The economic potential of network slicing
In our conversations with telco operators at industry events and during our day-to-day operations, 5G understandably comes up a lot. Undoubtedly, says Satu Huuhtanen, head of Planning and Design at Nokia, there’s a lot of excitement about the myriad opportunities it will bring, but also a lot of questions about where the real value will actually come from beyond consumer benefits like faster connections, fixed access points and mobile broadband.
Much has been made of network slicing as the silver bullet for telco operators – a very real chance for them to move up the value chain. But to date, there has been no research or economic modelling to quantify the true potential of network slicing and help operators understand the role it will play in their business.
Unsurprisingly, most are still exploring various approaches they might take as well as likely return on investment (ROI) before moving ahead. It is against this backdrop that Bell Labs Consulting undertook extensive research and modelling to provide the much-needed clarity on where the benefits lie and the best approaches to network slicing.
The findings are clear – just 1% increase in premium customers can increase revenue by 3% with network slicing. Targeting premium customers, delivering the services they need to keep pace with the fourth industrial revolution, is the true promise of network slicing. This industrial market requires strict service-level agreements (SLAs), scalability and a level of control more easily achieved through network slicing than dedicated network provision.
There is a large potential base of customers within public safety, industrial automation, healthcare, Internet of Things (IoT) and many other areas that would value such services. Network slicing overcomes the impracticality of creating dedicated networks for each customer segment and Bell Labs Consulting estimates that 15% of subscribers are interested in a premium connectivity service.
The findings clearly show that as the number of premium customers grow, the Total Cost of Ownership (TCO) of sliced networks becomes increasingly efficient compared to dedicated networks. Of course, the more slices there are, complexity also increases as well as margins tighten. The only answer to that is automation and a clear plan for the industry customers that operators want to target and the services they want to offer, with the network built to support them from the outset.
Bell Labs Consulting assumed 50% level of automation as challenging but achievable. Increasing levels of automation reduces human labour of tasks in terms of either the number of hours required and/or number of operational staff needed to accomplish certain tasks. In effect, even high numbers of slices could be managed without needing to increase the number of operational staff. The more automation applied, the lower the operating costs.
With these slices and service provision relying on cloud technologies and a high degree of automation, networks now need to be designed and optimised to meet the service level agreements (SLAs) premium customers will be increasingly demanding. Once in place, the network and slices will need ongoing monitoring and maintenance, requiring a great deal of experience and expertise.
For example, networks for autonomous vehicles will require extreme reliability and ultra-low latency. On top of this, some car manufacturers may wish to create premium services, for example around in car entertainment, which will open new revenue streams and require bespoke provision.
With the increased network complexity network slicing creates, successful deployment and operations will require end-to-end network planning combined with expertise in network management systems and tools. During the preparation phase, user traffic maps can be created using geolocation techniques and data analytics to correlate network data, crowd-sourcing and social media.
Approaches based on advanced data analytics and machine learning can be applied in the optimisation phase to identify issues in the complex environment of multiple network slices for multiple domains and quickly and accurately propose solutions.
The economic case for network slicing is clear and operators should start planning their journey to 5G and considering which market segments they should support now, in order to prepare their networks appropriately. Premium customers will be key to future profitability and those that plan ahead and prepare their networks to most effectively meet the need of premium industry customers will see the greatest return on investment in 5G.
The author of this blog is Satu Huuhtanen, head of Planning and Design at Nokia