Monetizing 5G is operators' biggest challenge for 2021 – Omdia

Although 5G services are rapidly rolling out across the world, network operators globally are still trying to figure out exactly how to make money from those services.

This, according to research and consulting firm Omdia, is perhaps one of the greatest hurdles facing service providers in the new year.

"How to monetize 5G for consumers will continue to be the biggest challenge for operators in 2021," wrote the Omdia analysts in their new report on top tech trends for 2021, which features information from its surveys of operator executives. Omdia is owned by Informa, the same company that owns Light Reading. "As of 2Q20, 77% of 5G operators did not bundle 5G-rich apps. Conversely, 23%, or 17 of the 73 5G telcos tracked, did have a differentiated pricing model and bundled at least one 5G-rich service in 2Q20. This compares to just seven 'differentiate' pricing models in 2Q19."

There are solutions to this problem, the analysts wrote. "Bundling a 5G-rich app (e.g., 3D AR shopping, e-books, or VR cloud gaming), alongside more expensive 5G plans, will make consumer upselling easier for telcos. In turn, this can lead to mobile ARPU growth/stability, lower churn, and incremental revenue as consumers buy more expensive 5G plans and a 5G handset."

These issues are clearly playing out in the US market. Indeed, most US operators are not charging extra for 5G services; instead, they're positioning the technology as a premium add-on to unlimited data options, alongside other digital goodies like personal hotspot services and Netflix access.

Verizon is perhaps the most aggressive US operator on 5G monetization. When it first launched 5G, Verizon said it would charge an extra $10 per month for 5G services. The operator did apply that fee to its cheapest unlimited data plan, and earlier this year hinted that it would do so on its more expensive unlimited plans too. However, Verizon's newest unlimited plans do not include that stipulation, which indicates that the carrier has backed off its initial plan to charge extra for 5G across all its plans.

However, top executives have explained that Verizon will make money from 5G by using it to entice customers to upgrade to its more expensive unlimited plans, which offer 5G for no extra cost.

Already the operator has shown promise with this strategy: Verizon said around 17% of its postpaid customers in the third quarter of 2020 subscribed to its premium, 5G-capable plans, up from 11% in the year-ago quarter. This, the operator explained, shows it can make extra revenues per user by encouraging customers to upgrade to a premium unlimited plan, in part by dangling the 5G option alongside those plans.

Nonetheless, it's still a tricky calculation, for Verizon and for the rest of the 5G service providers across the globe. Omdia reported that 22% of those operators it surveyed did not launch any new plans for 5G, which analysts described as a "do nothing" strategy.

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

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