The 5G investment conundrum: Cutting through the hype

As we move into the second half of 2018, the hype around 5G shows no signs of diminishing. There was palpable excitement about the next generation of mobile networks at Mobile World Congress in February, driven by flashy demos from vendors touting their network solutions. And at the FIFA World Cup football tournament in Russia at the moment, local operators MTS and MegaFon are demonstrating the technology in special 5G trial zones.

However, the investment case for mobile operators is not much clearer now than it was a year ago. Operators are jumping on the 5G bandwagon, announcing early trials and ambitious network launch dates that, fingers crossed, will be met. But once you’ve cut through all the hype and razzmatazz, what’s the business case for 5G? And what impact will this new generation of technologies have on improving the mobile customer experience?

Ericsson 5G

Trial 5G base station at 2018 FIFA World Cup. Source: Ericsson

OpenSignal’s CEO Brendan Gill answered some of the questions surrounding the 5G operator investment conundrum in a guest article for Mobile Europe. Brendan argues that operators need to focus on their core networks, in the near-term at least:

Commentators have been publishing their set of 5G use cases for quite some time, ranging from high speed broadband, through critical control of remote devices (think remote surgery), to IoT including all ‘things’ labelled connected or smart covering transport, infrastructure, healthcare or agriculture. But while many of these have the potential to live up to a revolutionary title that will drastically change our everyday lives, most are still very much in their infancy.

Except for one. Perhaps the most specific and current 5G use case for operators today is enhanced mobile broadband promising high speed mobile internet anytime anywhere. And in the real world, where the harsh realities of industry economics are at play, operators need to make investment decisions today focusing on existing opportunities. The smart bet for operators is to focus on the near-term and plan for the long-term – maintaining high performing 4G and 3G networks while simultaneously preparing for new technologies like 5G, which will come with a whole new set of challenges.

Brendan argues that operator investment decisions need to be based on customer needs today. If users’ 4G speeds are poor, then all the gigabytes on a fictive 5G connection will not keep them from moving to another provider:

Do users really need mobile download speeds of over 100 Mbps? Video accounts for the majority of data traffic. HD video requires less than 5 Mbps in speed, and Ultra HD ‘4K’ video needs only around 15 Mbps. With global average LTE download speeds averaging 16.9 Mbps according to OpenSignal’s latest analysis, current LTE networks are already more than adequately equipped to handle the video deluge.  For most operators, LTE – and in some cases 3G and 2G – services are paying the bills, and they need to manage their network investment strategies wisely, especially since most are still devoting substantial amounts towards their 4G rollout.

Brendan also points out that the transformation of operator business models and new revenue opportunities promised by 5G will not likely happen for several years:

5G consumer use cases remain aspirational at best. Current initiatives around improving 4G network capacity and availability can help operators grow subscribers and cut churn. This in turn will result in a more predictable revenue stream for operators to fuel future technology investments, including 5G. There is little doubt that 5G will eventually play a key role in improving consumer mobile broadband speeds. But the key questions hopefully being asked in operator boardrooms today are how soon can these upgrades realistically be implemented and, most importantly, when will consumers actually need them?

Here at OpenSignal we’ll continue to keep abreast of 4G network user experience, and 5G networks in the future. What are your thoughts on the future potential of 5G for operators? Let us know in the comments below.

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