At Ericsson, we hear two key questions from communication service providers (CSPs): “Is network slicing ready for commercialization?” and “Is there a business case for network slicing?”

The answer to the first question is a resounding yes! As we previously discussed in our blog post “Realizing 5G Network Slicing Monetization Opportunities,” CSP frontrunners have successfully tested various network slicing technologies, and some are evaluating go-to-market (GTM) scenarios and business models. A few frontrunners have even launched commercial slice offerings. 

But what about the second question? Is there a business case for network slicing? The answer is also yes. To help CSPs navigate through this question, Ericsson has developed a four-pronged advisory framework covering the business, technical and operations aspects of slicing. In this post we will guide you through our framework by exploring a recent engagement with a leading tier one CSP.

Tier one reference case

The CSP’s challenge

Like many CSPs, this tier one CSP was looking to monetize their 5G investment by providing customized 5G network solutions to enterprise customers. This is the area where they see maximum monetization potential, with enterprises expected to significantly benefit from network slicing’s reserved capacity, better reliability and quality of service (QoS) guarantees.

The first step required the creation of a business strategy. To determine which network slicing opportunities would be economically and technically viable, the tier one CSP needed to ask themselves the following questions:

1. Which industry verticals and use cases have the most potential to align with their strategy? What value chain role should we select?
2. What are the technical requirements for use cases with the highest potential? For example, required latency, guaranteed throughput and service assurance. 
3. How can we quantify the total cost of ownership (TCO), how do we monetize the use cases and ultimately decide if the business case makes sense? 

As a close partner of the CSP, Ericsson utilized its Network Slicing E2E Monetization Framework (Figure 1) to guide the engagement and assist in formulating answers to the aforementioned questions. The engagement focused on the first three blocks of the approach: the slice use case strategy, use case analysis and the business case.

 

Figure 1: Ericsson Network Slicing E2E Monetization Framework

 

Step 1. Network slice use case strategy

To develop a comprehensive digitalization strategy for an enterprise and a corresponding monetization strategy for a CSP, it’s crucial to understand industry priorities, vertical-specific requirements, challenges, KPIs, and processes. Based on our own market research, experience and discussions with the CSP, we narrowed down a list of potential use cases that aligned with their customer market.

The CSP needed to prioritize either horizontal or vertical use cases and select specific use cases by considering their advantages and drawbacks of each. A comprehensive analysis was necessary to identify the most promising use cases and create an implementation roadmap. 

Key vertical identification: They identified four key verticals based on industry needs within their geographical area: manufacturing, media and entertainment, transportation and ports. A deep understanding of specific vertical requirements was essential to identify opportunities for digitalization and determine where maximum benefit could be derived. For example, a skills gap was identified as one of the top challenges for the manufacturing industry while safety was the top digitalization driver for the ports. 

A peer scan: A scan of activities by global frontrunners was then conducted to map out what is happening globally, what leading enterprises and other CSPs have tried or deployed, and key learnings that could be applied to inform the development of the comprehensive digitalization and monetization strategies.

 

Looking at top industry verticals/use cases across different regions Taking a high-level view, the following use cases are of particular interest in different geographic areas: In Asia, leading CSPs have identified the top industry verticals as being manufacturing, utilities, construction, transportation and railways, together with a preference for high video-upload use cases using network slicing. Others are interested in more niche areas like slices for ports and sporting events. In North America, there is more emphasis on nationwide slices for mission-critical services, government services, compliance e.g., payment card industry (PCI), connected cars and horizontal services like private networks and IoT for industries. Cloud gaming is of interest to several top CSPs as well.

 

Ensuring strategic alignment: In order to ensure strategic alignment with potential use cases, Ericsson had to consider several factors such as the CSP’s priorities, existing customer relationships, ambitions, and synergy with existing solutions. This required the CSP to quantify their long-term internal strategy and prioritize use cases with high video upload requirements.

Creating a superset of use cases: Ericsson then created a superset of potential use cases based on industry analysis, the CSP’s strategic priorities, a peer scan, and Ericsson’s internal analysis. Initially, Ericsson identified 100 potential use cases within the four key verticals mentioned earlier. 

 

Figure 2: Ericsson’s use filtration framework.

 

Filtering and prioritization: The final step of the selection procedure was filtering and prioritizing potential use cases by focusing on business potential, technology and ecosystem maturity and investment requirements.

Using Ericsson’s Use Case Filtration Framework (Figure 2) enabled the identification of the top two slicing use cases: 1) live video production for media and entertainment, which is a use case with heavy uploading requirements, and 2) robotic automation, which is a typical use case in the manufacturing industry. Furthermore, mid- to long-term opportunity roadmaps were developed for future consideration.

Step 2. Use case execution strategy

The second component of customer engagement focused on addressing the technical and go-to-market (GTM) requirements, which involved collaborating with the CSP to map use cases to their detailed technical and business needs.

To illustrate the slicing value-proposition for the use case, let’s examine their top identified use case: live video production (LVP). The demand for live productions is on the rise, as consumers desire to watch events as they unfold. The primary objective of this use case is to facilitate connectivity that allows field cameras to transmit their stream to remote production servers in real-time. To accomplish this, the network should deliver high upload bandwidth with low-latency connections in the field and in a dynamic manner (supporting these requirements in a particular geography only when necessary). Presently, satellite-based solutions are employed to stream content from field cameras to production centers, but this method is costly.

By utilizing network slicing, the CSP can create a slice with customized network characteristics and required QoS to support remote video broadcast in a specific area. Implementing a 5G slice, as opposed to satellite solutions, can significantly decrease costs by eliminating the need for satellite vans, expensive connectivity plans and extensive travel by multiple support personnel (see Figure 3). 

 

Figure 3: 5G slice enabled live video production versus a traditional setup with extensive number of crews on-site

 

LVP case study: Deutsche Telekom (DT) has worked with Ericsson to trial on-demand video production and has demonstrated 5G network slicing with network exposure. DT is now engaged with RTL Deutschland to test and launch this service. This proof-of-concept set the benchmark for ‘network-as-a-service’ innovation, revealing how 5G network slicing can enable a new level of flexibility and control for enterprise customers, while also showcasing the ability to fully automate configurations, as well as provision end-to-end orchestration of the slicing service.

 

Slice implementation roadmap: The CSP’s business strategy should be anchored with technology availability to develop a clear implementation strategy across a use case portfolio.

When it comes to live video production, network slicing can provide news producers with the customized, temporary, and dedicated connectivity needed for live video broadcasting.

The news crew would require high upload capacity to stream the video to the production unit, along with it, the need to do this in almost real time. Additionally, there should also be an API-based setup which can be used to request enhanced connectivity when needed, thus enabling on-demand connectivity along with SLA-based charging (Figure 4). 

With these business requirements in mind, we worked with the CSP to identify the key technical capabilities that would be needed to enable this use case. To explain further,

• High upload requirements can be met by densification and deploying an E2E network slice
• Low latency can be achieved by deploying local packet gateways in strategic locations
• APIs to receive requests from news crews and corresponding automation of service provisioning is possible through process automation and network exposure APIs
• Current charging stacks support event-based charging capabilities
• SLA based charging is under development and will be available in mid term

By utilizing this methodology, we successfully mapped out the business requirements and technology capability roadmap, which will serve to define the deployment roadmap for the use case.

 

Figure 4:Network architecture to support live video production slice

 

In addition to the above, CSPs must also expand their focus to capabilities beyond network and connectivity, such as platforms, support systems and organizational capabilities. They need to determine which of these capabilities can be developed organically and which will require sourcing through partnerships.

 

Today, capabilities exist to deploy pre-configured slices and manage/monetize them, and we are seeing CSPs like Singtel successfully monetize slicing Dynamic slicing is being tested by multiple CSPs (Telstra, Vodafone, Telefonica) and is expected to be launched shortly Closed loop automation and SLA based charging are some of the most important features that CSPs are looking forward to

 

Go-to-market (GTM): With the detailed technical requirements identified, the next step was to explore GTM requirements. Doing this requires exploring:

• Value chain roles
• Partner choice
• Engagement models

As network slicing demands E2E services and not just connectivity, multiple players are involved in the process. Therefore, CSPs need to think about what role they want to pursue since that drives their revenue share.

In the case of the tier one CSP, they generally like to take a lead role, to be the service creator. However, the use cases that they selected were niche spaces requiring a lot of vertical expertise, which they would not be able to gain in a short time. Therefore, it was more beneficial to partner and take the service enabler role, providing connectivity and the hosting platform for the applications.

Step 3. The business case

The last stage of the engagement focused on testing commercial viability and devising a pricing strategy to induce adoption. Testing commercial viability required the TCO and use case benefits to be quantified.

Network TCO: The network TCO was estimated for the CSP based on the network design and dimensioning. Essentially, the cost of each element in the network (e.g., RAN, core, transport, and orchestrator) was apportioned according to utilization and QoS guarantees, which was never before done in a structured way.

 

Ericsson’s TCO calculator CSPs have a high interest in determining the TCO for network slice which is the basis for pricing. The TCO calculator has been created to help CSPs estimate the viability of different network slicing use cases and the necessary technological investment. This tool primarily has three commercial estimations: 1) Slicing TCO, which includes both CapEx and OpEx. 2) Cost plus pricing 3) Business case based on estimated TCO and pricing.

 

Benefit levels: Benefits levels were then identified, which is the first step in quantifying them for the use case value proposition. It’s very important that this exercise is conducted collaboratively with the CSP and the enterprise to validate value drivers and share inputs for estimating the financial benefits.

Determining the business case: When it comes to determining the business case, let’s examine LVP, one of the top two use cases identified for the CSP. It required an uplink bandwidth of 10 Mbps and one-way latency between 25-50 ms, with reliability of 99.9 percent. The target coverage area for network slicing, using the 5G SA network, was 50 sq km with two cameras in each cell site of 1 sq km. The total number of sites was 50, hence the total number of cameras (UE) to be supported for LVP were 100 with a maximum 20 percent concurrent connection.

In this particular instance we advised OPEX-based pricing without any upfront fees i.e., network slicing as a service (NSaaS) – a model generally preferred by enterprises. Ericsson modeling showed that the business case was positive and, depending upon the value chain role and pricing models, the payback would be within two to five years. Ericsson’s estimation shows, with an approximate TCO of $0.6 M to CSPs over eight years, and with a price margin of 30 percent, the service would become profitable in a maximum of five years.

 

Ericsson’s take on commercial models: – CSPs should start with simple use cases requiring minimum customizations, with OPEX-only commercial model, to test the market as well as to fast-track market adoption – For scenarios where a CSP incurs heavy CAPEX and OPEX for a stringent/customized QoS slice, it could potentially start with a ‘CAPEX + OPEX’ model and shift towards an ‘OPEX only’ model as the solution as well as the market matures. Alternatively, the CSP could secure a minimum commitment period from enterprise, whilst offering ‘OPEX only’ pricing, to make sure CAPEX incurred by the CSP is absorbed over time.

 

Step 4. The last step: operational readiness

The next stage for the CSP will be to assess their operational readiness and get ready for commercialization at scale. This is one of the most important areas, but is often overlooked.

Slicing is a fundamental shift in the way a network is deployed and offered. There is, hence, a strong need for CSPs to enable their organization to be able to deploy, manage and sell network slicing. CSPs will need to build capabilities in areas such as Agile and DevOps capabilities to add flexibility in ways of working, enhance vertical capabilities within the organization and automate processes to manage network slicing at scale. All these require proper planning and some degree of organizational transformation – something that takes time. Hence, it should be started in parallel to technical and business planning.

Looking ahead

Strategic planning reduces business, technological and operational challenges, enabling CSPs to seize network slicing monetization opportunities. Our collaboration with CSPs highlights the significance of performing a thorough commercial monetization and technology assessment. The CSP in this particular scenario gained enough insights into the top use cases, value creation, network architecture decisions and pricing of slices, enabling them to proceed with proof–of–concepts with friendly customers in their priority verticals.

Additionally, success in this field necessitates consideration of operations, which is currently not a priority for CSPs but has long-term consequences if neglected.

Want to create your own network slicing monetization strategy? Ericsson, through its highly skilled consulting team, offers its expertise to assist CSPs in devising their 5G and slice monetization strategies, while taking into account market-specific factors, business prospects, and requisite network capabilities. To learn more, please contact your local Ericsson sales representative.

 

Learn more:

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Read more about Network Slicing

Read our blog posts:

Realizing 5G network slicing monetization opportunities

Remote live broadcast capture – an early use case for 5G network slicing

Network slicing opens up new monetization possibilities in 5G

Value is at the heart of network slicing monetization

Download our white paper: 200 billion reasons to explore network slicing

Explore our report: Time to accelerate network slicing monetization: 5G network slicing adoption in the Middle East and Africa