effectively as well as to engage with increasingly prevalent automation. 

The relevant expertise is available in the market however it is not enough to cope with the skills needed to embrace digital transformation. Operators recognize that software-based networking skills—predominately in SDN and NFV—are in short supply. However, the greatest set of skills that are in short supply area application development and data science.    

Billing is one of the attributes that operators can bring to digital transformation. They have the capability to handle charging, bill presentment and collection and, in general, they are trusted by customers to collect money and bill accurately. However, digital transformation may result in a changed billing relationship with such focus areas as one-time fees and payments replacing traditional bills. Telstra as an example is moving to such a model and has recently launched mobile phone plans which do not lock users to a contract, but instead providing choice and flexibility based on usage demands and patterns.                                                            

The shift in billing emphasis has its roots in the changed service profile offered by operators. Instead of offering metered services based on monthly consumption of utility-like infrastructure, operators will increasingly be the providers of many different types of often low-value, high-volume services such as one time movie purchase, rewards and in-store offers.             

Operators will now need to have platforms which support large volumes of microservices, all of which need to be configured, operationalized, assured, charged for and, ultimately, retired.           

Operators such as Telstra and T-Mobile in the US are implementing platforms such as Pivotal Platform to support large volumes of microservices rapidly and at massive scale. This illustrates a reliance on the software vendor community such as Pivotal to bring new cloud platforms to market to enable operators to support this scale.                        

However, IT constraints would be a bottleneck that could hinder them in their support of large volumes of microservices. In the digitally transformed world, any bottleneck decelerates the market place and is unacceptable. Operators such as Telstra are investing a significant amount of capital in upgrading their IT to ensure they take advantage of all the digital transformation opportunities open to them both across the consumer space and across the enterprise.                         

If operators open their application program interfaces (APIs) to third party developers, they will enable operator functions, notably connectivity, to be incorporated with apps and microservices. There is potential for this to be monetized because of the inherent value of operator APIs. However, in the past, most operators  have guarded their APIs in the belief that they give them a substantial competitive advantage. 

Digital transformation means that game is changing and operators are increasingly regarding their APIs as important tools for developing the wider digital ecosystem and putting them at the heart of it.                                        

If opening APIs is a change that could enable the business models of third parties, the introduction of the Internet of Things (IoT) represents a new market in which operators can play a central role by providing connectivity plus additional services.                                             

The IoT business substantially differs from traditional telecoms traffic. Sensors in their tens of thousands may send only small amounts of data each month, while other IoT devices, probably in lower volumes, may continually stream high definition video. The market opportunities are therefore wide and varied. A common thread, however, is that billions of devices are expected to be connected, far outstripping the number of humans in the near future. Operators will have to redefine how they service these devices because the margins will be thin. For example, truck roll to service an IoT connection would wipe out profitability from the device for a period of many years.      

The concept of DevOps is clearly at odds with the traditional operator practice of developing each phase of a service to its completion before moving to the next and then going through extensive testing. It’s therefore apparent that DevOps disrupts the traditional development cycle as well as radically accelerating new service introduction time. This has a knock-on effect on marketing, support and customer experience management. The speed and the adoption of the change required will for some be the greatest cultural shift experienced.    

Experience Transformation                                        

Aside from increased profitability and productivity, one of the main goals of digital transformation is to provide enhanced experiences for users—consumer or professional                         

New network technologies such as 5G mobile and network functions virtualization to new concepts such as Internet of Things, new technologies such as augmented reality, virtual reality, artificial intelligence, and machine and deep learning. These new capabilities will enable and support digital transformation and, ultimately,be the catalyst for creating rich and new user experiences.                        

The experience users will receive in 2025 will be a giant step beyond what we know today and the step is likely to be far greater than that experienced with the introduction of IP technology for the fixed internet in the late 1990s or the arrival of smartphones over a decade ago. 

By 2022 new use cases enabled by 5G will require a transformation in user experiences. 



It is clear that service providers are acutely aware of the need to enhance their business models in the new digital economy. But it is also interesting to consider the massive catalyst for transformation that will be driven by upcoming 5G network rollouts.                            

5G networks are going to serve as the backbone for a new generation of services that require the higher bandwidth, lower latency and greater agility these networks have to offer.  Advanced digital experiences and services will have the power to transform our day-to-day lives in ways that are even more impactful than the digital transformation we are seeing today.                            

However, the focus for 5G must inevitably turn from how we deploy these networks to how we monetize them. 5G services and the associated network slicing will change the way service providers monetize network and data access, and the value they offer partners in the digital ecosystem.                                                

Pivotal is supporting the building of new experiences as well as helping modernize existing applications as well as helping reduce the cost of running existing applications. The enablement of the mass creation of microservices underpinned by platforms such as Pivotal Cloud Foundry are becoming the de facto standard across Telecommunication companies looking to be leaders of the 5G and digital era. 

About the Author

Patrick Pathinathan

Patrick Pathinathan is a Client Director at Pivotal.

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