How Much Mobile Operator Success in 5G Private Networking?

How much revenue upside and value might mobile operators be able to create from 5G private networks? Some, but not as much as some might help, if history serves as a guide. The distinction between public wide area networks and private local area networks always has created leadership by different firms, and types of firms.

Simply put, local area networking has not been a core competency for public network service providers, nor does private networking tend to offer opportunities to achieve scale. Third parties are the low cost providers in the local networking business, making success a difficult proposition for higher-cost public connectivity providers unable to take advantage of economies of scale in private networks.

Private 5G networks, 5G fixed wireless, internet of things networks and large-venue 5G tend to share a characteristic in varying degrees: they shift the focus of connectivity from outdoors to indoors, wide area to local area, public network to private network, recurring connectivity revenue to equipment purchases.

So infrastructure sales will tend to shift a bit to private networks, a trend we now have seen embraced by a growing number of public network suppliers--including Samsung, Nokia and Ericsson--as well as emerging radio infrastructure suppliers. That means suppliers of public network infrastructure increasingly expect to be selling directly to enterprise end users, and not only to service providers.

source: Real Wireless 

What remains unclear is how the support infrastructure will develop. Some mobile operators likely will set up dedicated indoor networking units to design, build and support private 5G networks for enterprises. If history is any guide, most mobile operators will not have a sustainable business case serving anything but the largest enterprise venues or customers. 

Telcos have not managed to develop sustainable revenue models for indoor, private networking. Instead, interconnect firms (voice), system integrators, value-added distributors and other LAN specialists (data networking) have emerged to design, build and support premises networks. 

So third party specialists also will emerge, in all likelihood, particularly among the ranks of firms that historically support premises networking. 

Why U.S. Mobile Operators and Some Telcos are so Big on 5G Fixed Wireless

“Fiber is the network of the future, and always will be,” I once heard an engineering executive quip back in the 1980s. Though not literally true, the statement was a reasonable summation of the business context within which fiber to premises networks are deployed. Put simply, the business case is strongest when only one network can be built, while other platforms, even when built, have some performance or cost issues.

Consider this older analysis of fiber to home payback. Analysts at Delta Partners Group noted that in countries where governments have intervened with financial support in the FTTH market, including Japan, Lithuania, Malaysia, Portugal, Singapore, South Korea and the UAE, homes passed range from 47 percent in Sweden to 95 percent to 96 percent in South Korea and Lithuania. 

More important are take rates. There is relatively quick payback when consumer buy rates are in the 45 percent to 81 percent range, for example. In the U.S. market, where Verizon has deployed FTTH, it has only relatively recently gotten to a bit over 40-percent adoption, after 13 years of marketing, which is literally “off the charts” in this case. 

Delta Partners Group 

The problem for U.S. telcos is that rival cable operators have 70 percent of the installed base and have led in market share (net new additions every year) for two decades. Mobile operator interest in 5G fixed wireless is precisely that it offers a platform with different economics.

Do Employees Understand AI Impact on Productivity Than Their Bosses Do?

Is it possible that employees of large firms have a better understanding of the impact of artificial intelligence on competitive advantage than their bosses do? Perhaps. 

It certainly seems to be the case that employees and C-level executives have different expectations about widespread AI adoption. 

Citrix sponsored a research effort conducted by Man Bites Dog and research company Coleman Parkes, polling 500 C-suite leaders and key decision makers within both large, established corporations and mid-market businesses with at least 250 employees. The study also involved surveying 1,000 employees. 

Fully 91 percent of professionals believe that by 2035, their organization will spend more on technology and AI than on human workers. Also, 90 percent of business leaders believe that in 2035, AI technology investment will be the biggest driver of growth for their organization.

By 2035, 83 percent of professionals believe that technology will have taken over low-value and repetitive tasks, enabling humans to focus on more meaningful work.

Some 89 percent of business leaders believe AI-powered digital workspaces will increase worker performance and productivity in their organization by 2035. Just 55 percent of employees share this view.

Fully 73 percent of business leaders believe that technology and AI will make workers at least twice as productive by 2035, while only 39 percent of employees share that belief.  

Only about 16 percent of business leaders say they are unclear about how their firms gain competitive advantages from AI, even when every major competitor uses AI. But 65 percent of employees say they are unclear on how their organization will gain a competitive advantage from using AI when it is being used by every business.

At least in part, employees seem to have a realistic understanding that AI will enable replacing humans with machines. Business leaders, though not immune from that process, tend to believe they will not be affected to the same extent. 

Perhaps shockingly, 57 percent of professionals believe that by 2035 there will be no traditional leadership team at all, as AI will make most business decisions.

Will Telecom AI Grow Over Next 5 Years?

Though connectivity providers have been slow to adopt artificial intelligence, that is expected by some to change dramatically over the next five to 10 years. 

source: Omdia 

Mobile operators seem to have moved earlier to adopt artificial intelligence than fixed network operators. At least, that is what STL Partners discovered in May 2019. Telcos that had incorporated at least some AI often used it to optimize existing network operations. 

Beyond that, some used AI for network planning and optimization, human resources, accounting and fraud-management. Some also use AI for cybersecurity and predictive analytics. 

AI also has been used for sales and marketing and customer experience (fault resolution, churn management) as well as supporting chatbots and virtual assistants. 

Singtel’s DataSpark provides access to GPS and mobile network data that other organizations can incorporate into their applications and services. 

AI is almost certain to be employed to help maintain profit margins as global revenue growth remains slow for the foreseeable future. 

source: GSMA Intelligence 

Is IT Productivity Slowing?

Industry disruption now has a familiar pattern. It starts with a cheaper, simpler version of a familiar product, which has some structural advantage. The product improves cumulatively, until the traditional industry can no longer compete. 

This illustration from Consensys shows value added in the financial services sector, compared to some more “physical” industry verticals. The broader point is simply that, by some accounts, either cloud computing or artificial intelligence are the forces leading productivity change.  

source: Consensys 

Technology optimists and pessimists tend to wage an unending war about the value of technology improvements. Some believe we are reaching an era of limits, such as the end of Moore’s Law, while others believe we will simply find other ways to keep pushing ahead. 

Optimists might counter that productivity now is shaped by software or cloud computing, not hardware.

This visualization by Deloitte shows the percentage of top 500 technology firms in Deloitte’s Fast 500 index. About 78 percent of the firms are in either the software or “digital” categories. About 10 percent of firms are in the hardware, devices or networking categories. 

source: Deloitte 

Nor is that an especially new trend. In consumer computing markets, new hardware has not propelled innovation advances as much as new cloud-based software and applications, for example. A study by Logic Monitor found that 74 percent of information technology executives in the United States, Canada, United Kingdom, Australia and New Zealand expect 95 percent of all software to be run in the cloud within five years. 

source: Logic Monitor 

The point is that pessimists might tend to see hardware limitations as negatively affecting rates of productivity growth. Those who see software, artificial intelligence or cloud as the drivers might tend to be optimists.

Study Shows Managers, Workers Believe Remote Work is Less Productive

A study of remote work at the Research Institute of Economy, Trade and Industry suggests workers and managers do not believe remote work is as productive as many claim. Keep in mind this is a survey of attitudes, not an attempt to directly measure some proxy for actual output. 

The productivity of remote work can improve over time, the researcher expects. Of course, much depends on the type of work. 

Some jobs simply cannot be conducted remotely, such as service jobs requiring physical contact with customers, often including doctors, nurses, hairdressers, and restaurant waiting staff.

Most work conducted by “information” workers in offices are easiest to do remotely, one might argue. The REETTI study suggests that the jobs of managers of knowledge workers might be far harder to do on a remote basis. 

Research Institute of Economy, Trade and Industry 

The study suggests four main classes of issues impairing higher productivity. Many people said the user friendliness of software and hardware for remote access was an issue. But Masayuki Morikawa, Research Institute of Economy, Trade and Industry, believes that is an issue which is resolved over time as workers become more experienced. 

Some tasks, conducted in the office, sometimes for security reasons, were hard to replicate in a remote context. 

Some people “emphasized the loss of the valuable, quick communication that is only possible through face-to-face interactions with their colleagues,” he said. 

Finally, a poor working environment at home, particularly the lack of a private room specifically designed for work, was reported as a serious constraint by many respondents. 

User experience and better remote location security and communications might be easier to fix. Home working environments will be much tougher to improve, as will the loss of face-to-face interactions. 

Will AI Upset Our Notions of How Much "Upskilling" Will be Needed by 2030?

It is hard to disagree with this McKinsey analysis of how skill requirements might change in the United States and Europe between 2016 and 2030. On the other hand, it also is possible to argue that we simply do not know yet how much artificial intelligence will reduce requirements for cognitive skills or technology skills.

In principle, AI should reduce the need for humans to acquire many cognitive or technology skills, as AI will automate so much of what we now believe will be required that perhaps there will be less “upskilling” need than the analysts expect. 

source: McKinsey