Blog: 5G business case still far from clear

12 MAR 2018

Since the 3GPP released the 5G New Radio (NR) specification for non-standalone (NSA) operation in late December 2017, the mobile industry experienced a flood of 5G announcements by vendors and operators. Of course, the swell only accelerated at the recent Mobile World Congress (MWC).

Ooredoo made the boldest claim, saying in a release it is “racing ahead on the path to 5G” and is the world’s first to have “5G New Radio with commercial equipment suitable for business customers” sporting speeds of 2.3Gb/s.

China Mobile, the world’s largest mobile operator, announced it will start large-scale 5G trials in Q2 in 17 cities supporting 11 types of services and applications.

Liu Guangyi, CTO of the wireless department at China Mobile Research Institute, said the overall goals of the trials are to verify key technologies including Massive MIMO and network slicing in large-scale networks. But he noted tests are also focused on testing real-life services to “make sure our 5G networks can earn money so we can earn back our investment”.

Rival China Telecom, in contrast, appears more cavalier about return on investment. Bi Qi, CTO of China Telecom Research Institute, said he’s not concerned about a lack of proven use cases for 5G: “We didn’t have them with 3G or 4G…and we all survived.”

“It’s possible for 5G ARPU to stay at the same level as 4G, which means it will take seven to eight years to recoup 5G investments.” He noted 4G ARPU stayed at 3G levels for a long time.

Lee Yong-gyoo Lee, head of KT’s 5G business unit, agreed the business case for 5G “is not clear at all” and admitted the South Korea-based operator is not yet ploughing ahead with large-scale investment in the technology, despite being a 5G front runner.

Focus on speed
While the business case for 5G may not be immediately apparent at this early stage, the scope of potential new services also seems to be more limited than previously forecast, with the focus primarily on capacity and speeds (wasn’t a key 5G argument that it was about more than fast access?).

Huawei rotating CEO Ken Hu said the company is experiencing emerging demand for 5G’s high bandwidth and high speeds, which will be helpful for the short-term development of the telecoms industry: “We see 5G can be applied to short-term business cases,” he noted, adding applications dependent on 5G’s low latency will only emerge in the longer term.

For many years industry players have been talking up three key 5G application scenarios: enhanced mobile broadband (eMBB); massive machine-type communication; and ultra-reliable, low-latency, communication. So the emphasis on eMBB comes as a major disappointment, particularly since LTE-Advanced networks are now touted to deliver 5G-like speeds.

Dan Warren, Samsung UK’s head of 5G research, acknowledged at MWC initial 5G rollouts may not be as immediately transformative as expected. He said 5G was developed based on the belief mobile connectivity could transform industries outside the traditional telecoms space, but noted there’s been a problem turning that vision into a reality.

Given these limitations, an Ericsson forecast 5G will help operators in Australia boost their revenue by 48 per cent by 2026 certainly seems overly optimistic. Telstra sees growth in developing multiple use cases, initially targeting verticals such as agriculture and mining.

To be fair, if an operator holds greenfield spectrum in the 700MHz and 3.5GHz bands, and 5G devices supporting these bands are available, it makes sense to deploy 5G technology for eMBB said Phil Marshall, chief research officer at Tolaga Research. This is particularly the case in areas where network capacity is limited, for example developing markets.

Device availability
Of course, one the biggest obstacles to 5G services is the lack of handsets, which appear to be nearly a year away. Huawei Consumer Group president Richard Yu said in Barcelona the company plans to launch a 5G smartphone using its own chipset in late Q3 or Q4.

But, after MWC, an expert from semiconductor company Qorvo warned the cost of licensing 5G technology could push smartphone prices even higher, potentially slowing uptake of next-generation devices.

Ben Thomas, the company’s director of 5G business development, told Mobile World Live handset vendors will be forced to pay for both LTE and 5G technology licences in the non-standalone environment, which will result in higher device costs.

As industry demand for IoT grows, the hope is 5G services will penetrate deeply into homes and vertical industries including healthcare and manufacturing, creating more compelling business cases. This scenario is likely years away: meanwhile, near ubiquitous LTE access should be able to handle IoT services and most massive machine-type communication applications.

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

Author

Joseph Waring

Joseph Waring joins Mobile World Live as the Asia editor for its new Asia channel. Before joining the GSMA, Joseph was group editor for Telecom Asia for more than ten years. In addition to writing features, news and blogs, he...

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