No Need for 5G?

At least some observers might have argued that “we do not need 3G.” Some might have argued there “is no need for 4G.” So it is not surprising that some argue there is no need for 5G, either.

One argument might be that data growth actually is not as robust as many believe it is. Video is the reason most-often given for why capacity is needed. But some might point out that video already represents more than 50 percent of total mobile network. Some might argue that future growth, though substantial, is a glass half filled. In other words, there will be significant growth, but not orders of magnitude growth.

Many of the new use cases likewise will be satisfied by existing fixed network assets.

Others might argue that, although 5G will enable many internet of things apps, 5G will not be needed for many such apps and use cases.

The point, some might argue, is that the commercial revenue drivers for 5G are not entirely clear. So argues William Webb, Ofcom senior technologist, for example.

“Users will not value the higher data rates that are promised and will not need the higher capacity forecast,” Webb  argues.

The countervailing argument is that demand will exist, or can be created. That essentially rests on the view that services and revenues based on 4G have reached--or will reach--saturation soon.

Since 5G offers new capabilities, it also can support new use cases and revenue models, either speeds much faster than 4G or with a different set of features (supporting low battery consumption use cases).

Others might argue that 5G will enable new business models precisely because it eliminates the price and performance advantage fixed networks traditionally have held over mobile networks, making mobile a full network substitute for the first time, and essentially allowing mobile to cannibalize fixed network revenues.

Networks that can deliver the highest speeds and greatest reliability will command the highest average revenue per connection, Juniper Research argues. That means 5G actually will be strategic for mobile operators.

That noted, demand will have to be created. In terms of commercial IOT revenues, Juniper Research believes average revenue per connection from IoT will be “disappointing, including smart cities and digital health.”

For starters, such devices will not require much bandwidth, implying relatively low revenue per connection.

That might not be so much the issue as the relative value of the transmitted data, in context. Almost by definition, the value of data collected from any single sensor hinges on its predictive role for the application it supports. A single sensor that can predict the failure of an expensive piece of machinery might have very high value.

A single sensor measuring pressure, temperature, vibration or performance might therefore be highly valuable. But many sensors, though valuable, will not have large immediate value.

Customers are not likely going to be willing to pay a high percentage of total potential gain or loss to be alerted to changes that suggest such potential gain or loss. In other words, customers might well be willing to pay a few percent of the value of any product’s value, but not 100 percent percent of that value, especially when a simple “replace it when it fails” approach is possible.

How much recurring cost will a consumer be willing to spend to know a light bulb is going to fail, compared to the alternative of simply replacing that bulb when it fails?

In other words, the market value of a recurring payment to learn about future device or component failures varies. Such value might be very high for many industrial and commercial purposes, but generally very low for most consumer applications.

That is one reason some believe 5G fixed wireless will be so significant. A single consumer 5G fixed wireless connection, in the U.S. market, for example, should generate monthly revenue between $50 to $100, depending on bandwidth, about the range of similar fixed network connections.

That is a big deal, when many internet of things connections might generate only a few dollars a month of revenue.

Also, consumer demand for internet access--including higher-bandwidth versions--is well known, and large. That means it has potential to directly and powerfully affect total service provider revenues. Many other new IoT apps will generate comparatively small revenues, at first, and so not move the revenue needle appreciably.

Fixed wireless could have a significant impact.

That impact might not be seen in all markets, or even many markets, at first, Juniper Research, for example, argues that most 5G connections, in 2025, will be active in just three countries:

China, the United States and Japan.

Together those countries will have 55 percent of all 5G connections by 2025, Juniper Research estimates. The United States will account for over 30 percent of global 5G IoT connections by 2025, with the highest number of 5G connections for fixed wireless broadband and automotive services.