5G has launched but how far are we from its full commercialisation?
May 2019
Introduction
In early April 2019, all three South Korean mobile operators launched their 5th Generation (5G) services and Verizon introduced 5G in two US cities. EE launched 5G in the UK on May 30.
5G will foster tremendous economic and societal benefits. By bringing greater speeds, lower latency, broader capacity, and more reliability and flexibility, 5G will enable applications in smart factories, smart cities, smart homes, digital health, autonomous vehicles, as well as immersive content with ultra-light AR/VR headsets in the retail, tourism, property, and media and entertainment sectors. "5G will contribute $2.2 trillion to the global economy over the next 15 years" GSMA predicts.
So when will Mobile Network Operators (MNOs) fully commercialise 5G?
Challenges
Managing 5G spectrum will be complex as it will take place in both the scarce sub-6GHz range and in the additional mmWave bands.
Millimeter waves will provide greater capacity and speed but will require more base stations and small cells to compensate for interferences, weaker penetration, and smaller coverage.
MNOs will have to refarm their existing spectrum and acquire new bands. They will also need to improve spectrum efficiency and figure out how to manage spectrum within a network and across networks.
The success of 5G will depend on the timing, amount and allocation of spectrum released by regulators.
It will be a while before 5G phones are widely available, affordable, and interoperable.
The first 5G smartphones are finally available, including Samsung's S10, ZTE Axon 10 Pro 5G, and LG V50 ThinQ 5G. However, their premium price and current lack of interoperability across networks and countries may slow down their adoption.
Although Apple has settled its court case with Qualcomm, it will launch its 5G iPhone in 2020 at best.
Foldable phones such as Samsung Galaxy Fold and Huawei Mate X are not ready for commercial release as their form factor needs to be perfected.
5G access technology won’t be sufficient on its own and the full ecosystem is not developed yet.
Operators will also need to deploy edge computing, virtualisation, real-time analytics, and machine learning to make their network flexible, scalable and intelligent.
Massive and mission-critical device communications will rely on the Internet of Things (IoT) and immersive content will require Augmented Reality / Virtual Reality (AR/VR).
However, those technologies and their standards are not fully developed and integrated yet. Also, their path to monetisation is unclear, as operators are facing strong competitors, complex supply chains, and long sales cycles.
Security risks and privacy issues will escalate.
Within the 5G ecosystem, a vast amount of sensitive data will be collected from citizens and critical vertical industries.
The proliferation of IoT devices, which are difficult to upgrade and run on widely different operating systems, will increase the potential points of cyberattacks.
Thus, threats will rise, including industrial hacks, intruding advertising, scams, misuse of information, invasion of health privacy, identity theft, and spying.
Geopolitical tensions could shatter the dream of holistic and international digital platforms based on 5G and IoT technologies.
Although the US government has failed in convincing all nations to ban Huawei, it has succeeded in leading its allies to follow more stringent 5G security measures.
As China and the US fight for worldwide domination and economic growth, telecom players may be forced into separate camps.
The majority of consumers do not comprehend the value of 5G and are not willing to pay a premium just for greater speed.
In a PwC study dated September 2018, 54% of people surveyed in the US were unfamiliar with the term 5G.
A recent worldwide survey from Ericsson ConsumerLab showed that smartphone users, once told about 5G benefits, would pay on average a premium of 20%, but have high expectations including mobile capacity boost, bundled services, and immersive entertainment and retail experience.
Early users in the US and South Korea complain about the weak 5G signal, although they enjoy its speed when they do find it. The uptake rate in South Korea is however reassuring (260,000 5G subscriptions in the first month).
Operators are not ready yet to address all vertical sectors in the Enterprise segment.
In a recent Accenture survey, 37% of executives consider moving from 4G to 5G isn’t yet justified, and 60% think that telecom companies lack knowledge about their industries.
MNOs will find it difficult to pursue a myriad of enterprise clients across all applications and industries.
Some operators will initially treat 5G as a mere 4G upgrade because of the perceived lack of Return On Investment (ROI).
5G stories at MWC19 were merely use cases and it still does not look like 5G revenues will compensate for the decline in traditional voice and messaging revenues.
A large investment is required, not only in the dense access network of small cells, but also in backhaul fibre, routers, network virtualisation, and edge computing.
If left unchecked, 5G running costs will also run high, particularly energy Opex. According to VERTIV, the total network consumption will increase by 150%-170% by 2026.
Europe risks falling behind the US, Korea, China, and Japan.
The fragmented structure of the European market makes ROI even more difficult there, and operators are keen on squeezing their 4G assets first.
Some European telecom players consider that EU's cumbersome regulations will hinder 5G progress.
Following the recent expensive Italian and German auctions, European operators are concerned about spectrum allocation and pricing.
A ban on Huawei equipment would delay 5G in Europe.
Conclusion
Accordingly, 5G commercialisation on a wide scale is still years away, potentially not until the late 2020s in Europe.
Yet, operators must act now, otherwise their 5G investments will solely benefit Cloud giants and specialist digital players.
Leading MNOs should:
Spectrum and technology
Determine the best spectrum paradigm for each use case, depending on utilisation requirements, data quantity, AR/VR, sensor capacity, and interference.
Enable spectrum sharing and transition, reduce cost, and increase capacity by combining advanced Radio Access Network (RAN) technology such as massive Multiple-Input Multiple-Output (MIMO) with older equipment, thus making 5G and LTE coexist on the same sites.
Reduce their energy bills by deploying sleep modes, cooling techniques, and deep learning solutions.
Combine 5G with other innovations such as network slicing, edge computing, AI, blockchain, and AR/VR.
Business model and corporate finance
Create their 5G business model and business cases, and justify and prioritise their initiatives by local market (e.g. home-wireless broadband in the US).
Find ways to share their infrastructure costs and to collaborate with other operators, vendors, tech players, industrial firms, and governments.
Dispose of their non-core assets and acquire digital capabilities.
Consumer market
Ensure the security and quality of their 5G network as well as communicate on the benefits of 5G.
Insure full transparency and protection of sensitive data collection.
Enterprise market
Develop services beyond connectivity (e.g. analytics, platforms, edge cloud,) and tailor value propositions by sectors.
Develop deep industry knowledge, partnerships with vendors and service providers, a new sales and operations structure, and a different corporate culture.
This article was initially published by TMT Finance.
The full review of MWC19 can be found here:
https://www.linkedin.com/pulse/mwc19-highlights-5g-launch-us-sk-etienne-piciocchi/