Problem: 5G Cost More than 4G; 6G Will Cost More than 5G

By some estimates, the cost of 4G and 5G networks has gotten more expensive, and 6G is expected to be more expensive than 6G. 

There are several reasons, including the cost of new spectrum; the need for greater numbers of small cells, each supported by optical fiber connectivity; the cost of more-complicated radios; perhaps higher-cost engineering and higher site acquisition costs. 

Technology	Cost per location	Cost per square mile
4G	$10,000-$50,000	$500,000-$2,500,000
5G	$25,000-$100,000	$1,250,000-$5,000,000
6G (estimated)	$50,000-$200,000	$2,500,000-$10,000,000

All of that drives mobile operator concern about the business model for 5G and 6G. Some of that concern is about revenue, but much of the issue is the ever-higher need for capacity. 

By general agreement, mobile operator capacity gains have historically been driven by use of smaller cells (network densification) and allocation of additional spectrum. But most observers would tend to agree that denser architectures have contributed the most. 

In addition to use of smaller cells and additional spectrum, Wi-Fi offload, better radio technologies and modulation techniques also have contributed. And the mix of contributors arguably has changed over time. For example, Wi-Fi offload was not a factor for 2G networks.

In the 4G and 5G era, Wi-Fi offload might represent as much as 75 percent of mobile device data (principally internet access), but rarely less than 45 percent of total mobile internet data. 

Country	Percentage of mobile phone traffic offloaded to Wi-Fi
United States	60%
China	70%
India	50%
Japan	65%
South Korea	75%
United Kingdom	55%
Germany	60%
France	50%
Brazil	45%
Russia	55%

As mobile executives resist the ever-growing amount of capital they must spend to increase capacity, data offload might be one of the most-fruitful ways to add effective capacity while containing capital investment, at least to a point.

"You Get to Keep Your Business" is the Point of Every Mobile Generation

As is true in any value chain, major innovations such as a new mobile platform (2G, 3G, 4G, 5G) will tend to produce a few key changes in user behavior and app experience. For example, though some would include a wider range of new use cases, most of us could agree that new apps or use cases “nearly everyone” uses can be identified for each mobile generation. 

Mobile Network	Key New Use Cases
2G	Text messaging
3G	Mobile web access, mobile email
4G	Mobile video streaming, mobile conferencing, ride sharing
5G	Fixed wireless for home broadband

Though we sometimes forget to note the developments, 2G also enabled widespread use of call waiting, caller ID, and voicemail. 

The 3G network added picture messaging and multimedia text messaging as well as mobile gaming. 

The 4G network added Wi-Fi calling, mobile offload to Wi-Fi, use of mobile hotspots, full web functionality on the mobile device (including full motion video) and, for some customers, mobile substitution for home broadband. 

The new 5G network is still developing new use cases, but fixed wireless to support home broadband is clearly the earliest case of a new mass market innovation, and among the few new features to produce direct new revenue for mobile operators. 

Device features also progressed, with at least some generally-available features on most makes and models. 

Mobile Generation	Key New Device Features
2G	Camera, color display, expandable storage
3G	Wi-Fi, GPS, MP3 player, better keyboards, turn-by-turn directions
4G	High-definition display, NFC, fingerprint sensor, speech-to-text,
5G	Still developing

And although we have to make somewhat broad estimates, revenue sources have continued to evolve in importance with each digital mobile generation. Though voice drove virtually 100 percent of all revenues in the analog era (1G), revenue sources have shifted in the digital era.

Proponents of every mobile next-generation network always talk about all the new use cases each new platform can provide. Indirectly, it matters. But even were no direct changes in use cases occurred, each new mobile generation would still be essential, and for the same reasons home broadband capabilities must advance over time.

People consume more bandwidth every year, require faster connections every year, and any ISP than fails to keep pace will go out of business.

So, at some important level, "new use cases" do not matter. Those will develop. But mobile ISPs must adopt the new platforms for another, more basic reason: they want to stay in business.

And each next-generation mobile network is primarily the way additional capacity gets added, cell splitting notwithstanding.

That noted, we still can point to new use cases that seem to develop over time. It simply helps to recall that such new use cases are not the main reason each next-generation mobile network "must" be adopted.

At a high level, voice has receded and internet access has become dominant. Text messaging became important in the 3G era. And even if the basic “subscription” continues to drive the bulk of revenue, internet access increasingly drives the value of a subscription. And the importance of business customers arguably has grown in virtually every generation. 

Mobile Network Generation	Voice	Text Messaging	Internet Access	Business Customers	Consumer Customers
2G	90%	10%	0%	10%	90%
3G	60%	20%	20%	20%	80%
4G	40%	10%	50%	30%	70%
5G	20%	5%	75%	40%	60%

Aside from fixed wireless, we still are waiting to see which innovations 5G actually will produce at scale. But even in a “worst case” scenario, where no identifiable new use cases actually become dominant, 5G still “succeeds” if it allows mobile operators to continue increasing the capacity of their internet access networks. 

“You get to keep your business” might not immediately sound like a huge benefit, but it is a far better outcome than “going out of business.” And that can happen when any internet service provider is unable to keep pace with the growing capacity requirements of the internet access business.

Recall all the dial-up ISPs that were not able to stay in business once the broadband era began. Think of the few pioneering “DSL” specialists that either went bankrupt or were absorbed by the legacy telcos. Think of the danger fixed wireless poses for some incumbent ISPs in terms of lost market share or account growth.

Who Needs to Know What?

It can be a humbling experience to realize how few people in any industry actually need to know the actual business dynamics that drive results in that industry. Even fewer need any serious knowledge of what drives outcomes in other industry segments than their own.

For example, multi-site enterprises are essential for providers of SD-WAN products and services, but irrelevant for internet service providers who only sell to consumers and businesses in local markets.

Likewise retail mobility revenues are mostly irrelevant (in a direct sense) for sellers of wide area network services. For channel partners, business customers matter, generally not consumers.

Hyperscalers do not need to bother with "local access." What matters is connectivity between data centers and points of presence. 

The point is that what drives the whole market can be quite different from what drives each submarket.

In today’s world, up to 85 percent (by some estimates) of total connectivity service provider revenues are generated by mobile services. In most markets, consumers provide up to 60 percent of revenue while business customers supply perhaps 40 percent of total revenue. 

Product	Revenue Percentage	Comments
Consumer Mobile Subscriptions	40%	Subscriptions are the key product. According to a 2022 report by the GSMA, mobile subscriptions generated 40% of global telecom revenue.
Business Mobile Subscriptions	20%	Subscriptions are the key product
Home Broadband	15%	Consumer internet access now is the core product for a fixed network
Voice Services	10%	Declining legacy service on both fixed and mobile networks
Mobile Internet Access	5%	Mobile internet access drives the next wave of mobile segment growth, once subscriptions saturate
Data Transport Services	5%	Data transport services including SD-WAN, MPLS, dedicated internet access are an important niche contributor

Looking only at business customer revenues, mobile services also are the biggest single revenue source, with local data access (internet access, private network access) being the second biggest contributor. 

Product	Revenue %
Wide Area Network Data Transport Services	15
Mobile Services	40
Fixed Network Voice Services	20
Local Network Access Services	25

None to little of that matters, in a functional sense, for suppliers of non-mobile services, ranging from home broadband (with the exception of mobile substitution) to SD-WAN or capacity services. 

The point is that very few people in the broader connectivity business actually care very much about top-line industry revenue trends, nor perhaps do they need to do so. CxOs, equity analysts and market analysts almost always need to have some knowledge of those trends. 

Why Fixed Network Internet Access Features Consumer Speed Tiers, While Mobile Networks Do Not

While it might be difficult to describe the average revenue per account impact of 5G accounts, compared to 4G, it seems far easier to show revenue lift provided by fiber-to-home accounts, compared to copper-based accounts.

Company	FTTH ARPU	Copper ARPU	ARPU Difference
AT&T	$65	$45	$20
Verizon	$70	$50	$20
Lumen	$55	$40	$15
TDS	$60	$45	$15
Brightspeed	$65	$45	$20

In large part, that is likely because FTTH allows sale of higher-priced access plans, which naturally generates higher revenue. Also, unlike the case for mobile account figures, home broadband is “service to a place,” so there is no effect of “multiple users” on recurring price.

In mobile scenarios, multiple users and devices might be supported on a single account, in the form of multi-user accounts, with “lines” or “numbers” ranging from two to some higher number. 

For example, Ericsson suggests 5G boosts average revenue per user by less than five percent, even if many observers suggest ARPA drives significantly higher impact. 

Company	5G ARPA	4G ARPA
AT&T	$100	$80
Verizon	$120	$90
T-Mobile	$90	$70
NTT	$110	$80
Telefonica	$100	$80
Vodafone	$90	$70

It remains unclear whether mobile operators might eventually shift to differentiated access speed plans for their mobile customers, as do home broadband providers. 

There are clear business imperatives underlying each charging principle. The cost of supplying capacity on a fixed network is far lower than on a mobile network, traditionally, largely because fixed networks generally have more ability to add capacity (optical fiber bandwidth is almost infinite; mobile capacity is based on radio frequency resources that are inherently limited). 

Traditionally, fixed networks have huge advantages where it comes to capacity and therefore cost per gigabit of consumption. While we might argue about the precise absolute retail cost of supplying capacity, mobile bandwidth has generally been about two orders of magnitude more expensive than fixed network bandwidth. 

Year	Fixed network (USD/GB)	Mobile network (USD/GB)
2000	100	10,000
2005	10	1,000
2010	1	100
2015	0.1	10
2020	0.01	1
2025	0.001	0.1

Under such circumstances, it makes sense that mobile operators “need” to manage consumption expectations, where fixed network operators can more easily consider “tiers of service” where higher-speed access is sold at higher prices. 

Rarely will mobile operators, with their higher cost to supply capacity, have high incentives to encourage higher customer data consumption by offering higher-speed (and higher-priced) consumption tiers.