Will 5G Capex Be Less, the Same, or More than 4G?
Many critics of 5G argue that it will cost mobile operators too much to build the networks or that incremental new revenue will be insufficient to support the networks, or both. The argument often is accompanied by the observation that some other approach (platform, network or business model) would work better.
But the cost of building mobile networks is not growing. mobile operator capital investment has been flat as capacity supply has grown as much as seven times over the last four years, argue analysts at Rewheel.
To be sure, the analysis requires careful thinking.
“Our calculations show that the doomsayers will again be proven wrong,” Rewheel says. “Mobile network capex will stay flat the next five years with the help of 3.4-3.8 GHz spectrum and massive MIMO even if data traffic grows another 10-fold (from 20 GB in 2016 to 200 GB per unique user per month in 2021) as forecasted by Finnish operators.”
Rewheel also notes that “the annual cost of expanding a 4G network’s aggregate capacity by a gigabit per second is as low as few hundred thousand euros, which is roughly the equivalent of €0.1 per GB, a near-zero marginal mobile data cost if one considers that consumers are paying few hundred EUR per year for their smartphone or mobile broadband plans,” say analysts at Rewheel.
The key word in that statement is “marginal” cost, however. Once built, a modern mobile network can indeed add a unit of supply affordably. But that does not speak to the cost of recovering the sunk investment in the full network; only the cost of the incremental supply.
The trick is that “flat capex” has to include both marginal increases in capacity and the full recovery of the cost of building the network in the first place.