Big new markets always face a "chicken and egg" problem: investment is difficult when there are few potential customers, yet people have no incentives to buy when the service is not available.
That is doubly true when network effects exist, where few suppliers mean few potential customers, but incentive to increase supply is quite low because there are so few customers.
Every next-generation communications network represents that sort of problem, and connectivity providers must always bet on the chickens.
The network must be built; the investments made, before customers can buy. That also means mobile operators have high incentives to get revenue-generating customers on that new network, as quickly as possible. That especially is important if the benefits to customers are not obvious.
You might find that an odd statement. Is not the whole point of 5G to supply order of magnitude faster speeds, to name one key example of benefit? The key word is "benefit."
So look at "benefits" from use of low-band, mid-band and millimeter wave spectrum. In many cases, low-band 5G will, in fact, not offer speeds much different--if different at all--from 4G. So there is little obvious consumer benefit.
Where mid-band or millimeter wave spectrum is used, speeds will be much higher, on the order of twice to three times as fast, on average. The problem? There are few consumer phone apps and use cases that can take advantage of such speed improvements.
That is doubly true when network effects exist, where few suppliers mean few potential customers, but incentive to increase supply is quite low because there are so few customers.
Every next-generation communications network represents that sort of problem, and connectivity providers must always bet on the chickens.
The network must be built; the investments made, before customers can buy. That also means mobile operators have high incentives to get revenue-generating customers on that new network, as quickly as possible. That especially is important if the benefits to customers are not obvious.
You might find that an odd statement. Is not the whole point of 5G to supply order of magnitude faster speeds, to name one key example of benefit? The key word is "benefit."
So look at "benefits" from use of low-band, mid-band and millimeter wave spectrum. In many cases, low-band 5G will, in fact, not offer speeds much different--if different at all--from 4G. So there is little obvious consumer benefit.
Where mid-band or millimeter wave spectrum is used, speeds will be much higher, on the order of twice to three times as fast, on average. The problem? There are few consumer phone apps and use cases that can take advantage of such speed improvements.
So supplier push rather than customer demand is going to drive early 5G subscriptions, since the experience advantages are going to be quite intangible in most cases. In many markets where 5G is launched using low-band spectrum, speed will not, in fact, be much different than fast 4G.
In other markets, where mid-band or millimeter wave spectrum also is used, consumer use cases will not be able to take advantage of the additional speed, with a few exceptions such as big file downloads, virtual reality or augmented reality. But how much time do consumers spend downloading big files? How many use AR or VR already?
And yet, 5G will be adopted. We do not know whether adoption will be faster, slower or at the same pace as 4G, but 5G will be purchased. One big reason is that 5G--though having eventual advantages for most consumers--has bigger advantages for mobile operators.
Even if consumers might not experience much benefit at first, mobile operators will. 5G features lower cost per bit than 4G, which helps prop up the business model when more capacity has to be supplied at a relatively fixed price.
Over the long term, consumers can only spend so much money on their communication services, so wallets budge only slowly, if at all.
5G also has network features helpful either for cost containment or new service creation. 5G networks will be virtualized, which creates the ability to turn up virtual private networks (network slicing) rather easily, compared to legacy methods.
In the radio network, virtualization allows mobile operators to contain radio network costs, since equipment from different suppliers increasingly will be mixed and matched with core networks.
Longer term, 5G latency performance opens up potential space for a role in edge computing networks, vertical market applications and partnerships.
And, as always, for some suppliers in each market, 5G represents a chance to preserve or upset existing market shares, if competitors cannot easily keep pace.
Hence the paradox: Though 5G is, by design, supposed to have performance advantages over 4G for mobile service provides and customers, the early advantages will rarely be sufficient to drive consumer demand. Instead, supplier push will be at work.
For customers, the advantages include faster top speeds and lower latency. For mobile operators, the advantages include faster top speeds, lower latency, virtualized networks, which promise new features and lower cost, higher device density (supporting lots of sensors and internet of things devices) and lower cost per bit.
That list is a clue to why 5G will be adopted, perhaps even more rapidly than 4G: it benefits mobile operators more than consumers. In fact, an argument might be made that 5G benefits mobile operators almost to the exclusion of consumers, at first. In the early going, using low-band spectrum, 5G might not be noticeably faster than 4G.
When mid-band and millimeter wave spectrum is used, speeds will be much faster than 4G, but in ways that do not actually benefit the use cases most people have for their phones. Big file downloads will be faster, but what percentage of time do people spend downloading big files?
At first, the early adopter desire to "get it first," where the driver is as much status as anything else, will be the driver. But there will be indirect drivers as well, such as the value of "5G comes with your new service plan." In many cases, 5G will be a "nice to have" attribute of a service plan, but it is the service plan that drives the switch.
Perhaps that will change over time, as new use cases develop. But it might also be the case that 5G gets adopted because it provides value for mobile operators, who will create incentives to adopt 5G, even if the actual experience advantages might be hard to demonstrate.
This can be seen in recent Opensignal measurements of speeds on new 5G networks. Where early tests of U.S. 5G rely exclusively on millimeter wave spectrum, the U.S. has the highest speed.
Aside from big file downloads, the experience advantages are almost impossible to demonstrate. Faster might be better, but actual consumer smartphone apps cannot actually take advantage of the faster speeds, yet, since virtual reality and augmented reality are not yet widely used.
Conversely, not that in some markets where low-band 5G has been launched, the speeds are almost identical to 4G, so there is no actual experience advantage.
Compared to existing 4G, 5G in early days has doubled to nearly tripled real-world speeds in some cases, but had almost no impact on speed in a few cases. Again, the choice of spectrum, or availability, really do matter.
Where low-band spectrum is the 5G choice, it sometimes does not life speeds very much. Where millimeter or mid-band spectrum is used, 5G speed advantages are clear, but app performance and user experience do not change much, with the exception of big file downloads.
No comments:
Post a Comment