5G launched in the UK in a blaze of publicity in spring 2019, with EE and Vodafone initially rolling it out before other major operators followed suit. Its promise of data speeds of up to ten times faster than 4G, alongside lower latency, were widely hyped, but, nearly three years on, 5G hasn’t yet become the default for businesses or consumers. Beyond slow uptake, it may also suggest operators are actually struggling to monetise it.
Although 5G is expected to take off in 2022, the reality is operators don’t yet have the support infrastructure in place to reap all the benefits. Only 11% of global 5G providers have a business support system (BSS) in place for effective 5G monetisation, according to Nokia, while 98% may need to alter their BSS in some way to meet the demands of 5G-powered business models.
The delivery of 5G is also stalling, according to the Centre for Policy Studies, although if coverage reaches a quarter more of the population than the government’s current target of 51%, it’ll add £41.7 billion to the UK economy by 2027. Operators will be among the winners if, and when, rollout on this scale is achieved, with more organisations tapping into their services. It’ll only happen, though, if they begin to address the key hurdles preventing effective monetisation now.
Rollout isn’t plain sailing
Universal 5G rollout is proving challenging, with many obstacles arising. Douglas Castor, senior director of future wireless research and innovation at InterDigital, reminds IT Pro about recent issues in the US around a dispute between telecoms firms and the aviation sector, for instance. It centres over whether 5G technology interferes with altimeters, which measure altitude. This was temporarily resolved by AT&T and Verizon deciding not to activate wireless towers near airports, with Castor suggesting it “highlights the conflicts that can arise between two verticals that make use of overlapping spectrum.”
5G also needs more cell sites than 4G/LTE networks, a function of its use of the short wavelength spectrum which, while faster than longer wavelengths, travels shorter distances. In built-up areas, the proliferation of new 5G infrastructure is increasingly apparent. Every new bit of kit, too, has an associated cost. This isn't to mention the social issues; many people actively campaign against 5G infrastructure being rolled out in their areas due to various falsely held conspiracy theories.
There are also challenges around integrating 5G with 4G/LTE, which has many aspects to it. At the customer end, the requirements include seamless handoff between 5G and 4G/LTE as people roam between coverage areas. The core network of 5G, meanwhile, is very different to that of 4G/LTE. As Mark Newman, chief analyst for research & media at TM Forum, tells IT Pro: “The 5G services that are available today operate by connecting the new 5G radio access network to the old LTE/4G core network. The 5G core is complex because it’s based on cloud computing principles, and operators want to introduce advanced new services based on new cloud architectures.”
In short, operators are investing in digital transformation processes to modernise, improve and optimise their 5G offerings over time in order to make the most of the technology.
Compare the market
As the work on infrastructure progresses, operators are acutely aware there’s no point in having a great offer if the market for it isn’t there. “All three markets – consumer, SMB, and enterprise – will need to be firing for 5G to be profitable,” says Raj Shah, North America industry lead for telecom, media & entertainment at digital consultancy, Publicis Sapient.
SMBs are the least well-served market currently, Shah tells IT Pro, so they’re what he calls the “greenest field” in terms of 5G. He proposes a number of use cases that operators can tap into to access the market and provide for it. “Micro-businesses will need access to ‘office in a box’ type services. Somewhat larger businesses will need accounting and back-office in the cloud type services. SMB, too, also drive a lot of innovation, and, if given access to the right tools and frameworks, could deliver new products and services in fields like AR, VR, IoT, and the metaverse riding on 5G infrastructure.”
Shah also warns, however, that consumers, ultimately, are where the payback and profit growth lies for 5G providers. Consumer expenditure needs to come from average revenue per user (ARPU) and average revenue per account (ARPA) growth, rather than net adds because markets like the US are already saturated.
A work in progress
The market isn’t just about humans, though, nor is it just about shifting data around the 5G network. It’s also about how the networks are invested in and managed.
James Gray, managing director of Graystone Strategy has launched a number of networks including Asda Mobile, Sainsbury’s Mobile and iD Mobile. He tells IT Pro: “I expect that the real value to operators will be derived from the cost efficiencies a new 5G network can deliver versus the costs of maintaining and running legacy kit.” Pointedly, he mentions Vodafone announced in January it would decommission its 3G network in 2023.
Our commentators agree that 5G is a work in progress rather than the finished article. Newman also points out the strategy is to boost investment over time. He tells IT Pro that operators “allocate a growing proportion of network investment every year to 5G rather than to LTE”. An operator, therefore, may start by allocating only 10% of its network investment to 5G but, by the time the fifth year rolls around, it may be the case that more than 50% of investment is allocated towards 5G. If more revenue is generated early on, too, investment can expan at a faster rate. The race to monetise 5G as broadly as possible is definitely on.
