Operators will invest up to $1 trillion in 5G networks between 2018 and 2025, according to GSMA. The return on that investment isn't expected to come from charging consumers more for smartphone services, although that will almost certainly be part of the plan. The biggest returns for operators could well come from new network efficiencies and new enterprise use cases, especially industrial use cases, according to those in the industry.
Already heavy industry has heard a lot about 5G, and so far companies like what they're hearing. The most prominent early adopters in this space are in Germany, home to many of the world's leading industrial automation companies.
For example, Audi is preparing to test 5G-connected robots at a production lab in Gaimersheim, Germany. "A powerful network architecture that can respond in real time is of decisive importance for us," said Audi CIO Frank Loydl in a press release. The company has partnered with Ericsson to implement 5G in a simulated production environment.
Elsewhere in Germany, Deutsche Telekom and Nokia partnered with the Port of Hamburg to test 5G in three separate use cases over a single network. One was a 5G-connected traffic light, which enabled the port to add traffic control without the expense of running fiber or cable. Another was connected sensors on ships to monitor motion and environmental data. The third was an augmented reality application that fed relevant information to maintenance and operations crews wearing 3D glasses. The port ran the tests for six months and said it would like to implement even more complex use cases in the future.
One of Germany's biggest manufacturing companies is Bosch, which owns and operates 280 factories around the world as well as an industrial automation equipment supplier called Rexroth. Bosch is trialing 5G at several factories and is a founding member of 5G-ACIA, the 5G Alliance for Connected Industries and Automation.
Teaming on 5G
"It is not enough if just industrial automation companies get together and discuss this because we are not necessarily the 5G experts," said Bosch's Andreas Mueller, who serves as chairman of 5G-ACIA, in explaining the purpose of the association. "It's hard to say what the infrastructure will be capable of. It's hard to say what the network operators will do. So that's why... we have to reach out to all these other stakeholders as well."
The group counts almost 60 members spanning manufacturers, network operators, radio equipment vendors, chipmakers, module makers and test equipment vendors. "We are very much interested in attracting more companies," said Mueller. "We want to attract end users."
End users of 5G industrial automation solutions are the big prize for the companies that are investing in and testing these new technologies. But so far, none of them have launched live production lines using 5G. Even at Bosch's own factories, the 5G trials run parallel to the live production lines, but are not responsible for actual manufactured deliverables.
In the future, Mueller hopes to see Bosch and many other companies using 5G to connect mobile control panels that can instantaneously start and stop factory machines. He said WiFi isn't reliable enough for this application, but 5G will be ideal.
Clearly, 5G will enable factory workers to be more mobile, but that isn't a change that can happen overnight, according to analyst Chris Nicoll of ACG Research. "It really touches the business strategy as well," he said. "How agile is the business in... redesigning the manufacturing floor?"
Nicoll doesn't see 5G industrial automation as a tool to help factory workers do the same work faster; he sees it as a revolutionary technology. "5G really, in order to take full advantage, has to impact literally the entire company: organization, strategy, philosophy, production, ecosystem -- the whole nine yards," Nicoll said.
5G connectivity solutions for factories are just starting to hit the market, according to 5G-ACIA's Mueller. For now, network operators may find it hard to sell companies on the value of 5G connectivity because there are very few components that can leverage the technology in a factory setting.
"What we have in general is a chicken-egg problem," Mueller explained. "Unless many factories have 5G connectivity available, the incentive for an industrial automation company to offer 5G-based products is very low because if there are no customers who are able to use 5G, then there is no market. But it's also the other way around. If there are no 5G-based industrial automation components, the incentive to build up a private 5G network, for example, in a factory... is very low as well."
Mobile network operators and their equipment vendors may not be able to ignite the market on their own. Many manufacturing companies are more comfortable buying technology for their factories from their own vendors, not ones in the mobile space. Research conducted by Nicoll's firm found that most industrial companies do not think mobile network operators understand their businesses. Nicoll expects to see third party integrators step in to bring next-generation networks to factories. And it may not happen right away.
Right now, many companies are interested in 5G, but when it comes to actual deployments they may be fine with LTE for a bit longer, according to Erik Joseffson, who leads Ericsson's global industrial IoT and 5G offering to manufacturing and process industries. "You can reach really, really far with LTE-Advanced," Joseffson said. "From an industrial point of view, they don't really see any difference between LTE-Advanced or 5G Release 15 in the first phase."
Joseffson added that many customers are looking with interest at Release 16, and said his conversations with customers are definitely shifting. "Before it was, 'What is the cool use case or why should I use it?'" he remembers. "Now it is not so much about why; it's more about how. 'How can I get info and how can I get started? How do I get spectrum?' It's more a conversation of the business side."
Joseffson said Ericsson currently has more than 40 references or installations related to industrial 5G, most of them in Europe.
Return on investment
For industrial manufacturers, a private 5G network is not an investment that can be expected to pay for itself within a quarter or two. That may be one reason US firms have lagged behind their European counterparts. "The whole DNA of our US firms is that they have to have a short-term return on investment," said Joseffson. But he said that's starting to change as American firms find more "flexible" ways to calculate projected returns. "It's quite hard to justify a big investment with just one use case," he said. "But it is [easier] when multiple use cases come together ... it will start to blow your mind with the value that it can generate."
ACG's Nicoll thinks 5G networks need to evolve before they will be ready to deliver value at scale for industrial manufacturers. He thinks that once mobile network operators can offer enterprise customers a range of 5G connectivity options, along with network slicing and edge computing, the value proposition will become much more real. "It may be kind of a late 2020 opportunity," he said. "It's probably a 2021, 2022, 2023 opportunity."
— Martha DeGrasse, special to Light Reading. Follow her @mardegrasse