Saturday, May 6, 2017

5G Will Cost More than 4G, But How Much More?

It is fair to note that the cost of building a 5G network hinges on several key inputs: which spectrum bands are available; what bandwidth can be refarmed and whether millimeter wave bandwidth is used.

The costs of using millimeter  spectrum bands to build 5G networks across Europe could be astronomical, according to Bruno Jacobfeuerborn, Deutsche Telekom CTO, costing between
€300 billion ($318 billion) and €500 billion ($529 billion).

Other estimates suggest far lower radio costs. But it might be reasonable to assume 5G will cost more than 4G, based simply on historical trends, where each new generation of networks is more capable than the earlier networks, in part because greater numbers of cell sites have been necessary, over time, to account for signal propagation of higher-frequency signals and greater need for frequency reuse.

Much of the cost comes from radio infrastructure, since the assumption is that small cells will be required, perhaps requiring an order of magnitude or more cell sites.

Barclays reckons the return on capital employed, or ROCE (a common investment measure), needs to be at least 8% for operators to be able to finance 5G rollout. Incumbents like Deutsche Telekom are likely to have a higher ROCE, according to its research, but Tier 3 mobile network operators fall well short of the mark, and the overall industry barely hits the 8% target.

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