Businesses expect changes every year, but few industries are confronting the sheer number of changes network operators are facing in the coming year. As a result, these changes will dominate telecom trends in 2019.
Buyers' requirements are changing at an unparalleled pace, and technologies that operators hoped would frame their transformation are moving at a snail's pace -- namely network functions virtualization (NFV), 5G wireless and IoT. As a result, 2019 will be all about trying to navigate the mismatch.
Operators have known for a decade or more that the internet and over-the-top (OTT) services could disintermediate telecom service providers from new revenue opportunities. But, worse than that, while new services increase network traffic, stiff competition prevents operators from charging for services on a usage-based model, rather than flat-rate pricing. Consumers want a lot of what new technology promises, but operators seem to have problems getting a piece of it.
The most important truth in 2019 telecom trends for operators to face is that transformation -- a significant technology shift to accommodate significant market changes -- isn't going to happen this year. Most CTOs had been hoping for three things to happen: widespread impact of NFV, rapid adoption of new 5G mobile services and increased revenue from IoT connections. It's obvious to the CFOs of those same organizations that none of these will come about as expected. Instead, operators have to plan for a buyer-side revolution and focus on technologies that best support the buyer influences most likely to develop this year.
5G focus shifts to fixed broadband
In 2019, the strongest technology arrow in operator quivers is millimeter wave 5G hybrids with fiber to the node (FTTN). Mobile 5G may enable new applications, but it doesn't increase buyers' willingness to pay higher prices for mobile services. On the other hand, 5G FTTN is already demonstrating it can literally revolutionize fixed broadband services by radically lowering costs and speeding new deployments. Operators could expect to reach about 80% of their customers with at least 75 Mbps broadband, while fiber to the home can reach only a quarter of that profitably.
5G FTTN makes fixed broadband internet potentially profitable in itself, particularly for operators whose service areas have a large home and business density. Telcos that have previously relied on DSL to provide home and small-business broadband can now expect to have a profitable, competitive and higher-speed alternative. Customers have demonstrated a willingness to pay for broadband beyond DSL rates, so a 5G-FTTN hybrid service promises higher revenue when mobile services are competitively capped at unlimited usage, which shifts the 5G focus from mobile to fixed broadband.
5G FTTN drives streaming video services
The 5G-FTTN hybrid accelerates another consumer-driven transformation: the shift to streaming video. Mobile users' appetite for video on the run quickly created a video market that supplemented linear home video delivery, but those same consumers are now turning increasingly to streaming at home. Because 5G FTTN can deliver streaming video, but not linear video, such as real-time broadcast television services, the 5G fixed broadband transformation commits operators to streaming, a telecom trend already visible -- with AT&T, for example -- in 2018.
Large-scale streaming video to both mobile and fixed locations means video and ad caching become critically important. The most convincing early opportunity for edge computing and carrier cloud is in caching video and ads and applying user demographics to make ad selections. This application could give operators a chance to create profitable edge-hosted OTT services of their own, because operators have available space in central offices worldwide that could be quickly exploited in these video-related applications. Others would face massive real estate and connectivity issues to match operator capabilities.
The challenge operators face in realizing these possible carrier cloud gains is the explosion in operations complexity. Services created from dynamic hosted features are inherently more complex than services created by purpose-built devices. Operators' initial NFV foray into hosted features failed to address the operational efficiency of hosted features. And more recent initiatives, like ETSI's zero-touch automation group, seem to be tracking NFV's path, rather than addressing the fact that future infrastructure will look more like a cloud than a traditional network.
This year, operators will face what could be a pivotal choice: Do they continue to focus their own standards efforts and open source projects using the network-device-based approach of the past? If so, carrier cloud will have to adopt the cloud computing industry's model of application development, deployment and lifecycle management, because device-centric practices cannot be adapted to the cloud without losing all of the cloud's dynamic benefits.
That separation of network and cloud would surely mean operators could provide OTT features and services only through separate subsidiaries, and their core business would become a low-margin connectivity game.
Operators need IoT smart facility service model
In the telecom trends 2019 lineup, IoT is in many ways a playground for this battle of infrastructure models. To date, operators have looked at IoT opportunity purely in terms of the revenue they might gain from connecting new devices to 5G mobile services. Recent studies by network equipment vendor Ericsson show operators will have to look at services to process IoT events and create consumer value to generate new revenue.
Smart homes, buildings and cities are the realistic framework for IoT adoption, and all of these things depend more on an IoT service model than on 5G or even cellular connectivity. Players like Amazon, Apple, Google and Ring are all looking at facility security and control, including personal assistants that integrate these traditional IoT applications with entertainment, communications and lifestyle overall. Every step taken by these players creates a new OTT threat by fulfilling the most valuable pieces of smart-facility opportunity before operators even get started.
The bottom line for telecom trends in 2019
So, what's an operator to do in 2019? To succeed in IoT, they need to radically advance their smart-city thinking to look beyond connection revenue to see the value points for smart cities and ensure network operators have offerings that directly address those value points.
In the end, what's next for operators in 2019 is that tough choices have to be made now. No more time for study, and no more multiyear explorations. Software initiatives have been embracing the notion of fast-fail for years -- a development model that says doing something quickly, trying it even if it fails and then making it better is far more effective than trying to plan for perfection from the start. Learning that lesson is what operators face and fear most in 2019.