As the promise of fifth-generation (5G) wireless broadband begins to become a reality, the role of communication services providers (CSPS) will change. The future home and indeed lifestyle will be built around massive amounts of data and pervasive information flows in the home.
Access to device and user information will feed experience-rich home services. For CSPs, shifting to new business models will be key to their survival.
Our recent study, The Future Home in the 5G Era, opens a window into consumer lives in a 5G world and offers a roadmap for service providers to make hyper-connected 5G living a reality.
CSPs must shift to survive
Historically accustomed to delivering hardware and connectivity in the shape of vertical organisations with siloed departments, most CSPs are still far from prepared to be the primary managers and traffic wardens of data flows in the Future Home.
CSPs need to evolve – just controlling data infrastructure, as they have done for decades in their traditional role, will not suffice. In the 5G era, successful CSPs won’t be static soloists; they’ll be orchestra conductors with a talent for improvisation.
As legacy infrastructure providers connecting households to broadband networks, the business models of CSPs have, in most cases, been to sell bundles of handpicked connected home services and connected devices to customers. And, while traditionally asset-oriented financial investment in the physical network has been the key source of revenue for incumbents – and their exclusive defendable control points, these physical assets are increasingly being superseded in importance by data flows and software.
With 5G hyper-connectivity, traditional CSPs must now compete with the multi-sided platforms of service providers like Google and Amazon, providers of the voice-activated Amazon Alexa and Google Home personal home assistants.
To create true economic value for themselves and sufficient user value for the consumer, CSPs will have to increase their relevance in the daily digital routines of Future Home users.
CSPs can be at the heart of the move to hyper-connectivity if they contribute the essential elements that will make the Future Home succeed – relevance, scalability, experience and trust.
Seeking relevance in ecosystems
To remain relevant and drive user value, CSPs will need to find ways to open up and engage with the new ecosystems forming around digitally connected users. This will entail reinventing their front- and back office capabilities to become orchestrators of ecosystems for their customers and users. The shift will be significant.
Image: From the old to the new for CSPs: Vertical integration vs platform ecosystems
Why would CSPs succeed as ecosystem platform orchestrators among all the other players already reaching for this role?
While there are key factors that will make them more successful as ecosystem players (and I discuss this later in this series of posts), their biggest advantage right now is their experience handling sensitive user data in huge quantities for decades, and the trust they have established among users.
Data security and data privacy will be paramount in the Future Home. And this puts the CSP in pole position as a data trustee.
Building and orchestrating attractive 5G ecosystem platforms
As the global pandemic has demonstrated, our homes have become a new digital hub as important as our mobile devices. The key question is what role can or will CSPs play in this journey.
The Future Home in the 5G Era, offers some insight into how CSPs can remain relevant and lead in an ecosystem-driven 5G world. CSPs can position themselves as a trusted ecosystem orchestrators.
Aligning platform partner incentives and key considerations
All ecosystem partners will have different interests that CSPs will need to understand and align with. A key task will be reinventing monetization to provide incentives for all partners to get involved.
While some device manufacturers may not expect any additional revenue streams to come from connecting their devices as they are only interested in the relevance and attractiveness of their products in a Future Home, other industry partners may already be in a service business or on the path to turning their hardware business (at least partially) into one.
They will judge their engagement based on the scalability and reach they can generate if they partner with CSPs, and the convenience of creating a business around the CSP platform.
CSPs thus need to understand and align with potential ecosystem partners’ interests to successfully grow their platforms.
Basic services can attract new ecosystem partners
The appeal to third parties will also, crucially, be driven by the attractiveness and ease of use provided by the CSP service catalogue to the end-user.
That may include identity management, service discovery, value-added offerings around service delivery (e.g., notification, fulfilment, assurance, billing), and the opportunity for continuous learning and feedback from usage.
CSPs can, for example, via their infrastructure control points, manage end-user identities when a third party wants to offer a service on the platform.
With the rich user-data assets they create from studying user behaviour, CSP can also suggest services to ecosystem partners. They can add components of service fulfilment, service assurance or service optimisation for a service offered by a third party. Finally, CSPs can provide ecosystem partners with user feedback.
All these ancillary services can create additional revenue streams and increasingly turn CSPs into very profitable ecosystem orchestrators. However, CSPs will need to be able to keep up with industry best practice for these services if they want their partners to be loyal.
In summary, here are some key thoughts:
- The multi-sided platform is at the heart of the success of Amazon, and the hitherto vertically siloed CSPs need to grasp the benefits of such platforms.
- Opening up, controlling and managing data, instead of infrastructure, will allow CSPs to create advanced Future Home data management services that hold higher margin value for themselves and trusted partners.
- Any CSP remaining in its ‘walled garden’ should be under no illusion: it will have to change anyway, one way or another. CSPs need to become open ecosystem orchestrators building on relevance, scalability, experience and trust.