Telcos’ enterprise ambitions at risk from private network operators, private spectrum

With the popularity of private cellular networks growing among enterprises, private cellular network operators are now an increasing threat to what has been a traditional and lucrative profit stream for telcos, a study from ABI Research has warned.

ABI’s Private wireless spectrum tracker found that there are currently initiatives in 15 countries for enterprises to deploy private networks. These include supporting arrangements for enterprises to acquire spectrum directly from the regulator, as well as spectrum assets held by mobile network operators, that focus entirely on providing private cellular networks for enterprises.

Even though the question remains of who will implement and operate private cellular networks for enterprises, the analyst said it is inevitable that the industry will see more and more new network operators enter the stage focusing on providing private cellular networks for enterprises.

“The rising number of these spectrum initiatives underpins the strong momentum for private cellular networks that we see within enterprises around the globe,” said Leo Gergs, research analyst for 5G markets at ABI Research.

“With the very economic pricing, we will see even more enterprises expressing interest, as the ecosystem for 5G connectivity matures. Specialist operators like Anterix, Ambra, Citymesh, Edzcom and Tampnet will disrupt the market by offering business models to enterprises that follow an everything-as-a-service (XaaS) approach.

“Since all these specialist network operators have a system integrator background, they have the vertical-specific knowledge about requirements, pain points and deployment complexity. These specialist network operators therefore enjoy an incumbent advantage over traditional telcos in bringing connectivity to enterprises.”

Although large enterprises might have the manpower and financial resources to manage the network on their own, the study pointed out that globally, there are only about 10 million enterprises with more than 500 employees, while there are more than 700 million small and medium-sized enterprises (SMEs) with up to 500 staff, which will look for third parties to manage a private cellular network.

“To realise this immense revenue opportunity with SMEs, network operators need to leave their comfort zone and offer appealing solutions to them, which are fundamentally different from the offerings in the consumer domain,” said Gergs. “These should centre around monetising services such as the provision of a particularly high bandwidth, certain low latency, or the provision of additional capabilities, such as network slicing.

“All these costs should be captured in regularly occurring subscription fees to keep the amount of upfront financial investment as low as possible.”

The ABI study comes hot on the heels of similar research from BearingPoint//Beyond, in collaboration with Omdia, which warned communications service providers (CSPs) that they must change their strategies to drive revenues from their 5G investments in enterprise solutions, and recommended urgent action to reverse this trend, as most projected telco 5G revenues appeared to rely on B2B and not enterprises.

The study said CSP 5G strategies that focused on selling just communications solutions were failing, and only CSPs that were engaging partner ecosystems to solve enterprises’ business problems would be able to make up lost ground. It warned that telcos were currently set up to sell data, network slicing and edge capabilities – technology assets that don’t do everything that businesses need.