Where is the Industry with End-to-End 5G Slicing?

With 3G and 4G, connectivity has been a uniform offering independently of the device or target customer. 5G slicing, by contrast, holds the potential to offer varied levels of connectivity characteristics (e.g., Service Level Agreements (SLAs), bandwidth, latency) for different devices, use cases, and applications. The expectation is that enterprises will pay a premium for 5G slices that guarantee SLAs for diverse services as opposed to uniform offerings. Furthermore, enterprises have differentiated requirements for isolation and security. This is especially important given that for connected ‘things’ (e.g., dumb IoT terminals) cost and time to market are typically prioritized over security. 5G end-to-end (E2E) slicing enables the creation of logical networks and, by extension, adds an extra layer of improved security. The Internet of Things (IoT) relies on 5G infrastructure. That, from a 5G security perspective, stands to create a market valued at US$12 billion by 2026, as indicated by ABI Research’s report 5G Network Security Market Data.

Moreover, Average Revenue per USER (ARPU) on IoT or connected 'things' offers economic benefits relative to consumers. So, in some cases there will be a 5G slice only for economic purposes, as opposed to bandwidth or latency requirements. Further, Communication Service Providers (CSPs) seek to innovate on their existing consumer-centric business models based on consumer traffic. 5G’s network capacity and connection speed are major drivers in the evolution of telecom networks and consumer services. But so far cellular innovation has not led to a price increase on consumer tariffs. That, coupled with a saturation on subscriber penetration rate, warrants for service and business model innovation. This is where 5G slicing holds promise. ABI Research anticipates the 5G slicing market to expand in the next few years mainly for the enterprise market. There are, however, some technical and commercial strands to ponder before 5G slicing affect telecom’s fortunes predictably and positively.

There are two infrastructure modalities for 5G slicing. One, share the whole infrastructure spanning Radio Access Network (RAN), core, physical devices, and physical servers. This constitutes a unified resource pool, the basis of which can be used to instantiate multiple logical connectivity transmissions. A second approach is to provide hardware-based logical slices by slicing the physical equipment. This is a time-consuming, resource-intensive endeavor, but it may be best option for mission critical services. It requires slicing the physical transmission network and oftentimes requires a dedicated user plane. This approach, as discussed in ABI Research’s report Private or Public Networks for Private Use?, is applied in private networks for on-premises deployments. ZTE is one vendor, among many others, that offers a flexible end-to-end offering based on either or both approaches. The approach that will prevail is a function of specific country regulation, rules, and policies on information and data privacy, as well as technology integration for cross-domain solution interoperability.

Horizontal integration for cross-domain interoperability is critical going forward. Equally important is vertical integration for 5G slicing lifecycle management of multi-vendor deployments. There is momentum building for penetration of 5G core network and maturity of 5G slice management functions. In terms of device ecosystem, there is ongoing work for end devices to support multi-slice concurrency and User Equipment Route Selection Policy (URSP), which may in turn affect wider uptake of 5G slicing. To that end, enterprises will seek to create and reserve slices statically and on-demand. They also want the ability to efficiently integrate with cloud providers through open and programmable Application Program Interfaces (APIs) to enable hybrid cloud/cellular slice adoption. Amdocs, Ericsson, Huawei, Netcracker, Nokia, and ZTE offer solutions that enable CSPs to create fully automated and programmatic slicing capability over access, transport, and core network domains.

5G slicing adoption falls into two main categories. One, there is no connectivity available. Two, there is connectivity but there is no sufficient capacity, coverage, performance, security, or a combination thereof. For the former, both private and public organizations are deploying private network slices on a permanent and ad hoc basis. The second scenario is mostly catered by private networks today, a market that stands to grow from US$3.6 billion to US$109 billion by 2023, at a CAGR of 45.8%. A sizable part of this market can be converted to 5G slicing. But first, the industry should address challenges associated with technology and commercial models. On the latter, consumers’ and enterprises’ appetite to pay premium connectivity prices for deterministic and tailored connectivity services remains to be determined. Furthermore, there is ongoing industry discussions on whether value that comes from 5G slicing can exceed the cost required to put together the underlying slicing ecosystem.

5G Slicing can potentially capture/replace a large part of current private networks/MPLS and dedicated connectivity services. Further, it enriches hyperscaler cloud services with guaranteed connectivity offers while reusing a large part of existing cellular assets. Initial driving force behind 5G slicing uptake is Fixed Wireless Access (FWA) for enterprise domain. For example, ABI Research observes that there are more than fifty-five 5G slicing Proof of Concepts (PoCs) and commercial tests from Ericsson, Huawei, Nokia, and ZTE. These engagements give the industry the insight to match up an emerging technology such as 5G slicing to new strategic opportunities and high-value use cases depending on the market. In the Middle East, CSPs deploy a separate core network (hardware-based slices) for mission critical services. In Europe, the tendency is for CSPs to deploy slices for mission critical services on top of existing consumer networks. There is, in other words, a mixed market. But the common denominator is how to unlock growth in the enterprise domain at scale and based on E2E standardization.

5G Slicing standardization is work in progress. 3GPP defines standardization for RAN and core network. IETF standardizes the transport domain. Therefore, some manual configuration may be required for 5G slices to be replicated in batches. In addition, 3GPP R16 and R17 standardizes management interface/processes and initial use cases, but further work remains to be done for URLLC, eMTC, and E2E assurance and Quality of Service monitoring. For example, standardization for radio has yet to defined as 5G slicing design for radio follows vendors’ own proprietary elements. Eventually standardization for 5G SA in conjunction with radio makes it viable to launch 5G slicing at scale. First it is key for the industry to push for consistency and uniform practices across multiple domains and suppliers, as discussed in ABI Research’s 5G Network Slicing. Ultimately, the core of the 5G slicing ‘dream’ is a business goal, not just a technology goal. It involves taking a quantum leap forward in how business is conducted within the industry and by the industry’s customers.

In contrast to 3G and 4G, with 5G the industry should focus on value not from technology per se, but rather from the strategic leap forward it can enable. Ultimately, CSPs must look beyond their traditional revenue scope. They should seek value creation in the enterprise market, primarily driven by 5G slicing. In some markets, 2G and 3G networks are already making way for 5G. Taiwan, for example, already has only 4G/5G installed base. With 5G slicing the industry should focus on convenience rather than performance, user experience rather than feature sets, and flexibility rather than rigidity. But the competitive landscape is changing, as reflected in ABI Research’s report How the Shift Towards Open Architectures Impacts the Telecoms Ecosystem. A growing number of new entrants offer private 5G offerings. These can potentially capture a large share of the market. Consequently, a cautious approach is required so that the industry finds in 5G slicing a reasonable basis for taking actions that predictably and positively affect vendors’ and CSPs’ revenues.