It is at present very difficult to determine whether private 5G, operated by enterprises or neutral host providers will, on balance, help or harm mobile service provider revenues. One might use the analogy of Wi-Fi, historically the province of private networks, as an example. It is doubtful if local area networks, on balance, reduce connectivity provider revenue. Instead, LANs and Wi-Fi simply connect devices on the premises to the wide area network. Private 4G or private 5G should have similar impact: simply functioning as a new LAN protocol for enterprises.
The tricky thing is that, unlike LANs, mobile service is expected to be available mostly everywhere, including inside buildings and homes. Of course, as mobile networks have moved upwards in frequency, signal blockage has grown to be a bigger problem, as higher-frequency signals do not penetrate walls as well as lower-frequency signals. That is partly why most mobile customers switch to Wi-Fi for internet access and sometimes voice while indoors.
Of course, many observers do not expect significant new consumer revenues from 5G consumers. First of all, most 5G accounts will simply cannibalize an existing 4G account. Second, it is unclear whether a 5G price premium can be maintained.
So the new 5G use cases are virtually universally expected to come in the enterprise customer segments of the business. ABI Research believes 2020 will be crucial because Release 16 from the 3GPP will be released in 2020. But that speaks only to standards, not commercial application. It is true that mass deployment awaits the finalized standard, as suppliers will be able to build actual products compliant with the standard.
But many could argue that almost nothing about the future success of 5G in enterprise verticals can be determined in 2020, since long-term value will require parallel developments in edge computing, applied artificial intelligence and broad developments in the internet of things, in addition to finalized standards that allow suppliers to build actual products.
ABI Research also says “private cellular will threaten the domain of mobile operators,” a contention that seems both plausible in some ways and yet nuanced. To be sure, mobile service always has promised connectivity “wherever” a customer is, indoors and outside. But the reality is that the enduring value of mobility continues to reside in outdoor spaces.
Most mobile customers are quite used to switching their mobile device internet connectivity to Wi-Fi when indoors. So the unique value of a mobile network remains outdoors coverage. Private networks often are a primary, perhaps exclusive domain for indoor mobility, often for public network voice, messaging and internet access.
In that sense, private indoor 5G networks are akin to private local area networks long used to support PC and premises networks, using cables in the 1980s and now Wi-Fi. We might well consider private 5G to be a similar sort of development, in which case private 5G networks are complementary to public wide area 5G and mobility, not a replacement or substitute.
In some cases enterprises might use private 5G where they once used private Wi-Fi or cabled networks. In other cases private 5G will simply allow users mobile device connectivity indoors.
Even if one assumes some use cases where private 5G is a substitute for public network 5G, as when sensor connections do not rely on mobile accounts but are relayed over a private network to a public network WAN connection, it is unclear whether that subtracts from a mobile network operator’s revenue potential.
Public networks always have terminated at a demarcation point at the side of a house or building. Inside the building long has been the domain for private networks, the salient exception being indoor mobile phone reception.
And even there, a case can be made that offloading the cost of mobile access to private 5G provides capex and operations savings that have a non-zero value for mobile operators, offsetting some potential non-zero account “losses.”
The point is that 5G does not necessarily have to drive near-term consumer revenue upside. Nor does private indoor coverage necessarily diminish in any way diminish the value of mobile service.
The value of private 5G for a mobile service provider includes the total cost of ownership. Capital investment and operating cost savings provide value even if some amount of account substitution could occur in some instances.
So private 5G might not prove an unwelcome trend for mobile service providers.