Future micro operators business models in 5 G
This paper focuses on creating an approach and discussing the coopetitive business models of Micro Operators (mO) in the indoors/small cell 5G environment. We define the mO as an entity that combines connectivity with specific content services in spatially confined domains and is dependent on appropriate spectrum resources. We review the literature of 5G business models and develop a framework to discuss the exosystemic, competitive and scalability elements of mO business models. Our findings indicate that the mO concept which has a natural role in the small cell/indoor environment can bring significant value added that complements existing communications services. Introduction The development towards the fifth generation (5G) of mobile communications has been understood to mean a shift towards small cells and indoors coverage in a situation where many larger mobile network operators (MNOs) compete by offering mobile broadband through a variety of different parallel access networks from 3G, 4G, and 5G to even WiFi. It is expected that in the future the number of mobile broadband subscribers will increase the same way as the data rates they demand for their services is increasing (Cisco white paper 2014) Consequently, placing significant demands for spectrum availability and usage efficiency should be undertaken. This has led the industry to seek new spectrum, as well as spectrum and infrastructure sharing, network function virtualization (NFV) and a variety of other technologies in order to improve network performance and efficiency. In general, the introduction of 5G has been related to several benefits ranging from considerably increased data volume and (guaranteed) user data rates, the number of connected devices, service reliability, mobility support up to 500 km/h to accuracy of terminal location. Additionally, 5G can tackle the problems related to a considerable decrease of energy consumption, latency, operating expenditures and service deployment time. In small cell indoor environment, the MNOs competitive landscape has changed dramatically. Compared to outdoor environment, many property owners have chosen to offer free broadband for their customers in their premises or use license exempt frequencies for their own purposes. More importantly, the local services required in different public, commercial, industrial or mixed use premises or spaces may be rather specific, and it may be impossible or not feasible for an MNO to offer such services. Therefore, one of the new business concepts emerging from the various indoor small cell operations is the Micro Operator (mO) concept. A mO can be considered as an entity that offers 1) mobile connectivity combined/locked with specific, local services, is 2) spatially confined to either its premises or to defined (but narrow) area of operation, and is 3) dependent on appropriate available spectrum resources. Due to the comparatively small size and limited resources of the mOs, the most likely mOs to emerge with required scale and scope of operations have either to serve a specific and necessary purpose and/or have a large enough user base. Good examples of such include hospitals and universities in the public domain, large scale entertainment or sport venues, big shopping malls or retail chains in the commercial domain, and large scale industrial spaces. In addition, these kinds of mOs are big enough to represent a lucrative business opportunity for MNOs, even if additional investments in the customer segment are required. To date, the literature on 5G related business models is still in its infancy. However, some observations can be made based on existing literature. Zhang et. al (2015) Have discussed a cloud assisted business model. They pay attention to densification of the network by providing open access to small cells with the aim of The Business and Management Review, Volume 7 Number 5 June 2016 International conference on Restructuring of the Global Economy (ROGE) University of Oxford, UK 144 bringing value to customers through flexibility, security, efficiency, scalability, low costs, and, also profitability when there is small cell accessibility. Andrews et. al (2014) Have presented a collaborative business model. They discuss network infrastructure sharing in a heterogeneous (HetNet) environment for maximizing users' data rate and creating more revenue. Rasheed et. al (2015) Discussed incentive and reputation business model to support cooperative network architecture and revenue generation. As the benefits of the discussed business model, they see possibilities for upgrading performance, connections, capacity, coverage of the network, quality of service, efficient network resource utilization (also from environmental perspective) and new cooperative or innovative services. Rasheed et. al (2015) discussed also brokerage business model that bring different kind of buyers and sellers together through auctions to enjoy network services. Hattachi Erfanian (2015) discuss asset provider, connectivity provider and partner service provider business models. The role of these business models is to support different kinds of customers and various levels of partnership activities. The value of these models would be the possibility to share infrastructure, receive particular network capabilities, enable software oriented capabilities, provide anything as a service, achieve real time network sharing, provide best IP connectivity, support self configuration of the network and enable the provision of combined service offerings. As the above examples show, the current literature lacks a coherent perspective on mO business models although some framing elements can be recognized for them. The fundamental dilemma of the mOs is their business model as dependent on the appropriate spectrum, content, site, or availability of other resources, therefore, some kind of cooperation is required for efficient use of resources for instance amidst inevitable competition with other service providers in order to differentiate their services and have competitive advantage. In strategy literature, this kind of situation has been coined as coopetition, parallel competition and cooperation Brandenburger Nalebuff (1996) While not all mOs require licensed spectrum, in this paper we focus on such cases where licensed spectrum is a natural choice due to the amount of broadband subscribers within the mO's coverage. According to (Bengtsson Kock 2000) when the need for external resources is high and a firm's position in the industry is strong, it is more likely to cooperate with competitors, thereby adopting coopetition strategy. For the mO the situation is exactly this with a slight twist: they are dependent on the resources of the MNO while having a "local monopoly" within their spatial confines. By defining the mO MNO relationship as coopetitive, we seek to address the context and process (Bengtsson et. al 2010) aspects of the mOs' business model. With a focus on the public, commercial and industrial mOs, the two fold research question we explore in this paper include is as follows: How we can approach the coopetitive specificities of the mO business model? How the coopetitive mO business models may scale? The rest of the paper is as follows. Section II defines and discusses coopetition as the context for mOMNO relationship, Section III provides a business model framework for analysis, and Section IV presents the methodology and data analysis of the paper. In section V and conclude with discussion and conclusions. The coopetitive context of mO MNO relationship Inter firm interdependences have traditionally been viewed through the lenses of two opposite perspectives either competitive or cooperative. Competition promotes a self interest oriented behavior since any action bound to accumulate profits provides benefits for one firm at the expense of the others (Padula Dagnino 2007) While competition can be regarded as a negativeor zero sum game, cooperation implies a positive sum game where the performance of the cooperating firms is mutually dependent. Brandenburger Nalebuff (1996) emphasized the limitations of both paradigms as accounting only for one part of the reality, and suggested combining competition and cooperation via coopetition. Studies in this vein perceive coopetition as a win win relationship and focus on balancing value creation and value capture (Gnywali et. al 2008) For the purposes of this paper we define coopetition as a relationship between multiple actors simultaneously involved in cooperative and competitive relationships, regardless of whether their relationship is horizontal or vertical. This definition not only reflects the nature of mO MNO relationship, but also allows accountability for the process and context features of coopetition and overcoming the dyad bias as there typically several MNOs and a myriad of third parties such as content providers active in the mO's business domain. To characterize further the mO MNO relationship, we refer to Casadesus Masanell Llanes (2011) who present open source, proprietary and mixed source (including open core, open edge) business models to study interaction among firms. It is evident that both mO and MNO need to adopt at least an open edge approach to let the mO to "plugin" to MNO's services seamlessly. The Business and Management Review, Volume 7 Number 5 June 2016 International conference on Restructuring of the Global Economy (ROGE) University of Oxford, UK 145 The current theoretical and empirical research on innovation related coopetition strategy suggests that it is suitable for creating incremental improvements in current products and services. From the perspective of MNOs, this is a valid argument for favoring coopetitive strategies. Coopetition has also been regarded as an effective way for generating radical innovations in certain sectors (Ritala Hurmelinna Laukkanen 2009) Whether the mO concept