What investment in 5G today means for the world tomorrow
As an industry, telecoms are obsessed with introducing the next generation. None more so than 5G. Not only has it naturally been promoted by the chipset and telecoms equipment manufacturers, it has also been hijacked by the world’s politicians as an easy attention grabber during election campaigns.
5G around the world
Given the universality of the marketing push, you would expect some consistency across the globe. In reality, the rollout of 5G is very patchy for a number of political, economic, and technical reasons.
- China has the largest number of 5G users today. The industry has consolidated under the guidance of the government, and the push for 5G as an inherent part of the next wave of economic acceleration has helped drive adoption.
- South Korea has also seen a major push from the government in conjunction with the main mobile operator, SK Telecom, all backed up by a strong play from Samsung.
- The United States has seen major activity around claims of 5G firsts from the top three operators with the newly merged T-Mobile/Sprint providing an aggressive catalyst for the industry as the ‘uncarrier’.
- Europe has been somewhat slower in its push for 5G, perhaps primarily due to the success of 3G and 4G, plus the regulatory environment resulting in higher competition.
Source: GSMA Intelligence, December 2020 (US and Europe data is based on estimates as not reported)
The inconsistency in figures being used does cause some problems when trying to analyze how quickly the 5G market is growing. Since the 5G label indicates innovation and faster speeds, we often hear of 5G-ready radio, 5G-capable handsets, and availability of 5G in certain locations – even though they may not actually be using a 5G service since there isn’t ubiquitous coverage yet.
What should be noted is that every country and every telecom provider is different and should be taken on their individual merits. What is interesting, is that markets like China and the US have settled down around three major mobile service providers whilst the more fragmented European markets have not had the same success pushing 5G so early.
5G hardware availability for consumers
The availability of 5G handsets has, of course, been a factor. Apple’s entry with its 5G devices in October 2020 has certainly given the market a welcomed boost. At the same time, the advent of lower-cost handsets has been most welcomed in markets where they can only dream of the sky-high ARPUs that US players enjoy. (A fellow analyst moving from the US to Europe recently reported he had reduced his communications bill by 90 percent!) While the top end of the market sees handsets pushing well past $1,000, any mass market is going to need the sub $200 handset to gain any sort of scale.
Talk of a 5G premium for consumer users was initially seen as inevitable. Early market activity has seen most of these premiums removed, hence raising questions about the profitability against the significant investment required to get 5G across the whole of a market. This could change if new use cases or “killer app” emerges that justifies a price premium.
5G opportunities for telcos: Network slicing and private networks
In some ways, the world’s telcos have been swept along in the 5G marketing momentum. The availability of spectrum and its auctions play a major gating role. Under previous generations, we were looking for data rates that would easily support our requirements from business and consumer applications, which should be satisfied by the gigabit speeds promised by 5G. New low-latency offerings including ‘slicing’ will bring new dimensions to mobile offerings, but initially these will likely be focused on the enterprise market.
The availability of spectrum for industrial purposes is one of the more immediate areas of actual application of 5G. Private 5G networks have captured the imagination of businesses where large campus or high bandwidth video-based applications are vital. Early examples in ports, airlines, factories, and oil & gas facilities have all witnessed encouraging activity. Private networks are most likely to see the greatest commercial activity of any 5G use case, as campus and larger facilities’ implementations benefit from a fresh approach to building out their communications infrastructure.
If 5G is to thrive in the enterprise market in the short term, it will be essential for telcos to partner with companies who have the essential industry knowledge of how processes work. Embedding 5G into every aspect of a company’s activities requires a lot more knowledge of how each business operates and how technology can be used to solve their specific problems.
From the telco perspective, the investment in 5G end-to-end is a much bigger story. New radio is one thing, but building out the 5G core, getting the right connectivity in place to link the radio towers back into the main network, and rolling out ubiquitous, consistent service is a long journey. While it might be ‘available’ in some large cities, it’s sometimes proving patchy. The promise of 5G changing society and industry requires consistent delivery of the service everywhere.
Longer-term, as the different national fiber backbones are built out to connect the tower infrastructure, 5G will become the default service for consumers and businesses alike. The arrival of ‘slices’ dedicated to different corporate customers or different next generation service providers, will enhance the underlying role of connectivity. But what is most important now is getting the house in order to prepare for whatever is thrown its way in the future. The telecom industry should prioritize 5G investment to put all parts of the fixed and mobile network infrastructure, service creation, and delivery into a new framework, align itself with the cloud and device sectors, and prepare for a new role in the broader digital economy.