5G Market Disruption Demands Pricing Innovation from the Get-Go
Digital disruptors like Amazon, Uber and Airbnb baked pricing innovation into the core of their business model—and did it from the start. They understood how to price different offers for different markets, and how to combine pricing with their unique platforms to provide better value. For instance, Amazon Web Services uses on-demand pricing and lets customers pay as they go. AWS also offers the capability to buy Reserved Instances, which is in effect “prepaid” for enterprises.
Sound familiar to anyone? They’re the prepaid and postpaid pricing models that telecom companies have used for decades—and they’re the models we need to redefine for 5G.
Pricing—The Missing Piece of the 5G Puzzle
Most of the 5G networks commercially launched to date have limited or no pricing innovation at all, with operators giving customers 5G at no extra cost or offering unlimited packages. Since these are deployments of 5G Non-Standalone (NSA)—that is, 5G radio with a 4G Evolved Packet Core (EPC)—the use cases have mainly targeted enhanced mobile broadband, or in some cases, fixed wireless access. These may not drive many opportunities for pricing innovations—you offer enhanced connectivity for a set fee every month, regardless of how much customers use.
Many operators around the world are beginning the next network evolution for 5G, and are starting to initiate 5G Core (5GC) network trials. So, what needs to happen in tandem with rolling out the 5G Core capabilities to deliver new pricing and business model innovations?
5G Core Building Blocks
First things first. Before we get to 5G commercial innovations, we need to understand how charging in the 5G Core is different.
One of the key differences between the NSA and 5G Core networks is the ability to divide the 5G infrastructure into end-to-end “network slices.” Operators can set up different slices for different use cases (enhanced mobile broadband, massive IoT, reliable low latency, etc.), different tenants and deliver slice connectivity at different rates and quality-of-service levels.
True 5GC networks will also be dynamically instantiated, able to scale on demand, and are expected at capacity to support between ten and a hundred times more devices. Consequently, 5G charging volumes are expected to fluctuate more dramatically and grow tremendously. Millions of transactions per second are becoming typical, and expect to see trillions of transactions per day in the near future.
How we have charged for 5G services so far may have been fairly “business as usual.” However, 5G Core networks and charging systems will not. Because the 5G Core is architected differently to the 4G Core, we can’t just replicate how things are set up now. The 5GC setup will move to a Service-Based Interface setup with completely new network functions—the building blocks of the 5G Core (see below).
Mediation as the Foundation
Two of the most critical building blocks of the 5G Core are the new 5G Charging Function (CHF) and Convergent Charging System Function (CCS). The 5G CHF, part of the CCS, enables deployments of charging functions in virtualized environment and use of new software techniques. We can use the 5G CHF for quota management, re-authorization, usage reports and CDR generation.
The CCS is made up of four logical modules, including the 5G CHF, as well as the Account Balance Management Function (ABMF), the Charging Gateway Function (CGF) and the Rating Function (RF). The CCS allows online and offline charging services to be offered to authorized network functions. High volumes of EDRs created generated from self-driving cars can be processed in near-real time (online charging), while charging data for IoT devices can be processed in bulk at a later time (offline charging).
5G Core Commercial Innovations
As we enter 5G Core trials, we must incorporate monetization and business model innovation from the start. With 5G set to be the biggest digital disruptor yet, we need to figure out how best to charge for it now, so we’re not scrambling with band aid models later. By including functions like CHF and CCS into the core trials from the outset, we’ll understand the capabilities, expected and unexpected, of 5GC and can begin to identify new innovations early.
A well-designed 5G charging and monetization architecture is fundamental to delivering pricing and business model innovations. It allows us to:
- Monetize Network Slicing to take advantage of new commercial models with differentiated slices, and support use cases from massive IoT to enterprise tenancy for critical industrial services
- Enable Different Commercial Use Cases by supporting microservices so it can be deployed as a central function sitting across all 5G network slices, or within a slice instance (for example, for dynamically instantiated tenants)
- Quickly Enter New Markets using CHF to route specific charging transactions to adjunct cloud-first OCS platforms that can be stood up in days to enable fast mover advantages in new markets
- Shield Online Charging Systems from 5G Volume Variability by dynamically offloading selected charging transactions and process them locally; thereby only sending transactions that require rating/balance updates to the online charging system
And for those operators that have commercial or regulatory obligations to launch 5G Core services within an aggressive timeframe, the 5G CHF enables the fast integration of the 5GC with existing charging and billing systems.
Whichever of these scenarios applies, as you’re starting 5G Core trials, don’t leave charging and monetization behind for when the market disruptors join the market. Get price innovation into the equation from the get-go, because it makes a fundamental difference to digital business models and your ultimate success with 5G.
This post originally appeared on The 5G Exchange.