South Korea's SK Telecom and Japan's NTT DoCoMo want to show it off at the Olympic Games their countries will host in 2018 and 2020. MTS and MegaFon are planning similar demonstrations when the soccer World Cup comes to Russia in 2018. And AT&T and Verizon are even talking about field trials in the US market later this year. But despite all the muscular posturing on 5G, technology developments appear to be sprinting ahead of a clear business case for the emerging standard. (See AT&T Lights Fire Under 5G, Plans 2016 Trials, Russia's MTS to Trial 5G in 2018, Verizon CEO: US Commercial 5G Starts in 2017 and DoCoMo & EE Share 5G Visions.)
Technologically speaking, 5G certainly looks set to be more transformative than any of its predecessors. A new air interface will be able to support much faster and lower-latency connections than today's 3G and 4G networks. In theory, this means a single system will be able to handle everything from the bandwidth-gobbling virtual-reality services used by tomorrow's consumers to critical but low-speed machine-to-machine links. "This is what we do not have today," says Yves Bellego, the director of technical strategy for France's Orange (NYSE: FTE). "4G is basically optimized for smartphones." (See Is This the 5G You're Looking For? and Orange Sours on Cost Benefits of NFV.)
Yet 5G will be more than just a new air interface. By introducing software and virtualization technologies into their core networks, operators should be able to allocate network resources on the fly. Essentially, this could mean "spinning up" a service for a specific user group, such as sports fans at a stadium, as and when needed. (See AT&T: Virtualized Mobile Core Key to 5G.)
It is this marriage between radio and core network developments that promises to be the game-changer. Through a technique called "network slicing," operators could launch a range of highly differentiated network services, each aimed at a distinct vertical market but relying on the same infrastructure as the others. "There are use cases that we can't deliver on today that will be key in future," says Mats Svardh, the head of networks for Sweden's Telia Company . "These can't be delivered only by a new radio interface." (See NFV Key to 5G Business Case, Says TeliaSonera.)
In principle, network slicing should allow operators to market a variety of more sophisticated access products based on multiple tiers of pricing. But rules on net neutrality could deal a huge blow to such plans, according to Bjørn Taale Sandberg, the head of research for Norwegian incumbent Telenor Group (Nasdaq: TELN): US authorities forbid operators from prioritizing Internet traffic in exchange for payment. And while European Union legislation seems to give operators more leeway, its definition of what constitutes a "specialized" service exempt from the rules remains unclear. "Our 5G thinking is that you should be able to offer a bespoke quality of service without building separate physical networks," says Sandberg. "If regulation doesn't allow that, you forego an opportunity." (See Telecom Needs New Net Neutrality Story and Net Neutrality Rules Threaten 5G, NFV – Telenor.)
That uncertainty has grave implications for service providers plotting their 5G futures. If regulation turns out to be an obstacle to what Sandberg calls "smarter pricing," Telenor will be under more pressure to slash costs at its core access business, he acknowledges. Succeeding in new vertical markets, such as banking and advertising technology, will also become more important.
Next page: Regulatory wrangling