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5G Consumer Services, Pricing Innovation and Network Monetisation

November 19, 2020 - Tony Gillick

Tony Gillick, GVP Product Management, discusses how network embedded services could add $136 billion to CSPs’ revenues

Earlier this month Verizon held a high profile investor event where they presented their 5G results, ambitions and plans. They presented on executing growth across 5 vectors.

These are:

  • 5G Adoption
  • Network monetisation
  • Next-gen B2B applications
  • Customer differentiation
  • New markets

While all the above are hugely important the topic of network monetisation jumped out at me. The fact that this term was being discussed by C level executives from Verizon shows that the network is moving from being a connectivity pipe to a strategic enabler that can be monetised, by driving higher value 5G traffic through each cell site and so increasing the profitability of each site.

In last week’s Openet blog we discussed how surveys showed 5G customers (consumers and enterprise) would pay a premium for 5G Guaranteed Quality of Service (GQoS) for 5G network embedded services. These are services where the network quality is a fundamental aspect of the offer and as such place the 5G service provider at the centre of delivering these services (think 5G gaming, or urLLC services like safety in autonomous transport). The introduction of network embedded services will drive network monetization and increase the ROI for 5G.

Also this week research firm Omdia and Ericsson Consumer Labs published a research paper that said that by 2030 the 5G consumer market could be worth US $31 trillion in ‘cumulative consumer revenues for the ICT industry’. Of this figure service providers could get $3.7 trillion from connectivity and selling digital services. By bundling in digital services service providers can get customers to move to higher value bundles. This approach is already being successfully used by Verizon. Their premium unlimited offer which includes unlimited data, Apple music, Disney +, Hulu and ESPN+ has seen its share of Verizon’s post-paid customer base jump from 11% in year end 2019 to 18% in Q3 2020. Unlimited data bundles differentiated by the addition of digital services seems to be the way ahead. In Q3 2020 88% of all new Verizon customers chose an unlimited plan and of these 58% opted for the high end premium unlimited plan. This trend reflects what we’ve seen in other regions. In South Korea, the Super Plus 5G plan offered by Korea Telecom is at 90,000 WON (approx. $78) one of their most expensive 5G offers. However, it’s also the most popular with 60% of their 5G customers opting for this package. Its popularity is down to the added digital services that are bundled in with this plan. The customer can pick two content offers from a list of services that covers video (TV, movies), music, streaming games, novels and VR based content.

So bundling content in with unlimited 5G works and can get customers to opt for more expensive bundles. In their report Omdia and Ericsson Consumer Labs call out the importance of pricing and have a chapter called ‘Pricing innovation to capture the connectivity opportunity’, which leads with the point: ‘A combination of attractive pricing models and service providers’ promotion of innovative services could help to facilitate growth in connectivity revenues’. While this is true, it could be argued that it’s missing an opportunity to capitalise on the 5G network.

And this is where network monetisation comes in.

5G isn’t just about providing connectivity and bundling in digital services for customers. The opportunity is to have the characteristics of 5G network as central component of the 5G offers. So rather than just selling a 5G gaming service that uses best effort connectivity – sell a 5G gaming service with guaranteed quality of service.  This is selling network embedded services and is key to 5G network monetisation. By providing network embedded services the service provider becomes central to the offer, the customer is buying the gaming experience, and higher value / revenue services are being delivered by the network, thus increasing the profitability of each cell site. However to do this you need 5G charging and policy forming a 5G Value Plane between the BSS, business / IT systems and processes and the 5G network, as the network experience is now part of the offer.

We’ve already seen that consumers will pay a premium for services with 5G GQoS, and data from the recent telecoms.com survey shows that service providers could achieve a 4.64% uplift in revenues by offering 5G GQoS to consumers. This adds an extra $136 billion to service provider 5G consumer revenues to 2030. The survey also highlighted that 61% felt that being able to offer SLAs with content partners that delivered 5G GQoS would make 5G a more attractive delivery channel for services companies. So this will lead to more partnerships for service providers, leading to a wider range of digital services in bundles, which we’ve already seen will drive 5G revenues.

Openet, Amdocs and telecoms.com will discuss this topic on a webinar – Monetising the 5G Experience on November 25th.

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