Lots of observers lament the “failure” of 5G to produce notable innovations so far. But some of us would argue that expectation has made no more sense than the similar claims made for 4G and 3G before 4G.
That is not to say new use cases will fail to materialize; some might,.as has happened in the 3G and 4G eras. But what has not necessarily happened is the creation of new revenue models whose value is captured by mobile operators directly.
What mobile operators complain about is not that “innovations have not happened” but that “innovations that make me money in a direct sense have not happened.”
In one sense, huge changes in revenue always are unreasonable.
Here’s one way to look at matters. If one asks what percentage of gross domestic product is produced by the mobile service industry, such figures are in the two-percent range.
Estimate of mobile service impact on GDP | Study name | Date of publication | Venue |
5.2 trillion U.S. dollars (2022) | Global mobile industry contribution to GDP | 2023 | GSMA |
9% of global GDP | The Mobile Economy 2022 (includes apps, platforms, services, infra, advertising, e-commerce enabled by mobile) | 2022 | GSMA |
1.8% of U.S. GDP | The Economic Impact of the U.S. Wireless Industry | 2022 | CTIA |
2.1% of GDP in developing countries | The Mobile Economy 2022 | 2022 | GSMA |
4.5% | "The Impact of Mobile Telephony on Economic Growth" | 2012 | World Bank |
4.8% | The Economic Impact of the Mobile Economy in the United States | 2020 | CTIA |
By way of comparison, consider estimates of internet contribution to GDP. As important as the internet is, studies generally have estimated impact in the four-percent range.
Estimate of impact | Study name | Date of publication | Venue |
3.7% | The Impact of the Internet Economy on the Global Economy | 2022 | McKinsey Global Institute |
5.5% | The Digital Economy and GDP Growth in the United States | 2021 | Bureau of Economic Analysis |
6.3% | The Role of the Internet in Economic Growth in China | 2020 | World Bank |
3.7% | The Economic Impact of the Internet on the United States | 2021 | Internet Association |
2.8% | The Impact of the Internet on the European Union | 2020 | European Commission |
4.6% | The Economic Impact of the Digital Economy in the United States | 2020 | ITIF |
3.8% | The Impact of the Internet Economy on Chinese GDP | 2021 | China Internet Network Information Center |
The point is simple: the mobile industry, no matter what the generation, only contributes so much to economic activity. And much of the innovation or exciting new apps, services and features that use mobile networks, are more properly considered part of the internet ecosystem.
We may like or dislike the mobile industry’s business model, profit margins or revenue, but spending on mobile service--in all forms--is limited. To the extent that innovation happens, it tends to take longer than expected, and in any case the rewards and investment are generally made by other participants in the ecosystem.
In a permissionless app development environment, there is very little in the way of “mobile operator owned” value that can be captured directly.
5G, still early in its global deployment, has not “failed.” What has “failed” are the grandiose promises of some in the industry who profit from deployment of the new networks; others in the value chain who profit from products sold to infrastructure providers and mobile operators who used the promise of innovation to win additional spectrum from regulators.
That is not to say 5G is going to be a “failure” longer term, anymore than home broadband investments will prove to be similar failures longer term. If demand for internet data continues to grow as it has for decades, then more capacity is absolutely required.
Without next-generation mobile networks deployed about every decade, that demand cannot be met.
The enduring value of 5G, or the next generations to come, is simply that the networks allow mobile operators to remain in business. “You get to keep your business” is far from the most-compelling argument to be made for capacity augmentation.
But as with fiber-to-the-home investment, the same fundamental logic applies: failure to upgrade copper access to faster platforms and greater capacity leads to business failure. Any ISP that refuses to upgrade speeds and capacity over time will lose out in the market to competitors who do make such investments.
Whether additional revenue can be earned, and how much, are related but separate issues. The bottom line is that capacity upgrades are a requirement for staying in business. Everything else really is secondary.
