In Business Model, Internet Access, Mobile

By 2025, global 5G services could be generating $250 billion in revenue, some project. What that means is not as clear as you might think. Some look at such numbers without subtracting losses in other existing product categories. That always is an issue with new generations of mobile networks.

In 2016, global mobile revenue was a bit over $1 trillion. Assume mobile data  now represents about 50 percent of global revenue. That implies mobile data revenue of about $500 billion in 2017.

One way of looking at the projected $250 billion of 2025 mobile data revenue is that it is not incremental revenue, but only a displacement of 4G and 3G mobile data revenues.

Nor is it even clear that new connections generated by IoT and low-latency applications will offset declines in human-focused mobile data revenue.

At the moment, though the new use cases for 5G are commonly said to be “enhanced mobile broadband, internet of things and low-latency applications, there are some not-obvious revenue issues, both in terms of magnitude and timing.

How much incremental revenue will 5G mobile internet access generate, over 4G spending? For low-latency and IoT apps, the issue is how soon those applications reach scale and revenue mass.

Yes, faster is better. And 5G promises speeds an order of magnitude or perhaps two orders of magnitude faster than today’s 4G. But will 5G produce an order of magnitude more revenue? Nobody believes that.

Twice as much revenue? Maybe. For some customers. But, for the most part, internet access prices have fallen over time, not grown, despite advances in speed (capacity).

Will 5G eventually be the replacement for 3G and 4G? Yes. But have those earlier replacements drive incremental revenue in proportion to incremental cost? That might be debatable. Fixed network internet access has tended to involve speed tiers, with differentiated pricing.

That regime has not developed in the mobile market (for reasons related directly to the way radios are used in mobile, compared to fixed network customer premises equipment. Fixed network modems are “nailed up” to specific locations and accounts.

Use of mobile radio resources always is temporary.

If 5G is ubiquitous and affordable, revenue upside is limited. If 5G is relatively high priced, fewer customers will buy, so again, revenue upside is limited.

The point: ubiquitous gigabit speeds might not boost average revenue per account as much as you think.

The use of 5G networks to support IoT and low-latency apps will be significant. But the timing is an issue.


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