Flashy 5G use cases are turning heads at MWC 2018, but service providers need to turn their attention to designing 5G business models before it’s too late.
February 28, 2018
You can see the excitement in people’s faces at Mobile World Congress as they watch demonstrations of 5G use cases that will transform industries and empower users. Yet, there is a hint of 1998-2000 in the air, bringing back memories of the dot-com era when internet business blossomed, venture capital flowed freely and the newly available technology medium introduced an innovative way to connect. We all remember what happened, though. Businesses with great product or service ideas needed a revenue generation model, but many did not. If service providers can’t develop a strategy around how to make money from 5G, then they’ll miss out on promising new revenue streams.
On day two of Mobile World Congress, there has yet to be a prominent discussion about 5G monetization. As use cases are highlighted for a variety of industries, what’s missing is how new network events, slices and actions will be rated and billed. Granted, we are probably two years away from a full-fledged 5G network rollout, but complacency around the design of 5G business models will lead to return on investment delays. To date, it’s the less sexy services, like fixed wireless access, enhanced mobile broadband and Network as a Service (NaaS) that have revenue models that are viable.
Take the connected car, for example. It is prominently displayed in booths throughout the eight halls at MWC because it's exciting and attention-grabbing. And with 5G, we can visualize cars communicating with each other, proactively monitoring themselves and bringing new entertainment options for passengers. But let’s look at the actual business model of the connected car. The ecosystem consists of a car owner, car manufacturer, car dealer, mobile operator and potentially an auto insurance company. Next-gen services for the connected car could include assisted driving, proactive maintenance and over-the-air upgrades for electronic systems and applications. This begs the question: What will the optimal revenue model look like, and what happens if the customer doesn’t want any of these new, 5G-enabled services?
Today, many commuters opt to pay a monthly fee for Wi-Fi services and satellite radio, deeming these applications to be value-added services. The billing and revenue model for these services is well established and understood, with charges billed directly every month or incrementally for specific transactions. The next generation of telematics has given us proactive maintenance notifications, which we may or may not pay for once a warranty expires. We also don’t pay for autonomous driving functions, as most are internal technology that operates within the car as a single unit to protect itself and its occupants—it is not part of a greater “collective” communicating with other cars on the road. If a customer doesn’t see value in connected services, he or she simply won’t renew them.
Things get a lot more complex when we connect to the 5G collective. Much of the technology within the connected car is designed with safety in mind. For example, one of the main advantages of autonomous driving enhanced by 5G connectivity is the potential of accident mitigation through the collective sharing of data across vehicles. From a service perspective, this presents high value to the user. It does, however, raise interesting questions about the connected car’s revenue model.
- If a car owner doesn’t want to pay for all of the proposed connectivity services, should that car still communicate with the greater collective, in the interest of safety? If so, then one would assume the car manufacturer foots the bill to ensure basic connectivity.
- Will regulatory bodies determine which services are mandatory for connected cars? This would have a monumental impact on 5G business models going forward. For example, does a car manufacturer take on the responsibility for maintaining connectivity with the vehicle for proactive safety if a customer decides they don’t want to pay for other connected services like WiFi? This will of course differ based on country.
As these 5G-driven business models become more concrete, one can hope that new business models, like the connected car, demonstrate a level of value that customers will want to pay for. Now is the time to start thinking about the revenue models for these ecosystems and who takes responsibility for what, when and for how much.