March 26, 2023

In 2010, Huawei analyzed the dynamics of emerging markets (EMs), developed markets (DMs), and super-developed marketplaces (SMs) in the global telecom industry. Our research delivered insights into the U-shaped evolution of the business — information that have supported the continued transformation plus growth of our customers and partners over the particular past decade. As the industry approaches another U-shaped evolution cycle, will U2. 0 have a strategic impact on the industry?

U1. 0 development: From monetizing voice to monetizing data

Looking back at the history of the particular telecom market, voice services peaked in 2010. Although 3G had already started reshaping the entire ICT ecosystem thanks to innovation by Apple, voice solutions still accounted for more than 70% from the industry’s total revenue.

A typical telecom trend analysis at that time would possess told the industry to continue to enjoying the benefits of the current voice-based monetization model. However , a potential industry surge brought crisis and disruption to traditional leaders. By analyzing carriers’ strategies and pain points, Huawei proposed the “U theory”, which depicts sector development mechanics and future trends along two axes: X representing the market plus Y symbolizing revenue and profit growth rates.

In 2010, EMs kept generating profits through the volume associated with voice service users, plus leading carriers were experiencing peak revenue and profit growth based on increasing minutes of usage (MOU) each month.

Leading carriers in SMs, such as the US, Japan, and South Korea, started adapting to the growing mobile Internet concept spearheaded by Apple company, moving towards the new “mobile-first” era of 4G. They were also able to rapidly expand their new user bases by developing mobile Internet providers. And they increased dataflow of usage (DOU) plus ARPU, leading to development in both revenues and profits.

As leaders within the voice era, service providers in European DMs, such as Vodafone, Orange, Deutsche Telekom, Telefonica, plus BT, had all passed the sweet spot associated with voice services and began to stagnate. Due to a lack of leading Web companies and smart device companies in the industry ecosystem that could act as guides, the development of mobile Internet services was slow plus innovation was lacking. Up-front 3G investment resulted in huge debt burdens for carriers, limiting investment capabilities. The need to address both tone of voice and information services within operations quickly drove up costs, causing negative income and income growth.

These factors resulted in the particular U-shaped advancement of the global telecom industry, with EMs upon the left, DMs bottom center, and SMs on the right (Figure 1).

U1.0: From voice-based monetization in EMs to data-based monetization in SMs

Figure 1: U1. 0: From voice-based monetization in EMs to data-based monetization inside SMs

Through U1. 0, Huawei was capable to gain insights into a major upward trend in the industry — the particular transition from voice dominance to cellular Internet. Through that transition, industry solutions, support, experiences, and business models all fundamentally changed and tremendous opportunities opened up. At that will time, it was crucial with regard to carriers in order to accurately transform towards the mobile Web.

U2. 0 evolution: Through mobile to internet industrial internet

Currently, the industry is going through a new round associated with transformation, shifting from B2C and B2H scenarios in order to B2X plus B2B scenarios. Leading US Internet companies (Figure 2) have evolved their strategies from “mobile first” to “AI first”, and the industry is already expanding from mobile Internet in order to industrial Internet. Industry trends as well as the types of competition are undergoing dramatic changes, with revenue growth in the global phone system industry currently showing signs of U2. 0 evolution (Figure 3).

OTT vendors

Figure 2: OTT vendors grew faster than the telecom business over the particular past 10 years

U2.0: From the mobile Internet to industrial Internet

Determine 3: U2. 0: From the mobile Web to commercial Internet

The monetization model used by EMs has evolved through voice consumer volume in the U1. 0 period to data user volume in the mobile Internet era, along with major companies already seeing new income growth. Carriers which have completed digital transformation now have differentiated competitiveness through digital platforms, enabling them to innovate digital providers and integrate traffic and digital support applications. Armed with such competitiveness, they can avoid homogeneous competition regarding user traffic, significantly improving both DOU and ARPU through traffic-based monetization. Market results show that the profit model dependent on user volume can support 4%-10% growth, while a model that also monetizes traffic can drive growth up to 20%-30%. Leadership in digital platforms plus ecosystems can help carriers lead in market capitalization, with the Indian carrier Reliance Jio providing a great example.

Europe hit rock bottom during the cellular Internet era and is still failing to develop the particular innovative abilities needed to make breakthroughs inside the industrial Internet period. The consumer volume benefit model, which usually relies on mobile Internet traffic, is now coming to an end. Major Western carriers that failed to deploy 5G at scale or develop IoT and industrial Web capabilities are now struggling with negative development, finding themselves in the trough of the U-shaped evolution model.

The ALL OF US, Japan, South Korea, plus China are usually leading the particular 5G marketplace, driving increases in visitors and amplifying the window of opportunity for the traffic-based profit design. Typical use cases that will realize 5G business value are rising in all major 5G markets. For example , Europe and the Middle East have got formed the virtuous company cycle in the development of fixed wireless access (FWA) services. Southern Korea and Japan have made breakthroughs in AR/VR applications. And European countries and the US have made single-point breakthroughs inside industrial Internet applications plus solutions. Such breakthroughs have got driven commercial 5G to a critical stage of adoption by industries. In terms of maturity, the extended reality (XR) value chain and 5GtoB are still being explored, during which the particular growth associated with leading providers has remained below 6%.

The leading 5G carrier T-Mobile US offers leveraged its leadership in digital systems and ecosystems, achieving almost 20% growth. In contrast, AT& T in the US is struggling from negative growth as a result of failed change into the telecoms, media, and technology (TMT) domain. AT& T’s sale of DirecTV and its electronic network assets (Domain 2. 0) within 2021 has been an iconic moment intended for telecom modification. By comparing the digital transformation practices of AT& T and T-Mobile US, it is clear that this key to successful transformation lies in understanding, identifying, plus pursuing integrated collaboration inside key services and programs.

China boasts leading performance in making money with 5GtoC traffic and innovating 5GtoB business models. Collaboration between 4-G and 5G has led to convergent and intelligent communication services being adopted at scale, including enterprise plus government videoconferencing, livestream shopping, mobile healthcare, education, and government services. These developments are unlocking newgrowth potential through innovative service forms other than TikTok plus Kwai.

5GtoB innovation is flourishing in China, with more than 10, 000 development projects underway by the end of 2021. The particular current maturation of 5GtoB technologies is particularly well suited to mid- and low-end industrial situations in The far east. This is likely to lead to breakthroughs in vertical solutions and the particular value realization from new business models in such scenarios. 5GtoB services will then enable the intelligent digital alteration of almost all industries, helping them obtain global leadership.

By the end associated with 2021, Tiongkok had deployed over 1, 425, 000 5G base stations, accounting for more compared to 60% of the world’s total. Cooperation between 4G and 5G has driven a DOU increase of more than 11. 7 GB, with 5G visitors accounting for over 20%. This has consolidated and improved the 4G experience and the particular digitalization market landscape. In the Chinese market, 5G has surpassed 4G to become the dominant force within the telecom marketplace landscape in the mobile Web era, driving the full adoption associated with a traffic-based profit model.

Shift inside telecom market leadership: Europe to the US in order to Cina

Over its 30-year history, the particular global telecommunications industry has seen a major upgrade roughly every 10 years, each of which has dramatically changed the industry plus shifted sector leadership (Figure 4).

New opportunities for China: From follower to leader

Physique 4: New opportunities to get China: From follower to leader

Europe led the world within the voice era. BT, which dominated fixed network technology, and Vodafone, which dominated GSM technology, shaped the tone of voice industry environment in terms of system technology standards, system architecture, and O& M models. They also expanded the ecosystem throughout the world, obtaining tremendous commercial profits plus gaining worldwide leadership.

Later, 3G and 4G opened the door in order to the cellular Internet. During this “mobile first” mobile Internet era, the US surpassed European countries. Apple defined the structures of the particular new mobile Internet industry as device-pipe-cloud. iOS, Apple’s strategic control point that connects smart devices plus the App Store, not only created new mobile Web experiences, but greatly advanced both business digitalization and the electronic industry. 4-G then formed a brand new type of lifestyle powered simply by the ubiquitous mobile Internet, which rapidly spread to all corners of the globe, producing profits via digital technologies in marketplaces worldwide.

5G is now unlocking a blue ocean from the commercial Internet. At the threshold of an “AI-first” industrial Internet era, China is poised for that third industry upgrade and strategic leadership. The country’s Brand new Infrastructure initiative has powered the large-scale deployment associated with and expense in 5G. Up-front infrastructure projects laid the foundation pertaining to the emerging intelligent digital industry, while computing-network integration strengthened facilities. Carriers plus industry leaders are furthermore exploring and innovating on the brand new infrastructure platform, aiming to elevate their own success in order to another level and bringing about new opportunities to lead market Internet development. Leapfrog advancement requires opportunities, and more importantly, the courage, wisdom, and ability to innovate.

Challenges plus opportunities meant for Chinese carriers

It will be likely that will the maturity and considerable commercialization of 5G-powered XR and 5GtoB vertical options will first be realized in China and taiwan. China leapfrogged from a good EM in U1. 0 to an SM2 in the U2. 0 period, but it must still fully transition from its role as the follower in the voice and cell phone Internet eras to that of leader within the commercial Internet period. Such modifications come with each challenges and opportunities. The particular Chinese telecom industry’s capability to create breakthroughs in the new domains will decisively impact the particular progress of the industry worldwide and the future part of China’s telecom sector within the global market.

U1. 0 drove digital change for better and U2. 0 will drive techniques and breakthroughs in B2X and B2B vertical solutions. China’s phone system industry followed Europe within the tone of voice era as well as the US in the mobile Web era. Nevertheless , to become a leader in the particular industrial Internet era, it must challenge itself to lead the way in developing the global industry plus overcome the particular constraints the currently faces. To this end, it is vital that Chinese language telecom carriers develop three capabilities (Figure 5):

1 . [0 to 0.1] Strategic insight and planning: From benchmarking against and rapid replicating world-leading businesses to gaining insights into the industry and driving industry preparing.

2 . [0.1 to 1] Breakthroughs in solution innovation: Through product plus technological advancement to answer innovation.

3. [1 to N] Large-scale operation and company design: From low-cost competition to customer-centric value creation and business design creativity.

driving industry development in verticals

Figure 5: Building management in new domains and driving business development within verticals

To overcome constraints in industry options and establish new command within the market, carriers need to utilize their particular differentiated resource advantages plus the windows of chance presented inside industry growth. They must carefully verify action plans, focus on overall goals and smaller details, define phased roadmaps, innovate, iterate, plus make discoveries.

During the U1. 0 time period, the telecommunications industry transitioned from the voice era in order to the mobile Internet era. During that will transition, the US, Japan, and South Korea seized industry development opportunities, leapt ahead, and made substantial profits through the use of digital technology. The U2. 0 period will present the styles, challenges, plus opportunities associated with transitioning to the industrial Internet. Because China evolves from an EM for an SM2, it is vital that Chinese carriers build leadership in new domain names and make use of U2. 0 as a guide to develop revolutionary B2X and B2B solutions. This will allow service providers to undertake leapfrog development plus lead the particular world when it comes to profiting through industry shift.

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