Sponsored By

Early Usage of 5G Off the Charts, but Profits May Not Be

Sprint confirmed that its first 5G customers are consuming three to five times more data than its 4G customers. This certainly indicates demand, but it also raises questions about how operators will profit from 5G.

Mike Dano

October 25, 2019

3 Min Read
Early Usage of 5G Off the Charts, but Profits May Not Be

MWC Los Angeles -- Sprint CTO John Saw said here that the operator's new 5G customers are consuming three to five times more data than its 4G LTE customers.

Those comments dovetail with research out of South Korea, where there are already more than 2 million 5G customers. Research firm Strategy Analytics in August reported that average customer data usage on 5G was 24 gigabytes in June, which was 2.6x higher than the 4G average of 9.1GB and 3.2x higher than the overall market average of 7.4GB.

While such figures certainly indicate demand for 5G, at least among the small portion of customers who have so far purchased phones that can access the technology, the revenue side of the equation is much more cloudy. That's because there are several complex calculations that go into determining whether 5G is actually making operators more money.

First, 5G is far more technologically efficient than 4G, which means that operators such as Sprint incur fewer costs when transmitting a single GB of data over 5G than they would over 4G. But Sprint hasn't said exactly how financially efficient 5G is, so it's difficult to ascertain whether 5G is still profitable when traffic increases by a factor of five or more.

Further, Sprint is not necessarily seeing any additional revenues from 5G. That's because Sprint isn't billing for 5G any different than it is for 4G. Instead, it's simply bundling 5G into one of its existing service plans. That's a different strategy than what operators in South Korea and the UK are doing.

But that doesn't mean Sprint is giving 5G away for free. The operator's 5G service is reserved only for its $80/month "unlimited premium" customers and can't be accessed on its $70/month or $60/month unlimited plans.

Indeed, the only US operator that has indicated it does in fact plan to charge a premium for 5G is Verizon, which recently re-instituted its $10/month 5G surcharge on its least expensive unlimited plan, and has said it will do so on its other plans at some unspecified point in the future. Verizon executives have said that 5G will have a "significant" impact on the operator's revenues starting in 2021, though that's partly due to the new line of business Verizon created with its 5G Home broadband Internet service.

Why this matters
At the heart of the 5G profitability issue is US operators' move to unlimited pricing plans, which occurred mostly during the course of 2017. That move -- which replaced per-GB plans with a flat rate pricing paradigm -- essentially prevents 5G operators from directly profiting from these early 5G customers who are consuming so much more data than their 4G counterparts.

To be clear, none of this comes as any surprise to the wireless network operator executives who are walking the MWC Los Angeles show floor here. They argue that 5G profits can and will come from a wide variety of sources in the future, be it mobile edge computing as Verizon is preparing to launch, or the kinds of bespoke 5G networks that AT&T and others are testing.

Regardless, the pathway to 5G profits remains cloudy in an unlimited data world, at least here at the outset of 5G.

Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

About the Author(s)

Mike Dano

Editorial Director, 5G & Mobile Strategies, Light Reading

Mike Dano is Light Reading's Editorial Director, 5G & Mobile Strategies. Mike can be reached at [email protected], @mikeddano or on LinkedIn.

Based in Denver, Mike has covered the wireless industry as a journalist for almost two decades, first at RCR Wireless News and then at FierceWireless and recalls once writing a story about the transition from black and white to color screens on cell phones.

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like