The easiest way to kill a new product or service is to price it wrong. Buyers always compare new stuff with older stuff, and accept a higher price only if they see a clear incremental benefit. Sellers always want to recover incremental costs with price increases. This challenge is now coming to the fore in 5G technology, and while I don’t think it will kill 5G to get it wrong, it could impact how we use 5G for years to come.
5G is, first and foremost, a part of a long and relatively orderly evolution of mobile network services. As such, the biggest test it has to meet is becoming the dominant if not universal framework for cellular networks. That means that users will have to accept 5G and acquire 5G-capable devices. Switching to a 5G device will cost money, and if 5G services are also more expensive, users will drag their feet.
Operators, of course, are looking at 5G as an almost-complete transformation of mobile infrastructure, something that’s going to cost them a lot of money. Most are already scraping the bottom of the cost-reduction barrel to get their profit per bit up, and so a big capital boondoggle like 5G infrastructure doesn’t look very attractive. Why not jack up the price a bit?
Publicity for 5G encouraged operators. You can’t attract readers to a story about technology that’s invisible to them, so most 5G stories have focused first on the much higher speed of 5G networks. This, despite the basic fact that a smartphone user might have considerable difficulty seeing any difference between 5G and 4G services (5G wireline replacement would be different, of course). If users somehow believe that 5G will make their videos faster or better, or that it will make them cool or desirable, then maybe they’d pony up some extra bucks for it.
At the basic service level, this isn’t looking like a winning approach. Verizon, who had planned to charge $10 per month more for 5G, recently admitted they were dropping that price hike. In a competitive market, there was little chance they could command the higher price when there were few (if any) differences in the service.
What this has done is to force 5G operators to focus their increase-my-revenue hopes on 5G applications other than smartphone mobile service. Network slicing and IoT are typical examples of this, and as this story in Light Reading shows, at least one operator believes that the ability to offer very dynamic and flexible 5G pricing for specialized service/application mixes will be critical. But will it really be the opportunity driver, or is pricing here still posing the same optimization risks we’ve faced with all products and services?
IoT services were operators’ first excursion into “new applications” for 5G, and operators still have lingering hopes that a bunch of Internet-connected “things” will each get a cellular service bill each month. Could pricing help with that? Sure, if the price were zero, which is what alternative technologies cost today. There are certainly applications in industries like transportation where 5G might well offer enough of a benefit to create direct mobile service subscriptions, but this is not ever going to be a mass market. It might be able to exploit flexible pricing, but pricing capabilities aren’t going to drive adoption. Let’s move on.
The two specific things that the LR article talks about are network slicing and dynamic pricing for capacity. Dynamic capacity pricing mirrors pricing policies based on scarcity, like the Uber example the article cites or off-hour versus peak-period network usage. The value of dynamic pricing is difficult to assess in 5G, given that we have virtually no exposure to it, but other attempts to offer capacity at different prices, including the “turbo button” approach and seasonal or hourly-shift-based enterprise service pricing, have not been widely accepted or successful.
Dynamic pricing seems to depend on a different application model for success, and it’s not clear just what that model might be. Some operators have suggested that things like smartphone updates and app purchases might benefit from the dynamic model, but if updates and purchases can be deferred, they could in most cases be done over WiFi, which has no cost to the user.
Network slicing is an example of the real value of dynamic pricing, including that the real value may depend on hypothetical applications again. We can offer examples of network slicing in use, including secure networks, company secure networks, isolation for IoT services, and so forth, but we still can’t demonstrate a broad business case for those examples.
What, then, are we seeing with operators like Dish? I think it’s related back to the fact that operators have always been doubtful of the mass-market value of 5G, to the extent that they’d hoped to be able to limit their 5G costs with things like the 5G-over-4G-infrastructure “non-standalone” or NSA approach. When it became clear that competition was likely to force them to full 5G, they were then constrained to rely on some sort of new application set to pay back their investment. That, in turn, means they have to be able to do very flexible service pricing.
5G Core is one of those in-for-a-penny things, in short. If you decide you need to do it, you have to do it in such a way as to be responsive to a set of opportunities that everyone writes about and nobody currently validates. It’s difficult to adapt to things that are formless, so you try to create the most agile implementation possible in order to maximize the chance that the emerging and real opportunities will fall in the scope of what you’ve prepared for.
This raises an interesting question, which is whether this same sort of adaptation will be required for overall service, network, and operations/business management. Whether the people involved want to admit it or not, today’s OSS/BSS processes tend to be tightly coupled to network behaviors, because those behaviors are what create services. If a network is built to be flexible, agile, dynamic, is it also “behavior-less” in a sense? What will drive the overall operations models of the future if there are no fixed behavioral relationships built into the network?
Some of the operator planners who have dissed OSS/BSS systems to the point where they want to see them scrapped and a new model adopted, believe that this is the time when we should be thinking of driving networks from services and not the other way around. They may well be correct, and this may be how model-driven operations really comes into its own.