Wholesale wireless is growing as it expands beyond traditional offerings to help meet customer needs across industries. The increasing demand for device connectivity, driven by application services and legacy internet of things (IoT), is expected to reach billions of dollars by 2030. The market demands higher-level network functions and wholesale services, such as reporting, analytics, activation, security and cloud-based solutions. To take advantage of this growth, software integrators and third-party enablers in the ecosystem are using wireless wholesale as a service to help create significant value. Mobile service operators (MSOs), with their strong networks and capital investments in 5G, are well positioned to develop alternative business models in wholesale wireless as businesses embrace digital transformation.
Our key advice for MSOs
Partner with companies that are driving growth in the connectivity market so you can capitalize on the revenue being made. These partnerships are important for MSOs as they come up with new ways to sell their products and offer a mix of options, like ones branded by carriers, partners or both.
Connectivity market opportunities
The mobile industry is transforming from legacy IoT to application services through technology-led transformation. While 5G plays a role in this transformation, enabling low-latency and high-bandwidth applications, it’s often not the whole story.
Increasing demand for connectivity to enable the huge services market is considered to be crucial right now, and often driven by the shift from legacy IoT to more advanced application services. These services can be very specific and include:
- asset tracking
- safety and security
- environmental monitoring
- health
- smart watches
- building automation
- industrial automation
- vehicle and transportation services
Connectivity transformation challenges can create opportunities for MSOs already under pressure to update their go-to-market approach around transport-only offerings and help meet customer demand for more complex, integrated service solutions. Carriers are determining where to invest and how to elevate core network services with an eye toward positioning themselves to take more market share by developing strategic partnerships with those seeking to resell wireless wholesale services.
Developing a new, integrated go-to-market strategy can be a big adjustment for carriers. An even bigger challenge is the gap between the cost of mobile transport and the value unlocked by connectivity. PwC estimates the US application services market will reach nearly $130 billion by 2030; however, connectivity (wireless transport/subscriptions) will account for just over 11%.
Given this imbalance, MSOs should take part in the broader application services market, instead of just enabling others to benefit from connectivity. Of the $14.7 billion connectivity market, we estimate over 85% will come from wholesale services, not from carrier-branded retail offerings. We are forecasting legacy B2B wholesale relationships will likely give way to more sophisticated B2B2X and B2G2X offerings. This shift will also likely drive significant changes in carriers wholesale service offerings and force the creation of alternative channel programs — and new partnerships that focus on network technology integration and delivery. Moreover, wireless wholesale services should be offered with the latest network technologies and the same quality of service available in carriers’ retail, carrier-branded, offerings.
Value share in wireless wholesale
MSOs are likely to lean into core network services first. Core network services — including network security, network slicing and device management that can allow them to help carve out certain application service capabilities that leverage core network functions — subsequently allow MSOs to participate in greater value creation. Real-time kinematic (RTK) positioning is an example of how carriers can use a core network function. RTK allows for 1-2 cm accuracy in positioning. Carriers deploying RTK can uniquely participate in market offerings that require precise, real-time positioning in farming, mining, transportation, construction, machine control, certain drone enabled services and more.
Outside network services, carriers are likely to face obstacles, such as changes in buying behavior and decision-makers. Many companies are now thinking about mobile services as a component of complex issues and needs. They consider what the solution can provide without separating connectivity from the underlying application service. Accompanying this change is a shift in the decision-maker and buyer to the business or operating function in need of the underlying application service and away from original legacy IT purchasing functions. Customers typically prefer a single point of accountability for both mobile application services and connectivity due to their increased complexity and dependency.
Some larger application services area include:
- Connected home /vehicles
- Smart city/buildings
- Track and trace/supply chain/fleet management
- Retail
- Medical/safety
- Manufacturing/industrial/environmental
What does this look like in practice? Consider the grocer in a retail, environmental, monitoring market. The grocer has an issue with cold chain management in several stores, one of their most expensive operating costs (excluding labor real estate). On the surface, it appears obvious to sell the grocer temperature monitoring and management solutions. But these services are critically dependent on underlying connectivity to support them, connectivity with which retailers are hesitant to engage, as their technology is operationally proprietary and not easily integrated with a third-party management service. Retailers are also hesitant to add external access to their internal networks limiting the viability of Wi-Fi and making a cellular-based solution ideal for these types of applications. In this scenario, cellular solutions can help meet the demands of the grocer who needs to keep their network separate while also leveraging licensed spectrum and access to the latest wireless network capabilities such as 5G with low latency, network security, high bandwidth and seamless handoff for mobile-specific applications.
Go-to-market and partnership strategies
Mobile operators looking to increase large capital investments in 5G should consider a product portfolio that can offer both flexible and scalable solutions. Unlike legacy strategies that isolate wholesale and retail, the future calls for hybrid GTM approaches embracing the needs of vertical players supporting end-to-end, wholesale, mobile networking and connectivity. More complex solutions that require higher levels of customization at the network layer and operators can offer network-as-a-service (NaaS) platforms. These new wholesale models can allow MSOs to capture higher value through offerings including cloud services and network data analytics.
Partnerships are often critical to the success of mobile operators. In many cases partners have strong relationships with customers. More important, however, is that the value can be largely driven at the application layer, and MSOs should forge strategic partnerships to participate.
Mobile Virtual Network Enablers (MVNEs)
MVNEs should rethink their strategy around carriers and view them as channels, not just enablers. MSOs looking to grow wholesale businesses are going to be asked to provide turnkey MVNE capabilities to help support small niche players that don’t require customization to support their connected applications and services. These players often lack the knowledge and resources to manage mobile network functions on their own. To help meet the growing demand for connected devices, MVNEs that can provide activation/deactivation management at scale and other account management functions will be highly sought after.
At the same time, MSOs should think about aligning themselves with specialized MVNEs that can be strong partners to help drive growth in specialized service markets. By strategically aligning with MVNEs that offer unique services in the IoT/application services landscape, MSOs can layer in higher-level network capabilities designed around their offerings. This approach can help unlock significant value and allow them to expand their role in the ecosystem by sharing in the overall solution value creation.
Now is an ideal time for mobile operators to leverage their capital investments in AI, cybersecurity and back-office functions. They can extend these capabilities as service offerings in the wholesale wireless market, helping bring scale to the market. Partnering with other companies can be foundational to helping achieve the level of growth that is within their reach.
Hyperscalers
Many MSOs already have existing relationships with hyperscalers, can benefit from forming more strategic relationships with them. Hyperscalers continue to help consolidate power and influence in the market, and mobile operators have an opportunity to restructure their relationship so they can better align their interests for long-term growth. This may become even more important as some hyperscalers start providing communication services and hosting core network functions for satellite and 5G standalone networks.
From a channel perspective, many customers already work with hyperscalers to host business and service applications through their cloud and digital offerings. By forming a more integrated partnership with hyperscalers, MSOs can help enhance the benefits of 5G with ultralow latency solutions, edge computing, network virtualization, private networks, network slicing, and high-demand data storage and analytics.
MSOs have previously partnered with MVNEs to offer a wide range of wireless wholesale services. Now, MVNEs and segment-specific systems integrators are building new relationships with hyperscalers so they can help meet the demands for specialized application services and act as channel partners. Similarly, MSOs should strategically align themselves with hyperscalers to co-create capabilities and services that only they, as network operators, can help deliver. This alignment can unlock the potential of hyperscalers as a channel to help drive growth.
Business model reinvention
The wholesale wireless market is being disrupted by new competition in an already saturated market. New players can offer unique value propositions and ways of doing business. External factors, such as evolving regulatory changes that focus on data privacy, may pose challenges for MSOs and their customers. But it’s not all bad news. There are opportunities for growth due to labor shortages and the move toward digitization. Those willing to adapt and reinvent their business can thrive.
PwC has developed a suite of tools and accelerators to help carriers with their business model reinvention needs. Is your company ready to reimagine growth in wireless wholesale?
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