Over the past year or so I’ve been hearing a few rumbling doubts in our industry that 5G isn’t delivering strong enough revenue for operators. Or that the market for 5G services is moving too slowly. Or that there’s perhaps less opportunity or demand for 5G than first believed. I think such conversations overlook a few considerations: how far 5G has come, how far it still has to go and the transformation that has to happen in operators’ strategies and business models to produce the many market opportunities that 5G still has to offer.
To date, 5G has achieved in about three years what 4G did in five years: more than 1 billion subscribers, available on 265 commercial networks, with more than 2,000 devices launched, 40% of which cost less than $200, as well as 95 5G fixed wireless access projects and 20,000 enterprise 5G projects deployed. There’s clearly much more 5G activity still to come. But as networks are built out, what of 5G services and — most importantly for operators — monetization?
5G is proving that it can boost average revenue per user — certainly my own monthly phone bill hasn’t come down since I upgraded to 5G — as well as total revenue. But the latter part seems to be where expectations need recalibration: revenue from 5G will come in waves, more or less aligned with phases of 5G network and service evolution. In general, 5G brings three waves of monetization:
Monetization of traffic — 90% of operators have achieved data upselling, thanks to customers’ demand for higher speeds or greater volumes of data as they stream high-definition or interactive video, for example.
Monetization of experience — 40% of operators now offer a speed-based service tier that offers a quality of experience according to usage, such as live streaming or cloud gaming. In this phase, monetization is not just based on data downlink speed but also uplink and latency.
Monetization of new services — 25% of operators offer new services such as glasses-free 3D content generated by artificial intelligence, cloud gaming, enhanced voice calls and extended reality, or have noted their intention to do so in the near future. To deliver this type of new service, networks need to be ready to support traffic demand that is 10 times the current level, as well as enhanced quality of experience.
The game has changed from the 4G era: 5G networks can do a lot more, but to exploit those capabilities, operators need to evolve their services, and the road map of monetization phases follows directly from this. If anything, the fact there are phases of monetization and many markets to pursue is a strong argument to quieten those who doubt the ability of 5G to deliver revenue and returns on investment.
One of these new 5G services is fixed wireless access, which we estimate has been launched by more than 40% of operators with 5G networks, supported by a collection of about 270 devices. Adoption has been robust in some markets, such as Saudi Arabia, where home broadband penetration has risen rapidly, thanks to fixed wireless access, from 43% in 2018 to 95% in 2022, surpassing adoption in the EU, which rose from 81% to 89% over the same period.
In 2022, many launches of 5G fixed wireless access networks were in emerging markets, such as Mexico, South Africa, Nigeria and the Philippines, where there’s strong potential for subscriber adoption. But about three-quarters of fixed wireless access offerings are best effort, comprising volume-based tariffs with a certain allowance of data gigabytes per month. Only a quarter of offerings have speed-based plans, which is typically how fixed-line broadband services are tariffed.
This indicates that although the market has evolved, many consumers, especially those outside urban areas, remain underserved (or unserved entirely) by high-speed broadband of at least 100 Mbps. Mid-band time-division duplex spectrum and low-band frequency-division duplex spectrum may be insufficient for fixed wireless access in many cases; operators could achieve this level of high-speed service by deploying high-band millimetre-wave spectrum to add capacity and deliver the quality of experience for new applications such as 4K and 8K video, games with shorter latency, glasses-free 3D video or extended reality.
In this way, operators can evolve the service offering based on enhanced network capabilities. Huawei expects there to be over 200 million subscribers to fixed wireless access services worldwide by 2027, with over half of them on 5G.
Another area of great promise for 5G is the enterprise market. In particular, 5G private mobile networks are beginning to accelerate in adoption, with Huawei citing two- and threefold growth in revenue from private 5G networks by operators in China, as well as an “enablement effect” in other areas, with private mobile networks prompting three to 10 times more investment in data centres, the Internet of things, cloud computing, value-added services and industrial applications across a broad range of industries. The chart below shows the range of sectors deploying private mobile networks.
Private mobile network deployments by sector, worldwide
Source: Global mobile Suppliers Association, Private Mobile Networks, May 2023
Private mobile networks can enable a huge number of new applications, although often it may be one primary use that provides the green light for deployment of the network; once the network is launched, many additional applications can be introduced. One example I heard when attending the 5G MENA (Middle East and North Africa) event in Dubai in 2022 was from construction firm Depa Group.
Ali Katkhada, the group’s chief information officer, said that the construction sector is seeing resounding benefits from 5G and edge computing in labour management, quality, health and safety and environment, and communication. For example, Depa Group uses 5G sensors in helmets to generate on-site data such as heat maps and to monitor temperature and humidity. The sensors can also vibrate when the site needs evacuating, and sensors can identify workers for payroll and record the inventory of materials. He noted that having real-time, low-latency, high-data streams from its operator partner Etisalat enabled further uses such as live project status dashboards.
A final point is the role of application development in creating new services, and hence the industry focus on network openness, to monetize the demand for enhanced network capabilities — functions that use information and resources in the network but can also configure the network. These capabilities are available as network APIs to some extent in 4G but more powerfully so in 5G networks. For example, quality-on-demand APIs; radio access network congestion APIs; 5G coverage APIs — all capabilities from which developers can build applications.
The on-demand, secure and controlled exposure of these capabilities paves the way for the transformation of operator networks into service enablement platforms — the utopia of new service (and revenue) creation. Facilitating application-to-network integration is essential for delivering enhanced and service-customized user experiences on 5G networks. However, this requires abstraction from network APIs to service APIs, to make them user-friendly for non-operator customers, and to conform to data privacy and regulatory restrictions.
Camara is a global API initiative, backed by a multitude of operators, technology providers and integrators. It’s an open-source project within the Linux Foundation that aims to define, develop and test network capability APIs, working in collaboration with the GSMA Operator Platform Group to align requirements and publish API definitions. Huawei is participating in Camara to support network-capability-as-a-service, in which network resources are exposed to developers so they can access network performance metrics, such as 5G slicing, high-capacity uplinks, low latency or positioning, as a basis for new applications. Existing examples include APIs to support smart parking, remote assistance and drone control.
Even though the 5G era doesn’t necessarily change the fact that operators are still in the business of delivering connectivity, the nature and value of that connectivity is changing. Multigigabit 5G connectivity is a platform on which operators have tremendous potential for building new services that use other transformative technologies such as artificial intelligence, data analytics and cloud-based resources. With the addition of open service APIs to let application developers access 5G capabilities, operators can transform their portfolios and ride out the waves of monetization. No one is suggesting such transformation is easy, but with the right partners and solutions ecosystem, it’s definitely achievable.
Subscribe to our blog
Make sure you don't miss out on our fresh insights on topical news in the connected world
"*" indicates required fields