Two new reports warn of delays amid operator capex restrictions
Yesterday EE announced that it will connect ten sites across London to a test 5G network in October. The small east London trial will use its 3.5Ghz spectrum acquired earlier this year in an Ofcom auction. Rival 02 is also expected to announce a 5G pilot later in 2018. This is small beans however, even as China, Korea and Japan race ahead.
Big questions remain: does the UK have an appetite for this next generation infrastructure? Who’s going to pay for it, if operator revenue per user is falling, yet the infrastructure expense is so high? Is the market facing a classic “chicken or egg” scenario? Computer Business Review took a close look at the latest for 5G.
What’s 5G again?
It’s blisteringly fast mobile connectivity. A recent Ofcom report “Enabling 5G in the UK”, estimates peak speeds of 10-20 gigabits per second. To work, it needs what former Ofcom director William Webb describes as “huge numbers of small cells, antennas with hundreds of discrete elements, computing provided at the edge of the network and high-performance network cores running virtualised functions.”
But it would be great, right?
Howard Jones, Head of Network Communications at EE, told Computer Business Review: “There is an enormous array of vertical industries that would be able to benefit from improved wireless infrastructure.”
“Factory automation, logistics, healthcare are massive, global, trillion-dollar industries that can become efficient through effective use of technologies and the mobile operator can be the facilitator of that community.”
He added: “[But] the big picture of 5G from a business case is much more than just one ?Big Bang on Day One.”
Big Bank needs Big Bucks
Operators see three main use cases/routes to monetisation: 1) enhanced mobile broadband (eMBB); 2) ultra-reliable low latency IoT and 3) fixed wireless access (FWA).
Yet as a report from independent telecoms consultancy Northstream shared with Computer Business Review put it this week: “The 5G use cases discussed in the industry will likely bring no (or very small) increase in mobile service revenues for operators in the period 2018-2022.”
“Operators in key markets are facing a competitive environment with stagnating or even declining mobile revenues. Without a clear revenue upside we believe that operators will aim to keep CAPEX flat and therefore 5G rollout will be gradual, starting in 2020 and lasting over seven to ten years”.
Wait, We Might not Get 5G Till Nearly 2030?
Some compelling examples of eMBB include TV & Media (video quality 4k, 8k) augmented reality, virtual reality, immersive gaming and video surveillance.
Northstream’s analysts see these as the main potential revenue drivers, over IoT applications or FWA. Yet they warn that: “Average revenue per user and operators’ revenues have stagnated or even declined in many developed markets.”
“In previous technology generation shifts (e.g. 3G to 4G), companies like Google, Facebook, Netflix have been the ones able to monetise data growth through content/data centric business models, while mobile connectivity has been increasingly seen as a commodity… Going forward, customers’ willingness to pay for mobile broadband services will not increase and revenue increase from eMBB based on current business models is unlikely”.
Can the Government Step In?
A report for the government by Deloitte published yesterday said government will have a crucial role to play: “The UK Government’s 5G Trials and Testbeds Programme will play a critical role in accelerating this process, bringing forward the potential benefits and keeping the UK at the forefront of 5G-enabled use cases.”
“Supporting real-world demonstrations, particularly in those areas where the business case and potential benefits appear most compelling, could bring material benefits to UK businesses”…
Professor William Webb, who now runs his own consultancy at Webb Search is not optimistic. He said: “5G networks are fiendishly complicated… [infrastructure] will be very expensive, but the incentive for the mobile operator to invest is minimal. With revenues falling and little indication that 5G will reverse this trend, the business case for investment is impossible to make.”
How About a ‘5G Experience’ Instead?
Some have other ideas: commenting on the Deloitte report, Nick Watson, VP EMEA, at Ruckus Networks, said: “Wi-Fi is increasingly widespread across the country, and it’s becoming a fundamental ‘glue’ holding together different technologies and supporting our ever more digital lives. Most operators are looking to expand mobile coverage and capacity, and 5G and Wi-Fi are both part of this.”
He added: “The combination of LTE (4G) and Wi-Fi technology essentially creates a “5G experience” by allocating a wide pipe of bandwidth to end users.”
“In the US we’re seeing shared spectrum on CBRS meet this challenge, and similar approach is being discussed by governments here in Europe. This will provide the UK with characteristics comparable to what’s envisioned for 5G, while making full use of unlicensed spectrum. This combination will also potentially be available for deployment sooner than conventional 5G, at a fraction of the cost, and could be available as early as 2018.”
It is passingly possible that “real” 5G will never come to the UK.