Wednesday, January 18, 2017

If Telecom Survives, It Will be Because it Finds a Way to Replace Revenues from Services Sold to People

In many ways, 5G is a confusing and complicated topic. Some question the need for 5G, others its cost. Armand Musey, Summit Ridge Group founder, says the talk about 5G remains him of 2000 and the internet bubble, with all the wild talk about unlimited growth.

Ironically, some of us would argue, those inflated hopes actually were fulfilled. The internet did up being the “next big thing.” So it is possible that some expectations are unrealistic, in the near term.

But if even the shattering history of the internet bubble burst suggests dashed expectations--even huge disappointments--are a possibility, some would argue the direction is correct. Wild spending of course is a danger.

But the fundamental premise of 5G--a network designed from the beginning to support machine-to-machine communications and sensor networks--is a necessary bet on the future of whole telecom business. That is not always so clear, it seems.

A U.K. government report says mobile connectivity now is essential, not a luxury. “Today, 93 percent of adults in the UK own and use a mobile phone,” says the Connected Future report.

5G means seamless connectivity. Ultra-fast and ultra-reliable, transmitting massive amounts of data at super low latency.” To be sure, the document also says 5G “will support the ever increasing requirements of the existing network and new applications.”

But the main thrust still seems to be on the “faster” angle. The big focus arguably should be on the exhaustion of the existing business model, and the role 5G is supposed to have as the platform for creating new revenue streams at least as big as the entire present industry earns.

When people argue there is “no spectrum shortage,” as does Pierre de Vries, Silicon Flatirons spectrum policy initiative co-director, there are several angles. Except at peak hours, one can argue that collective capacity for all U.S. mobile networks, for example, is sufficient to handle demand.

That is particularly true as as much as 80 percent of total mobile data demand is met by Wi-Fi, as Bob Pepper, Facebook global connectivity and technology policy executive notes.

There is even debate about whether spectrum sharing is a response to immediate scarcity. Spectrum sharing in the 3.5-GHz band, for example, is not necessarily driven by spectrum shortages, but by exploration of  new methods of allocating spectrum, says Tricia Paoletta, Harris, Wiltshire & Grannis partner.

But Kalpak Gude, Dynamic Spectrum Alliance president, argues that there are spectrum shortages, and that dynamic spectrum can help solve such problems.

Even if one believes there is a need for much more spectrum, and that scarcity is a problem we want to replace with abundance, that is not actually the main reason 5G is “required.”

One of the persistent misunderstandings about 5G is that it is primarily about “more bandwidth” or “higher speeds” accessible to consumers. In fact, it is a practical attempt to create the underpinning for a major shift of mobile operator business models.

The coming 5G platform might be the most-radical break we ever have seen in the mobile and broader telecom business since the end of the monopoly era.

Some of us would argue that the telecom business cannot, long term, support itself on revenues earned by selling services to people.

Instead, the industry must find big new services and revenues earned some other way. The importance of 5G is that it sets the stage for a business model built on selling services to enterprises, to support sensor and control networks.

In a simple--but reasonably accurate way--the change is from selling services used by people to selling services used by machines.

There is only so much people are willing to pay for voice, messaging, even internet access or video. And all those markets are mature, or about to become mature. The 5G network will not change that.

So if 5G succeeds, and if the telecom industry survives or thrives, it will be because huge new revenue streams are created or discovered that replace revenues earned by selling services people use. It is just that simple.

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