This Industry Viewpoint was authored by Andrew Walker, Global Communications & Media Industry Lead at Accenture
The ongoing pandemic effects, combined with technology-driven disruption, has changed the way carriers use technology and has fundamentally altered the communications industry and expectations of service providers. Fortunately for carriers, their networks were resilient during the last two challenging years. With 2022 now in full swing, there are several trends impacting this sector that will continue to cause further disruption and generate new growth opportunities.
The 5G Road to Profitability
5G is nothing like any cellular network service that has come before it. Unlike previous services (2G, 3G, and 4G) that focused on connecting humans and devices, 5G was designed to connect our world and it can be configured and personalized for particular use cases.
This year, we will see more 5G use cases come to life, inspiring even more individuals and organizations to use its capabilities to solve societal challenges – from sustainability to safety and security, as well as the opportunity to close the digital divide. For telecom providers, 5G means greater bandwidth to provide enhanced services to the end customer which ensures better customer experience and higher revenues. With 5G, service providers can match the network to what the user requires. For example, one company might require very high throughput while another might need a network that is very responsive and has low latency. With 5G, providers can configure the network to each of these use cases. This can be done by providing the customer with either a private network or taking a dedicated slice of a public network.
In addition to the great capabilities that 5G will offer, it is also expected to have a transformative impact on the U.S. economy. According to recent economic modeling analysis, the impact of 5G on the U.S. economy could drive up to $2.7 trillion in additional gross output (sales) growth between 2021 and 2025.[i] This is a significant opportunity, and telecom providers can benefit greatly because they play an instrumental role in putting the global 5G backbone. They have a unique opportunity to capture new revenue opportunities based on all the exciting capabilities that 5G has to offer.
The Great SMB Opportunity
The SMB market represents the biggest opportunity for carriers to go beyond connectivity, and this market is huge and untapped. SMBs are growing at a rate not seen in decades and are employing more people than ever before. They are doing business differently — virtually, even with customer care.
As more SMBs embark on digital transformation, they’re boosting their investment in IT products and services. In fact, SMB spending on new technologies and related products and services is projected to climb more than 6% between 2020 and 2025.[ii] A lot of this momentum can be attributed to COVID-19 which, despite slowing IT spending in the short term, created a greater sense of urgency among SMBs to become more digital as they witnessed the pandemic’s impact on their business.
The cloud is one technology area that’s attracting a lot of money: it’s expected to account for more than half (53%) of SMBs’ total IT spend in 2025—up from 42% in 2020. In fact, 63% of SMBs expect their usage of Platform as a Service in the public cloud to increase somewhat or significantly in the next year. More than half of SMB executives also said the same about their use of Infrastructure as a Service and Software as a Service for core business applications. Along with a more significant cloud presence comes a greater need for a wide range of security services. These new services represent an untapped opportunity for telecom providers to capture new and recurring revenue streams, in addition to connectivity.
SMBs are looking to work with a partner that could help them understand how specific solutions can help them achieve specific business goals and outcomes. And they’d prefer to consolidate the services they currently receive from their vendors to a central partner who handles all their communications and technology needs. Juggling multiple vendors and contracts consumes a lot of time that SMBs could otherwise spend on managing and growing their business. According to Accenture research, two thirds of SMBs purchase such services from three or more vendors, and half of them would like to reduce that number. This translates into a big opportunity for an external provider that can be the “one-stop shop” for all SMBs’ needs. CSPs can become that provider: a single, trusted partner with a local presence and requisite knowledge of SMB customers’ business and industry that can orchestrate everything SMBs need to transform into and operate as a modern digital business.
Beyond Connectivity in the Metaverse
Conversation around metaverse environments and the convergence of physical and digital worlds has exploded in recent months, spearheaded by the leading players in big tech. It is set to be the backdrop for a cultural and business model evolution. In fact, the metaverse market is predicted to reach $814 billion by 2028. Our own research found that in 2021, businesses were doubling down on virtual and augmented reality, with 88% of global organizations investing in technologies to create virtual environments and, among those, 91% are planning to invest further.
Right now, the metaverse continues to be a largely unexplored area for CSPs and it can be more than just an opportunity to connect more devices—it can be a platform to re-invent business models. CSPs can unearth new avenues for monetization via subscription models, virtual stores and in-world services around identity and trust and safety while looking to build engaged communities. Metaverse may also help CSPs better engage with their customers & employees and provide platforms by which they can run their own businesses more productively.
At Accenture, we’re deploying 60,000 VR headsets and have created an enterprise metaverse, called the “Nth Floor,” where employees from around the world can meet for presentations, socialize as teams and participate in immersive training. We’ve created a virtual campus for onboarding tens of thousands of new employees and created digital twins of various offices to provide familiar environments for our people while working remotely. We are also partnering at an industry level to make the metaverse real for our clients, an example of this is the recent launch of Touchcast’s MCity, where companies can deliver immersive communication, collaboration, commerce, and learning experiences.
And with the power of 5G, with all its mobility, superior speed, and throughput benefits, the opportunity is there for the industry to accelerate growth of the metaverse while engaging customers and employees in new ways through immersive experiences. This will require a metaverse strategy that is not currently in place, and many CSPs are not yet prepared to realize the potential of the virtual-physical convergence. This year’s Mobile World Congress (MWC) may be the stage to lay the foundations for these strategies and encourage a bigger focus on cooperation and collaboration with the wider industry.
Engineers, developers, creators, policymakers, and telco partners all need to join up to build these new universes. They cannot afford to waste this opportunity to innovate with the industry to solve real world problems for businesses and consumers. Indeed, the people and businesses who engage in the experimentation and building of the metaverse now, by playing an active role in exploring its possibilities, will be most likely to reap the rewards into the future. CSPs can bring their own value to the table by leveraging their capabilities of network slicing, edge computing and super-fast transmission of immense volumes of data not to mention help solve for the problems of identity in the metaverse and important issues such as trust and safety and diversity, equality and inclusion.
One of the most widely talked about topics today in telecom is OpenRAN. This technology allows service providers to speed up 5G network development through its open architecture. By opening up the network and bringing in cloud capabilities, carriers can run their networks more efficiently and in ways that were not possible in the past. Longer term, this is expected to be a game changer for large and small providers – yet today, it’s the smaller providers such as Rakuten that are driving innovation in this area. However, it’s only a matter of time before it trickles its way up to the larger, more established players.
This interoperable, multi-vendor approach will also ensure that operators can rapidly innovate by co-creating and optimizing reference designs that can be deployed at scale—an imperative for the country’s growing wireless demand and evolving usage patterns. Early studies show that OpenRAN can reduce the total cost of ownership (TCO) by an estimated 30% to 49%. As wireless networks extend to a wide variety of devices and deployment models such as dense small cells and private networks, the flexibility and cost benefits of OpenRAN will also ensure the requisite ROI for enterprises investing in 5G by providing a flexible upgrade path.
Are You Ready for 2022?
While the telecom industry will continue to experience significant disruption and change during 2022, we also see significant new opportunities for telecom providers to transform themselves into more efficient and profitable businesses. Technology is advancing at one of the most rapid rates in our history and as a result, companies must adapt in order to succeed. The paths are there to find new opportunities – it’s just a matter of which one (or ones) they decide to pursue.
[i] Accenture Report “The Impact of 5G on the United States Economy.” https://www.accenture.com/_acnmedia/PDF-146/Accenture-5G-WP-US.pdf#zoom=50
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