Shifting Paradigms Set to Shape 6G

How is North America affecting policy change and industry competition?

The participation of White House and Congressional speakers at 6G World’s recent symposium shine a light on the strategic prioritization of next generation communications systems. Political participation matters in the context of 6G leadership ambitions, the practicalities of which I outlined in this three-part article series for 6G World - 1: Leadership, 2: Purpose, 3: Leverage. 

The event was equally important for shedding light on how industry stakeholders are approaching emerging 6G topics and market development activities. The mix of discussions spanned academic research, commercial and operational implications of 6G, industry competition, long-term Federal funding programs, policy priorities, standardization, and vertical-industry requirements. Rather than summarize each panel discussion chronologically, here are several threads that ran through the different sessions, beginning with the need to learn from the past. 

“6G Needs to Learn from 5G” 

There continues to be much reflection on the roll out of 5G, much of it tinged with disappointment connected to overhyped commercial expectations. Panelists from different parts of the industry as well as the Deputy Assistant to the President of the USA, Anne Neuberger, highlighted the imperative to learn from 5G. These are not solely lessons about commercialization. They include national strategy, supply chain considerations and the process of developing each new ‘G’. 

Technical and standardization experts who are less in the 5G marketing limelight challenged the narrative around 5G’s weak demand. One message was about the flexibility designed into 5G’s architecture, the benefits of which will be realized across the evolution of 5G and subsequent generation systems.

The process of 5G also prioritized eMBB (enhanced Mobile Broadband) over mMTC (massive Machine Type Communications) use cases, partly to manage the scope of work. As industry focus shifts beyond broadband, attention is turning to enterprise, IoT and closely related technologies such as digital twins and AI/ML. Looking ahead, the industry needs to prepare for a wider scope of use cases as 6G contains six categories which will shift market and industry paradigms. 

Competition and Industry Paradigm-shifts 

The cellular industry emerged from a market defined by voice, roaming and landline communications. This is no longer the relevant backdrop especially as cellular operators are no longer exerting their (central) role in the ecosystem. There is a view that they are not in charge of setting the requirements and that suppliers are not benefiting from the oversight they historically provided. To some extent, this is one consequence of the industry paradigm shift from vertically integrated businesses to open access infrastructure. In parallel, the telco developer ecosystem is giving way to Internet and App developers.

These changes are setting the stage for customized connectivity, full programmability, and resource sharing. Customized connectivity appeals to the enterprise sector whereas many cellular operators are often geared up to consumers. Full programmability sets the stage for a transition from automation to autonomous operations with implications for workforce size and skills requirements. Resource sharing heralds the end of building vertically integrated stacks with providers expected to do less with hardware and more with software with horizontal approaches. Through a transition that might take several years to take hold there are expectations for a shift from current, software-licensing frameworks to ‘as-a-service’ models.

Panelists outlined other technology and standardization paradigm shifts that the industry needs to anticipate. For example, the communications sector dominated the technology development progression from 1G to 5G. However, the industry can no longer depend on communications sector specialists when the next generations of communications systems will involve much higher levels of compute capabilities. In 3GPP Releases 17 and 18, for example, the “data plane is just a pipe with a few add-ons”. The compute world, however, introduces multiple data centric services which will require much greater intelligence capabilities. Since 5G has no ‘compute’ plane, compute awareness is handled as an over-the-top capability, with technical and commercialization and monetization implications. It remains to be seen how existing, telco-centric models will engage other industry specialists and absorb the new requirements they are likely to introduce.

Business Model Implications 

Across the industry, network operators are already flagging concerns about 6G-related investments and the need to avoid heavy CapEx network improvements. This is one of the factors favoring the adoption of cloud and open infrastructure offerings. Anticipation for one of the biggest business model changes relates to the commercialization of new capabilities for multiple ‘customer’ groups which include network operators, hyperscalers and multiple developer communities. As an example, Google’s representative put forward the idea of Google becoming the (communications) ecosystem and the developer ecosystem. Such ideas for ecosystem orchestration carry obvious implications for incumbents, industry competition and business model innovation. 

One area where communications service providers need to adapt is in the area of business support systems (BSS). This element in the technology architecture tends to hamper innovation and constrain service monetization opportunities. This is a case of a legacy turning into a liability.

Over the top service providers are wise to business operations issues and actively looking for disintermediation strategies. One of the examples discussed applied to cars, many of which only get about 200 hours of use per year. While innovators are interested in tailoring subscription models around usage measures, their approach contrasts with annual subscription models which tend to be the default for many communications service providers.

Subscription management is a middle-person role; in the personal data sector, innovators want to disintermediate telcos. As one speaker noted, this dynamic is reflected in a growing use of the #ownmydata social media tag. 

Rationales for Interoperability 

The personal data reference illustrates how the scope of the communications industry is changing from its initial voice + roaming + landline paradigm. The many greater uses of data will multiply the application possibilities with corresponding long-tail monetization possibilities. This is one of the reasons to advocate for interoperability.

Another reason concerns the business and operating environments that 5/6G’s flexible open and architecture will enable. Since these will not be vertically integrated or vendor-specific walled garden environments, concepts such as end-to-end service quality and joint optimization on an industry-wide level depend on sound interoperability foundations. This also applies to a future where federated sub-systems are able to support distributed compute and compute-as-a-service offerings. 

“Understand Verticals to Interpret Demand” 

One way for service providers to gain commercialization leverage is by understanding and addressing demand. The 6G Symposium agenda included panels that addressed agriculture, automotive and digital media sectors. As the NextG Alliance demonstrated in its research into vertical industry needs, to which I contributed, many requirements highlight opportunities for better packaging of communication systems capabilities rather than ground-breaking innovations.

The Agri-sector discussion contained several examples such as the need to plan for a one-week window for seeding or harvesting. That requires a fleet management solution that provides farm managers with information about vehicle availability, vehicle type, operating status, and location. In case of vehicle problems, remote diagnostics can improve workforce management. Farmers currently rely on off-line map data for their fields. Online data would avoid re-farming and re-seeding situations. At some point in the future, it would be desirable to track a seed over its lifecycle, from seeding to harvest. 

Innovation vs. Engineering 

None of the Agri-sector requirements depends on breakthrough innovations typically associated with 6G. If anything, there is a need to balance 6G research investment between technology innovation and engineering or utilitarian solutions. Examples of the latter include research on energy efficiency in communications systems and developments that can improve spectrum use. 

One speaker commented that a promising role for 6G is to make 4G and 5G work together by offering a framework that integrates multiple technologies and fixing the foundations of 5G’s flexible architecture. 

North America’s Market-economy Paradox 

North American businesses have a strong presence in most of the sectors that make up the communications ecosystem. This is also the case for 6G’s wider scope which covers industrial players that will drive demand and suppliers of cloud, computing, and content capabilities. Market economy principles contribute industry dynamism, market responsiveness and wealth creation to an unprecedented degree. There are a lot of dynamic, short to medium-term activities. 

And yet, when it comes to longer term developments, there is a palpable concern that North America is not doing enough to maintain and develop its leadership record. For example, market-economy principles are not producing a large enough or suitably trained workforce for the expertise and jobs that will contribute to the 6G economy. Nor does the current system facilitate basic governance activities – in areas such as site permitting and spectrum management - in ways that support long-term planning and timely deployments. 

Market economics also encouraged off-shore technology development and manufacturing leading to long-term supply-chain vulnerabilities and loss of technology sovereignty. As a result, the ecosystem is trying hard to readjust itself with a call for government involvement. 

Adjusting for the Future

Industry participants acknowledge that government agencies will have to play a stronger role in 6G and the national agenda. This is coupled to a strong appetite for public-private collaboration. The big challenge is how to incentivize and stimulate dynamism in areas where outcomes take time to materialize and where market-economy principles are not delivering. 

A few ideas came up in the panel session I moderated. Firstly, the industry needs to go further in thinking about value chains. As an example, technology suppliers need to explore ways of creating new revenue opportunities for their network operator customers to alleviate the commercial squeeze that the latter face. This is not a short-term undertaking and will raise profound issues about industry structure and value sharing.

Secondly, the communications industry needs to plan for the IT-telco divide giving way to a platform infrastructure that all ecosystem participants can leverage (via multi-sided business models). The foundations for this exist in the flexibility designed into 5G.

Thirdly, learning from 5G’s emphasis on eMBB use cases, 6G developments need to address a broader scope and to do so in a way that is more connected to drivers of demand. That entails closer and earlier involvement with industry verticals. The same applies to the drivers of societal needs, many of them emanating from less privileged and digitally dependent populations.

Adapting to these realities might be the biggest paradigm shift for North America’s 6G ecosystem.

2020 in Review: Corporates Adapt Their IoT Business Models

This review of 2020 corporate initiatives in the IoT market builds on a history of tracking strategic industry developments for over a decade. Two sets of corporate events that bookended the start and end of 2020 provide instructive examples of the roadmap and dead ends that characterize today’s IoT market. In the intervening months, organizations in different parts of the industry ecosystem bolstered their IoT strategies. Some developed complementary capabilities through M&A while others addressed go-to-market issues through business reorganization and product-innovation initiatives. For many organizations, however, there remain challenges in balancing short term imperatives with strategic positioning goals. There is a degree of comfort in embracing the familiar. The risk is that this leads to an under-investment in properly integrating new business approaches and complementary technologies.

Rumelt on 3G: Lessons for 5G and IoT

The consultancy McKinsey recently republished a 2007 interview with Richard Rumelt [1], professor of strategy at UCLA’s Anderson School of Management. Rumelt opened his commentary on strategy by noting that most corporate strategic plans have little to do with strategy. Instead, they typically end up being “three-year or five-year rolling resource budgets and some sort of market share projection”.

What senior managers want out of the strategy process, according to Rumelt, is a pathway to substantially higher performance. That can happen in one of two ways. A firm can either invent its way to success or, it can quickly and skillfully exploit some change in the environment. Examples of such change include technology, consumer taste, resource price or competitive behavior factors.

The telecoms industry finds itself at the intersection of many such changes. On the supply side, the arrival of 5G networks and the standardization of low-power IoT devices provide two industry transition opportunities. These developments will usher in new service concepts and business opportunities.

A change in perspective reveals new IoT strategies

My last post examined the direction that several MNOs are taking with their IoT strategies [1]. Applying these trends at an industry level, I questioned whether MNOs are approaching the commercial opportunity with a broad enough strategic perspective. Think about it from the perspective that traditional mobile connections will supposedly account for roughly 10% of all IoT connections. That proportion should rise now that low power cellular technologies (NB-IoT family) are firmly on the deployment roadmap. Since this raises the credibility of a vibrant supplier eco-system, more adopters should gravitate to mobile connectivity to take advantage of more compelling economies of scale.

Nevertheless, it’s clear that mobile connectivity will coexist as one of several IoT access technologies. However, unless MNOs find ways to stake an economic role in activities higher up the value chain they will lose out on promising commercial prospects. They will also find themselves dis-intermediated from end customers and their needs. How might this play out?

IoT and Smart-building opportunities

What are the important industry dynamics in the smart buildings sector and is there a role for the IoT? Last week, I attended the 6th Building Energy Summit [1] to hear from building owners, building operators, real-estate portfolio managers and corporate-sector tenants.

As in all other industrial sectors, much of the discussion highlighted the established processes and the conservative nature of this sector. Most notably, procurement and architectural design processes make it difficult to introduce truly innovative construction ideas into the sector. In existing buildings, the challenge is to introduce new technologies and working practices in a highly cost conscious environment. The sector is however becoming more technology-friendly and data driven in its decision making.

There is growing acceptance of the idea that IoT is the way to improve decision making and deliver innovative services. Among the IoT use cases discussed, successful projects typically received approval, after considerable financial scrutiny, and realized a return on investment within a period of 1-2 years.

2016 in Review: Shift in Industry Dynamics as the IoT Enters the Mainstream

According to my records, the strength of IoT corporate initiatives witnessed over previous years weakened in 2016, somewhat in contrast to the much greater visibility of the IoT at industry events and in the marketing literature.

While the number of merger, acquisition and investment (MA&I) fell compared to 2015, as a proportion of all corporate events it increased over the prior years.

About 70% of these relate to acquisitions; the remainder correspond to fundraising or investment activities.

Now that the IoT market has become a mainstream idea across the wider economy, the MA&I dynamic reveals a stronger tendency for companies to accelerate their IoT strategies by acquiring capabilities from third parties.

Co-opetition in Digital and IoT markets

Several news stories have circulated over the past few weeks in connection with the potential acquisition of Nokia’s mapping business, HERE. The most recent stories have a group of German auto-manufacturers winning out over Uber although there has been no formal announcement to this effect.

HERE is an important enabler for mobile value-added services. One element of its technology captures location content such as road networks, buildings and traffic patterns. Other businesses then purchase or license this mapping data along with navigation services from HERE. Smartphone Apps, to make use of mapping data, form a part of its technology portfolio.

The potential acquisition of HERE by three German car makers – BMW, Daimler and Audi – is relevant to the telecoms industry for several reasons.

Review of M2M Corporate Events in 2013

2013 as a whole was another year of strong corporate activity in the M2M market. A total of 147 events easily surpassed the 115 events that were recorded in 2012. These events include: announcement of an industry changing technology breakthrough; market entry/expansion initiatives; strategic partnering; investment-related acquisitions or divestitures; distribution agreements along the value chain; product innovation and outsourcing of key service delivery capabilities.

While 2013 saw many more companies taking to the press wires to publicize their sales wins, these are not recorded here as corporate initiatives. If anything, sales wins are the consequence of one or more corporate strategy commitments made in prior years.

An important development that occurred over the course of 2013 was a shift in sentiment to promote IoT in preference to M2M. This began with a raft of announcements at the Consumer Electronics Show (CES) in January 2013. Momentum continued to build around the IoT theme due to significant publicity drives and business commitments by large organizations such as ARM, Bosch, Cisco, GE and Intel.

Smart Home Platform Innovator Strategies

Early in 2012, I completed a study for the GSM Association (GSMA) on the topic of new business models that would be linked to innovative, connected-device applications. This study laid out a sequence of value propositions, as companies seek to move up the value chain. In order to bring these new value propositions to market, new and innovative business models would need to be designed.

In the early days of M2M, the value proposition was all about connectivity. This would make stand-alone devices ‘smart’ and the business challenge was largely about how connectivity could be ‘embedded’ inexpensively. Later on, the market evolved as companies started to care about deployment, reliability and the user-experience issues. This ushered in a new value proposition around managed connectivity and several specialist platform providers have emerged in their own right or as partners to mobile operators.

The final two sources of value that were identified included the delivery of ‘platform innovator’ and ‘stewardship’ services. The connected devices market has been moving in these directions with three companies – Arrayent, Deutsche Telekom’s Qivicon and Zonoff – investing their energies in the platforms arena.

Rethinking the mHealth Value Proposition

Over the past few weeks there have been a couple of thought provoking developments in the mHealth market. The first event was the withdrawal of two recently launched mHealth services by O2 UK on the grounds that there was inadequate consumer demand. The second event relates to Verizon Wireless which obtained FDA approval for its mobile health remote monitoring and personal health data platform.

These developments prompted me to revisit some earlier work I did on the value proposition in mHealth. In particular, I was investigating whether remote monitoring is actually a relatively minor, but necessary, element in the business model. My earlier work focused on diabetes care although I suspect that the arguments carry over to other chronic health conditions.

M2M Acquisitions and the Price of Growth

The topic of acquisitions in the M2M market has featured in several company announcements and several of my discussions with industry players. In late June Avista Capital Partners completed its $253m acquisition of Telular Corporation, an M2M event monitoring and reporting service provider.

During the month of May, the CEO of Sierra Wireless was quizzed about his company’s acquisition intentions by financial analysts at a Global TMT Conference organised by Jefferies, an investment bank. Following its divestiture of a non-core business unit to focus on M2M, Sierra Wireless holds about $160m on its balance sheet. Of this, about $100m is being earmarked for M&A initiatives. So, what are some of the considerations that will determine how these funds might be deployed?

M2M Corporate Initatives - Strong H1-2013

Over the first half of 2013, there has been strong evidence that companies in the M2M market are continuing to implement a range of business strategies to capture new M2M service and revenue opportunities. Specifically:

• the number of corporate initiatives is more than double that for the corresponding period in 2012

• the market is no longer entirely driven by supply-side companies; several enterprises have strategically embraced M2M connectivity and have either partnered with mobile network operators or they are taking the lead role in developing new services

Verizon M2M - revised priorities?

My attention was recently drawn to Verizon’s recruitment activities in the M2M sector. I was intrigued by the profiles and the roughly 130 positions Verizon has been trying to fill notably when these are viewed against the acquisitions it made as part of its M2M strategy. More on this will follow after a recap of Verizon’s initiatives.

Competing for In-Home Services

Late last year, in the course of some project-related research, I took a look at the home security market in the context of 'smart-home' service concepts. Fixed- and mobile-network operators view this as one of several promising market opportunities to offer home automation and home security types of service.

A great deal is made about mobile operators pursuing new opportunities such as these in what are referred to as ‘adjacent markets’. However, it is as well to recognize that incumbent providers from those 'adjacent' markets may also have ambitions of their own in the communications arena.

Finance as a Telco M2M offering

The role of telecommunications service providers in the M2M market is typically associated with the provision of wide-area data connectivity. This narrow perspective ignores the other capabilities - technical and non-technical - that service providers can bring to bear in new application scenarios.

In November 2012, Telefónica announced a cooperation agreement with Generali Seguros in Spain to pilot a new, automobile insurance service. The service will allow users to pay for their car insurance policy based on how they drive. The service will also provide information about how users can drive responsibly and tips to improve their driving habits. The overall service concept is not new; it has parallels with an offering such as 'In Drive' which is available in the USA from State Farm Insurance and Verizon's recently acquired subsidiary, Hughes Telematics.

However, what is interesting in the Spanish case is the three-party business model that Telefónica has put in place to capture a share of the wider commercial potential of this new service.

Connected-device business models in the US Market

(published in RCR Wireless - 26 Nov 2012)

A previous article in RCR Wireless magazine highlighted the topic of new M2M business models with reference to the size and characteristics of this fast growing market opportunity. It also highlighted the central role that communications service providers (CSPs) occupy in the eco-system. Beyond traditional data plans, however, what are the new business models that will allow the full market potential to be attained?