MNOs - Challenges
Technology disruption has impacted the traditional MNO space driving innovation and forcing companies to solidify substantial investments to cope with the transformation and increased competition. The issues surrounding 5G deployment, security, the introduction of eSIMs, increased market saturation, and the appearance of MVNOs are among the most important challenges faced by MNOs over the last few years.
5G deployment issues
- The United States has only limited capability when it comes to the infrastructure of the currently installed wireless base that will be used as a framework for future 5G systems.
- The characteristics of the millimeter waves and their propagation pose a challenge to the MNO industry. The technology is vulnerable to environmental factors such as humidity, rainfall, and fog, and has major range limitations. T-Mobile stated in 2019 that the millimeter wave technology will not be scalable beyond dense, urban environments.
- Pessimists see the capital expense required and lack of new use cases as major current drawbacks in 5G deployment. They believe MNO underestimate the challenge of leveraging 5G for new business models and think that investment in IT enablement can be delayed without a significant downside.
- Due to the current drawbacks in the high-frequency spectrum range (which is severely affected by obstructions such as trees or buildings), carriers will need to deploy several small cellular radios (cells) around any areas that get a 5G signal.
- Experts alerted that the use of 5G components manufactured by untrusted companies could potentially expose U.S. entities to security risks such as the introduction of malicious software and hardware, component flaws, and counterfeit components caused by sub-standard manufacturing processes and maintenance procedures. 5G services, hardware, and software provided by untrusted entities can increase the risk confidentiality compromise of the network assets.
- British intelligence issued a report flagging suspicions about the security of Huawei's 5G system. This reinforces the view that the Chinese company shouldn't play a role in providing equipment for commercial wireless systems in the United States.
- Although U.S. networks are secure, data traveling overseas through untrusted telecommunication networks is potentially at risk of manipulation, disruption, interception, and destruction.
- Since 5G will use more components than previous wireless network generations, the proliferation of 5G infrastructure can allow for more attack vectors. Given the challenge, the effectiveness of 5G's security enhancements will be decisive to the widespread implementation and configuration of this new technology.
- Internet of Things (IoT) introduces additional security concerns, as it requires more vulnerable devices to be connected to mobile networks. While the devices don't currently pose a threat individually, the synchronicity of action between them could impact mobile network availability if potential security breaches are not properly addressed.
- Mobile malware is another security concern for MNOs, with multiple capabilities ranging from SMS SPAM, generation of DDoS attacks (Distributed Denial of Service), and data-theft.
- Sprint's customer data was hacked twice in 2019. Such breaches have made MNOs realize that they need to protect more than just the data being transferred over their systems.
eSIMs (embedded SIMs)
- eSIMs disrupt the telecommunications industry by allowing clients to purchase data connectivity from whomever they choose. They allow for dynamic over-the-air service provisioning once a network is selected. The introduction of eSIM technology, paired with the possibilities that 5G brings, has enabled tech companies that are not telecommunications providers to compete with the telecoms of tomorrow.
- eSIMs are expected to offer a more open market and increased competition between telcos and MVNOs, as well as other tech companies looking to enter this market.
- IoT adoption is being driven by the implementation of eSIM technology by removing one of the biggest roadblocks to cellular IoT deployments, which is the need to hold a SIM-bearing inventory for multiple SKUs and manage it over long distances. eSIM enables readily available connectivity and in-market localization, enabling scalable IoT deployments.
- MNOs will need to revamp their business models with the introduction of eSIM technology.
- The technology advancements introduced over the last few years have pushed MNOs to face increased competition and price pressures to cope with the market saturation that derived from the introduction of new industry players. Operators have created targeted offers for specific segments (youth, military, elderly, immigrants) and have been forced to innovate to keep up with these changes.
- For example, Republic Wireless developed Bonded Calling, a service that uses cellular to improve the quality of Wi-Fi calls.
- Operators are embracing digital transformation by becoming more flexible, efficient, and customer-centric in their operations and cost structure.
MVNOs (Mobile Virtual Network Operators)
- 5G will enable a new generation of MVNOs by giving companies like Snap a readily available ability to sell network services to their subscribers. While MVNOs, startups, and tech businesses purchase the technology that enables them to offer these services such as 5G broadband in bulk from traditional MNOs, their proliferation poses a challenge to MNOs with increased levels of industry competition.
- Unlike AT&T’s $3.5 billion roll-out cost for 5G, MVNOs don't need to invest to enter the industry and start competing for customers.
- To cope with the changes, MNOs such as T-Mobile U.S., Sprint, and AT&T operate in the MVNO via sub-brands acquired through in-market takeovers.
- The space has low barriers to entry and several different ways in which an MVNO can operate: full MVNO, light MVNO, branded reseller, and MNO sub-brands.