Digital transformation demands give rise to new spaces in the core network market

The industry market has become a new growth space for 5G SA networks

On April 7, China Mobile announced the results of the tender for its 5G independent networking architecture (SA) core network equipment. Compared with the previous 3G and 4G networks, a significant change in the 5G core network deployment is that China Mobile will deploy two core networks for the B2C and B2B markets. The contract value of the core network used in the B2B market is estimated to be about 15% of that of the B2C network.

This shows that China Mobile is adjusting its growth strategy, and the corporate and industrial Internet market has become China Mobile’s hope of regaining growth momentum in the 5G era. This is also the fundamental reason why China Mobile insists on deploying SA architecture 5G core network. The SA-based core network can enable China Mobile to serve the diversified needs of vertical industries while keeping network costs at a reasonable level.

In the same week of April, Deutsche Telekom also launched the first 5G campus dedicated network based on the SA architecture at the Interconnection Industry Center of the Aachen Campus of the Aachen University of Technology. The network runs on the 5G spectrum owned by Deutsche Telekom, but the network server, SA architecture core network and wireless access system are all located in the park, thereby providing dedicated connection services for enterprises in the park. Strategy Analytics believes that these deployments show that 5G SA networks, especially SA architecture core networks, are ushering in new growth opportunities.

Industry users show clear demand for 5G SA network

When telecom operators deploy dedicated 5G SA networks for vertical markets, leading vertical industry companies have also shown keen interest in the powerful capabilities of 5G SA networks. In September 2019, Siemens cooperated with Qualcomm to deploy the first dedicated 5G SA network in an actual industrial environment. The network uses the 3.7-3.8GHz frequency band. German regulators have allocated this frequency band to the 5G enterprise private network. use. Eckard Eberle, CEO of Siemens Process Automation, said: “Industrial-specific 5G is a key step leading to a full range of wireless networks. Such a network can serve production, maintenance and logistics. High data rate, ultra-reliable transmission and extremely low latency It will greatly improve the efficiency and flexibility of industrial production.”

In February 2020, Lufthansa Technology and Vodafone Enterprise Services deployed a dedicated 5G network based on the SA architecture at the Lufthansa Base of Hamburg Airport. The network covers the Lufthansa base of 8,500 square meters. Due to the use of the 5G private network frequency, the network is completely isolated from the public network. From the server, the core network to the wireless access system, they are all deployed independently. This dedicated 5G SA network can provide Lufthansa bases with a connection bandwidth of up to 1Gbps and a delay of less than 10 milliseconds. It is a “perfect solution” for serving Lufthansa’s fully connected bases.

SLA is the key to the telecommunications industry to develop vertical industry markets

The above cases show that both telecom operators and vertical industry enterprises believe that the 5G independent architecture is most suitable for supporting mission-critical applications that require ultra-short response times. As Antje Williams, senior vice president of Deutsche Telekom’s 5G campus network, pointed out, “5G networks are particularly suitable for performance-critical industrial uses.” In fact, service level agreements (SLAs) that reflect network performance and service quality indicators have become corporate partners. An important differentiated service element in the vertical market is an important starting point for telecom operators to provide differentiated services. “The key issue in the 5G enterprise market is how to show SLAs to customers. If this can be done, then any solution can be sold.” Arnaud Vamparys, Senior Vice President of Orange Wireless Networks, said in an interview (more specific information Please refer to the Strategy Analytics white paper “5G Positioning & Pricing Strategies”).

Therefore, in the 5G era, the role of the core network in the entire mobile network will become more and more important. Especially for vertical markets, the 5G core network is expected to play a central role in the digital transformation of the industry. In addition to traditional user identity information management, call processing, mobility management and other functions, with the help of network slicing technology, the 5G SA core network can also perform effective, end-to-end SLA management of the mobile communication system. This will be an important step for the mobile communications industry to enter a broader industry market.

The dedicated 5G core network for enterprises and vertical industry markets enables service providers to support the digital transformation of vertical industry partners from multiple perspectives. The wireless connection with ultra-low latency and ultra-high reliability can support precise remote control, automatic guided vehicle (AGV), automatic fault detection and other applications, and then serve vertical industries such as flexible manufacturing, smart ports, and smart mining. Private network deployment can safely isolate data and protect data privacy. This is essential for vertical industries to incorporate 5G connectivity into their core production processes. The network automation capabilities of the 5G core network also enable vertical industry enterprises to customize their networks flexibly and easily. Using software control network (SDN) capabilities, industry users can coordinate, plan, and manage network service parameters, flexibly deploy networks and applications, and add or delete user devices.

The SA architecture core network has a bright future for incremental increments

This prospect has also attracted the attention of cloud service giants. Amazon, Google and Microsoft have all started cooperation with telecom operators to combine their edge computing services with 5G networks to expand their cloud service portfolio and seek new market space. Microsoft even acquired Affirmed Networks, which focuses on fully virtualized, cloud-native core network solutions. Microsoft hopes that this acquisition can “further develop our cooperation with the telecommunications industry on the basis of the safe and reliable cloud platform we provide for operators.” According to CNBC’s report, the value of this transaction may be as high as $1 billion, and Affirmed Networks has raised a total of $155 million before the acquisition.

The current impact of the new crown epidemic on the global economy has further highlighted the need for 5G to enable digital transformation. In a recent blog entitled “Should Mobile Operators Push Back 5G Plans to 2021?”, we discussed the contribution of 5G to the prevention and control of the new crown epidemic, such as the use of 5G-enabled cloud robots or unmanned driving tools for contactless remote inspections , Treatment and remote consultation using 5G network, etc. Strategy Analytics believes that the new crown epidemic will prompt many companies to accelerate their digital transformation plans, and 5G will play an important role in the current epidemic prevention work and the future economic recovery process.

In the research report entitled “Where is the 5G Enterprise Opportunity for Telecom Operators?”, we analyzed the potential deployment scenarios of 5G enterprise private networks. In some cases, private networks can share 5G base stations with public mobile networks. But if business users want to use 5G to support their digital transformation, they must use an independent 5G core network. Therefore, Strategy Analytics predicts that the growing demand from enterprises and vertical industries will promote the further expansion of the total market size of the 5G core network. As the enterprise and vertical industry markets are still evolving and many service providers have not yet fully determined their business strategies in this market, the conditions for accurately estimating the increase in the 5G SA core network market are not yet fully sufficient. However, China Mobile The bidding results of the 5G SA core network do show considerable room for market increments.

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