It is reasonable to expect some uptick in mobile service provider capital investment as suppliers begin building 5G networks. It is, despite worries to the contrary, unlikely that the increased capital investment will require a doubling, tripling or some other huge increase in spending , as some have feared.
In fact, Three UK and Swisscom executives now say 5G investment will be “flat,” in relationship to existing levels.
Credit open source, Moore’s Law, facilities reuse, spectrum aggregation, new spectrum, unlicensed spectrum, small cells, virtualization, software defined networks and use of commodity servers as innovations that actually reduce capex requirements, even as performance is boosted.
In other words, the amount of capital required to build new networks often is less than using legacy platforms and technology.
The other big constraint is that returns on deploying capital are less than in past years. Put simply, investing a unit of capability produces revenue at a fraction of that investment. In recent years, in every geography, there is about an order of magnitude less revenue produced for each unit of capex deployed.
That creates huge pressures on service providers to better match investments with investment return. That is one good reason why 5G capex might be far more restrained than many expect.
The new 5G networks must be built, of course. But how they are built, when and where, will be more strategic than in the case of past networks, one might argue. The reason is simply that the business model might be far more challenging than in the past.
So capex will have to be scaled to match expected financial return. And that will put constraints on the amount of investment.
No comments:
Post a Comment