Pamela MALLETTE: Welcome back to 15 Minutes with 5G, a bi-weekly discussion with the industries’ big brains about the latest developments in 5G, and what they mean for consumers, businesses, and society in general.
Ericsson recently published the findings of the 2017 5G Readiness Survey. It was conducted by Coleman Parkes research. I am here today with Peter Linder, the Networked Society evangelist at Ericsson, to talk about that report. He is one of the most informed people I know on the developments taking place on the journey to 5G. Hi Peter, thanks so much for taking the time to talk with me today.
Peter LINDER: Thank you very much, Pam.
MALLETTE: Peter is also a very prolific thinker and writer, whose blog on Ericsson.com is well worth following, so I highly recommend that you do that. So, Peter, can you tell us a little bit more about this year’s survey? What was its objective with the respondents?
LINDER: A little bit what we are trying to do with this report is to survey where operators are in terms of their readiness in preparing and adapting for 5G. So, this is the second year we do it, and with this second year we will be able to tell some differences, to see how things have developed compared to last year. We have interviewed 50 people from different operators across the whole world in technology roles, marketing roles, and business development roles – so now we will try to give a little bit of perspective of the people that we have talked to, to get a feeling for where they are. The top three people; you won’t be surprised by seeing network architecture and marketing people up there, as they were pretty much the first affected by the 5G wave. We have seen a quite significant increase in salespeople participating in this year. Last year, it was a little bit hard to find 50 people that were open and prepared to talk about where they were. This year, people have been knocking on our door.
Two numbers that I think stand out of who has been responding and what people are saying that they are doing: the first one is that operators’ representatives who are saying that they are in trials this year has gone up from 32% to 78% - in a single year. And operators’ representatives that are in the step before -- in development, that has gone down from 34% to 2%. So, we can clearly see here how the whole activity and the type of activities within operators have moved forward a lot closer to commercial deployments and addressing a broad perspective of issues that we did see last year.
MALLETTE: Well, I tell you I know that Ericsson is very much obsessed with getting operators ready for 5G. I would really like to understand a little bit more about how operators have moved ahead in those preparations. And last year, they talked about focusing their 5G strategies on three key markets: consumers, business and enterprise, and specialized industry segments. How much have those operators’ priorities changed?
LINDER: I would say that they changed quite a bit. Last year we saw 90% of operators talking about focusing on consumers, we saw 34% talking about specialized industry services. This year, in 2017, 58% stated that they are focusing on specialized industry services, 56% on business users and 52% on consumers. So, you can say that there is more even split between these three different groups, close to equal weight among all of them. And I think when you are trying to interpret what is driving these shifts, I think that there is more of an awareness that the business and the industry potential has grown a lot during the year. And also, the awareness that mobile broadband is a very saturated market in North America, so whatever you do there, you can grow revenues per subscriber, but you cannot grow subscribers significantly – we are running out of people. And the consumer is still extremely relevant since mobile broadband and enhanced mobile broadband will be the cornerstone for the 5G rollouts. The other thing worth reflecting on a little bit: we issued the report early this year when we saw that the current operator revenues in the US are around $350 billion per year. And we projected that with 5G, you can unlock another $150 billion in annual operator revenues by 2026. It is a lot of money and if you look into that, you see that there is a number of different industry sectors - it is not one industry sector, you have got a 100 million and a lot of smaller ones, it is more like the number of different industries in the $20 billion range. So, this is opening up for a lot of opportunities for operators where they are going to place their bets.
MALLETTE: So, in this survey, respondents identified their top industry sectors and then, it seems as if they put media and entertainment at the top of the list. What 5G use cases do you envision standing out in media and entertainment?
LINDER: The 5G use cases in the media and entertainment space: the responses point out three key areas. The first one, which is the most near-term, which is already sort of existing to a large extent, is the high-quality streaming to mobile devices. The development here why the 5G is needed is that we are streaming more and more, hours and minutes and hours per users, it is more people that are streaming and the locations where people are streaming - there is a lot of people streaming at the same time. So, the benefits of increased peak rates and increased traffic density in 5G are definitely going to help that use case.
The second one is: 56% saying mobile virtual and augmented reality gaming applications are very important. 20 years ago, people were hanging on to ISDN rather than doing DSL because ISDN had lower latency back then. Here, the lower latency is what we are after with 5G. The lower latency will determine if you are a winner or you are a loser in the mobile game. Especially, as we start adding the VR/AR capabilities to the games.
The third one is perhaps a little bit further out, and we are a little bit earlier in the mobile status of this one: immersive integrated entertainment media and gaming. Before I came here, I had to look up immersive since I am not a native English speaker, but it is very much when media and everything just surrounds us and perhaps these user experiences with futuristic players can articulate and already building applications for it, but for the large majority this is what we aim to experience. And here, it is perhaps a combination of various 5G attributes for both latency, peak rates and also the ability to deliver this user experience over a dedicated slice of the network because these services to the large extent of volumes have not been seen yet.
MALLETTE: It is interesting to see how the consumer behavior changes over time. You and I probably went to a baseball game and just sat there and watched the game in the past. And now you not only watching the game, you are sharing now with your friends that you are the game, you are streaming a live video through your phone to your friends while you’re there. So, as you said it is immersive, you are surrounding yourself and you are surrounding others. So, you share the experience with others, but of course, you need the networks to be able to do that, you need all the links, features and functions and slices and all that kind of stuff to make sure that happens correctly. So, it is interesting that the respondents in the study also talked about use cases in other sectors. What were some examples of those?
LINDER: There are a number of different use cases in other sectors and sometimes it is a little bit hard to pick and choose what do we think is going to stand out, and perhaps more interesting: where is it going to start? In the automotive sector - what we did in this study that you will also find in the report - we asked questions about different use cases in each and every industry. What came out:
- The most important one in the automotive segment was autonomous vehicle control where it is the latency that allows us to play an important role in how vehicles are talking both to each other and talking to the networks, and enabling the vehicles to move without us necessarily sitting at the steering wheel. Yeah, this is a little bit scary, but on the other hand, what is even scarier is when someone is sitting behind the steering wheel and texting, especially if on the highway to work. I think we are seeing certain countries in the world struggling with traffic accidents actually increasing because people are paying less attention to what is going on in the traffic. The other thing that I see every morning is that we get through fewer and fewer cars on each green light by the traffic lights because it is always someone in the queue that sitting and texting. So, when it flips over to green, it takes a few honks on the horn before they figure out that it is green. And half of the green time is gone, making everybody else further down the queue annoyed. So, there is a number of different things that can be changed for how autonomous vehicles change, especially the traffic situation in urban areas. And also, when we are not driving the car, we have got opportunities to build consumer entertainment or we have the opportunity to drive perhaps to work like if we have already been in work, not only being on the phone conference or listen to podcasts like this one. I think that all these three things are making the cars, the autonomous vehicles, safe and secure to operate and being able to use the time available for either entertainment or professional services. We make the traffic patterns to cars in urban areas totally different than what we are seeing today.
- The second area, healthcare, which was standing out in the survey was remote robotic surgery and home healthcare delivery. The fact that we are now depending on more and more specialists and we can just secure that specialist can reach patients wherever we are rather than having us to find the specialist. The second one is home healthcare delivery: it is becoming more and more important to use the capabilities that networks enable, to take better care of senior citizens or take care of them in a cost-efficient way, because we are living longer and the cost of taking care of us is increasing, unless we find ways of getting home healthcare delivery. The role that 5G plays in both cases is perhaps about latency. If it’s surgery, you do not want to have latency when you, as a doctor, move your hands and something is supposed to happen on the other end. It is about security: we often talk about secure patient data or reliability, these are really reliability-sensitive applications.
- The third area is the public transport and actually what stood out there was smart GPS. What we can do to enhance not only telling us where we are but telling us what is the best route going forward? With more active tools, actually, not only route planning but route management based on the traffic situations are developing, where both the data volumes and the latency aspects of 5G will be relevant.
- The last thing is perhaps the most interesting development area, the energy and utilities space, where the survey pointed out the control of the edge of the grid and what is happening there. The edge of the grid is typically where our houses and homes start, so where the grid is handed over to whatever is on the inside. In the past, for the last 10-15 years, we have had electricity meter systems. We thought it was fantastic when we could measure the electricity meter remotely, so someone did not have to go out there and we are still doing the measurement that way fairly regularly. The edge of the grid here is transforming to a lot more dynamic environment. Dynamic in the sense that we have solar panels on the roof, generating more than that we need when the sun is out, so we want to pipe that electricity back into the network. At the same time, we are having an electric car or a hybrid car coming home in the evenings consuming a lot more electricity than what it used to be the low usage time of the day. And now people are wanting to take advantage of the fact that they have a solar panel and a car, and they want to charge the car when the electricity prices are low and not when they are high, so steering the consumption here towards depending what the pricing schemes look like. So this is more or less developing to a very dynamic trading market, with both input and output of electricity, where technology that we as consumers have access to has been matched with what electricity providers have access to. So here, 5G can definitely play a role in both in managing the data volumes – that would be required for this, and also the latency aspects as well.
MALLETTE: I tell you, when I listen to some of these use cases, I am very excited about what the future holds. It seems like it is going to be a lot easier to just get around and save time and money on some or the stuff around the house. It sounds great. But now, we are coming to the proverbial $65,000 question. We know 5G is going to be powerful but will it be profitable? Do operators really think that they are going to raise rates on customers to generate new revenue or are they looking at different ways to monetize 5G?
LINDER: I think the network today is the world’s biggest machine and 5G is going to take us into a direction where the world’s biggest machine is going to get a lot bigger and the world’s biggest machine is also going to be a lot more valuable. Today they say the fact is that it is shaping or determine all people’s lives with the kind of things and developments that we see right now, from both the industry sectors and from society. In general, the value of the network is just going to increase. Operators have been serving the whole market with one network slice, so mobile broadband, no questions asked, this is what you get. You can get more of it, you can get less of it, but it is bits and bytes. What we can see here is that the report is pointing to a few things. The first one is to increase the value to underserved costumers by adding new features and higher performance levels for the people who are prepared to pay for that. The second thing is that operators who will be paying a lot of attention to the customer base that they have, so migrating the 4G customers to 5G and then charging a premium for the attributes where 5G is different from 4G. We also see that the pricing, perhaps not all the prices will be tied to bits and bytes, because to some extent when you have a price more or less tied to bits and bytes, it is a little bit like running a restaurant where you charge for calories, so salad is cheap and bacon is very expensive, but the value to the user might not necessarily be reflected by bits and bytes. Videos are perhaps the most obvious case where the value per video data bits is several orders of magnitude lower than important healthcare data bits. And the fourth area, which I think is the new enterprise and industry markets, is a more virgin territory. We we don’t really know how we should exploit that. It was the fastest rising category compared to last year, and here is this potential to understanding how we would serve these categories we had so far from mobile broadband, and we have been giving them what we did for consumers and they have taken it as is, but there is a lot of things we can do there. Personally, I believe a lot in the concept of the instant economy. With 5G we are going to take a step further into making the world with we see us almost instant today that would be truly instant tomorrow. And I would not be surprised if we see a change where today we buy a 50 Mbs mobile broadband service, tomorrow I perhaps buy a one millisecond one where the differentiator between what I get is based on a different parameter than what we are seeing today.
MALLETTE: It does sound like there is a couple of different levers that the operators have, that they can move around to either change the pricing model or change the business model in general. So, it sounds like again an opportunity there, right? If there is one big takeaway from the 5G Readiness report for 2017, what would that be for you?
LINDER: I think the big takeaway here is that 5G is coming, whether we are ready or not, and I think the best way to approach it is to choose to be ready. You are becoming ready by doing a number of different things in this field. You are doing lab trials and market pilots, you really want to explore this and gain experience of this technology in real network conditions. How radio waves are propagating when you are changing their architecture, what implications that have on the performance, how you are going to place antennas to make it simple, how is this going to look like on the inside of the house, not only to the house when we are talking about fixed wireless. It’s a range of things that you can get out of the market pilots and lab trials. The second one is marketing showcases, and I think showcases are the first step. That is when we have something interesting which we think will be valuable and that we can show and get people excited based on early lab prototypes of something new, often starting with a new kind of device, a new kind of device tied to a certain industry, and perhaps an application at the back end which is introduced early as a minimum viable product, then to engage interest and see where we are going. From the marketing showcases we are getting to the use cases, perhaps the useful cases, in terms of understanding where will 5G really provide value. So, when we are going towards commercial launch, we have gone through the different steps and see these 3-4-5 things that are going to be the foundation of the business case as we put the pedal to the medal, and really accelerate the build-out of 5G.
MALLETTE: So, I think you summarized it really nicely, 5G is coming, ready or not and we need to choose ready. Peter, thanks so much for your time today, I really appreciate talking with you.
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