The need for shared B2B marketplaces in telecom grows, since CSPs seek closer cooperation to retain or increase the profit margin.
The emerging 5G monetization scenarios and Industry 4.0 use cases highly rely on the operator’s capability of being efficient in the procurement and deployment of resources of all types. This can be achieved by joining a global marketplace with the necessary dynamics and reliability brought with the Distributed Ledger Technology (DLT).
Telecom as an industry is expected to increase its revenues to $4.7 trillion by 2025, while the market for IoT-powered services alone is projected to grow to $8 trillion this decade according to BearingPoint. This prompts horizontal collaboration between different communication service providers as it is them who eventually power up this new reality.
This suggestion stands to the test of business reasoning. Only 30 percent of telecom-related profits this decade are expected to come from providing actual connectivity services. The rest lies with B2B solutions that horizontal collaboration models facilitate. This includes vertical solutions for manufacturing, logistics and retail. The lion’s share of all those projected profits, $4.3 trillion, comes from rendering 5G-powered services to enterprise customers.
Capturing those opportunities, however, currently entails significant capital expenditures for the improvement of networks and support of high-capacity low-latency services. However, those expenditures will only grow when 5G becomes commonplace and reach $1 trillion with just 17 percent of the amount coverable from infrastructure-depending revenues.
This will require communication service providers not just to innovate, but to seek closer cooperation to mitigate financial risks and retain the profit margin (or even increase it). And with this, the need for shared B2B marketplaces in telecom looks all but axiomatical.
How marketplaces work
Simply put, a marketplace is a digital environment enabling participants to buy, sell, rent, and lease their unique capabilities such as infrastructure assets. By making them accessible to all participants on the market, a communication service provider can easily integrate partners into their ecosystem and significantly reduce their capital expenditures while increasing their profit margins without the need to bear any integration risks.
In a simple example, an eSIM-based travel product may be developed. Subscribers will be able to get foreign eSIMs from their home operator, so they won’t need to look for local subscriptions upon arrival. This will solve the problem of silent roamers, delivering a smoother experience suited to the evolving needs of the customers and create new revenue streams previously unavailable to MVNOs. Similar marketplace-based mechanisms are applicable to more complicated B2B and industrial IoT use cases.
The most promising kinds of marketplaces are decentralized thanks to distributed ledger technology (DLT). This allows all market participants to cooperate in a trustful environment without risking any of their assets. On top of that, participants from beyond the communication services industry, such as app developers or manufacturers of IoT devices can easily join in.
Essentially, a marketplace is a solution that turns major one-time capital expenditures into a continuous flow of sharing, producing, and exchanging all kinds of assets that would usually require serious investment and rigorous paperwork.
The size of a marketplace mainly depends on the number of participants. Still, there is room for upscaling the model to greater customer bases, more industries, and different regions of the world.
When the need arises, a federation of such platforms would become the key to increase the use of infrastructure and generate new revenues while significantly diversifying the scope of services they offer both in B2B and B2C models.
As an example, with this approach communication service providers should be able to order flexible telecom cloud infrastructure to temporarily increase their infrastructure capacity and to deploy VNFs/CNFs such as Fixed Access Network function (vOLT, vCPE), Mobile Access Network function (v-RAN), Mobile Core network functions or Fixed Core network functions. Scenarios like this are particularly common for emergency services or B2B customer demands, such as the ones generated by connectivity requirements in Industry 4.0.
A federation of infrastructures could better fit MEC, SD-WAN, and IoT than the current model of completely independent providers/competitors. Those use cases are likely to rely on global infrastructure and on-demand availability of network resources. A federation of infrastructure marketplaces would share the costs between different asset providers thus ensuring higher ROI and easier compliance with regulations found in different jurisdictions. Thus it could later evolve into a service-centric entity powered by AI, machine learning, and distributed ledgers.
Futured opportunities for marketplaces
Consumer devices being a part of a federated marketplace offer access to connected supply chains, smart grids, and retails among other things, which potentially opens up an additional $3 trillion revenue for the entire industry of which communication service providers are an essential part. Data itself could become a direct source of shared revenue while complying with privacy-championing legislation such as the European Union’s GDPR.
An additional possible use case is the establishment of digital identities for people and devices powered by distributed ledgers, which could find use everywhere from the Internet of Things to communication with government entities. With the expected market growth and 24.8 billion expected IoT connections, as well as eSIM capabilities and KYC/Digital ID requirements, federated marketplaces could become the most prominent solution for efficient management of data, digital/digitized assets, and infrastructure.
The most fundamental philosophy behind DLT-powered federated marketplaces focuses on adding the momentum of cooperation to the usually competitive telecom market. Such marketplaces will be capable of retaining and increasing profit margins for their participants invite players from different industries and finally create a safe and secure environment beneficial for all.
* The article is based on the white paper, which unveils the results of the Catalyst project called “Vertical industry telcos: A federated DLT-based marketplace”. Held under the auspices of the industry association TM Forum, the project aimed at creating a prototype of the ecosystem that would allow market players to freely exchange digital assets. Thus, CSPs will be able to explore new revenue streams, increase their productivity and reduce expenses. The leading CSPs (Orange, BT Group PLC and Rostelecom) and vendors across the globe (Nexign, Nokia, IOTA and Argus) participated in the project.