Industrial use cases reveal that there is money to be made from 5G but telcos must adapt their business models if they are to capitalise on this opportunity

Telcos must be ready to capitalise on the huge number of potentially profitable niches that will emerge in the industrial sector when 5G networks begin to be rolled out in 2019, according to Red Hat.

Speaking exclusively to Total Telecom at The Great Telco Debate last week, Red Hat’s worldwide VP of communications service providers, Darrell Jordan-Smith, said that telcos could miss out on revenues by over focussing on consumer applications for 5G.

"From our perspective, the average consumer is not going to be prepared to pay twice as much, or even one and a half times as much as they currently pay, just to be able to download a video faster, especially given the performance you can already get for that type of thing over LTE today. Consumers are going to demand those speeds anyway and are not necessarily going to be prepared to pay for it," he said.

"A lot of the use cases that telcos are particularly interested in at the moment are those that enable Industry 4.0 applications. We are talking about machine to machine communications, the robotics, the factory based industrial uses and the EHealth initiatives. A lot of these applications demand extremely low latency and the processing will need to be done right at the edge of the network."

Red Hat is involved in a number of industry 4.0 trials with telcos and key industry players around the world. In Germany it is working on a series of factory automation initiatives with a leading producer of household whitegoods. 

"We are doing a lot of factory automation research in Germany, Japan, and the US. Just think of the big companies in that space – we are working very closely with them. And we are doing all of this in partnership with the telcos. They are very much a part of the pilots and the proof of concept initiatives that we are involved in," he said. 

"Our view is that we are going to see a lot of verticalization from a telco perspective in these areas of the enterprise. I don’t think you could necessarily achieve that without the telcos, because you need that underlying network infrastructure to support that, and to have the SLAs in place to guarantee the availability. That is the unique value proposition that telcos can bring to the table.

"For these types of industrial use cases, you really can’t make do with 4G or LTE. You need 5G to enable these," he added.

2018 has been a busy year for Red Hat, with its $34bn acquisition by IBM dominating the news since its announcement.  The scale and breadth of reach that the acquisition will provide should mean that 2019 will be a hugely successful year for the company. Looking ahead, Jordan-Smith said that Red Hat was looking to forge as many strong partnerships with telcos as possible, as the firm continues to facilitate their digitalisation.

"When I first joined Red Hat we were very focussed on the IT sector. We’ve pivoted a lot to the capability of virtualising network infrastructure and helping that part of the business become more agile through software. OpenStack is a good example of that, as a foundation for traditional, virtualized and cloud-native workloads to help accelerate private and hybrid clouds. We have well over 500 customers deployed on Red Hat OpenStack Platform. We are now seeing that evolve to an environment that is far more containerised.

The question is how do you go to market with some of these services? Telcos don’t necessarily inherently understand enterprise use cases and selling technology in that sense. They have large groups within their business doing that – but it is not native in their DNA. So, the code that we want to crack is: how do we partner with telco companies effectively to deliver the next generation of applications," he said.