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Research on Economics of 5G Network Segmentation for Internet of Things Deployment

2018-01-09 11:05:57 Author: Source:CTI ForumComment:0  Click:


Foreword
During last year's MWC, Ericsson worked with Deutsche Telekom and SK Telecom to create and showcase the world’s first 5G joint network slicing to provide global coverage. Network slicing is seen as a key driver and supports multiple services in the 5G era.
Before the arrival of this year's MWC (February 26th), Ericsson brought 2018 “First Meal” to everyone, which is exactly what we recently launched: 5G network slice economy research for the deployment of Internet of Things. The study examines the capital expenditure, operating cost changes, and revenue changes in the three cases when new business is introduced to observe the scalable network opportunities and benefits that the 5G network segment brings to operators.
Mobile data traffic is growing rapidly. In addition, the number of IoT terminals is expected to reach 20 billion by 2023, and the demand for data will be even greater.
The Internet of Things is expected to change in all walks of life and even the entire society, and 5G will bring new possibilities for the new business model. To handle this huge amount of Internet of Things traffic, the network needs to be adjusted.
To take full advantage of the potential value that may arise, operators need to invest in new technologies to meet the efficiency and flexibility requirements of new business deployments. Network slicing is a solution that has emerged to provide the ability to implement new business models across multiple industries. It allows operators to segment networks to support specific services and deploy multiple logical slices for different business types on a common infrastructure.
Although the industry has conducted extensive discussions on network slicing, so far we have not found any economic studies that can quantify this technological advantage.
As a result, Ericsson and UK operator BT have worked together to study the economic impact of network slicing. In the past four months, Ericsson and BT have been working together to target new business deployments, comparing network slicing to two other deployment scenarios (which we call "single large networks" and "single private networks"). We evaluate the benefits of network slicing based on the incremental contribution to the operator's profits, which is called “profit contribution” in the table below.
Our research question: When deploying new services, which of the following three scenarios is more economical?
1, using a single large network overlay bearing all business types
2. Separate dedicated core network for various service types
3, Each business type has a new network slice
The result of this discrepancy study is a techno-economic model that considers the key value drivers behind new business deployments (such as time to market, operational and deployment costs), and has an impact on revenue, operating costs, and capital expenditures. The scene varies. We compared the differences in revenue between the use of (core network) network slicing to deploy new services and the use of a single large network and multiple separate networks. Although it is recognized that network slicing can be extended to end-to-end deployments across wireless and transport networks, this study is limited to assessing the impact of deploying network slicing in the core network.
  
Figure 2: Benefits of using network slicing in five years
Methods
This study examines capital expenditures, operating cost changes, and income changes after the introduction of new business in three scenarios. Assume that all three scenarios use a virtualized core network to eliminate the impact of virtualization on economics. And suppose the mobile broadband service network has 25 million users. The study looks at the introduction of 40 separate service types each year. Each service type requires different network design and verification tasks, including a stable hybrid network consisting of 60% of C-MTC and 40% of M-MTC services. It is also assumed roughly that it includes a more than three years of automated investment to implement network slicing.
Significant revenue contribution
The results of the comprehensive study are based on five-year studies. By comparing the income, operating costs, and capital expenditure structure under different scenarios, we calculated the corresponding comparable contributions. The increase between each scenario contribution represents the economic benefits of a network slice.
The study found that incremental revenue from the introduction of new services in the network slicing scenario is 35% higher than the introduction of new services in a single large network. Compared to multiple individual networks, the network slice is 15% higher. Compared to a single large network or multiple individual networks, the potential impact on revenue proves to be the greatest benefit of deploying network slices, followed by operational cost savings.
Impact on income
Web slicing affects revenue because technology can stimulate the market, accelerate the time to market for products and services, and gain opportunities from smaller niche markets. However, if the required ecological cooperation system is not in place or there is no market demand, the value of network slicing will be reduced. This means that marketing and pricing need to be effectively coordinated in order to launch attractive services and drive deployment.
Operating cost savings
Shorter service delivery cycles and simplified operations (implemented through automation) mean that operators can reduce operating costs through network slicing. When designing new business types, they also ensure the validity of design and verification. However, the operational benefits of network slicing increase are not as significant as revenue gains compared to multiple individual networks because multiple separate networks use dedicated hardware rather than shared hardware.
Avoid capital expenditures
In terms of capital expenditure, the deployment of network slices is not much different from other scenarios. Although network slicing is inherently more capital efficient than other network solutions due to infrastructure efficiency, this advantage is offset by the necessary investment to automate the elimination of additional network complexity.
Quick return
Although this is a big expense, the initial network automation investment required for network slicing may be quickly recovered.
We have evaluated the annual and cumulative discounted returns of network slicing compared to a single large network. Multiple industries have achieved digital disruption, which will drive the explosion of new business and business models. Therefore, in our research, we considered the introduction of new services to increase year by year, and in the fourth year we have reached a scenario of adding 40 new services each year. Research shows that if it is assumed that a large amount of business is launched, automation investment can be recovered within a year or two.
We also investigated the results of reducing the number of businesses from 40 to 5 per year. We have found that operators can still see discounted recycling within three years compared to a single large network. This shows that even if there is only a small amount of business, the investment risk is low due to the flexible and scalable advantages of the network.
It should be noted that if the number of business releases per year is estimated to be only five, the level of investment in network automation will be reduced accordingly.
Revenue continues to grow with the introduction of business
Investment in network automation is a prerequisite for network slicing to manage large numbers of slices. We have seen that investment can be quickly recovered. The study also shows the economic benefits of network slicing.
Because flexibility is the core feature of 5G, the extensibility in this case makes it stand out as an innovative business model. When comparing network slices with multiple individual networks, we see the benefits of deploying five or more types of business each year. Compared to a single large network, network slicing can benefit from initial service launch. As more and more businesses enter the market, profits will increase significantly.
Our basic research results reflect the scenario in which up to 40 businesses will be launched each year in five years. The results show that the more business operators deploy with network slicing, the greater the economic benefits they receive.
The most viable option
By comparing network slicing and other network deployment schemes, Ericsson and BT have found that network segmentation on 5G networks has significant economic benefits.
The realization of this economic benefit is based on two assumptions: the deployment of the appropriate level of automation to support the creation of network slicing and scale services, and the significant increase in the number of new services planned and implemented by operators each year.
The network slicing has contributed to an ecosystem that makes it possible to serve a wide range of customer groups and carry out a variety of Internet of Things services, and these customers have their own business needs. The larger the number of slices, the more economical the business model, and the greater the opportunity for operators to increase revenue and save costs.
As the complexity of technology applications and their connectivity are increased, network slicing can be tailored to these applications in a logical configuration that enables rapid delivery of new services.
Many industries will benefit from slicing networks that provide maximum flexibility to support different needs. If operators are to meet these changing needs, they will need to have full potential for network segmentation.
The advantages of network slicing
 
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