Will carriers be ousted, or forced to cede ground, in the enterprise market with the rise of private networking and the liberalisation of spectrum in the 5G era? Nokia thinks the existential threat to the operator community has been overplayed.
“By and large, almost exclusively, the situation has been overstated and misunderstood,” said Houman Modarres, the company’s head of enterprise marketing. “Perhaps we just need a villain in the piece,” he adds, pointing to the perceived jeopardy played out in the trade press, and in these pages.
“The reality is service providers covet enterprise business. And when looking forward, especially towards 5G, they see the industrial opportunity as the massive value-add, the massive plus-opportunity – in addition to extreme mobile broadband. So they’re excited about it.
“They are going to address it in multiple ways. Private networks have always existed, in one form or another. Enterprises have the freedom of choice to build or buy – and, when it meets their needs, they don’t want to be in the networking business.”
But it sounded like a change in tone from the Finnish vendor, which has maintained a tougher line, notably compared with old rival Ericsson, on the matter throughout 2018 and 2019. Gabriel Brown, analyst at Heavy Reading, picked up on it, too, in attendance at Nokia’s global analyst forum in Finland last week.
He described a “subtle, but definite… shift in emphasis to working even more closely with telcos on private wireless.” Brown reflected: “This is in part due to customer demand for licensed spectrum, but also I suspect a business model and telco customer relations issue.”
What is clear is that mobile networking – with government intervention on spectrum for industry, availability of private networking gear from vendors like Nokia and Ericsson, and even work streams in 3GPP to design 5G for unlicensed bands – is no longer the sole preserve of the traditional operator set.
However the threat to operators is perceived, their stranglehold has gone. Mobile network is changed forever. Nokia has, itself, counted up the opportunity in terms of mast sales, with 14.6 million potential venues, including no fewer than 10.7 million in the loosely-defined “manufacturing and industrial” space.
It sounds like a lot, and it is: more than twice the number of cellular 2G, 3G, 4G, and 5G base stations already deployed, globally. More than this, the changing dynamic, with industrial LTE and 5G, will see the market move from a handful of networks in a country to millions, potentially.
The excitement is palpable. ABI Research says the market for private wireless networking will be worth $13.6 billion by 2025. Nokia is doing good business, it seems. It announced last week it has deployed private LTE networks with more than 120 customers across multiple industries and geographies.
Katharine Buvac, president of the company’s enterprise division, told analysts in Finland five per cent of Nokia’s revenues in 2018/19 came from enterprise networks, with the lion’s share from private wireless networks; the current run-rate is up 12 per cent in the year to date. The division is “on fire”, reflected Brown.
Speaking with Enterprise IoT Insights, Modarres sought to mollify any perceived angst among the operator set. Almost half of the 120 customers Nokia has supplied with private LTE gear have signed with operators for the airtime component.
“In close to half of the cases, they are with service providers. A lot of times the operators will provide spectrum leasing arrangements to these industries. This idea needs to be debunked that it’s a zero-sum game – that we’re doing this without the service providers. No. We are a better partner to our service providers because we have this depth of understanding,” he said.
But it has not been presented as a zero-sum game. That is the point about the threat to carriers; it was a zero-sum game, before, when they owned all the spectrum. Nokia’s new business with industrial partners has already bypassed the old telco guard, in about half of cases – and that’s before general and private access (GAA and PAL) spectrum comes available with the 3.5 GHz CBRS band in the US, and before various industrial allocations are made in Europe and Japan, notably.
Modarres commented: “It’s some and some. This is not a purely unlicensed play. In fact, in the US, for example, CBRS and GAA really are only becoming available right now. That’s been the gating thing. We’re just now in some initial commercial deployments and certification with spectrum access system (SAS) providers.”
The narrative tells that operators will not get it all their own way, even if they remain the go-to providers for enterprise connectivity. Capgemini says one third of industrial companies, and almost one half of large industrial organisations, will apply for their own 5G licenses.
Meanwhile, Bosch, proclaiming a private owner-operator model for industrial 5G, confirmed last week it had applied for 5G licences at 3.7-3.8 GHz in Germany; Siemens is working with Qualcomm on a test 5G network using a provisional holding in the same band. And even Nokia stated this week, elsewhere, that it has been asked to provide private 5G by 10 companies, looking into buying their own spectrum from the glut being made available by the German government.
Modarres implied the operator community will step up and the industrial sector will step back when the the dynamic tilts, and LTE and 5G are part of the industrial fabric. “Enterprise needs have always spurred service provider innovation, and defined the new waves of services. That’s always happened. That’s how VPNs happened,” he said.
“Enterprises will do what they need to move their business, and service providers will offer it as-a-service when the opportunity is right. Which will be well received because those businesses want a job done – they don’t want to be in the comms business… Customers don’t care what G it is; they don’t care what the name of the product is. In fact, they’d rather not know. What they want is information – which impacts key KPIs, whether around productivity, efficiency, or safety.”
He added: “Private and public network offerings will always be in balance. Service providers will always want their share of value-add. And we’re in the business of making sure enterprise requirements are met. A lot of time, in close to half the cases, that is in partnership with service providers – because they are our partners, and because the easiest spectrum is today.”
