Success of 5G depends upon operators’ monetization and pricing strategies

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this piece Shay Assaraf, CMO of Optiva takes a look at how operators can make the most of the 5G opportunity.

As headlines and advertisements increasingly tout the promise of 5G, it’s important that operators not fall for their own hype. While 5G certainly holds promise for creating new business models and service segments, realizing that promise depends, in large part, on the development and implementation of sound monetization and pricing strategies.

5G completely alters the way in which communication happens by improving throughput and reliability, lowering latency and increasing network robustness. Likewise, 5G alters what is communicated, enabling machine and device communications that underpin connected autonomous cars, smart cities and other next-gen applications. Furthermore, the dynamic and elastic nature of 5G requires operators to fully embrace and utilize the public cloud to support demand for those applications and decrease time to market for launching new, related services. As such, operators cannot and should not apply 4G thinking and 4G IT infrastructure to monetize 5G.

Instead, operators should visualize the types of 5G environments they want to support and then build a business case around it. Operators need to determine the applications they want to support and design ways in which they can deeply immerse customers into experiences and content. They should consider how customers will interact with each other, as well as with machines and devices, over the 5G network.

Throughout this process, consideration should be given to opportunities for monetization. Likewise, pricing strategies should be developed to address the unique nature of 5G offerings. Following are three key areas that operators should consider when developing such plans.

1. Monetize the network

5G enables operators to fully leverage their network and infrastructure capabilities to create new monetization opportunities, including:

2. Monetize the slice

According to research from Gartner, the greatest revenue potential for 5G will be developed through network slicing, which supports multiple use cases, business models and services. Network slicing enables operators to create multiple virtual networks using a shared physical infrastructure. They can then tailor slices of the network to highly specific use cases and unique business requirements based on capacity, latency, quality of service (QoS), security and other variables.

Network slicing enables operators to deploy only those functions needed to support each customer and/or market segment, allowing them to differentiate through service customization. Slicing also enables “network as a service” offerings that enable operators to manage the slices independently and apply rules as needed. As such, operators can develop offerings for third-party tenants, wherein they maintain control over service deployment and operation and adjusting access according to each agreement.

For operators to truly monetize, the slice will require significant changes in business and operation support systems (B/OSS). Orchestration and Intelligent network functionality － managed in real time － will be key in the OSS layer to enable automated network operations. Meanwhile, the BSS layer requires more flexibility to rate and then charge in real time for a new wave of services for any account, customer, subscriber or user.

3. Monetize the enterprise market

While 5G enables operators to expand service offerings to consumers, the bigger opportunity is what 5G enables for enterprises, including applications for B2B, B2B2X and IoT market segments. For the B2B market, 5G enables mobility solutions and cloud services to SMEs and large corporations. In B2B2X markets, the concept of “customer” expands even more. For instance, an operator might provide high definition video services to a stadium operator that then sells the service to its premium customers, who are able to capture lost moments and referee decisions using virtual and augmented reality.

Likewise, operators glean great potential from monetizing enterprise applications for IoT. In fact, Gartner predicts that the enterprise market, as opposed to the consumer market, will account for more than 90 percent of the overall IoT services spend.

Determining the pricing model

As operators determine how they want to monetize 5G, consideration also should be given to pricing models for new products and services. Pricing models should include options for one-time charges, subscriptions, usage-based charges, “pay as you go” applications, freemium models and charges for application programming interfaces (APIs).

For operators to maximize ROI on their 5G investments, they need to clearly understand the costs and what they stand to gain from 5G transactions. It’s key to implement end-to-end real-time billing and charging to glean the most revenue for every interaction on the 5G network.

Without question, 5G networks enable vibrant use cases that are creating excitement and expectation for operator networks. However, a well-developed monetization and pricing strategy will enable operators to exceed the expectations of 5G, differentiate their service offerings and ensure future revenue.

Shay Assaraf is CMO of Optiva. He has a wealth of B2B and B2C experience in marketing and strategy with more than 15 years in the telecom industry. At Amdocs and before that with Pontis (acquired by Amdocs), Assaraf held various positions, and in his last role, he led the marketing consulting and analytics teams addressing customers’ challenges using analytical data, machine learning and artificial intelligence tools and expertise.