3.4 Operators may have more suppliers to choose from as they move towards fully virtualised networks

The shift to cloud-based networks and the convergence of the network and IT operations can also accelerate the change in an operator’s 5G supply chain. When networks consist of disaggregated software functions run on commodity cloud servers, the ecosystem is closer to that of the enterprise IT market than a traditional telecoms ecosystem. This opens the door for suppliers from that IT market (from COTS server vendors and chip providers to specialist VNF developers) to extend their reach into the telecoms industry.

It also introduces cloud economics to the network. For example, Facebook initiated the Open Compute Project (OCP) to drive the development of common designs for cloud infrastructure, which could be adopted at massive scale, thereby resulting in low costs and a broad ecosystem. It then set up the Telecom Infra Project (TIP) to introduce the same thinking to networks, including 5G. The result of these projects, together with the work done by other groups such as the O-RAN Alliance, is an emerging set of open interfaces, VNFs and reference designs that could open up the 5G supply chain and enable multi-vendor virtualised platforms, if commercially proven in large-scale networks.

The most radical attempt to follow these principles so far has been Rakuten Mobile’s 4G (soon to be 5G) deployment in Japan, in which over 25 suppliers were involved, including traditional mobile vendors, vendors from the IT world and new start-ups.

4. A platform approach and the 5G core will be needed to maximise the monetisation of 5G

As argued in the previous chapters, deploying an NSA 5G RAN and moving towards IT-based platforms and processes can deliver significant commercial benefits in terms of reduced TCO and improved performance regarding core KPIs (such as market share, customer retention, Net Promoter Scores and, in some cases, ARPU) in an operator’s established markets.

However, only 12% of the mobile operators in our survey believe that these business benefits will be sufficient to justify the huge investment in 5G and digital migration, if additional returns are not achieved within 3–5 years of launch. These additional returns fall into three main categories:

• brand new revenue streams in the enterprise, industrial and IoT markets
• a second, intensified wave of TCO reduction, enabled by further automation and digitalisation
• significant new revenue opportunities from the enhancement of current services.

The first of these three categories will have the most dramatic impact on the return on investment from 5G because if achieved, it will enable an operator to access new sectors and ecosystems, thereby significantly extending their addressable market. Importantly, the continued evolution of digital platforms will also enable operators to target a wider variety of use cases and industries than was available for 4G, with a far lower cost of entry per market.