5G networks will change esports – and the telco playbook

a spectator celebrating from tadium seats at an esports game

Telecom service providers are feeling somewhat squeezed.

Squeezed, even with new revenue opportunities from 5G, AI and IoT? Well, yes, says a global industry study released late last year by EY analysts. Alongside those new opportunities, telcos are also facing headwinds like competition from web and OTT giants like Facebook and Google, slower revenue growth in enterprise IoT vs. consumer IoT, and rising capex to roll out 5G networks.

In EY’s words, “Overall, profitable growth remains challenging. Growing revenues are not translating into earnings before interest and tax (EBIT) growth due to increasing operating costs, primarily due to higher investments in network expansions.”

Once those networks are fully expanded to provide 5G connectivity worldwide, however, they’ll open up a brand new route to healthier profit margins for telcos in every market: network slicing.  

5G network slicing

Today, using traditional network infrastructure that still relies heavily on dedicated hardware, operators can offer broad network capabilities designed for a wide swath of functions like voice, mobile broadband, SMS, etc.

“With 5G, this will change,” according to a new report by British research firm STL Partners. Since 5G will allow network functions to run on virtualized, software-based infrastructure, “the operator will be able to spin up and spin down network functions at will without the need to install expensive bits of dedicated equipment.”

While still using a common physical infrastructure, 5G and virtualization enable the creation of network slices, where each slice “has the functionality of a complete network, including specific layer capabilities, operational parameters and network characteristics,” STL explains in its research paper. “This means each network slice can be designated to serve either a particular use case, purpose or even an individual customer.”

How can this 5G network slicing boost a CSP’s bottom line? 

Playing the game profitably 

Although STL’s Philip Laidler estimates network slicing is about three to five years away, he says telcos should be making their own game plan for slicing right now.

To do that, CSPs must think about using 5G network slicing to innovate and generate new income streams in a quicker, more agile way than they can with traditional infrastructure, says Laidler, consulting director at STL. One sector that could provide CSPs with this opportunity is esports.

A new arena for telcos

If you’re not familiar with esports, picture the scene at the largest competitive gaming tournament in history: Over the course of two weekends in 2017, almost 175,000 fans filled Spodek arena in Katowice, Poland. They watched 12 teams compete in an event that may make its Olympic debut as a demonstration sport at the 2024 summer games in Paris.

The opening ceremonies of the 2017 Intel Extreme Masters (IEM) tournament in Katowice, Poland was action-packed and pyro-heavy.

Already a global industry, competitive gaming is growing at a phenomenal rate. The worldwide viewing audience for esports (via live event venues, TV and online streaming) could surpass viewership figures for the National Hockey League and Major League Baseball by 2022. Esports revenue – including media rights and sponsorship – hit $1.1 billion in 2019, up an astonishing 26.7 percent in just one year.

While fans attending esports competitions watch the action on a big screen, 5G network slicing could enrich their experience by “allowing them to not just be spectators but participants,” suggests STL’s Laidler.

Thanks to network slicing, audience members inside an esports competition venue may one day enjoy 3D augmented experiences, instant replays on their own mobile devices, 360-degree views of the gameplay, time-lapse capabilities, and the ability to actually join in by playing the game from their seats.

As described in STL’s report, “the 5G small cell installed at the event venue will enable the service provider to offer a dedicated network slice for the duration of the esports event.” Artificial intelligence and automation could make spinning up a new slice for an event “a simple job of visiting a software portal, inputting usage parameters and pressing a button to go live.”

Fast, flexible, profitable

Group of gamers sitting at a table and playing online games during an esports tournament

That “simple job” of creating a network slice for an esports event is just one illustration of how telcos can adopt a flexible fail-fast approach to become more market-driven, less technology-driven, and more profitable.

“It’s an example of new business models [telcos] couldn’t address with today’s technology, and at the same time, they’re under pressure to find new revenue and business models,” Laidler says. “In the old world, it would have cost you a lot of money to get to that point and be stuck with perpetual license fees and the upfront and internal development costs would be even bigger.”

With a virtualized 5G network, however, Laidler says a telco can create a slice to meet the needs of a particular customer or event without having “to put much in place [up front] – and even the software is on a per use basis.”

Keeping costs low

Telcos providing 5G network slices for esports events will face three main hurdles to making it profitable: 

  1. The cost of designing and developing a slice
  2. The cost of spinning a slice up and down
  3. The fee a telco can charge per user (i.e., audience member) at each event 

STL offers telcos these tips to keep their slicing costs low:

  • Design a slice with similar esports events in mind so it can be replicated easily for future events without incurring repeat costs for design, assembly and testing.
  • Use AI and automation to make slice provisioning and configuration faster and less error-prone than doing so manually.
  • Deploy AI to alert of potential SLA defaults (i.e., for latency requirements) and trigger automatic provisioning of extra resources to avoid defaulting.
  • Adopt nimble processes like DevOps to shorten the usual 12- to 18-month period it takes to develop and launch a network slice.
  • Since telcos will only charge for network slices when they are live, they should negotiate similar pay-as-you-use, flexible licensing conditions with their own suppliers. 
  • Calculate how much you must charge each esports audience member in order to make a profit against development, spin up and spin down costs; For example, STL estimates that slice development costs of $50,000 require a fee as low as 50 cents per user to be profitable, while development costs of $300,000 require a user fee of 90 cents for profitability.

Laidler confesses he hasn’t attended any esports events himself, explaining his two adult daughters aren’t really within the core age demographic for esports fandom either. Yet his fellow STL analysts have reported back from esports tournaments, and he now has his eye on the esports arena, at least as it relates to 5G technology. What he sees there are richer experiences for esports spectators and competitors around the world, and a nimbler, more innovative way for telcos to meet customers’ needs while improving their own profit margins at the same time.

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