Industry Snapshots: Telcos Role in Driving Industry Innovation
In the era of hyper-connectivity, society stands on the cusp of change. We have evolved from the basic internet connections introduced two decades ago and are now edging towards real-time mobile connectivity with 4G and the convergence of the physical and digital that is being driven by the fifth-generation mobile network and the rise of the Internet of Things (IoT).
However, with increasing complexity comes an increasing demand for bandwidth, speed, and efficiency. Indeed, the rise in person-to-person, person-to-machine, and machine-to-machine communications are fuelling ever-increasing demands on network operators to provide the backbone that can support these advancements. Nor is the transformation complete. As technologies advance, the fourth wave of the hyper-connected era will bring real-time artificial intelligence and robotics automation which will further alter how we communicate.
Network operators and the ecosystem partners that supply and work with them are the epicentre of these evolutions. They are uniquely placed to serve almost every industry and every vertical as everyone looks to innovate how they connect and how they communicate. But, the telco reality is that they are tasked with simply providing an ever-increasing bandwidth capacity simply to support these advancements – rather than being pivotal in helping to drive them forward.
This report delves deeper into next-generation connectivity in selective industries and determines how operators can leverage these emerging opportunities and be more than a ‘dumb pipe’.
"AS TECHNOLOGIES ADVANCE, THE FOURTH WAVE OF THE HYPER-CONNECTED ERA WILL BRING REAL-TIME ARTIFICIAL INTELLIGENCE AND ROBOTICS AUTOMATION WHICH WILL FURTHER ALTER HOW WE COMMUNICATE."
Spotlight on Industries
The automotive industry is being overhauled by a combination of four simultaneous megatrends — connectivity, autonomous driving, shared mobility, and electrification – the first three of which are dependent to greater or lesser degree on data networks and the wider IoT.
Ericsson’s VP of Global Sales Connected Vehicles, Juergen Daunis, points to the fusion of IoT, 5G and AI that will transform the auto industry into a digital services business, but also warns that current cellular networks are simply not technically capable of supporting the advancements of AI and the high speed, low latency needs of autonomous vehicles.
“Only 5G has the necessary capacity to make truly self-driving cars a reality from a connectivity standpoint,” he adds. Whilst wireless connections can support automated vehicles, in-car entertainment and telematics to enhance road safety, the impact in terms of revenue on the telecoms industry may be modest. That’s because the jury is out on whether 5G will form a core part of the autonomous vehicle ecosystem. Telco networks will be used for non-real-time updates to and from the vehicle (such as traffic and mapping information) but bandwidth requirements for these services may be relatively low.
“Self-driving cars will depend more on on-board processing (e.g radar, lidar, optical) than the cloud,” says analyst Tom Rebeck, Analysys Mason. “Real-time connectivity will be beneficial, but not essential.”
Autonomous motoring is predicted to turn drivers into passengers, and potentially into consumers of video, gaming and audio content – all of which could generate new demand for operators’ services but this is unlikely to happen for the majority of vehicles until after 2030. While 5G will stream content to the car, onboard Wi-Fi hubs are expected to route data to devices.
To stake their claim in this space, telcos are advised to partner with established digital players such as Microsoft and Google as they build their operating systems into the 250 million connected cars due on the road by next year (Gartner), as well as start-ups in the automotive space. Malaysian operator Altel Communications, for example, allied with Chinese firm ECarX to develop car connectivity tech services for Malay car brand Proton.
WHAT THE INDUSTRY IS SAYING
"ONLY 5G HAS THE NECESSARY CAPACITY TO MAKE TRULY SELF-DRIVING CARS A REALITY FROM A CONNECTIVITY STANDPOINT."
Juergen Daunis, VP of Global Sales Connected Vehicles, Ericsson
"SELF-DRIVING CARS WILL DEPEND MORE ON ON-BOARD PROCESSING (E.G RADAR, LIDAR, OPTICAL) THAN THE CLOUD, REAL-TIME CONNECTIVITY WILL BE BENEFICIAL, BUT NOT ESSENTIAL."
Tom Rebeck, Analyst, Analysys Mason
With OTT streamed content eating into their traditional pay TV subscriber revenues, and competition in broadband access intensifying, service providers need to tap new revenue streams. Beyond the triple or quad-play voice and entertainment bundle, operators are increasingly looking to lead the IoT-enabled smart home revolution, but partnerships are crucial to making this work.
With established and credible consumer relationships on their side and a router into the heart of the home, network operators are well placed to exploit the opportunities related to broader management of home connectivity. Indeed, consumers are increasingly seeing value in smart home devices - from energy management to CCTV – with consumer spend on smart home-related hardware, services, and installation fees growing at 10% CAGR 2018-2023 to attain $154bn worldwide by 2023 (Strategy Analytics).
Whilst wary of being the fall guy for everything from streaming video glitches to cybersecurity, operators can leverage their position as the first point of call and take ownership of the whole home network.
“The solution is to have very effective and robust guidelines,” explains Bruno Tomas, Director Of Programme Management at the Wireless Broadband Alliance.
“These guidelines will effectively ask customers to commit to only using equipment provided by their telco – or their recognised partners – as part of their home network. Loyalty is the price they will pay for cybersecurity and quality of service.”
With smart home apps not a core expertise, service providers will partner with third parties and look to onboard, validate and manage devices in a seamless way. In so doing, they will aim to keep control of the home network.
Telefónica, for instance, has integrated its AI-powered digital assistant Aura with Facebook Messenger, Google Assistant, and Microsoft Cortana. In Spain, Aura is built into Movistar Home, which Telefónica aims to become home hub for user management of all connected devices.
Partnerships with TV vendors are another part of the mix. It is unlikely, however, that a main TV will become the central control for the entire smart home infrastructure. With smartphones, tablets, PCs and multiple TVs around the home, it makes more sense for the smart home controls to be accessible from any connected screen.
Says Tomas, “Operators are focusing on multi-device and this is why they realise it is important to harmonise all of the smart-home architecture.”
"These guidelines will effectively ask customers to commit to only using equipment provided by their telco - or their recognised partners - as part of their home network. Loyalty is the price they will pay for cybersecurity and quality of service."
Bruno Tomas, Director of Programme Management, the Wireless Broadband Alliance
Industrial IoT (IIoT) focuses on the optimisation of operational efficiency with significant application opportunities in intelligent manufacturing, smart industry, and industrial control. Also known as Industry 4.0, the global IIoT market is expected to be valued at U$751.3bn by 2023 (per Wise Guy Reports).
Two examples: machine-learning models can predict equipment maintenance issues ahead of failure to save unscheduled downtime; Image recognition can be used for industrial quality control to sort faulty items (from toys to food) before they are shipped.
However, lofty claims made for such digital transformation have not been fulfilled. An IDC prediction of 2016 claimed that some form of AI would make its way into all IIoT deployments by this year, yet a Cisco report of 2017 found that just 26% of manufacturing companies considered at least one IoT initiative a complete success.
The struggle to implement IoT in the enterprise comes down to data, security, and infrastructure; all areas where operators can score.
Securing IoT devices requires an operator who not only understands the stakes involved but who is also well versed in best practices. Just keeping up-to-date with machine firmware and security updates will go a long way toward keeping manufacturers safe.
Another concern is network complexity. With tens of thousands of IoT devices on a network sending telemetry data and potentially receiving control data from a central server, companies face a challenge planning network capacity and managing peaks and troughs in traffic. This presents another unique opportunity for telcos operators to step up and take responsibility.
Operators are in a strong position to support enterprises in their digital transformation journey. As connectivity shifts to the heart of IIoT solutions, they can deliver value-added services such as cybersecurity, pure cloud, and hybrid cloud migration, AI, big data management, and edge computing.
A CISCO REPORT OF 2017 FOUND THAT JUST 26% OF MANUFACTURING COMPANIES CONSIDERED AT LEAST ONE IOT INITIATIVE A COMPLETE SUCCESS.
"People are connected all the time, and you're no longer playing or buying a singular game that you play and complete. Games now evolve over time and are much more of a service than ever before."
Mathieu Duperre, Founder of Edgegap
Intel predicts that AR and VR entertainment will deliver cumulative revenues of $140bn between 2021 and 2028. Immersive applications that don’t even exist today could generate $67bn a year by 2028 – equivalent to the value of the entire global media market in 2017. This isn’t surprising considering the fact that connectivity has transformed the gaming industry as we know it.
As Mathieu Duperre, Founder of Edgegap who provide the first software to beat latency in online video games, put it: “People are connected all the time, and you’re no longer playing or buying a singular game that you play and complete. Games now evolve over time and are much more of a service than ever before”.
The key technology underpinning these advancements, and this growth, is 5G (wireless and wireline). Indeed, perhaps the most significant new consumer application for these technologies is cloud gaming. Some see it as more of a gamechanger than 4K UHD streamed video since real-time multi-player gaming isn’t possible, certainly over mobile, without 5G and the near instantaneous millisecond latencies it delivers.
Synched with this is the need for edge computing in which logic is moved out of the device into the cloud – or the datacentre. If you can process more encodes and transcodes there you can create thinner client apps, effectively streaming from the edge turning any device into a console.
Led by Google Stadia and Microsoft xCloud, cloud gaming is set to consume up to four times the amount of bandwidth compared to SD video and contribute up to half of all traffic over 5G by 2022 (per Openwave Mobility), clearly impacting mobile operator data strategies.
“No matter how much bandwidth there is or how much the cost per bit comes down, spectrum is still finite,” says Matt Stagg, director, BT Sport mobile strategy. “If you have payment models where a consumer pays for all their data then streaming 4K quickly becomes expensive. Where the operator offers all-you-can-eat video passes then the operator pays for bandwidth.”
He advocates HD streaming to mobile in 5G’s early phases to reduce data demand.
EE (BT Sport’s mobile network) has begun rollout of 5G and partnered with Niantic, makers of multiplayer AR game Harry Potter: Wizards Unite, in a bid to prevent being a mere conduit for OTT activity.
Telcos can further capitalise on the demand for cloud gaming by providing network architecture including essential data centres that can process data from multiple users in real-time, react to spikes in usage and prevent packet loss. According to Duperre, the answer lies in operators being the key to castle. Drawing on the AWS experience, he maintains that operators and ISPs alike need to move away from trying to define what is best and provide a service that can please everyone, and instead move towards creating and owning the network that these gaming studios need. As he summarises:
“In the early 2000s, operators lost the battle against the OTT. They kind of stopped bringing value, or lost track of where they were bringing value. So, then they became the dump pipe that we’ve all heard of. What’s happening now is a unique opportunity for them to regain value and that control over the pipe and to move away from the dump pipe mentality; they own the network and the last critical mile. Betting on that last mile, and on creating an infrastructure that can’t be done by the likes of Google or Amazon, is going to be key to their success”
"WHAT'S HAPPENING NOW IS A UNIQUE OPPORTUNITY FOR TELCOS TO REGAIN VALUE AND THAT CONTROL OVER THE PIPE AND TO MOVE AWAY FROM THE DUMP PIPE MENTALITY; THEY OWN THE NETWORK AND THE LAST CRITICAL MILE."
Mathieu Duperre, Founder of Edgegap
The operators’ role in healthcare delivery is expected to expand dramatically beyond emergency calls and analysis of network alarms and power failures – into telemedicine and other data-heavy areas, such as manufacturing and logistics.
On the logistics side, for example, telco analysis of smart city data can plot the most efficient transport routes, alert the most relevant medical professionals and assess which hospitals have the most appropriate equipment for an incident.
The biggest opportunity lies in telemedicine (the use of telco and IT to provide clinical health care from a distance). It’s one of the fastest-growing IoT verticals, with the number of patients being monitored remotely worldwide projected to exceed 50 million by 2021 (Berg Insight).
Bricks and mortar clinics in remote locations could be plugged into superfast connectivity virtually overnight where there are private or national health service budgets. Mobile operator EE, for example, offers a Rapid Site model connecting buildings in remote areas to speeds of 60Mbps over its existing 4G network in a matter of days.
The increasing ubiquity of smarter wearable devices combined with a telecoms infrastructure could also create ‘virtual hospitals’ to provide remote consultation diagnostics and treatment via video conferences, VoIP calls, and sensor analytics.
However, healthcare increasingly reliant on data and network connectivity risks exposing patients and health care providers to safety and cybersecurity hacks or malware infections. The onus is therefore on operators to guarantee that data will be transmitted and safeguarded to ensure trust in the system.
There is also a need to collate all of this data and ensure that it is readable by the analytical algorithms that aid with key decisions. This is a big data exercise that operators can turn their expertise to by launching and managing medical specific operations centres (MOC).
“A MOC requires a separate set of skills that span areas such as health sensor data interpretation, the application of specific analytical methods on medical data, and the application of operational rules related to the management of medical emergencies,” says Danny Itzigsohn, Senior Director at analytics solutions provider TEOCO.
In order to provide highly effective telemedicine services, telcos need to ensure optimal interoperation between their existing network operations centre and the MOC.
"NEXT GENERATION CONNECTIVITY, PREFACED ON 5G AND THE IOT, WILL BE A PHASED ROLLOUT THAT EXTENDS OVER THE NEXT DECADE BUT THAT HAVE THE POTENTIAL TO TRANSFORM ALMOST EVERY INDUSTRY AROUND."
Next-generation connectivity, prefaced on 5G and the IoT, will be a phased rollout that extends over the next decade but that has the potential to transform almost every industry around.
However diverse and unconnected the likes of healthcare, automotive, and gaming industry may appear, they do in fact share a common denominator, which is the need for agile, carrier-grade service operations. The networks owned and operated by the telecommunication industry will carry the data connecting massive concurrent connections between people and the IoT. These network connections will create multiple touch and revenue opportunities – but only if telcos also create an open, mutually profitable approach to partnership.
Careful planning is needed to avoid the dumb pipe trap that plagued 3G and 4G implementations, where network improvements fuelled the app revolution, but value creation almost completely skipped operators. To avoid this pitfall once again, operators need to look forward and put certain strategies into place from the off.
Operators must acknowledge that unlocking the potential of technologies such as AI/ML, security and infrastructure are primary challenges to every industry and that, whilst the strategy will inevitably differ depending on the industry and associated transformation, they will be central to the success of these endeavours.
There needs to be a shift in mindset away from simply supporting these transformations with a sufficiently fast and efficient network. Instead, they need to focus on building a next-generation network that these industries can plug and play into; rather than providing a network to fit their individual and growing needs.
Fortuitously, factors including reputational credibility, accessibility, market-leading data expertise and the physical presence of an existing network all combine to put communications service providers in an enviable position to carve out new revenue streams and ensure their relevance beyond the data-pipe even as bandwidth demands rise with the digital hyper-connected economy.