Achieving over $1bn cost efficiencies in the 5G era: new Network Economics Annual Report

As 5G becomes an increasingly ubiquitous feature of connected life over the course of 2020, operators seeking to make the most of this transformative, but famously capital-intensive, the development will need to achieve economic optimisation of their networks.   Drawing on the practical expertise of 21 operators, the GSMA’s Future Networks Programme supports this work by providing guidance on how to reduce expenditure, boost efficiency, achieve interoperability, and implement novel approaches to unlocking value from cellular networks.  The latest Network Economics Annual Report sets out the Programme’s findings in several key areas which operators are advised to consider over the coming year: in particular Energy Efficiency, AI & Automation, Backhaul and Infrastructure.

5G’s revolutionary capabilities don’t come cheaply – the 5G era will see the complexity of mobile networks increase substantially, and that calls for greater use of AI-in-network management to maximise operational efficiency. SKT’s work in this area is exemplary: the Korean operator’s AI-assisted network operations system TANGO consolidates network management into a single platform, using advanced data analytics to assist functions such as RAN planning and automatic load balancing, reducing inefficiencies associated with the use of network tools, and enabling greater monetisation of the network, especially for B2B customers. This will be an area of particular interest over the coming years as AI’s role continues to grow; see the report for a profile of KT’s network failure root-cause analysis solution Dr Lauren, an innovative AI approach to network support outside working hours, which helps the operator’s customer retention and brand reputation.

Optimising energy use is a key area of concern for any major player in the tech sector: operators are wise to consider how to minimise consumption for financial reasons, of course, but also in pursuit of their sustainability targets, and those of the markets they operate in.   Orange Jordan has shown leadership here, with a solar farm using photo-voltaic panels expected to generate up to 80% of the operator’s energy consumption.  80% of Jordan’s current energy consumption comes from diesel and other fossil fuels, almost all of which are imported, making it both environmentally unsustainable and expensive – this initiative helps the operator reduce its own carbon footprint alongside costs, while also supporting the host country’s ambitious targets to reduce emissions.

Savings in energy consumption are among the top priorities in the mobile industry’s work in infrastructure optimisation. For operators working in South Asian countries such as Pakistan, Bangladesh and Myanmar, the unavailability of grid power makes energy efficiency a particularly major challenge. Partly collaborative initiatives such as Telenor Pakistan’s Energy Management Plan provide a useful case study in the value of remote monitoring systems, smart operations, equipment modernisation, implementing common technical KPIs, and site sharing: in this instance, an OPEX saving of 6.3%.

Partnership underpins much of network economics, for instance in the agreement between Telefónica and Vertiv – which allows the equipment provider to conduct efficiency audits on behalf of the mobile operator, then design, invest, implement, operate and maintain the infrastructure recommended in the resulting report.  Known as Energy Savings as a Service (ESaaS), this approach allows large operators to optimise infrastructure while sharing the risk with a partner, reducing OPEX and avoiding CAPEX entirely, with Vertiv’s financial reward comes from the overall energy savings achieved throughout the ten-year engagement.

The key source of infrastructural efficiency gains in the age of 5G, however, are in Infrastructure Sharing. 5G networks are expected to incur higher deployment costs to meet throughput requirements and demand and are likely to be offered on radio spectrum above 6GHz, meaning each cell offers smaller coverage radius.  The GSMA Network Economics model indicates that sites will need to increase by at least 50%, meaning operators should consider sharing both passive (sites and power systems) and active (antenna and transceivers) infrastructure to achieve performance cost-effectively. With backhaul consisting of more than half of OPEX in developed markets, and almost half in emerging markets, component sharing will prove a natural route here.

Greater detail in these topics and more, with numerous supporting case studies, can be found in the latest Network Economics Annual Report.  If you would like to contribute to future work in this area by joining the Beta Labs Innovator roster, or simply to find out more, please visit our website, or contact futurenetworks@gsma.com.