In the 5G era, what else can we sell besides traffic?

According to official news, 5G will be put into commercial use in 2020. After learning this news, the author fell into deep thought: Operators sold voice and text messages in the 2G era, traffic in the 3G era, and traffic (mostly video traffic) in the 4G era. Will they continue to sell traffic in the 5G era?

Upstream: Various operations

Those who like 5G the most are the upstream equipment suppliers. It’s a pity that the little sweetie who used to watch the moon with me can only be called Mrs. Niu now.

Operators are very calculating. In the past, they have always been willing to spend money to expand pipelines, upgrade networks, and improve support and storage overload, because the bigger the plate, the more revenue will naturally increase, and of course they will be happy with suppliers. Today, there are 890 million mobile users nationwide, 260 million telecom users, and 290 million Unicom users. The 4G penetration rate has reached 70%, and the mobile communications market is highly saturated. The marginal benefits of pipeline investment are constantly declining, so operators are naturally no longer so impulsive in purchasing equipment.

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Equipment suppliers also understand this, so we can see manufacturers displaying new application scenarios, new business solutions, 5G and IoT industry alliances, etc. at various exhibitions. The purpose of these initiatives is only one, that is, to tell operators that building new networks is valuable and can change people's lives and work conditions.

However, operators have reservations about this, and are especially cautious about the various Internet-oriented transformations proposed by manufacturers. In their view, due to differences in thinking patterns and management methods, operators will most likely not be able to adapt to the Internet (such as OTT services), so it is better to focus on building pipelines. In addition, the huge investment in network construction and the revenue ceiling mean that the payback period is extended, and operators certainly hope to maximize the benefits of the original network.

Of course, 5G will eventually come, especially after the emergence of unlimited data packages, a "traffic black hole". According to the experience of other developed regions, in the 4G era, the competition between operators will definitely be a competition of network experience in the early stage, and then make a fuss about the unit price of traffic, and finally the unlimited data packages will be the winner. As the proportion of unlimited data packages and large data packages will gradually increase, their requirements for network load can be imagined. Whether the operators are active or passive, with partial coverage or full coverage, it is only a matter of time before they finally use 5G technology.

In summary, from the perspective of upstream manufacturers, the probability of selling traffic in the 5G era is still very high. However, since the door to unlimited traffic has been opened, the value of connection has begun to decline - this is indeed a problem.

Peers: Competition is never easy

Looking at the telecommunications market in any region of the world, operators are facing a similar problem: homogeneous competition.

There is a reason for this. After all, there are only a few equipment suppliers, and construction units and support units only work for money, so no operator can make a big difference in communication capabilities. However, all this is based on the premise that the operators are at the same level (operating capabilities and financial levels have reached a certain level). Therefore, the three major operators are competing in a homogeneous manner in China, but in some places abroad, it may be a dimensionality reduction attack.

For example, in developed regions such as Europe and the United States, the communication market is highly competitive, and their operators are located at a relatively high latitude. However, in some countries with low communication levels, the advantages of the three major domestic operators are reflected. Although my country is a developing country, it has also absorbed a lot of advanced foreign experience, and its operation strategy will be more down-to-earth. For example, in some areas, tariffs are more influential than brands, and buying a contract phone with a package and sending a bag of rice may be more effective than advertising. So on March 18, 2018, China Unicom (Thailand) Operation Co., Ltd. was officially established in Bangkok, Thailand; in recent years, China Telecom has not only established a branch in Singapore, but also put into operation a series of cross-border and cross-regional land optical cable systems such as CSC optical cables connecting Southeast Asia. Provide high-quality basic communications and value-added services for Chinese companies to neighboring areas, and local companies to China and the "Belt and Road" region.

Of course, the three major operators still have their base in China. Although competitors are enemies, in the current environment, operators need more cooperation than competition. After all, competitors in other dimensions have long been eyeing them. For example, OTT businesses led by WeChat have weakened the existence of mobile phone numbers, and Alibaba Cloud has occupied half of the cloud computing market. At present, China Unicom, which has the weakest foundation, has started mixed-ownership reform. Internet companies have obtained a lot of resources through equity investment: targeted free traffic (Wang Card), cooperation in cloud computing (Alibaba Cloud and Tencent Cloud), Internet of Things...

This kind of thing happens not only in the telecommunications industry. I remember that in the past free TV services in Hong Kong, ATV kept coming up with new ideas, but its ratings were always suppressed by TVB. So TVB felt that the market had stabilized and began to streamline its expenses. ATV closed down a few years ago, but TVB's stock price began to decline. This is because TVB's own business has run out of room for imagination. In the international market, its production standards are far inferior to those of HBO and Netflix; and in the mainland market, the TV stations that spend money like water are no longer what they used to be, and the streaming media market is dominated by video websites under BAT.

From another perspective, competitors exist not only in China, but also abroad. After all, competition at least proves that the business is still profitable.

Different industries: Cloud computing is a treasure

In the eyes of operators, Internet companies are outliers. They bet on tomorrow rather than today, and can endure long-term losses to expand market share; they hold high the banner of free services, but in fact third parties pay for them. Faced with this unusual routine, operators seem to find it difficult to adapt for a while. However, the current reality is often that operators are fixed, but the Internet is changing. On the one hand, this is because my country's Internet dividends have peaked, and several leading companies and alliances control most of the profits, so they can only extend to other industries and fields to find opportunities; on the other hand, the high returns of the Internet are also accompanied by high risks.

Operators have re-understood the relationship between them, believing that the Internet may be an eagle flying in the sky, but it cannot replace the sharks in the sea. In fact, each has its own advantages and disadvantages. Therefore, Internet companies are not only challengers, but also partners and test fields. Operators can follow behind and quickly follow up when they see opportunities, just like Samsung followed Apple.

Among the businesses that have been recognized by Internet companies, cloud computing is the most popular. This is because:

• It is still an incremental market, and the market is getting bigger and bigger;
• Cost advantages of virtualization over traditional IT equipment;
• The capital market highly recognizes it.

Take Amazon as an example. According to the financial report, Amazon AWS business has accounted for 40% of its profits. Therefore, Amazon, which has two major profit sources, e-commerce and cloud services, has a higher price-to-earnings ratio than Alibaba, whose 90% profit comes from e-commerce (pure financial analysis). At present, the domestic cloud computing market is full of contenders. Operators are of course involved in it, but currently only telecom cloud computing can rank in the top five (however, telecom's cloud partner Huawei has announced its own cloud service). Fortunately, cloud computing does not follow the pure technology flow. Google and Microsoft also have their own unique features in this regard, but Amazon is indeed at the forefront because sales capabilities are as important as services.

The future is already here, it’s just not popular yet

Let's go back to the topic at the beginning. In the 5G era, one of the options for operators may be mobile cloud services (traffic + cloud computing). After all, cloud computing has replaced minicomputers in a raging manner, so what about personal computers (Google's Chromebook has already established a foothold in the netbook market), or mobile phones with the same Linux system? Can it be avoided? Secondly, it will never be another smartphone that replaces a smartphone, but can a terminal that combines artificial intelligence, voice recognition, and AR be tried? Apple smartphones back then all used existing mature technologies. Perhaps when 5G comes, everything will be ready.