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5G Business Case Revisited5G Business Case Revisited

How will network operators recoup their 5G investments?

November 12, 2019

4 Min Read
5G Business Case Revisited

Carriers around the world are slowly, but surely, rolling out 5G networks. To date, dozens have announced the availability, however limited, of this new generation of connectivity. However, between the promises of brand new services and blazing speeds, there lies a whisper. I am referring to the question of: Just how carriers will recoup their 5G investments?

The battle will not be won easily
The 5G business case has been discussed multiple times, yet as time passes more questions arise. New business models have not yet seen the light of day, and many of those new, futuristic capabilities (AI, sensor feedback and more) will take quite some time to roll out. In the end 5G has primarily begun with faster speeds as is evident from the barrage of "just how fast" images appear across the digital ecosphere. (If I see one more image of a smartphone speed test...)

Remarkably, just as the latest picture is uploaded, The Verge Sr. Editor discovered that 5G speeds and feeds were inconsistent at best. In some cases underperforming 4G speeds in the same areas. OK, you're right, 5G is "work in progress." The good news is that in those more 5G advanced countries, there are initial indications that 5G users use more data than 4G users. Just how much more? According to the S. Korea telecommunication industry, 2.6 times more. And yet will higher speeds and bigger data packages really get consumers to pay more?

Not according to various surveys out there. In a survey late last year by Telecoms.com, industry experts reported that in their opinion consumers would pay only 5% more for 5G than they currently do. As if on cue, just last month 3 UK announced "5G at no extra cost" and BT was quick to concede that 5G premiums would not be sustainable. Only Verizon has been caught with its hand in the proverbial cookie jar when it "snuck in an extra $10 for unlimited 5G plans."

Indeed, two of the three largest telcos in S. Korea have reported a slump in profits as slight 5G revenue increases were offset by increased expenses. No surprise, of course for those in the know.

What about all those other 5G services?

So what happened to all of those other 5G services which were to generate new revenue streams? Let's have a look, shall we?

Autonomous vehicles
The industry's darling, while captivating, requires massive R&D before going mainstream. It will take a good many years before anyone sees money out of these applications. Even then who will profit from the excess bandwidth is still a question.

Looks to be more of a narrowband solution which can be served as well by current LTE infrastructure and WiFi. So the vast majority of consumers will roll these extra bandwidth requirements into their current "unlimited plans."

Industrial IoT (Industry 4.0)
Much work remains to be done before Industry 4.0 can be incorporated into manufacturing equipment. Even after sensors, monitoring systems and BI have been implemented, many agree that this use case will best be served by local area/private 5G network

Smart cities and smart transportation
Smart cities don't necessarily need real-time communication. The variety of sensors, monitors and systems connected have multiple benefactors. The question remains: who will pay a premium for these 5G services and more importantly who will profit from them.

There is one business case left which has not been displaced (yet) – real-time video
Real-time (a.k.a. ultra-reliable low latency) video can be used in a variety of applications. Currently these applications are served by expensive dedicated connections or local implementations only, which mean that there are pain points currently not being addressed. Most importantly this pain point is primarily a carrier play.

That said, in order to provide the assured real-time capabilities required will not be simple. Changes need to be made in the transport infrastructure, in order to guarantee the services and provide strict assurance required.

In my latest white paper, I look not only at the revenue potential these types of services offer, I also discuss those steps service providers must take today in order to ensure that their networks are up to the tasks. Download the white paper here.

— Hayim Porat joined ECI to lead its innovation center and spearhead the efforts in the areas of NFV and SDN. Previous to joining ECI, Hayim held the position of chief of cloud IaaS and SDN architect at Toga Networks, principal architect at Tejas Networks, founder and CTO of Ethos Networks and more.

This content is sponsored by ECI.

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