Drawn & Quartered – What Recent Earnings Say About the Mobile Ecosystem

By Mika Skarp

If you’re a mobile infrastructure provider, no doubt it’s been a bad few quarters. October saw Ericsson’s 3Q/17 results drop 6% year on year. Closer to home Nokia’s earning for the quarter looked even worse – a drop of 7% (4% on currency adjustments) spurring European SVP Markus Borchert to lob a shot cross the continent’s bow this week, decrying Europe’s lagging investments in the mobile grid. Meanwhile, the Asian elephant in the room, Huawei, has for the last year enjoyed a commanding lead over a market that has in general seen a waterfall decline in revenues. So where is the mobile infrastructure ecosystem going amid the inflated hype around 5G? The answer is nowhere.

If we look at the big picture, it’s clear that infrastructure spend - tied closely to mobile operator revenues - has shown nothing but flat revenues that have forced them to trim spending to maintain profitability.  Certainly, this is no new news and a trend that been sustaining itself for years now. The only promise for growth has come from operators like AT&T who are moving into the content business albeit amid heat of regulators close on their heels.

All this comes as vendors and mobile operators alike sound and echo the hype about the “next big thing”, namely 5G. And while industry news is full of stories about 5G replete with all the requisite demos and visions about new business verticals and all that 5G will enable, capital has been slow to the mark. This would seem a strange thing as 5G promises to touch every aspect of society in the coming era of the "Internet of Everything". And yet, the purveyors of the “revolution” have been watching their stock tumble while operators grasp at ever shrinking margins. Could it be that the market isn’t buying the 5G hype? Perhaps they don’t believe that 5G will actually change anything in the mobile ecosystem. Perhaps they are right. But more importantly, perhaps they are wrong.

Certainly if they don’t believe it then nothing will change. Mobile development will continue to slow and the end result will be a fait accompli. A self-fulfilling prophecy. And in the process, an entire generation of promising technologies will never find their markets. Is this not the essence of the new technology conundrum? Does it not all begin with investor and market faith? Perhaps, but maybe it’s as much about who is doing the selling and how it all gets sold.

The fact is that 5G really does have the potential to be all that and a bag of chips and it’s about time the market steps up and sees the forest. If nothing else they should see the enormous promise of what will certainly be its defining feature, Network Slicing. A truly universal, game-changing innovation and business model, Network Slicing has the potential to make a real difference. It will not only make a difference for mobile networks but will come to drive the mobile ecosystem, the end-to-end customer experience and indeed the entire business ecosystem into the future. No doubt this is a critical development, but because the change is so deep in the ecosystem it means that we need to start experimenting with it now.

But if it’s all that – and we’re not the only ones saying so - why has Network Slicing not been taken into production already? One big hurdle is regulation. As a vastly promising technology, Network Slicing is so far reaching that it quickly finds itself running up against government regulations at the very highest level. Unfortunately, at least in the US and Europe, the rules aren’t very clear. While, and as we’ve we’ve relayed in these pages, Network Slicing is not in conflict with the very strictest rules on Net Neutrality, regional and country specific deployments have not been tested. But regardless, as long as the user is in command of the requesting and use of slices Network Slicing meets the test of any Net Neutrality laws on the books. In our minds this should be enough of a green-light to inspire operators to start experimenting and showing the market what the next generation mobile ecosystem can look like.

For their part, regulators should have industry growth high on their agendas. Aside from not appearing to stand in the way, they should be looking at the latest technologies like Network Slicing not as a threat to a free and open internet but rather a much needed disruption to the status quo which will keep this most essential business, social and technological ball in the air.