In Business Model, Internet Access, Mobile, Spectrum

Will service provider executives and firms be significantly better at predicting 5G use cases and new revenue streams than they were at predicting 3G and 4G use cases and revenue streams? Probably not. The important point to keep in mind is that service providers who are prudent about their 5G investments do not have to be able to predict the emergence of new use cases. 

All they have to do is recognize that 4G soon will run out of ability to support additional capacity for smartphone users. That’s it. So long as they keep investments in line with current capex, and build gradually, the 5G investment can be justified completely on the basis of capacity augmentation for 4G.

Service provider executives, expecting nearly all the early value to come from supporting existing data services, are almost uniformly keeping their 5G plans within the limits of existing capital budgets, even if many observers (most, actually) have expected huge increases in spending. 

That was not expected, and has really-important implications for the 5G business case. Put simply, 5G can be understood as a necessary way of provisioning more capacity for smartphone customers, and almost nothing more. That is not to say new use cases are unexpected, but only to emphasize that 5G investments do not require such new revenue sources.

In fact, some estimate 5G capex could be lower, far lower, than was the case for 4G. Better technology is part of the reason for lower capex than some had feared. Phased deployment also will help, with 5G being most valuable in a minority of total cell sites where capacity demand is greatest.  

That is true for Telenor, Verizon and AT&T, Swisscom and Three UK, for example.  

The point is that mobile capacity has to be increased–in many cases vastly increased–every year. And we are reaching a point, in many markets, where 4G will not support what is needed. So 5G can be viewed as “merely” a way of supplying that capacity supply. So long as capex budgets do not increase, all the other new use cases are opportunity at no extra cost.

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