Does 5G Drive Higher ARPU?

It is totally understandable that suppliers of 5G infrastructure and many service providers are anxious to show that investments in 5G networks are driving higher revenues, profit margins or subscriptions. So Ericsson argues that 5G subscriptions are correlated with higher revenue earned by mobile service providers. The implication might be that the two are causally related. 

“The launch of 5G services in the top 20 5G markets is followed by a positive revenue development of 3.5 percent CAGR compound annual growth rate over the last two years, or a total of seven percent,” Ericsson argues. 

Perhaps 5G is “responsible” for that growth, in some cases. In other cases, retail packaging policies might be the driver. In the former case, perhaps 5G subscriptions, all other things remaining equal, are priced at higher levels than 4G subscriptions. Then a reasonable case can be made that 5G actually is driving higher revenues.

source: Ericsson Mobility Report 

The same assurance is not possible when other key elements of retail pricing also are changing, even if some 5G service plans are priced identically to comparable 4G plans. 

Ericsson itself says that “only 22 percent of the 182 service providers offering 5G are showing a price difference which the consumer needs to pay in order to gain access to 5G services.” So in roughly four out of five instances, higher revenue has to be explained some other way. 

For example, 5G might be available for “no extra charge” on some higher-priced service plans, so that customers might in some sense be buying “more data, unlimited data or something else” and getting 5G as part of the package. 

To be sure, greater capacity provided by 5G does enable new thinking on the economics of “unlimited usage” packages sold for higher prices. “Service providers with 5G commonly have more unlimited packages available,” says Ericsson.

The point is that it is quite difficult to determine whether 5G itself leads to average price increases, or whether some other drivers (such as unlimited usage plans) actually are driving higher revenue per account.