The enterprise market represents significant revenue growth opportunity for Verizon as the company expects the combination of multi-access edge compute (MEC), private cellular networks (PCNs), IoT and B2B technologies will grow to an addressable market exceeding $30 billion by 2025. Verizon also anticipates the aforementioned technologies will generate over $2 billion in revenue growth for the company from 2022 to 2025.
The Verizon 5G Innovation Session held in Boston showcased the opportunity advanced 5G use cases provide in attracting businesses seeking to improve operational efficiency, streamline headcount, optimize on-premises safety and security, and enhance customer experience. Verizon Business, as well as other telecom operators, will face challenges that will hamper 5G monetization, however, such as business models that require revenue to be split with other members of the value chain including hyperscalers, ISVs and network solution providers. Telecom operators will also face headwinds in the MEC and PCN markets from certain clients circumventing operators to work directly with hyperscalers and OEMs, limited recurring revenue opportunities, and customers’ limited awareness and budget allocation toward enterprise 5G solutions, especially among SMBs.
A prominent theme of the event was the value of partnerships, such as with Nokia, in bringing use cases to life while also coinnovating with customers to expand possible use cases into a variety of customer business units. Verizon is holding similar events with partner Ericsson (Nasdaq: ERIC), and Verizon also has a relationship with Celona for its private 5G solution. The event showcased several use cases that can be enabled by Nokia hardware and software combined with Verizon’s 5G connectivity and delivered by Verizon’s systems integration practice. Verizon’s mature partner ecosystem can foster additional symbiotic relationships with other network solution providers and ISVs in the 5G era, which is unique in cellular technology history. As Nokia Head of Cross Portfolio Solutions and Partners Jason Elliott noted, “5G is purpose-built for enterprise, whereas 3G and 4G were not.”
Impact and opportunities
A focus on improving business outcomes will position Verizon Business to attract 5G clients
Use cases demonstrated by Verizon Business at the event highlighted how 5G solutions can help businesses address operational challenges while providing opportunity to significantly reduce expenses, especially regarding headcount. Robotics and manufacturing solutions are a prime example of this strategy as Verizon demonstrated multiple use cases in which robotics solved businesses challenges, including placing an engine inside a vehicle at an automobile manufacturing plant as well as pairing robotics with video analytics to inspect and monitor parked vehicles, including for potential suspicious activity.
Frictionless shopping was a prominent use case as Verizon showcased an autonomous store leveraging 5G MEC and AI-powered computer vision applications to enable customers to purchase items without the need for an on-site human cashier. TBR believes this use case will be particularly appealing to national retailers such as convenience stores seeking to open smaller locations that require minimal headcount. Large venues such as stadiums and arenas are another targeted segment for Verizon as 5G solutions are helping to optimize processes such as crowd control and admission while improving the fan experience through benefits such as providing projected wait times for areas like concession stands as well as immersive smartphone applications offering capabilities such as showing multiple camera angles of an event.
TBR believes a focus on equipping sales personnel to help clients identify how 5G solutions can improve business outcomes will be paramount for Verizon Businesses in attracting contract wins. Providing systems integration (SI) services is also beneficial for Verizon Business as recurring revenue from MEC and PCN deployments will be limited by clients using their own or unlicensed spectrum, such as Citizens Broadband Radio Service spectrum. Notably, Verizon did not directly mention collaborations with traditional SI partners at the event, potentially indicating that Verizon aims to work with clients more directly in this area to maximize revenue opportunities. An increased focused on SI services will also strengthen Verizon Business’ existing bonds with its large client base, enabling Verizon to more successfully upsell customers to advanced 5G solutions in areas such as MEC and PCN while helping the operator differentiate and counter hyperscalers and network equipment providers seeking to attract customers in these areas, independent of telecom operators. Verizon Business would face challenges in growing its SI personnel, however, as Verizon will need to compete against leading SI firms to attract talent.
Verizon and Nokia benefit from each other’s strengths
Nokia and Verizon work together across several domains, and Nokia places a high value on its partnership with Verizon, which owns relationships with enterprises to which Nokia can sell its MEC and PCN solutions, particularly the Nokia Digital Automation Cloud (NDAC). Verizon is also bringing to bear its SI capabilities in MEC and PCN engagements with enterprises, enabling Nokia to minimize investment in selling and service delivery while remaining true to its core competency of selling communications networking hardware and software.
Nokia’s NDAC solution is a part of a robust set of private cellular network deployment options Verizon has for its international private 5G platform for enterprises across the globe. The quickly deployable solution includes Nokia radios, switches, mobile core, and either a Hewlett Packard Enterprise (HPE) (NYSE: HPE) or Dell Technologies (NYSE: DELL) server. The switch, mobile core and server stack is highly compact and can support up to 100 Nokia radios. Nokia demonstrated a hologram use case at the Innovation Session leveraging only a Nokia small cell, switch and evolved packet core (EPC) in combination with an HPE server. Nokia and Verizon have a significant reference deployment of NDAC with Associated British Ports’ (APB) Port of Southampton, for which the companies have rolled out a 5G PCN and greatly consolidated the port’s wireless infrastructure. A Nokia representative told TBR the ABP deployment consisted of seven macro radios running over the aforementioned NDAC stack, condensed from 250 Wi-Fi access points.
Nokia’s long-term revenue growth depends in large part on diversifying its customer base to include more enterprises. 5G and enterprise go-to-market partnerships with operators such as Verizon are essential to Nokia achieving its goal.
The Verizon 5G Innovation Session showcased compelling use cases highlighting the potential of technologies including MEC, PCN, IoT, robotics and video analytics to improve business outcomes for enterprises. TBR believes large customers such as manufacturing companies, arenas and stadiums, and national retailers will account for the bulk of Verizon’s MEC and PCN initial target customers as they have a more tangible business case and path to ROI for deploying these technologies and also have higher budgets to support costly accompanying solutions such as robotics.
TBR expects Verizon Business will continue to focus on serving its smaller clients with mainly traditional network solutions, such as through its 5G Business Internet fixed wireless service and unified communications solutions including BlueJeans while targeting specific industries through existing portfolio offerings leveraging 5G such as transportation and fleet management companies via Verizon Connect and first responders through Verizon Frontline. The expanding availability of Verizon’s 5G Business Internet service also enables the company to serve new broadband customers outside of its FiOS footprint and target clients seeking cost savings over rival broadband companies, including cable and fiber providers.
Verizon Business will face formidable competition in the MEC and PCN markets as AT&T (NYSE: T) and T-Mobile (Nasdaq: TMUS) are likewise evolving their portfolios and partner ecosystems to capture market share, though Verizon will benefit from being the first U.S. operator to form partnerships with all three leading hyperscalers (Amazon Web Services [Nasdaq: AMZN], Google Cloud [Nasdaq: GOOGL] and Microsoft Azure [Nasdaq: MSFT]) to enhance its position in these segments. Verizon Business will also be challenged by hyperscalers and network equipment vendors positioning to serve clients independently of telecom operators. Fostering relationships with partners such as Nokia and existing clients will be paramount for Verizon Business in countering these pressures, while equipping its sales and SI teams to ensure clients realize the full ROI potential of 5G MEC and PCN will be vital for Verizon Business to compete as a leading player in these segments long-term.
A select group of industry analysts, media representatives and customers gathered at the Verizon Innovation Center in Boston to learn about Verizon Business’ 5G customer strategies and developing use cases leveraging emerging technologies including MEC and 5G PCN. The event was co-hosted by Nokia (NYSE: NOK), which is providing underlying infrastructure to support many of Verizon’s (NYSE: VZ) 5G enterprise solutions, and included use case demonstrations, speaker segments and panel discussions featuring leadership from several Verizon Business customers. Verizon is hosting a half-dozen similar events across the country. Key representatives who participated in the event included:
• Aparna Khurjekar, SVP and chief revenue officer, Business Markets and SaaS, Verizon Business
• Jennifer Artley, SVP, 5G Acceleration, Verizon Business
• Andy Brady, VP, Enterprise Sales, Verizon Business
• Mark Tina, VP, Business Sales, Verizon Business
• Danny Johnson, director of Product Marketing, Verizon Business
• David De Lancellotti, VP, Global Sales, Nokia
• Jason Elliott, head of Cross Portfolio Solutions and Partners, Nokia
• Michael Israel, chief information officer, the Kraft Group
• Samia Mahjub, VP of Business Strategy for TD Garden and Boston Bruins