Could a 5G network actually be the best dumb pipe ever?

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Alon Segal, Senior Vice President of Software and Services at Telit, ponders some of the new opportunities offered by 5G.

For operators, 5G networks represent a promised land of new, highly valued, digital services and solutions with differential pricing and endless capacity for innovation.  A new digital network with an ambition to unlock revenue streams and increase profitability.

Of course, the last network development to hold out that promise was 4G, and before that it was 3G.  There is no doubt that 5G will be different, but unless the operators are switched on in terms of thinking from now, then it could also be the same.

The 5G network will be the most intelligent network ever-built by the mobile operator community.  It will be about as far away from the concept of the dreaded ‘dumb-pipe’ as it is possible to imagine.  And yet.

The dumb-pipe business model arose to haunt the operator community because 3G networks opened up a whole new world of App-based solutions from the Over The Top suppliers.  The OTT companies arrived to sell rich, value-added services direct to consumers piggy-backing (or leeching) off the investment operators were making in new digital, data friendly networks.

If you think about what happened in the early days of the OTT explosion, the carriers, in essence, tried to compete or to play a walled garden role. They fought Netflix and HULU by offering managed content of their own instead of becoming an open ecosystem player and enjoying the benefits of that ecosystem. Had they created value through their services and billing, they may have enjoyed a greater share of the opportunity.

This pheonomen exploded with the advent of 4G speeds and ubiquitous coverage. The 100’s of BN$ in value created by the likes of UBER, Lyft and other players in the shared-economy would not be possible without the mobile operators’ 4G infrastructure. Yet that value creation completely skipped the carrier community while 4G speed and capacity further fuelled the app revolution and breathed a second wind into the largest internet companies such as Amazon, Google, and Facebook.

Now, with 5G the operators will have a truly intelligent network.  But a 5G network will most likely also be the most open network ever-built – it will need to be if it is to deliver on one of its missions to fuel the growth of the Internet of Things.  And being open, means plenty of innovative companies – big and small – will be looking to connect to 5G networks to introduce a range of currently unknown products, applications and smart IoT tech to the world.  They will be taking advantage of the intelligent nature of 5G networks and technology, while leveraging the rapid service enablement features to maximise their opportunity – and their revenue.

The challenge for carriers in IoT lies in rethinking their roles to better share in the value. I can see two approaches.

One is in the evolution of the network and understanding of what 5G means beyond the radio access network. Carriers talk about the cloudification of the network with network functions virtualisation (NFV) and software defined networks (SDN) and how the smart edge and open source come into play. So let’s see how they follow through on the openness vision.

The other approach is that carriers are clearly focused on vertical services where they can extract a premium and that comes not so much from the connectivity but from the services as a whole. The network gatekeeper is the carrier, they are proud of it and they have an opportunity to play a valuable part in the IoT ecosystem and deserve a fair return for that.

What all this means is that now – before they launch the networks – the operators need to be hard at work on the business models, to define their roles, their control mechanisms and the partner eco-system. Operators have a major role to play in the development, success and evolution of IoT networks and all the benefits they can bring to the world.  But now is the time to define their partnership position, and their role as a key enabler alongside their partners.

If they don’t get all that right now, the most intelligent network ever built, and the investment behind it, might just devolve into simply a faster and better pipe.

Alon Segal is the Senior Vice President of Software and Services at Telit. He is responsible for the technology roadmap and product strategy for software and services. He is a visionary technologist and entrepreneur with global work experience. Throughout his career he has held senior technical roles that contributed to business growth and leading-edge innovation. Prior to joining Telit Alon was the Chief Product Officer and co-founder of Zoeticx, a ground-breaking SaaS middleware solution that turns healthcare IT into an active environment, where patient medical information reaches out for providers’ attention.