Asia-Pacific Will Drive the Private Networks Market Until 2025, When Europe and North America Catch Up

While both the telco industry and enterprises from different verticals spur the hype around private network deployments, new research from tech market advisory firm ABI Research shows that this appetite is primarily driven by Australia, China, Japan, New Zealand, South Korea, and Singapore. Together they create an almost US$7 billion market opportunity (accounting for more than 65% of global private network revenues) by 2025. By 2030, developed markets in North America and Europe will have followed and account for more than US$16 billion (representing 25% of global private network revenues).

“These findings show the great regional variability that we see for private network deployments,” says Leo Gergs, Research Analyst for 5G Markets at ABI Research. Two primary factors are creating the drive for private networks. One, a rising number of national spectrum liberalization initiatives are allowing enterprises access to licensed mobile network spectrum without having to involve a communication service provider for their spectrum assets. Initiatives like CBRS in the United States, spectrum sharing in the UK, and the site-aside of licensed spectrum in a growing number of European countries give enterprises the opportunity to deploy a deterministic network that minimizes the risk of unauthorized access. “As these arrangements guarantee enterprises the opportunity to customize the network performance to fit their needs exactly, it is no surprise to see that the auction of CBRS Priority Access Licensees (PAL) has raised more than US$4.5 billion in bids.”

The second factor is that the demand for enterprise digitization is increasing sharply, driving new attention to the market. “There is a range of new players attacking the traditional telco industry when it comes to private networks,” says Gergs. Hyperscalers like Amazon Web Services (AWS), Microsoft, and Google are rapidly advancing their telco ambitions in the private network domain. At the same time, vertical-specific players are working to integrate private cellular networks into their existing enterprise offerings. In addition to System Integrators, industrial automation vendors like Bosch Rexroth, Siemens, and Phoenix Contact, are deeply rooted in the industrial manufacturing domain and growing their product portfolios to include private cellular networks. “One should not underestimate their capabilities,” Gergs emphasizes. “Recent announcements of Siemens setting up a private 5G network to cover 1.4 million m2 at Germany’s largest exhibition ground in Hannover gives a hint to just of how capable these industrial automation vendors are to serve their specific verticals.”

These developments show that the traditional telco industry is under immense pressure to gain a foothold in private networks for the enterprise domain.  “While new players have the power to disrupt the private network's market with new innovative service-based business models that resonate well with enterprise requirements, traditional CSPs keep trying to force enterprises into the last decade’s CAPEX-intensive business models,” says Gergs.

The telco industry needs to radically rethink its approach to successfully target the immense enterprise private network opportunity. “They need to embrace spectrum liberalization initiatives and consider flexible business models that can be adjusted to address heterogeneous enterprise requirements. As a first step, and as much as possible, telcos should move away from a focus on short-term profitability and embrace a long-term monetizing strategy that does minimize the amount of necessary upfront investment,” Gergs concludes.

These findings are from ABI Research’s Deployment Strategies for Private Cellular Networks application analysis report. This report is part of the company’s 5G Markets research service, which includes research, data, and analyst insights. Based on extensive primary interviews, Application Analysis reports present in-depth analysis on key market trends and factors for a specific technology.