The economics of 5G-based network slicing in smart network industries

The transition towards 5G-based smart network industries is concomitant with a fundamental change of the traditional physical infrastructures driven by digitalization which pervades all decision-relevant components of the infrastructure value chains. The goal of this paper is to develop a network economic foundation for 5G-based network slicing based on a generalization of the concept of virtual networks combining a required sequence of virtual networks in order to fulfill the necessities of smart network industries. The key concept to analyze the economic incentives of the different actors involved is the well-established concept of opportunity costs of usage of scarce network resources. The allocation problem of traffic service providers fundamentally differs from the allocation problem of virtual network providers. Whereas interoperability and interconnection between different virtual networks are not standardized significant standardization efforts via network slicing can be observed in particular from the perspective of end-to-end QoS guarantees. 5G-based big data use cases with cross-border challenges for network slicing, and the subsequent interoperability of virtual networks, enable tremendous potential for innovation in smart physical infrastructures. The 5G-based European Future Railway Mobile Communication System and cross-border oriented, 5G-based connected, cooperative, and automated mobility applications are investigated with a large and open set of heterogeneous use cases requiring cross-border standardization of QoS-differentiated network slices.