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Monetizing 5G NSA: do MNOs need to wait for standalone cores?

Dean Bubley

Disruptive Analytics

27 Jul 2021

Monetizing 5G NSA: do MNOs need to wait for standalone cores?

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This blog is guest authored by Dean Bubley, Founder & Director, Disruptive Analysis.

5G is an important milestone and upgrade for mobile operators (MNOs). It adds huge extra capacity and performance - even if some of the "world-changing" hyperbole is overdone, and coverage is initially constrained, especially indoors.

For now, it mostly offers users "more of the same" – especially with the ongoing build-out of current deployments and their re-use of existing 4G core components. That said, it's really a lot more of the same in many cases.

Unsurprisingly, operators want to find ways to monetise the significant extra investments they are making in infrastructure and spectrum. That applies both to 5G's current form, based on 3GPP Release 15, as well as the future 16/17/18 Releases which should arrive in sequence over the next 2-6 years, which do incorporate some notable extra features.

This time-period is also an important transition point for many MNOs, where they bring in new partners, new devices – and some different internal architectures and cost structures. There are plenty of discussions about IoT, cloud gaming, Open RAN, neutral hosts, smart cities, telemedicine, vertical industries, AR/VR and many other developments, which often get linked to 5G.

In truth, most of that correlates with 5G's arrival, rather than being caused by it, or enabled uniquely. But as the changes are occurring simultaneously, we can expect them to be linked in 5G service propositions and marketing.

 

 

 

The distinction between the network types is especially important here. Mostly early 5G networks are what is known as "non-standalone" – they reuse a lot of the existing 4G infrastructure – notably the core in "NSA" mode. (Some 5G networks also re-use the 4G radio network, with techniques like dual connectivity or dynamic spectrum-sharing).

 

Some MNOs have started trialling or deploying new 5G standalone (SA) core networks, with more expected to follow suit over the next 24 months – but that is an exception at present. Eventually, 5G SA can be seen as a fundamental building block of "real" 5G, where new capabilities such as ultra-low latency, network-slicing and accurate positioning become possible. It is likely to appear first for enterprise uses in specific sites, although some MNOs already use SA for 5G in areas where there is no 4G "anchor" coverage for NSA.

In other words, widespread availability of 5G SA is mostly for the future, especially in terms of mass-market wide area mobile broadband for consumers and businesses. For now, many (perhaps most) MNOs need an interim strategy for deriving more revenue from 5G NSA, where it is available for users.

How can 5G be monetised?

A fundamental challenge with "monetising 5G networks" is that most MNOs' 5G coverage is still patchy, whether that is using NSA or SA cores. Even where a 5G logo is displayed on a smartphone screen, the performance varies hugely depending on the spectrum band(s) and specific configurations involved. Rural and indoor coverage suffers in particular. In some circumstances there is no noticeable difference to 4G mobile; indeed some 5G networks give worse user-perceived bandwidth than good 4G.

This makes it very hard to justify charging users a premium for 5G NSA – either because they only see it in certain places/times, or because some regions of a country may not get 5G access at all.

This means that new 5G-related services must either be:

  • Location-specific: If an operator has good network design, mapping and testing processes and software, then it should be able to offer certain premium 5G NSA services in areas where it is very confident of delivering near-full coverage. 5G FWA broadband services are the most obvious examples of this. (While some countries permit regional-specific pricing and packages, in others it may be problematic for both regulatory and commercial / reputational reasons).
  • Unique pricing and plans: MNOs may be able to use 5G NSA as a headline benefit of upgrading to a higher-tier plan, perhaps aligned with availability of a new smartphone such as the latest iPhone or Galaxy. The economics of 5G networks (and large swathes of fresh spectrum) may allow operators to offer flat-rate "unlimited" plans, or a maximum-speed tier. This would still work when the user is connected to 4G, but the aim is that over time the user would progressively use a greater proportion on 5G.
  • Unique applications and content: Some operators are using 5G NSA introductions or upgrades with bundled applications that are designed to showcase its capabilities. AR-based gaming is a good example of this. In most cases the applications also work well on good 4G or Wi-Fi networks, but this does not negate the marketing benefits. In the future, there may be iterations that exploit the later SA or Release 16/17 features, but the initial offers will be more limited.

B2C

Broadly speaking, most near- and medium-term consumer 5G services are not dependent on standalone cores. Although various visions around network slicing, edge-compute and ultra-low latency can be constructed (for instance, for cloud gaming or live/immersive sports viewing), the majority of B2C traffic is "normal smartphone mobile data".

In other words, the same blend of video/audio streaming, social media, commerce, communications and mapping/transport that are already in use. 5G NSA networks allow more "headroom" for higher-definition images and video, faster upload/download speeds… and not much more, at least for now.

In other words, the main monetisable benefit of 5G MBB is simply "more", whether that is speed, data quota or bundled content. There is likely to be some improvement in average latency as well, but this will vary significantly depending on location and frequency bands involved, as well as differences between uplink and downlink.

Thus as mentioned above, some operators will use 5G introductions – despite reliance on NSA – to nudge their customers to upgrade to a higher-tier plan. There are various options here:

  • 5G is associated with flat-rate data at a higher price.
  • 5G is associated with a "Max" or "Top-Tier" plan, which comes with a variety of services which may not actually need 5G.
  • 5G is based on a plan with unlimited maximum data-rates, rather than being throttled to (say) 20Mbps or 100Mbps.
  • 5G comes bundled with a number of months of movie- or music-streaming, or video content in UHD rather than HD or SD resolution. (In theory, the lower cost-base of 5G, especially on "clean" new spectrum, should mean the network incurs less cost to deliver the greater traffic volumes from this).

 

The other near-term consumer 5G NSA proposition is around FWA for residential use. Clearly this is very coverage dependent (and also a function of available spectrum and backhaul), but has the advantage of being offered just in specific locations. More sophisticated MNOs even use mapping software to decide specific apartments in a block which should be able to receive optimal signal strength. The market for FWA is evolving fast, and could easily take up a full blog-post or white paper to discuss in depth.

B2B

Many of the promised features and benefits of 5G for enterprise do require standalone cores – ultra-low latency, fine-grained positioning, MEC edge computing and full network slicing are all dependent on SA cores, and ideally full Release 16/17 features. These all feature heavily in many of the Industry 4.0 and "vertical" use-cases that get widely discussed in a 5G context.

However, there are some benefits for enterprises from 5G NSA, especially for mobile broadband deployments in urban areas, or some major campus sites like universities, retail malls or hospitals. These places will likely have the necessary high-performance 4G underlay coverage to act as an "anchor" for an NSA network, as well as fallback for users without 5G handsets. As well as smartphones, NSA-enabled mobile broadband is good for security cameras for smart cities and other sites, basic vehicular coverage and general employee smartphone/laptop access.

As with consumer 5G, there is also scope for B2B FWA applications using 5G. Existing WAN connections for retailers' branches can employ 5G as a backup in case of wireline outages. Temporary sites such as construction projects or major broadcast venues can benefit from greater downlink and uplink speeds. mmWave 5G "drops" may be able to connect businesses set back from a highway with gigabit broadband, without needing to lay fibre through a parking lot or garden.

In the US, the new CBRS shared-spectrum band is mostly used for 4G LTE connections, as that aligns with the first generations of the standards and equipment certification programs. However, 5G NSA versions of CBRS are now being tested, and it seems probable that this will yield some new potential offers.

Being cynical, there will also undoubtedly be a lot of claims for "monetising 5G NSA" using low-power IoT connectivity based on NB-IoT or LTE-M networks. Although technically these are both 4G technologies, it seems probable that many will be badged as 5G anyway. The same is being seen with many LTE-based private network deployments – and even some Wi-Fi connectivity .

Perhaps the best way to view these developments is that they are part of the "5G Era" – a broader set of connectivity technologies and business models that coincide with the arrival of 5G networks, even if they're not technically 5G. This blurring of definitions is often seen in the political domain as well, where government officials sometimes use "5G" as a general shorthand term for "cool new wireless stuff".

Conclusion

MNOs do not need to wait for 5G standalone cores to start monetising their investments. However, the initial versions of 5G offer only limited scope for true technical service innovation, although it is a convenient point for new pricing and bundling options.

FWA is probably the most interesting source of new incremental customers and revenues with 5G NSA, as it can be offered solely in places where the operator is certain of 5G NR coverage and performance.

5G mobile broadband services are harder to monetise in the early days of 5G, as users will often spend substantial periods of time on 4G networks and may resent any increases in pricing. Nevertheless, NSA still gives operators an opportunity to create and promote new bundles or partnerships, as well as introduce tiering that is "futureproofed" for future advanced SA-derived services when they arrive in future. It may make sense to upgrade BSS platforms with this roadmap in mind.

One other area that should be mentioned is wholesale. A number of operators have already extended 5G capabilities to their MVNO partners. Although in the long term, it could be expected that MVNOs may turn into "slice operators", for now they tend to resell the same core network services as their host operator.

In summary – 5G NSA is still just scratching the surface of the eventual possibilities suggested for 5G. But that does not mean it cannot be used as a hook for additional service and revenue opportunities – although they need to be well-calibrated to the realities of network coverage and performance. In many cases, they will also need the back-end BSS/OSS software (and people and processes) to evolve in tandem as well, in order to support the progressive introduction of new business models.

Ideally, MNOs can set up new plans and brands which can evolve smoothly to later versions, when future SA and Release 16/17 networks are commercialised. For instance, an early focus on bundled games or AR/VR applications with high-end 5G plans might progressively adopt lower-latency 5G features or edge-cloud graphics rendering in future.

The early versions of 5G are not world-changing. But that does not mean that new sources of value cannot be found.

Dean Bubley (@disruptivedean, https://www.linkedin.com/in/deanbubley/ ) is the founder of Disruptive Analysis, an independent technology industry analyst and consulting firm based in London. An outspoken analyst & futurist with over 25 years’ experience, he specialises in mobile / telecoms fields, with an eye on broader technological, futurism and societal contexts. He is one of the leading market observers and forecasters covering 5G, network infrastructure & software, IoT, telecom business models, voice/video communications, AI and broadband/spectrum policy.

 

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