Can the 5G vendor space get any worse? Apparently it can, according to a Light Reading story that quotes a number of analyst firms. Consider this quote: “Research from Omdia, a Light Reading sister company, reads like a horror novel for anyone in the radio access network (RAN) products business.” Well, I agree, obviously. I do disagree with another statement, “The bosses of Ericsson and Nokia got it badly wrong.” I believe both companies were less “wrong” than both misleading and misled. 5G never had a chance to do what was claimed for it, and the two vendors had a choice; say that something would save 5G spending or admit three years ago that there was little long-term hope for mobile equipment. We all know why the second choice wasn’t taken, but is there a third choice, a redemption for mobile and 5G spending. The article says that “The industry’s great hope is that developers will cough up where customers aren’t.” Anyone who can read statistics knows that there aren’t enough developers relative to the number of users. There’s also a suggestion that traffic growth might somehow pick up down the line, but both suggestions have the same issue.
One factor here is that, in most markets, the mobile user base has been largely served, so no growth in customers is possible except via changes in provider. That’s why a hope that developers would somehow pick up the slack is unrealistic. Could developers be expected to gain new customers? Unlikely; a saturated base isn’t likely to be resolved by developer evangelism.
If you can’t get new users, you have to boost ARPU. The problem there is twofold. First, developers might get ARPU from new applications, but how much of that would roll to operators? Unless developers paid operators for API usage, only data charges. The problem there is that many users get unlimited data, and that only content delivery, which isn’t a developer opportunity, is the only significant data traffic generator. The data traffic realities also argue against any data-driven recovery of mobile network spending down the line.
The reality here is that all markets saturate. Wireline services tend to saturate when all homes and offices are connected, and that occurred decades ago, so mobile services were the hot profit growth opportunity. Now mobile is largely saturated. The question then becomes not one of mobile standards as much as mobile’s role in people’s lives, which means that it’s a demand/application factor.
So does everything depend on developers after all? Not in the way that operators and network vendors hope. What these players really want is for some organizations to launch new services that, rather than being just another Internet OTT application, are actually partnerships with operators. But how likely is that unless operators offer APIs to present new and valuable features? Why share revenues with operators if all you really need is Internet dialtone?
What way, then, does this depend on developers, what kind of developers, and what would they have to develop? The simplistic view of operators, and of many within both Ericsson and Nokia, is that developers would exploit 5G APIs that expose connectivity features. Those features can’t easily be differentiated from Internet service, so that approach is doomed. Given that, you either have to assume that the operators build out a new feature-middleware offering to underpin a vast new service opportunity, that third parties build up that middleware/service vision as an OTT, or that OTT providers (probably public cloud providers) build their own unique services on their own.
I think there is little or no chance that a significant revenue stream for operators would develop under anything other than the first of these three options. Yes, if we created a compelling service that required superior connectivity and capacity, that might provide a reason to make 5G universal (on a recent trip to a tourist area in the US, I had only LTE coverage), but how much would that add to operator revenues? Thus, the future of mobile spending likely depends on operators deploying the feature middleware. Which, of course, we know they simply will not (and likely cannot) do. That means Ericsson and Nokia need to do it.
I’m told by people in both companies that they have internal initiatives that aim to identify and prototype just what’s needed, but that the activity so far hasn’t worked out of the “identify” step. There seem to be two camps here, and the vendors are trying to refine what may well reduce to a single approach, which is a metaverse facilitation service.
The first camp is the “SODDI” camp, which to paraphrase a police term, means “some other dude does it”. This camp believes that Meta’s metaverse initiatives will popularize a more consumeristic metaverse concept, but also reveal limitations that will open a path for operators to exploit. The vendor, then, should wait to see what limitations emerge and then address them.
The second camp is the “stake in the ground” camp, which wants the operator to pursue an early and business-focused metaverse, the “industrial metaverse” perhaps, and wants the vendor to develop facilitating middleware/service tools to fit.
I think that the second approach is the best for operators for the simple reason that jumping out to frame their contribution to service would reap more revenue. Since any increase in operator spending on mobile infrastructure has to be justified by operator revenues, getting a bigger piece of the retail pie is good for the vendor. I think Nokia favors this approach right now, but the question of what the product/middleware would look like hasn’t yet been settled, and there’s a hope within Nokia (which I think currently dominates Ericsson thinking) that some international body might step up to both design the middleware and promote developer interest in building it.
The problem with the international-body approach is the time it would surely consume. I believe nothing significant could be done in less than a year, and full support for any services would probably take two years. In that time, both Ericsson and Nokia could expect to see their stock prices deteriorate. I think that either of these vendors could step up and make something happen a lot quicker.
The other chance is that a cloud provider or platform player could do the job. Whatever the features the middleware and service need, their implementation will surely be hosted software. I don’t have a good conduit into whether any of these platform/hosting players are looking at this issue, but I think they have an opportunity there. If they exploit it, they’ll surely relegate operators to be an UTT (under-the-top) player, with little new revenue potential to drive further infrastructure spending. Something Ericsson and Nokia should be thinking about, huh?
