The sigmoid function arguably is among the most-important mathematical expressions one ever encounters in the telecom, application and device businesses. It applies to business strategy overall, new product development, strategy for legacy businesses, customer adoption rates, marketing messages and capital deployment, for example.
The sigmoid function applies to startups as well as incumbents; software and hardware; products and services; new and legacy lines of business. Describing a specific relation between sets, the sigmoid function also is required whenever neural networks are created.
The concept has been applied to technology adoption in the notion of crossing the chasm of value any technology represents for different users. Mainstream users have different values than early adopters, so value propositions must be adjusted as any new technology product exhausts the market of early adopters. Early adopters can tolerate bugs, workarounds or incomplete on-boarding and support experiences. They tend to be price insensitive.
Mainstream users typically require fully-developed customer support, costs that match value and a developed ecosystem (they do not want to write their own apps). Scale is not a huge issue early on, since the number of customers is limited. All that changes with adoption by the mass market, when support at scale is necessary.
The S curve also is embedded into the concept of the product life cycle or new product development. Simply put, every product eventually exhausts its market. That further implies a constant need for new product development, which must necessarily begin before the succeeding product has reached its peak adoption level, and before that product begins its decline.
Among the important takeaways is that technology or product adoption is logarithmic, not linear. What happens early in technology or product availability is quite different from what happens when any technology or product is demanded by the mass market.
Product attributes and the ecosystem required are highly disparate for early adopters, compared to mass market customers in the growth phase, which is different from attributes required to attract late adopters.
So how does this apply to 5G?
We’ve already started to hear stories about how consumers or enterprises are “disappointed” with 5G, even though 5G availability is still rolling out, even though there are different flavors of 5G with different strengths and weaknesses (because coverage and capacity, as always, are trade-offs).
It is worth recalling that it took 10 years--in Europe--for 3G to reach adoption levels ranging from 30 percent to 60 percent. Take rates for 4G took a decade to reach 80 percent, and about five years to reach 50 percent adoption.
If 5G is close to 4G in value, it will be about another five years before half of consumers actually buy the service. That is a good illustration of the S curve adoption model, something that applies to new services of all types, provided by incumbents or startups.
As applied to 5G, it is easy to understand why early mixed reviews are understandable. The biggest performance boosts come with millimeter wave service that is going to take some time to supply, meaning few users actually have sustained use of that form of 5G.
The other issue is the “obvious experience advantage” of 5G over 4G, compared to the difference in experience between 4G and 3G. Many do not recall, or did not experience the transition from 3G to 4G. Simply put, 4G brought immediate and obvious improvements in user experience of using the web from a mobile device, where 3G experience was painful.
That will not generally be the case for the transition from 4G to 5G. There are almost no use cases consumers will generally encounter or desire where 5G speed, capacity or latency advantages translate immediately into better experience.
In other words, 4G service quality is quite good, compared to 3G experience when 4G launched. In fact, many users on low-band networks might not always even detect a significant difference in experience.
As we already have encountered with fixed network performance, gigabit per second speeds--compared to services offering 100 Mbps to 200 Mbps--actually do not yield tangible experience benefits for any single user, though useful for multi-user households where simultaneous 4K streaming happens, lots of simultaneous gaming occurs or when multiple users are uploading lots of video content.
It can be argued that 5G launches represent that same sort of situation: the capacious millimeter wave services cannot generally provide experience gains because 4G suffices (for the moment).
That is bound to lead to some user disillusionment.
The story can be quite different for a mobile service provider, deploying 5G in part for other reasons. As end user bandwidth demand continues to grow, there comes a point where 4G just runs out of room for improvement.
That matters because cost per bit matters. Basically, mobile operators have to keep supplying more bandwidth to end users, but at about the same retail prices. There is some room for improvements at the margin, but the trend for decades has been that consumer prices have remained the same, or fallen, while the supply of bandwidth has increases, in some cases, at about the rate one would expect from Moore’s Law (doubling about every 18 months to 24 months).
So end user experience “at the moment” is not the big issue. Supporting user experience in a few years, when the 4G network cannot do so at lower cost, is the big issue for a bandwidth supplier.
Eventually, consumer benefits will be seen. But even so, lower cost per delivered bit would be reason enough for mobile operators to move to 5G now, before the next capacity crunch hits.
The ultimate creation of new services, apps and use cases, some of which will provide direct and indirect revenue, also are important. But the move to 5G is supported--one can argue--strictly by the need to deliver internet bandwidth at far lower cost.
Latency and capacity improvements are nice, and have happened with each succeeding digital generation. And those improvements have lead directly to new use cases and value creation. Still, the bottom line is that mobile networks must drive down the costs of supplying internet access. 5G does that.
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