In Business Model, Internet Access, Mobile

Chinese operators are on track to launch commercial 5G networks by 2020 and are expected to establish China as the world’s largest 5G market by 2025, according to a new study by GSMA Intelligence and the China Academy of Information and Communications Technology (CAICT).

Mobile operators in China plan to run a phased testing period for 5G networks from 2017 to 2019 before launching commercially in 2020. Following commercial deployment, it is forecast that 5G connections in China will reach 428 million by 2025, accounting for 39 per cent of the 1.1 billion global 5G connections expected by that point, GSMA Intelligence predicts.

The study also shows that industry insiders see a mismatch between “most important” new revenue sources. All prior mobile networks generated most of their revenue from selling services to consumers and human users.

The coming 5G era is likely to be the first mobile network generation whose new revenue sources are likely to come from enterprise customers, not consumers.

Among the potential 5G business model challenges is a mismatch between the expected value of use cases and hoped-for revenue opportunities. Put simply, the gigabit speeds 5G will enable for “enhanced mobile broadband” are not generally needed, so value will be low. But operators making investments will be looking for a financial return, so there will be pressure to price faster 5G services at higher levels than 4G. But 4G still will work for most consumer applications.

How important will 4K or 8K video, virtual reality and augmented reality really prove to be, early on? And how much more will consumers pay to get such support?

At the same time, the greatest hope for incremental revenue growth might come from enterprise apps generated by various internet of things applications, even if those take longer to develop.

At least, those are reasonable inferences from what industry executives currently believe. A survey by GSMA Intelligence found 69 percent of respondents believed enterprise apps (for IoT) would be the most-important drivers of new revenues. Just 23 percent believed consumer apps would be the most-important new revenue source produced by 5G.

In fact, three of four very-important new drivers of revenue are in the enterprise space, not the consumer space. In other words, it is easily possible to argue that 5G is the first mobile network generation of greatest value for enterprise applications, not direct consumer use cases.

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