Oddly enough, both challengers and incumbents in the U.S. mobile market make the same argument: they are monetizing 5G right now, irrespective of new use cases and revenue sources.
In Verizon’s case the actual revenue driver is not 5G as such, but a shift by customers to higher-priced unlimited-usage plans.
“Our service revenue is growing all the time because we have this migration going from limited to unlimited premium,” said Hans Vestberg, Verizon CEO. “So, we are going to have the majority of our customers unlimited.”
In a sense, 5G is being monetized as part of the shift to higher-priced service plans. “Sometimes people ask about when will you monetize 5G?” said Vestberg. “We're already doing it” in the form of higher average revenue per user, driven by the migration to unlimited-usage plans.
Beyond that, some mobile service providers believe they are better positioned to capture market share, or have better assets in place, and can simply introduce 5G using normal or relatively normal capex spending they invest annually.
"One of the questions I've gotten for years as we planned this midband-centric 5G mobile Internet pure-play is, 'how are you going to monetize 5G?' And I've always thought it was kind of a crazy question because 5G is just the next G," said Mike Sievert, T-Mobile CEO.
T-Mobile's equity valuation, for example, has far exceeded that of AT&T and Verizon, both of which have been seen as no-growth assets by investors. The reason is simply that T-Mobile can continue to grow without necessarily finding or creating new revenue sources. It simply has to keep taking market share. Cable companies are in the same position. Invention is not required.
T-Mobile’s merger with Sprint gave it a trove of 5G spectrum and other assets that arguably mean it will enjoy at least a temporary lead in 5G coverage and, soon, speeds across its footprint. And T-Mobile has been taking 4G share for years.
AT&T and Verizon, on the other hand, have had to spend heavily to acquire 5G spectrum, and also face market share losses to T-Mobile and cable operators. That being the case, they need new revenue sources to justify that spending.
So though there are two different ways of looking at 5G, the immediate boost in revenue from 5G is coming either from higher market share (T-Mobile) or higher ARPU (Verizon).
The first view is that 5G, by design, will support internet of things and other ultra-low-latency applications that 4G actually cannot. The foremost defenders of that view tend to be infrastructure suppliers, for the simple reason that this argument tends to spur purchasing by mobile service providers. That is a longer-term potential source of growth.
The second view is simply that mobile networks get upgraded about every decade, to support higher bandwidths and lower costs per bit, so the immediate advantage is simply lower cost per bit.
Mobile service providers tend not to want to talk about that so much, for the simple reason that investors never are too excited about capital investment that essentially is “maintenance” spending, rather than investment to capture new revenue sources.
But lower cost per bit enables the “unlimited” offer, which leads to higher ARPU. Lower cost per bit also enables home broadband using the mobile network. So 5G, by enabling lower cost per bit, also makes possible home broadband services using the mobile network.
In that sense, 5G enables fixed wireless for home broadband, a new revenue source.
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