How to speed up 5G monetization with differentiated connectivity – insights from leading CSPs
Monetizing the capabilities of 5G standalone (5G SA) is both a challenge and an opportunity for communications service providers to break free from ARPU stagnation. Read key insights from service providers’ representatives stemming from the discussions about their current and future plans for deploying new 5G services.
Head of Solution Line Packet Core
Head of solution and portfolio, Core Networks
Solution Marketing Manager
Strategic Marketing Manager 5G Core
Head of Solution Line Packet Core
Head of solution and portfolio, Core Networks
Solution Marketing Manager
Strategic Marketing Manager 5G Core
Head of Solution Line Packet Core
Head of solution and portfolio, Core Networks
Solution Marketing Manager
Strategic Marketing Manager 5G Core
When meeting global telecom leaders, a major topic on our agenda is often how to address the key challenges of the current market and what innovative solutions can be developed in collaboration with market-leading telecom vendors and ecosystem partners to solve these challenges.
Here, we bring the summary of these conversations and provide concrete examples of the services CSPs are already deploying today, as well as those they are considering for future implementation.
Take a glimpse into the future of 5G SA monetization and the approaches that could drive the industry forward.
The business opportunities lie in service differentiation
Despite the continued growth in 5G subscriptions, CSPs are facing challenges in increasing their ARPU and finding new revenue streams. The current best-effort mobile broadband subscription model has reached its revenue capability limit, negatively impacting subscribers' service experiences.
Research shows that frequent app quality issues in crowded locations have led to 4 in 10 5G users no longer willing to accept best-effort 5G performance (Ericsson ConsumerLab report: Elevating 5G with differentiated connectivity). Additionally, the wide variety of traffic types requires different connectivity performance, making it difficult for CSPs to provide optimal services across all applications. This model also limits CSPs' ability to innovate and address newly emerging applications that demand more specific characteristics and performance.
To address these challenges, CSPs recognize the need for service differentiation and are exploring new models that offer varied services and reflective payment options. By embracing new business models, they can better meet the diverse needs of their subscribers, capitalize on new revenue opportunities, and enhance overall service experience.
The evolving business model for connectivity services
Main business opportunities highlighted by communications service providers
The discussions often highlight several opportunities for service differentiation among CSPs. These advancements are expected to deliver differentiated services that cater to specific customer needs, thereby enhancing the overall user experience.
At events, we often demonstrate use case examples and discuss various endeavors for monetizing 5G standalone with many CSPs. For example, a North American service provider explored the capabilities of differentiated connectivity enabled by network slicing technology during a motorsport event. They served multiple applications with optimized connectivity, including ticketing machines and points of sale, fixed and mobile broadcasting cameras, photojournalism, and drones for mission-critical purposes.
Another example is an Asia Pacific service provider case with premium connectivity for consumers at major events, such as sports and concerts.
One of the major service providers from North America recently shared insights into its innovative strategies, emphasizing the importance of dynamic network slicing, security, and mobile edge computing. Their approach to monetization extends beyond traditional mobility services, highlighting security as a lucrative area. They pointed to zero trust and post-quantum cryptography as key technologies poised to enhance enterprise offerings. Additionally, adopting SaaS-oriented solutions for secure enterprise connectivity is a key part of their agenda.
The conversations with our customers also touch on the evolution of fixed wireless access (FWA), one of the main 5G services that is already being deployed globally. Broadcasting services are gaining traction in several countries through concrete implementations and have been recognized as an emerging opportunity.
The potential integration of satellite precise location services to offer differentiated tariffs based on user location has also been discussed. Moreover, service providers are exploring Mobile Edge Compute (MEC) to support emerging AI use cases. MEC enables data processing at the network edge, delivering extremely low latency and immersive experiences – essential for applications such as connected and autonomous vehicles.
Fraud prevention is another area that service providers are focusing on. Fortunately, new technical solutions now exist to combat increasing scam attempts and provide users with a safer communications experience. This service already functions in 4G but can be enhanced in 5G with lower latency, enabling more advanced AI capabilities.
Enterprise and public sector use cases are frequent focal point of discussions, with customers exploring services for first responders, connected ambulances, and local packet gateways for on-premises data. These use cases highlight the importance of differentiated connectivity, which can provide guaranteed low latency and premium connectivity for critical applications.
The discussions reveal that CSPs must leverage their existing B2B relationships and collaborate with multiple providers to offer differentiated services. Overall, the talks tend to emphasize the need for communications service providers to explore new business models and strategically utilize their current network investments to monetize differentiated connectivity services.
Through our industry partnerships with device and chip makers, we often showcase the power of differentiated connectivity, which enables smart glasses and AR glasses to perform at their best.
Business model transformation is needed – but it comes with challenges
The business-related discussions highlight the importance of developing well-structured go-to-market strategies and thoroughly considering business models. Adjusting the business and pricing models when selling and marketing to new customers is required, which may vary across different enterprises and public sector verticals.
From a network perspective, the discussions center on the importance of adapting commercial models to leverage existing network investments, ensuring IT system readiness, and fulfilling net neutrality requirements. The internal prerequisites for launching new services emphasize the need for robust IT systems to support services such as fixed wireless access. Automation and service handling at scale were identified as critical components for successful deployment.
An important aspect to consider is how service providers communicate with their customers, including enterprises, public sector verticals, and consumers. They should avoid using telecom technology jargon and industry-specific terms like network slicing, UE route selection policy (URSP), cloud-native, automation, and other telco industry buzzwords. What is most relevant to end-users are the characteristics of the services they are paying for and how these relate to relevant Service Level Agreements. The technologies used behind the scenes by CSPs to achieve these characteristics are not the concern of service buyers.
Stronger collaboration between CSP’s marketing and technical teams is also needed to align technical network solutions with customers’ business needs and to effectively communicate the value proposition and solutions to target personas in customer engagements.
Ecosystem readiness and regulatory compliance are seen as pivotal factors. Achieving this shift requires the entire ecosystem to focus on creating a universal understanding of how best to match application requirements with the expected level of performance in the mobile network. Work in this area has already begun, with CSPs and telco vendors taking a leading role. With consistent standards of network performance and guaranteed performance assurance, app developers can create applications that deliver a more satisfying user experience.
Differentiated connectivity ecosystem
Net neutrality – the elephant in the room
The discussion on net neutrality always emphasizes the importance of ensuring that all users have access to the internet while also allowing for differentiated services. An example is a model similar to the airline industry. In this model, basic services are available to everyone, but premium services come with additional costs and benefits. For instance, in an airplane, champagne is available to all passengers, but it is included in the ticket price for first class passengers, while economy-class passengers can still purchase it onboard at an additional cost.
It is essential to structure service offerings in a way that ensures compliance with net neutrality regulations. This involves creating different subscription packages that provide varying levels of service without violating the principles of net neutrality. The goal is to offer differentiated connectivity services while maintaining fair access for all users.
How to start the shift toward differentiated connectivity services
Let's not delve into the technical aspects and network solutions now, as this would require another blog post. For this purpose, we recommend reading our Differentiated Connectivity Handbook, where you will find information about Ericsson’s proposition and essential portfolio capabilities to realize differentiated connectivity service offerings.
To conclude this blog post, we would like to share our recommended blueprint, developed through collaboration with major early 5G SA partner customers. This blueprint aims to accelerate progress and maximize the value of differentiated connectivity at every phase. It consists of three stages:
Differentiated connectivity blueprint
Stage 1: Explore
Begin by building your knowledge with a live “sandbox” deployment and an open mind. Target a specific user group with single use cases while the wider network remains unaffected.
Stage 2: Scale
Expand coverage and increase the user base by scaling up use case deployments in a controlled way to a wider location and multiple target groups. This will enable you to offer multiple connectivity options with differing characteristics and start to grow monetization.
Stage 3: Monetize
Focus on maximizing your return on investments by implementing business support systems and expanding your offering to a broader market. Explore performance-based business models driven by applications through industry collaborations with the ecosystem.
As noted in discussions with service providers, the recommended strategic approach is to start with a single enterprise use case or media production and then expand gradually. CSPs should leverage existing B2B relationships and collaborate with multiple providers to offer differentiated connectivity services.
Summing up
As 5G continues to reshape the telecommunications landscape, communications service providers must navigate the balance between technological innovation and strategic monetization. Leading service provider insights offer a valuable reference for other CSPs seeking to unlock the full potential of 5G. They emphasize the importance of strategic partnerships, regulatory compliance, and service offerings tailored to the needs of consumers, enterprises, and the public sector. By adopting a thoughtful approach, service providers can not only enhance their service portfolios but also drive meaningful business growth.
Explore more in our Differentiated Connectivity handbook chapter 2: “Unlock the value of differentiated connectivity,” which you can find on this page: How to reach differentiated connectivity.
If you're interested in exploring additional services to deploy on top of your 5G Core, which can also benefit from differentiated connectivity, take a deep dive into some inspiring use cases that utilize network exposure: 5G innovation with network and service exposure.