Central Agency in Telecommunications

Mobile network operators (MNO) have long been the engine at the heart of the modern communications industry. With operating licenses and obligations set by government, MNOs’ reach stretched from the shaping of technology standards in 3GPP to deciding what communications services consumers would get.

From the 2000s, however, internet era dynamics lessened the revenues dominance of voice communication; messaging, data, and media services filled the gap, beginning with the hype around 3G. That is when the MNO cog started to lose some of its motive force as the communications industry began to resemble an increasingly intricate machine.

From Linear to Interconnected Operating Environment 

Over the past few years, advances in 5G and aspirations for 6G communications are amplifying the role of other interconnected cogs in the industry system. Now, many observers question which entity, or entities might supplant MNOs as central agents in the communications industry.

The industry picture is more complicated, thanks to the entry of cloud-providers and information services providers. More organizations are looking for industry influence via industry or open-source alliances (special interest standardization) and through open and formal standardization bodies. For example, industrial equipment suppliers participate in 3GPP so that the insights they have about their customers’ use cases are addressed at source. Governments are also active through policy objectives on topics ranging from secure and resilient supply chains to digital rights.

While innovative technologies might be at the root of some industry changes, others stem from business drivers and new sources of demand. As economies succeed, rises in the “money value of time” stoke investments in remote connectivity and IoT solutions. These enhance productivity and make supply chains more predictable. 

Separately, enterprise needs are taking precedence over consumer broadband offerings. In ‘telco’ speak, private networks and massive, machine-type connectivity (mMTC) are rivaling enhanced mobile broadband (eMBB) propositions. As a result, the MNOs’ market landscape is segmenting. There are competing (or complementary) network propositions such as low-power and satellite connectivity for IoT and private network models for enterprise hub locations such as airports, factories, hospitals.

Another change agent is the rise of software capabilities, which can take advantage of flexible capacity enabled by cloud and elastic-computing infrastructure. This encourages MNOs to collaborate with hyperscaler, cloud providers, notwithstanding that some of these relationships are rivalrous. 

Against a changing industry backdrop, issues of control and ‘down-scaling’ economics will determine how dominance shifts among the intertwining cogs. 

Control 

Standardization and regulation are two means of industry control. While the ITU and 3GPP have been dominant institutions for communications technologies, the picture is changing. Now, industry alliances seek to influence standardization governance models and technical roadmaps. In parallel, the role of government is growing to encompass policy choices about competition, digital rights, and digital equity. Converting these choices into actionable policies passes through national research and standardization bodies, as in the case of US National Science Foundation initiatives on 5G/6G and, injection of AI risk management practices via the USA’s National Institute of Science and Technology. 

Examples of private sector, or ‘special interest’ standardization fall into two groups. One involves offering open source and freemium tools to spur adoption thereby establishing a de facto standard through a critical mass of users. This is the modern-day equivalent to the “easy on-ramp to the internet” of the late 1990s. However, easy adoption comes with latent risks. A recent example is the realization of organizations storing data in cloud provider infrastructures. Many were not aware of the extent to which they were locked-in to provider platforms. That changed when Google Cloud removed restrictions on users moving their data to other cloud providers; its move was aimed at disrupting larger cloud providers. 

Another approach to exert industry control is to advance a technical standard through an industry alliance approach. Open RAN is one example. Another, in the home automation sector, is the collaboration of home appliance vendors and information service providers under the Connectivity Standards Alliance to advance the Matter connectivity protocol. 

In the open standardization realm, device vendors and industrial firms are feeding in their technical requirements based on better insights about end-user application needs (beyond connectivity). As illustrated above, new competitors and new channels of influence are circumventing the network operator role. This is not offset by network operator involvement in non-cellular connectivity, information service, or data management industry bodies. 

‘Down-scaling’ Economics 

Two factors - business criticality and new, value propositions - are changing the complexion of communications technologies in industrial use cases. This gives scope for premium pricing and innovation for niche application scenarios. Alternative providers have been quick to respond. 

Speakers at the recent 6GWorld Spring symposium noted that under addressed demand and external developments are affecting the network operator role and fostering the rise of more agile and focused solution providers. For example, one industry expert commented that “90% of 5G capabilities are not being deployed by MNOs because they have one use case in mind”. 

Another spoke about a satellite service provider targeting an under-served opportunity. The observation in this case was that “satellite does not compete with telco voice and broadband offerings, so it became easier for the MNO to re-sell or integrate (satellite) into its portfolio.” Both observations are symptomatic of connectivity- and subscription business rules and salesforce incentives that constrain MNO strategies. 

Rationales for Change 

As the economy transitions to make greater use of 5G networks and 6G systems, one key challenge for mobile network operators is the rise of enterprise and public utility customers. Those that have embarked on private network strategies will expand the supplier base and economics for smaller enterprises. This requires MNOs to pivot to alternative business, pricing, and delivery models. 

A second challenge is to project industry scale; can the mobile communications industry compete with the cloud industry or, are MNOs preoccupied about competing with other MNOs? Consider this challenge in the context of the recent initiative on network-service APIs for enterprise and developer communities. The industry scaling challenge needs to look beyond adopters targeting limited and localized use cases because they are unwilling to sign contracts (for uniform APIs) with multiple MNOs. What will it take for the communications industry to offer coherent and extensible network-API offering on a global scale?