I mentioned in my Monday blog my mock political debate on “smart versus dumb pipes.” Now it seems that the industry is heading for a reprise of that same issue, which is a good thing because it was never really resolved. The obvious question is whether there are new ideas behind the old question, or whether we’re just doing another rehash of the past.
The SDxCentral article I cited above opens with an interesting comment that should be the launch point for the whole issue. “Operators won’t be collecting big checks from YouTube or Facebook anytime soon,” says the piece, “but new services and capabilities delivered by 5G could lead to new revenue.” Let’s parse that statement and see where it goes.
The first point is that we’re still circling around on the question of whether there will be a “net neutrality” rule that bars settlement among providers and/or paid prioritization of traffic. That question is outside my topic boundary here, but suffice it to say that the “dumb pipe” option would surely be more viable were operators able to get traffic-based revenue from the OTTs. If they can’t, then the problems with declining revenue per bit are likely to go unchecked.
That leads us to the second point, which is that 5G could “lead to new revenue”. Does that mean connection revenue, meaning dumb-pipe revenue? It could if we presumed that 5G would either cost more than current 4G services or that it would somehow have more customers than current 4G service. We already have announcements from operators like Verizon that 5G won’t cost more. We surely have plenty of operators and pundits saying that the Internet of Things could add a bunch of paying-non-human customers for 5G service, but they don’t explain why these same new users wouldn’t already be testing the cellular waters on 4G.
A few largely ignored voices have been saying for years that 5G is really just a somewhat-faster-but-nobody-knows-how-fast version of cellular services we already have. What is surely true is that in the end, it provides another dumb-pipe option. That raises the last point in our parsing of the statement, which is whether 5G could create new smart-pipe revenue opportunity for operators. That depends on two factors: do 5G opportunities require something beyond connectivity, and are the operators in any position to provide it.
The foundation of a smart-pipe revenue stream from 5G is associated with what we could call “socialized IoT”. Instead of communicating in a traditional sense, socialized IoT contributes information. The notion of sensors open on the Internet fails the sniff test of business case; who deploys them when it costs to buy and maintain them, costs to connect them, and you are contributing them to all? What’s actually needed for socialized IoT is a public-utility model, and perhaps that’s the best argument for network operators to reap some smart-pipe revenue from it. The big and obvious question is “How?”
The obvious part of the answer is “not from connecting devices”, which would take us back to the failed sniff test. If IoT is contributing information, then it’s information that the operators need to be selling, at the minimum. They could go beyond that, to offering services based on information, but the information piece is the irreducible minimum of a smart-pipe offering.
IoT information is a potentially valuable commodity for a number of reasons. First, you need sensors to get it, and operators have long experience in deploying things that earn revenue only over time. They can make the big “first-cost” investments and we know that because they do it all the time. Second, operators can shield the sensors themselves from hacking, and validate the information that they generate. They’re already regulated, so adding regulations to protect device and data security and safeguard public privacy isn’t difficult to add on. Third, they have offices, real estate, located in proximity to where most sensors would end up being deployed and most information would end up being consumed. If things like low latency mean anything in IoT, then operators have hosting points that would sustain it.
The reason for my qualified “potentially valuable” is that we’ve all read a lot of things that you can do with IoT, but most of them are either home-control/facility-control and security applications that we really don’t need new technology (or new players) to support. Other applications like augmented reality and autonomous vehicles are problematic in terms of willingness to pay, difficult to frame a service for without forklifting a lot of consumer technology, or simply silly.
I’m a fan of augmented reality in the form of unobtrusive glasses that let information be displayed over top of the real-world view of the wearer. Think of it as a personal heads-up display, lined to information fields that describe what things are, what might be offered there commercially, and even whether you really know that person who’s coming the other way on the sidewalk. The problem is that the technology to support this in a convenient way, a safe way, is still embryonic. We probably will have this in five years, but we almost surely won’t have anything more than a glimmer (augmented glimmer, of course) in the next couple years.
Autonomous vehicles are both sensible and silly depending on just what you think is controlling them. If you visualize a future where a central edge-computing-and-IoT pool runs all the vehicles on the road, I hope you’re young enough to have a shot at seeing it. I doubt it, though, because the smart model of autonomous vehicles is like augmented reality—it’s a set of information fields that a vehicle and its onboard controller are moving through and drawing information from. The decisions made by the controller are a combination of information-field-driven and driven by onboard sensors that are responsible for what could be called “reaction”. There’s a tactical and strategic dimension to driving, and the tactical part is surely going to stay within the vehicle.
The good news here is that we’ve (perhaps accidentally) stumbled on the smart-pipe model. It’s those information fields. Any realistic new-revenue scenario will end up here, in my view, and it’s completely feasible to promote network operators as the creators of those fields. It would then make them an intermediary between raw IoT elements and applications that consume the information, which is the role they play now. If operators want to go the distance to the user themselves, they’re free to do that, and if not, they can fall back on “disintermediation light”, a position where they do more than connection but less than OTT competition.
This doesn’t seem to be what Dell, the company named in the Light Reading piece I’ve cited, is thinking. They seem to be looking at transformation purely in terms of cost management and 5G optimization, and that’s not enough. It’s clear that 5G Core might require more virtualization of functions than we see today, but it’s only a “might” and it’s not going to happen soon because of delays in justifying the move from 5G RAN-only (non-standalone or NSA) to 5G Core. Not only that, operational automation has little value if you can’t automate all of operations, not just one-technology pieces. And even if Dell succeeds in smartening operations, it doesn’t smarten the pipes.
I think Dell needs to take another look at this question, and maybe we need to take up that old debate in the industry at large.