Let's Talk About 5G Efficiency, Not Wacky Services
Rarely has the division between a pushy supplier and a down-at-heel telco been laid so bare.
Connecting farmyard animals and other dumb stuff to 5G networks will generate billions of dollars in new service revenues, was the message from Ken Hu, one of Huawei's chief executives, during a conference hosted by the Chinese equipment giant in London last week. Just minutes later, Johan Wibergh, Vodafone's chief technology officer, was on the same stage telling the audience that 5G is "overhyped." It was like watching a door being slammed shut in the face of a traveling salesman.
And there were more 5G doubts cast during the two days of Huawei's Mobile Broadband Forum event. Gavin Patterson, CEO of UK telecom incumbent BT Group plc (NYSE: BT; London: BTA), told attendees that he and other CEOs are "struggling" to pin down the business case for the next-generation mobile technology. In an afternoon breakout session, executives from Vodafone Group plc (NYSE: VOD) and Deutsche Telekom AG (NYSE: DT) gave short shrift to the technology's most ardent promoters. "We should stop talking 5G bullshit," said Santiago Tenorio, Vodafone's head of network strategy and architecture, echoing his boss's remarks, while Antje Williams, Deutsche Telekom's 5G executive program manager, insisted that 5G new radio, the most heavily publicized feature of the standard, is not particularly revolutionary. (See DT Is Not Going Radio Gaga About 5G.)
Operators are not about to pull back on 5G, but their realistic priorities are not about near-term revenue growth. As vendors like Huawei Technologies Co. Ltd. and Sweden's Ericsson AB (Nasdaq: ERIC) continue to bang on about the 5G sales opportunity from connected cows, connected cars and connected everything, service providers are starting to regard 5G mainly as an opportunity to fatten profit margins through cost savings -- at least in the short term.
This 5G efficiency story is actually compelling. The 5G new radio alone is about ten times more cost efficient than 4G, Wibergh told conference attendees last week. As the volume of data traffic on networks continues to skyrocket, and revenues per bit are squeezed down, operators need every means possible to reduce costs. "The regulator requires operators to reduce charges for customers but also increase data rates, and operators are starting to promote unlimited data for customers," said Guangyi Liu, the wireless chief technology officer for the research unit of Chinese telco China Mobile Ltd. (NYSE: CHL), in explaining the pressure his company is under during last week's event. (See Nolle: In 2017, Cost Per Bit Exceeds Revenues and China Mobile to Deploy 10,000 5G Basestations by 2020.)
But a new and more efficient radio would be just one way of reducing expenses. For most chief technology officers, 5G has become synonymous with a network and operational transformation whose purpose is to make telcos look more like the cloud companies they admire and fear in equal measure. For all the fascination with a new radio, the real 5G revolution will come in the shape of more software-based and highly automated networks. And while these might unlock new business opportunities in time, the efficiency case is a much easier one to make now.
Take Germany's Deutsche Telekom, for instance, which has jettisoned its "growth areas" strategy from several years ago but still expects to realize at least €1.2 billion ($1.4 billion) in annual cost savings from network transformation. While executives rarely discuss 5G in the same breath as the "pan-net" project that is responsible for much of this overhaul, there is clearly an overlap on objectives. "Cloudification," pan-net's central tenet, is also a 5G goal, said Williams during last week's event. A technique called "network slicing," which builds on this cloudification, is another priority, allowing operators to operate multiple independent network services over the same infrastructure. Both will boost efficiency, if they work out as planned. (See DT's Pan-Net Still at Start of the Marathon.)
Next page: The wow factor
Like what we have to say? Click here to sign up to our daily newsletter
One of America's most loved telecoms get-togethers, The BIG 5G Event, will be returning to Austin in 2023 to host 1,500+ telecom, cloud and technology professionals — and we want you to be a part of it!
For three days, you can meet and network with leaders from every part of the North American 5G ecosystem and hear from over 150 speakers on the hottest industry topics. To apply for your complimentary pass to the event, visit this link.