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5G could transform network operators into IT companies

Carriers that walk into enterprise sales meetings armed with stats about 5G network speed and bandwidth may not get very far. Instead, 5G deals are more likely to hinge on how those networks can meet specific customer needs.

As a result, according to speakers at the recent 5G World virtual trade show, network operators are increasingly investing in areas beyond network technologies.

"Carriers are transforming from network operators to IT companies and 5G will accelerate this movement," said Christoph Aeschlimann, CTO at Swisscom. He said this transformation requires telcos to do two things: One is to build up skill sets such as software programming, machine learning and cloud capabilities. The other is to bring development and operations closer together, which Aeschlimann described as "building up a new culture."

Scott Petty, CTO of Vodafone UK, agreed that software engineering and development skills will be more critical to telcos moving forward. "As you virtualize and move to cloud-native technology, that's an IT play. It's not a network play anymore," he said. "The skills and cultural transformation is massive, and we will look like an entirely different company five years from now."

Jürgen Hatheier, CTO of Ciena's Europe, Middle East and Africa business, said he sees telcos starting to make the change already. "It's not something evolutionary where we just go to the next step – a little bit more throughput, more bandwidth – it's really revolutionary … it's really an IT play," he said. He sees the transition as positive for Ciena, in part because it supports the convergence of wireline and wireless networks. He said it also makes his job more fun.

"It's a wonderful transition that we are going through because it changes the conversations that we are having," Hatheier said. "It changes from an infrastructure play to a services play, to an orchestration and automation play, and that makes it really fun."

Omdia analyst Camille Mendler, the moderator of the discussion, asked the speakers where their companies are placing the biggest bets with respect to 5G. Terje Jensen, SVP of network architecture for Telenor, said he's focusing on "organic 5G," or 5G for consumers, rather than on new industrial use cases.

However, Petty said that Vodafone is focused on industrial 5G use cases while waiting for the consumer space to mature, with more 5G devices and applications like virtual reality.

"The ones that are actually turning into real projects and real deals are mostly in Industry 4.0 or smart factory," Petty said. "I do think connected health and connected agriculture will be the next two after smart factories that move from pilot phase into real deployment .... The business case is very positive and I think that will mean that they go to scale faster than maybe some of the more exciting use cases that will come a couple of years later." Petty added that the UK government and 5G incubators are likely to accelerate connected health and connected agriculture deployments.

The panelists also said 5G will change telcos by forcing them to get to know their customers better. Telcos often find that they need to partner with companies that know the verticals. "We need to open up more and collaborate more," Telenor's Jensen said.

Ciena's Hatheier pointed out that this shift to a more customer-focused mentality is changing the way networks are designed. "While we have been looking at networks from a throughput perspective, the gigabits we can deliver … now it's all about the use cases, the services," he said.

Swisscom's Aeschlimann added that telco business groups and IT groups need to work together more closely to build new solutions more efficiently.

As the panelists discussed their efforts to understand potential 5G customers better, Mendler shared research from Omdia that she said might highlight an opportunity. She said most telcos interviewed by Omdia foresee large multinational corporations as their biggest source of 5G revenue. Meanwhile, less than a third of the large companies interviewed saw telcos as a primary 5G partner. But midsized companies were very positive about working with telcos, which makes sense given their relative lack of in-house network engineering talent.

— Martha DeGrasse, special to Light Reading. Follow her @mardegrasse

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