BY MIKA SKARP
One of the big challenges over the past few months has been the shift in Network Slicing discussions with carriers from the technical side (solved) to the business side which remains a ball in the air.
This for me really gets to the heart of what Network Slicing is all about, and the changes in thinking that its new business models will require. It’s a very good place to be as it brings the core value proposition to centre stage, and with it the enormous opportunities for new revenues and savings the framework will provide.
Network Slicing – A Revenue Generator in Waiting
Before jumping into the numbers, it’s good to visualize the technology in the carrier network context. At this point, it is generally accepted that Network Slicing means controlling multiple, logical (virtual) networks within a single physical one.
How these networks are separated varies from case to case. For example, while in some instances a logical vertical network slice would be completely separated and independent, while in other cases it would share resources with other instances, and these separations will be defined by QoS features.
This, by the way, is a concept that has been getting regulator acceptance and buy in. There is a very clear directive from these camps that Traffic Management within logical networks is and should fall in line with Net Neutrality regulations.
And we can see why combining any currently separate networks into a single network makes a great deal of financial sense.
Consider the unnecessary cost of the status quo, where in most countries we have at least one mobile network, one dedicated public safety network (Tetra or P25), multiple proprietary networks for corporations (served over copper, satellite and microwave) as well as DSL and Cable networks for home Internet access.
In the emerging paradigm, all of these purpose-built networks can have their needs served by one physical network that hosts many dedicated logical networks for different verticals and the many use cases within them.
In what is known as Fixed Wireless or hybrid mobile broadband networks, it is good to remember that base stations need to have fiber connectivity, and that indoor coverage requires its own “repeater”. Here, and as it relates to network slicing, we see many situations where the logical network must provide SLA guarantees on WiFi access points to the backhaul.
But this is really just the beginning. Whether we want to call them 5G or not, we are seeing a whole wave of new mobile applications coming online that touch virtually every 4G/5G network slicing use case.
And of course, new technologies, physical and virtual, are being closely watched by regulators. Take for example recent requirements for autonomous vehicles in huge markets like California. There, the DMV has just announced that any AVs or drones need flawless access to the mobile network and adequate capacity for video streaming.
We see the same mission- and even life-critical requirements for healthcare and its many promising use cases including remote patient care, doctors-on-demand via video conference and a widening array of telehealth devices like sensors and video for remote monitoring.
And these are just a few of the typical use cases we are seeing where mission-critical mobile devices need much better than Best effort capacity and latency.
But in spite of the many clear-cut revenue generators being proposed (and in a few cases, including those being trialed by us and others) there is a challenge. Today, global annual revenues for Mobile Operators stand fairly still at around 1.4 trillion USD, and all of this revenue is coming from one product; SIM cards.
Certainly, no single logical network will deliver 1.4 trillion USD revenue, but when you add them all up on a worldwide scale them you will get very close to it. Ericsson is forecasting that by 2026, additional revenue from logical networks could be 35%.
This amounts to about $619 Billion USD, a significant uplift, especially when you consider that additional investment toward those revenues amounts to zero. The only real challenge then is one of fine-tuning the mobile operator’s business model.
So where is the business case for 5G? Unpacking it we see that it has three components.
First, is that running a 5G network will, by definition lower OpEx thanks to virtualized network functions and cheaper rates per Gigabit.
Secondly, several purpose-built physical networks can now be combined within a single network with multiple vertical virtual entities, thus lowing CapEx costs.
The third and most important element is that these bottom-line improvements will share the spreadsheet with new top line revenues from mission-critical mobile connections, industry 4.0 and a wave of new interactive entertainment services.
Of course, the biggest obstacle is a change in thinking around how carriers envision their core business(es) moving away from an all SIM-card based revenue model to the business of selling differentiated capacity products.
No doubt this is a big change, but revenue-generating baby steps can be taken today in 4G and provide a perfect test bed to learn and refine the new models. And as 4G networks will be widely used in conjunction with 5G networks, Network Slicing should be introduced and available in both.