As 5G deployments continue, ABI Research forecasts indicate that total 5G mobile subscribers will reach 10 million by the end of 2019 and consumer penetration will increase exponentially in the following years. Indeed, the 3rd Generation Partnership Project (3GPP) Release 15 was frozen mid-2018 and, nearly a year later, there are four chipsets in the market (HiSilicon, Mediatek, Qualcomm, and Samsung), while the Global Supplier Association (GSA) reports more than 75 5G devices. At the same time, ABI Research estimates indicate that 150,000 5G base stations will have been deployed as of Q3 2019, most of which in South Korea. On the other hand, in the first year of the 4G standard, there were no devices, no chipsets, and about 400 base stations deployed. The 5G supply chain is well established, while there is increasing demand for mobile broadband in both consumer and enterprise markets.
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5G Deployments Will Differ from Previous Generations
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NEWS
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As 5G deployments continue, ABI Research forecasts indicate that total 5G mobile subscribers will reach 10 million by the end of 2019 and consumer penetration will increase exponentially in the following years. Indeed, the 3rd Generation Partnership Project (3GPP) Release 15 was frozen mid-2018 and, nearly a year later, there are four chipsets in the market (HiSilicon, Mediatek, Qualcomm, and Samsung), while the Global Supplier Association (GSA) reports more than 75 5G devices. At the same time, ABI Research estimates indicate that 150,000 5G base stations will have been deployed as of Q3 2019, most of which in South Korea. On the other hand, in the first year of the 4G standard, there were no devices, no chipsets, and about 400 base stations deployed. The 5G supply chain is well established, while there is increasing demand for mobile broadband in both consumer and enterprise markets.
However, 5G deployments will likely take a longer period to reach a critical mass compared to previous generations, for many reasons:
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The macroeconomic climate in 2019 is in a challenging state.
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Most 5G commercial launches in developed markets indicate that a 5G price premium is not possible; while these markets are also saturated in terms of mobile subscriptions. 5G will not likely create organic growth in most markets.
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5G spectrum is in higher frequency bands compared to 4G, meaning that deployments will be dense and expensive. South Korean Mobile Service Providers (MSPs) are already reporting congested networks and proceeding to start 5G network densification. Even if Dynamic Spectrum Sharing (DSS) is enabled, and 4G and 5G networks share lower frequencies, there will be an eventual shortage of spectrum and cellular will need to evolve, too.
ABI Research has also conducted a Return on Investment (ROI) study for 5G, estimating that 5G will take approximately 14 to 15 years to break even if it remains in the consumer market. On the other hand, the break-even period will be 10 years (like other generations), if enterprise business models are in place.
5G Needs Enterprise Verticals
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IMPACT
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Previous cellular network generations have capitalized on the demand of mobile broadband connectivity, and LTE Advanced Pro (LTE-A Pro) has created a consistent data fabric in most outdoor areas for consumers and business users. The penetration of mobile broadband in developed markets has maintained MSP revenues and profit margins in healthy levels and current mobile networks are coping with demand.
On the other hand, the revenue potential of 5G mobile broadband—and Fixed Wireless Access (FWA)—cannot justify nationwide 5G rollouts, especially when 5G services will not introduce any revenue uplift and 4G is currently providing an adequate consumer user experience. In fact, South Korean networks indicate that the user experience in the new 5G networks can be worse than 4G, especially since the latter is mature and much more densified compared to 5G.
Consumer 5G revenues will only be able to justify rollouts in dense urban areas, where traffic demand cannot be fulfilled by 4G. As such, MSPs will not be able to rollout 5G nationwide or sell 5G-capable phones on a wide geographical basis. On the other hand, enterprise use cases will be necessary to drive new use cases and the next wave of 5G deployments, which will arguably be a mix of public and private networks. Public networks will likely be used for wide area domain and use cases that require nationwide mobility, and private networks in cases where customer and operational data needs to remain on-premises.
Public and Private Deployments
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RECOMMENDATIONS
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It is not yet clear how 5G will be deployed, especially when considering mmWave and higher frequency spectrum. However, the MSP community is accepting that 5G will be deployed across the public and private domains for different use cases, as expected if 5G needs to cater to a multitude of use cases beyond the consumer space. In fact, the biggest challenges MSPs will face in the coming years are reinventing themselves as enterprise application enablers and accepting the fact that they may not be the central component of this new Business-to-Business (B2B) app economy. Such developments may already be in progress, e.g., with AT&T becoming a “public cloud first” company and other Tier-1 MSPs offloading their cloud assets.
Enterprise needs to become the key topic of discussion in the telecoms industry, and 3GPP needs to focus its discussions in this space instead of the consumer mobile broadband market. When this happens, 5G will enable the B2B app ecosystem it promises. 3GPP and the telecoms industry need to have a much tighter relationship with enterprise vertical technology vendors and consider their requirements the most important priority of the telecoms community.
