Private LTE/5G networks: telecoms operators must differentiate their offers in a crowded market

Operators are hopeful that the opportunity to build and operate private LTE/5G networks for customers will create a new source of revenue. Mobile operators can use their core competencies of building and operating public mobile networks to address the private LTE/5G market. However, delivering a differentiated private LTE/5G proposition in an intensely competitive market is challenging; the low levels of operator activity in the private network market send a clear signal that the business case for entering this new area is difficult to make. However, operators have options to differentiate their offering, not least by exploiting their public network assets.

This article summarises the conclusions from our recent research report Private LTE/5G networks: operator strategies.

The dedicated network model limits the role of the operator

Analysys Mason defines the basic models for private networks as follows.

• Dedicated private network model. This model is composed of single tenant, on-premise network components. It is currently the most-commonly deployed model. Operators such as Telefónica and Vodafone deliver dedicated models alongside hybrid models.
• Hybrid network model. This model uses a combination of on-premise and public network assets. For example, operators can provide access to a private slice of their radio access network with a dedicated core, or access to their public core with a dedicated radio network. We do not explore all the different combinations of hybrid model in this article but there are several variations.

Operators can provide both dedicated and hybrid models, but it is harder for operators to differentiate a dedicated network offer. The operator’s opportunity to maximise value from both types of model is summarised below in Figure 1. 

Figure 1: Opportunity assessment of dedicated and hybrid network deployment models for telecoms operators

Source: Analysys Mason, 2020

Overall, the dedicated model is less attractive for an operator because it does not leverage its key asset, the public network, it may not use its spectrum and the operator will resell vendor infrastructure. Furthermore, this model is resource-intensive because it involves building and managing many smaller networks for multiple customers; operators do not have any obvious differentiators. Operators have more opportunity to experiment and differentiate with hybrid models.

Certain regulatory regimes may facilitate operators’ provision of dedicated networks. For example, in Canada, Rogers can deliver a dedicated private network model and will operate the radio network because Canadian regulation only allows licensed operators to operate networks. In Germany, in contrast, the industrial spectrum regulation shifts the benefits away from operators because enterprises can own spectrum. For example, Mugler, a systems integrator, will deploy a private network based on its own spectrum to support its logistics site in Germany (as well as deploy 5G private networks on behalf of its customers). 

The hybrid network model generally provides operators with greater scope to maximise their revenue and increase their margins. This is because:

• operators have more flexibility to deliver multiple variations of RAN and core at different price points and with different revenue models, more so than with dedicated models, and
• operators have opportunities to provide public edge solutions to host local breakouts of core network and enterprise applications. This is not unique to operators but allows them to extend their offer.

The hybrid model is also an important step on the path to full, 5G-supported solutions and network slicing. Deutsche Telekom, Orange, Telefónica and Vodafone are all exploring hybrid network models and have early commercial deployments. 

Operators should explore multiple network deployment models to differentiate

Operators will need to adopt very different service delivery models to public network models to capture a share of the private LTE/5G networks market. For example, operators may need to work with a broader selection of vendor partners to deliver solutions that meet requirements in terms of both complexity and cost. 

It is also as important to be able to deploy and manage networks on behalf of enterprises. This will require lower-cost, automated solutions that are easy to install and operate. Private LTE/5G networks are currently expensive and complex to install and not a good fit for the operator model, which is focused on mass-market, scalable solutions. If the networks become easier to deploy and manage, scale will be more important than skill, which could work in the operators’ favour. 

Finally, the hybrid model provides a wealth of possibilities for operators but will require significant effort to both deliver and gain acceptance with enterprises. Operators that have entered the market early have not underestimated the challenges to differentiate their offer and are working to address them.  

Analysys Mason’s consultants support network operators, vendors and network users in their assessment of private network opportunities and deployment. Our work covers spectrum, commercial offers, cost of ownership and procurement support. You can find more details here.