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Innovation in Business Model to Explore 5G 2B Applications

Release Date:2020-11-20  Author:By Tang Hong  Click:

Enabling the Internet of Everything (IoE), 5G brings infinite imagination to the society. With the help of new technologies such as big data, artificial intelligence (AI), cloud platform and edge computing, 5G has attracted the attention of the whole society. Mobile operators are actively exploring new 5G business opportunities, and 5G applications for vertical industries are a vast blue ocean business for them. According to GSMA, 5G will contribute $2.2 trillion to the global economy from 2019 to 2034, accounting for 5.3% of GDP growth. And Gartner predicts that 5G will bring $619 billion to global operators in vertical industries in 2026, accounting for 36% of their operating revenue.

Exploration of 5G Industry Applications and Business Model
In the early stage of 5G development, some leading operators have started to explore 5G industry applications. Vodafone and Deutsche Telekom have launched applications such as medical services, remote control and video surveillance in Europe, SKT and KT have carried out automatic driving, smart factory and smart grid in South Korea, and China's three major operators have explored more extensive applications in many industries. Based on ZTE's experience, 5G vertical industry exploration needs to focus on industry selection, business positioning, service framework and solutions, and profit models.

Select Industries Through Multi-Dimensional Evaluation
Selecting the target industry and appropriate application scenarios is the first step for operators to expand the industry market. The China Academy of Information and Communications Technology (CAICT) has proposed five key factors for industry selection: profitability, digitization, rigid demand for 5G, competitive risks, and competitive opportunities. China Telecom has also put forward the PRMCC+A model: Policy, Reform, Market, Customer, Case and Advantage. Furthermore, the selection of target application scenarios chiefly consider the dependence on 5G and the ability to support 5G.

Determine Business Positioning of Operators in Industry Applications
Four basic value positioning are suggested for operators according to their involvement after fully considering their own capabilities, industrial market size, dependence of the industry on 5G, and industrial digitalization level.
Connection providers: Provide 5G end-to-end network connection 
Platform providers: Provide MEC basic platform and industry PaaS platform for third parties 
Service integrators: Provide end-to-end industry applications integration and have a deep understanding of the industry 
Service providers: Provide end-to-end services for industry customers and have deep involvement in the industry as industry experts.
In these four value positioning, connection providers are operators' basic capability, platform providers are their extensible scope, and service integrators and providers can serve as directions they can attempt in the mature stage of their industry businesses. 

Provide Service Framework and Solutions for 5G Industry Applications 
According to the four value positioning, operators can provide corresponding platform solutions and private network solutions. The platform solutions provide services and service support capabilities for industry customers. According to different value positioning, operators provide the platforms at different levels including IaaS, PaaS and SaaS. The private network solutions guarantee different 5G capability needs of industry customers, including 5G private line, 5G virtual private network, 5G hybrid private network and 5G physical private network.

Innovate the Pricing and Profit Model to Achieve Business Returns
For 5G 2B industry applications, the pricing of products and services is also a main research direction of operators' business model. Unlike 4G 2C traffic-based pricing models, 5G pricing model is more complex. Corresponding to the four value positioning, 5G 2B value-based pricing model is adopted, with the connection as the basic quotation package, and the platforms, services and operations as value-added services. In the basic connection quotation package, differentiated quotations can also be made in accordance with the type of 5G private network and the traffic of industry users.

Case Study of 5G Industry Application Planning 
5G industry application practice is the only way for operators to explore 2B market. Only by exploring, practicing, and innovating with industry partners can operators find their own business opportunities in the 2B industry. The following shows key industries of a 5G 2B application planning made by ZTE for an operator in the Asia-Pacific region (Fig. 1). Industrial manufacturing, power grid and ports are the first priority followed by new media, public safety, transportation, medical care and agriculture. Described below are service planning and business models of the three major industries with the first priority.

—Smart factory: Manufacturing is the most important pillar industry in the national economy and plays an important role in electronics, automobile, and chemical industry. Digital transformation will greatly boost the development of manufacturing in this country. The 5G application planning in the smart factory can focus on environment monitoring, high-definition video surveillance, industrial camera, AR/VR-assisted guidance, and logistics tracking in the initial term, on cloud AGV, automatic control and automatic driving in the medium term, and on accurate operation and flexible production in the long term. The operator can be positioned as a connection provider or platform provider, and can also be considered as an integrator in mature areas such as video-assisted production monitoring. In terms of private network, 5G private lines, virtual private networks or hybrid private networks can be selected to meet different needs. The operator can charge based on its value positioning and the type of 5G private network it provides.
—Smart grid: The power grid is a national livelihood project and also a complex large-scale network involving power plants, power grids and a large number of consumer terminals. The 5G application planning in the smart grid can focus on intelligent drone/robot inspection, VR/AR remote maintenance and training, HD video monitoring, asset management and meter management in the initial term, on electrical load response, precise load control, intelligent distributed power distribution, differential protection of distribution networks, PMU and remote precise control and scheduling in the medium term, and on smart home and electrical appliance control, electricity monitoring and power saving system, and fire monitoring and alarm of home appliances in the long term. The operator can be positioned as a connection provider or platform provider, and it is recommended to provide guaranteed connections as its target value positioning. In terms of private network, it is recommended to choose a 5G hybrid private network to ensure that the network data meets the strict security needs of grid customers. The operator can charge based on the hybrid private network mode.
—Smart port: Port is a relatively closed geographical area compared with other industries. For the operator's early 5G 2B exploration, it can reduce interference to the public network. The 5G application planning in the smart port can focus on HD video monitoring, data collection, logistics tracking, customs inspection and real-time analysis in the initial term, on remote heavy truck driving and remote quay crane control in the medium term, and on automatic driving, automatic inspection and other innovative applications in the industry park in the long term. The operator can be positioned as a connection provider or platform provider, and it is recommended to serve as a platform provider considering that port applications are relatively mature. In terms of private network, 5G hybrid private networks and physical private networks can be selected. For a large port area that is relatively closed and has data security requirements, it is recommended to build a separate physical private network. The operator can charge based on the hybrid private network or physical private network as well as platform services it provides.

The above 5G 2B planning and suggestions given for the operator need further network deployment and commercial practice. At present, Chinese operators have been in the forefront of the world in the exploration of 5G industry applications, and some 5G industries are gradually put into commercial use. ZTE is poised to develop the 5G 2B market with global operators and hopes to share China's successful experience with them.