It should be obvious that 5G is in trouble, at least in terms of fulfilling all the hopes operators and vendors (in particular) have pinned on it. Nokia’s CEO stepped down, and there was a rumor last week that Ericsson and Nokia were considering a merger (the rumor was squashed, however). Huawei, who claims to be winning a lot of 5G deals, is under suspicion by the US government, and AG Barr has suggested the US might want to take a big stake in Ericsson or Nokia to counter Huawei. This isn’t the dynamic you’d expect in a healthy market, and since 5G is the focus of all the vendor maneuvering, it’s not a sign of a healthy 5G opportunity. Fierce Telecom makes this point HERE, and there are news stories quoting early 5G users as not getting what they expected.
Well…the simple truth is that we should never have expected the kind of 5G market that’s been publicized. There has been, and is today, no question that 5G New Radio is a logical successor to 4G, primarily because it offers higher subscriber density per cell site. There’s also little question that having higher-density sites means having faster backhaul connections, and that the Evolved Packet Core (EPC) component of 4G and its 5G equivalent, would likely be adopted as 5G devices and 5G NR rolled out. However, since there is no credible evidence that consumers will pay more for 5G, any assumption that operators would have significant incremental revenue to fund deployment would have to be based on something other than traditional cell service.
The current fallback positions for the 5G proponents are “IoT” and “business services”. I’ve worked through additional modeling on both of these, modeling directed at trying to identify a set of opportunities that would maximize the chances of success. That’s what I propose to work through today.
The “IoT postulate” is simple; an enormous increase in machine communications, created by linking new sensors and controllers, will generate additional 5G customers. This will counter the fact that smartphone empowerment is plateauing as the population becomes fully equipped. How many new “virtual customers” might be created? Billions, so they say.
The obvious problem with this assertion is that we already have smart homes, smart buildings, and sensor/controller applications without 5G or even 4G connectivity. The majority of places where a consumer or business would want to install a sensor or controller are within WiFi range, within range of other established short-range IoT protocols like ZigBee/Z-Wave, or even suitable for direct wiring.
Where 5G IoT makes sense is in two specific situations. First, some prospective IoT locations are not within range of short-range RF or wireless. Second, some prospective IoT applications involve sensors/controllers that are themselves moving. Let’s look at optimizing each of these.
“Thin IoT” is credible in public missions, meaning where sensors and controllers are to be installed not on a company facility but in areas like public right-of-way. It may be credible in company installations where the geography covered is large (railroad yards are an example, and airport runways another). The problem with these applications is the true vulnerability of IoT business cases for 5G; machine communications isn’t like human communications.
We call or text for a lot of reasons, few of which can be called critical, but all of which are at least somewhat important to us personally. Machines don’t personalize; they support specific applications. Give a teen a phone and let nature take its course, and you’ll have cellular revenue. Give a sensor a 5G connection, and it has nobody to talk to…unless we define an application framework in which it’s used. We’ve got suggested 5G applications, but not real ones, and so my modeling says that it is about as likely that a given city/area would simply deploy 5G sensor/controllers in the hope that something that justified them arise, as public WiFi would be. Some do it; most don’t.
Company applications are more promising, largely because in most cases, the companies know what the application would be and can frame a value proposition. The problem today is that even in industries like transportation, where as much as 80% of companies have potential IoT applications, and utilities (45% have IoT potential), the ability to realize those applications is limited. Rough data from two dozen transportation companies suggests that current application development costs and delays would disqualify over two-thirds of all projects. Utilities have a similar rate of disqualification. What these companies want is a good “IoT middleware” offering. Public cloud providers like Amazon come close, but many of the applications aren’t considered suitable for the public cloud.
My modeling suggests that 5G IoT in fixed locations needs an application framework to facilitate adoption.
Mobile 5G sensors are a whole different story. Transportation (again) is a critical opportunity, and here we would find the only space where consumer IoT presents an opportunity—the (gasp) connected car. This space is the perfect counterpoint of hype and reality.
Connected cars are a good way to share a cellular connection among multiple passengers, something valuable if we continue to shift toward WiFi-centricity in controlling cellular data costs and avoiding throttling. However, this would create a net loss to operators if optimizing plan pricing is the only goal. Other connected-car benefits can be derived from having vehicle telemetry integrated with cellular services, as current models of vehicles are already showing. Hype has tended to push the notion way beyond these currently interesting applications, toward autonomous vehicle control, for example. Even if connected-car technology were necessary for autonomy, the high cost of vehicles makes it difficult for it to pull through 5G. Adoption rates are too slow, and again we’re depending on an application framework to make the concept viable.
A kind of reverse-connected-car-think may be essential here. Most auto GPSs will pair with smartphones, and so the first step in connected car may be to use the smartphone as a bridge to the car, as a means of offering some connected-car value without requiring the purchase of a new vehicle equipped with connected-car technology.
In the transportation industry there’s a lot of value in 5G IoT for telemetry on big, expensive, moving stuff like airplanes, trains, ships, and so forth. Obviously, all of this requires wireless, but it also requires a different 5G service model than we’re used to. IoT sensors likely don’t need to be able to make calls, and texting would be only an optional way of exchanging data versus simple IP Internet access. Operators need to be thinking about a new kind of service plan, with suitable service types and pricing.
They also need coverage, which likely means that it will be difficult to launch a mobile IoT market without having the service capable of falling back to 4G connectivity. That raises the question of why, if 4G could work for the applications, we would expect them to create 5G opportunity. My model says that only connected car (done right, without the hype) has the potential to create mobile 5G applications.
The big challenge with mobile 5G will be the transition to it. All mobile applications of 5G either need ubiquitous 5G to develop (meaning “Field of Dreams” spending by operators) or fallback to 4G capability. That means that we need an application framework that could be sold as the benefit, and that could then be mapped to 5G as the number of users increases. Without an application framework, we have no particular reason to think that 5G will be driven by any form of mobile IoT. That means that what proponents should be doing now is driving mobile-cellular application models on 4G, with the goal of increasing usage quickly and thus contributing to the potential 5G demand pool.
If we return to the Fierce Telecom piece I cited above, we see that the issues they’re raising are really not about 5G drivers at all, but issues related to the supply-side Field of Dreams deployment model. Spectrum is expensive. Phones and services are locked in co-dependency. Network equipment is expensive. All that is true, but all could be solved for a moment if we had some convincing killer 5G apps, which Fierce Telecom also says. You have to wonder when the industry will recognize this.
For the record, all this is just as true, or more so, for edge computing. Edge computing is a cloud-hosting model variant, and anything that’s centered on a hosting model necessarily depends on having something to host. It does no good to say that 5G and the edge transform applications, because both are saying the other will be the driver. The most visible example in the real world of a circular dependency is a toilet flushing. The truth is that applications will have to transform 5G and the edge. Vendors should ponder that.
OK, now let’s consider business services. My model says that productivity enhancements based on 5G could generate over $700 billion in incremental IT spending, generally concentrated in industries that have a large percentage of “empowerable” workers, meaning workers with a high unit value of labor. Workers who are more mobile are obviously more susceptible to 5G-related empowerment strategies, and of course both unit value of labor and mobility vary by job category and industry.
I’ve run detailed analysis of both job categories and industries, and the range of potential by vertical market ranges from a low of about 0.62 for agricultural and related (NAICS code 1) to a high of 18.7 (health care and related (NAICS code 62). Those figures represent the percentage of workers in the workforce that would obtain benefit from productivity enhancement. The level of enhancement ranges from 25% to 88% depending on the number of different “jobspace targets”, meaning job/application combinations, the worker is involved with. Government (all levels), conglomerate management, professional/technical, and (believe it or not) accommodation and food services round out the spaces where the greatest potential would lie. I’m glossing over a lot of details here, but I’ll pick them up in another blog later.
Business services are, then, a highly credible opportunity for 5G, but when I survey enterprises (even in the key opportunity sectors), they’re not aware of any efforts to improve empowerment, despite the fact that there have been some vertical-market initiatives in various places. There just isn’t enough being said about the needs and opportunities in the space. In particular, users don’t know of any sources from which they can obtain suitable technology.
Business services could drive 5G deployment to its full potential, but only if there were clear application frameworks to deliver the productivity benefits. Just having 5G doesn’t move the ball; it’s what 5G might enable that does the job. It’s also important to note that most of the 5G business service opportunities relate to worker empowerment through smartphones, coupled with input from pervasive IoT. A solution to the business service challenges would thus enable the IoT driver.
Time to summarize. First, the natural course of mobile evolution will result in a gradual and limited deployment of 5G, mostly to the RAN and then to backhaul. The modeling says that there is no way to build a justification for aggressive 5G deployment from the field-of-dreams side, only a number of opportunities that could justify earlier deployment if we had a strong application model—middleware, tools, and some reference applications—to support them. Approaching the problem from the perspective of use cases (the operator mindset) does no good because the use case development doesn’t create the necessary application frameworks needed to actually empower anyone. What we need is IoT application and productivity middleware, which if we got smart and focused on worker productivity, could end up being the same thing.
Open-source? Maybe, but ONAP shows that even an open-source concept can be contaminated by standards-think. It may be up to a vendor to take the lead here, perhaps a smaller one with a willingness to stand up in the open-source world and start something insightful.
Perhaps a larger, and more desperate, vendor works too. Nokia and Ericsson are the deer caught in the 5G headlights here. As Protocol said about the former, “…5G is so new and so enormous that the company has a chance.” The problem is that while 5G NR is enormous, the rest of 5G is still groping for a business case, and in trying times such as these, with the delicate ballet of smartphone-vs-5G-radio in driving growth, it may grope for some time.
Companies like Nokia and Ericsson need to understand a basic truth that seems to be the outcome of my modeling. The pace of 5G deployment, and the depth of impact on services and infrastructure, will not depend on network equipment or technology. It will depend on what we can do with them. If the future of 5G lies outside the smartphone, then we need to think about the justification all the more, because there are no natural exploits of non-smartphone 5G. Sensors and controllers don’t have ears and mouths.
Applications will drive the future of networking, period. Somehow, the network equipment vendors in general, and the 5G-dependent players in particular, are going to have to start promoting the applications, not the networks. If they don’t, then 5G pressure will be in the direction of commoditization, with open-model elements. There’s still time to do this right, but current industry and market indicators say the time is running out.
