Tuesday, August 15, 2017

No 5G Business Model; It Has to be Invented

It has to be said: the business model for 5G will have to be created, it is not intuitive. Like earlier networks, most users eventually will migrate from older networks to 5G. The issue is how then to pay for the new network, if the base of human users is essentially the same as exists for 4G and older networks.

“Faster internet access” is the logical answer. And there the evidence is that higher usage, when usage is rated, leads to higher average spending. And that points to one potential problem. If usage is “flat rate for all you can eat,” higher usage does not increase revenues.

So a 5G network deployment adds capital investment cost, but possibly little incremental revenue from human users.

Many will note that is precisely why internet of things is so crucial: it represents the best hope for incremental new value and revenue from new use cases in enterprise verticals where the users are sensors, not humans.

Some are blunt. “Unlike 4G, there is no discernable use case that will encourage operators to roll out 5G networks,” says Juniper Research.

As a result, Juniper anticipates that increased investment from governmental bodies will be needed to encourage the development of these networks in most regions outside North America.

In many cases, that support might include measures such as spreading spectrum investment over some years.

The 5G era also seems to be shifting the strategic function of fixed networks, adding value as backhaul for small cells expected to anchor much of the 5G network. Verizon has been most forthright in arguing that spectrum assets are only one way to increase capacity, something that always has been true.

In fact, some might well argue that, historically, shrinking cell radii has been a more-typical way of increasing capacity than adding new spectrum assets. In the 5G era, both will play important roles, especially in markets where regulators will release huge amounts of new spectrum for 5G and other networks.

Despite the huge increases in new spectrum assets (perhaps 10 times to 100 times as much as currently is available for all mobile purposes), some believe 5G spectrum will cost significantly less than did 4G spectrum.

5G is going to be different from 4G, says Juniper Research. Different enough, in fact, that business models, use cases and implementation will differ from 4G, indeed from all prior mobile generations, one might well argue.

There is a near certainty that brand-new revenue streams and use cases will disproportionately be created by enterprise customers supporting internet of things applications. That is not to say consumer internet access will not be important. Obviously, eventually most 4G users will migrate to using the 5G network. But it is unclear how much incremental revenue might be created, and for how long, by that substitution.

In the consumer internet access area, there is one important exception: use of the 5G platform to create fixed wireless connections with features that rival fiber-to-customer or hybrid fiber coax networks.

Juniper Research believes that use case will prove viable in both urban and rural areas. “The peak data rates of a 5G system will be higher than 10 Gbps but, more importantly, the cell-edge data rate (for 95 percent of users) should be 100 Mbps,” says Juniper Research. “This will allow the use of the mobile Internet as a reliable replacement for cable wherever needed.”

That will be more important in some markets. Lower-density markets will benefit, as those are areas where alternatives such as fiber to the premises are too costly.

In the consumer internet access area, it will likely prove to be the case that fixed wireless--allowing the mobile network to compete fully with the fixed network--will be the most-significant new use case.

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