Many will be taking a well deserved holiday summer break and perhaps catching up on some reading. My choice wasn’t the latest thriller but instead a book on 5G by William Webb. He provides some strongly argued reasoning to justify why we shouldn’t assume 5G will be a natural winner. I wonder if it could be a distraction from a more commercially sensible evolution?
The commercial drivers for 5G are not entirely clear
During the onset of 4G, we could already see huge pent-up demand for mobile data. The iPhone launch in 2007 made good use of 3G service but anyone could see that more capacity and faster speeds would be a commercial winner. We have enjoyed a feast of speed and burgeoning capacity over the past decade.
One premise for 5G is that this demand will simply continue as before. Another is that it will be used for all kinds of IoT, super fast video and/or low latency virtual reality. William takes us through each of these potential business cases and makes a strong case against them.
- Data traffic growth. It’s not growing as fast as it was, and that’s partly because after giving everybody free unlimited video streaming, there’s only so much that data that you can use. Video now comprises over 50% of total cellular traffic so is the one to watch (no pun intended). Recent popular traffic growth rate forecasts have been revised down.
- IoT. Only a proportion of IoT devices will be cellular and many will be locally connected through Wi-Fi, Zigbee, Z-wave while wide area service competes with SIGFOX and LoRa. Of those, many will only be very occasionally sending data – maybe an update once a day or so – and often severely limited by battery power. The total traffic load may not be as much as today’s text messages and easily carried by existing networks.
- Virtual Reality. As I’ve noted in my own visit to a VR conference, the place for this is in fixed locations where your precise position and hand movements can be closely tracked. Gigabit Wi-Fi (WiGig) is much more relevant.
But haven’t all the big networks allocated huge budgets for it?
Nobody wants to be left behind, so financial provision is being made for a big future spend. But it’s far from certain. China Mobile’s Chairman said just last week that the world’s largest operator won’t be able to determine the expected CAPEX for its 5G infrastructure until both technology and business models are more mature. He specifically stated they would need to consider the return on investment of future 5G networks rather than blindly invest in the new technology.
So will business users pay higher rates to use 5G?
Gartner conducted a survey of IT and business leaders about their appetite for investment in 5G. The results look pretty impressive, with 31% prepared to pay up to 10% more for 5G than 4G, 22% paying 10-20% more and a further 14% willing to cough up 20-30%. (See chart below)
It’s mainly seen as a network evolution rather than a digital business enabler.
Surprisingly, the majority of respondents (57%) saw the primary driver for 5G to be IoT communications. Even Gartner found this disconcerting, noting that IoT can be amply satisfied by today’s technology. Even then, it will only serve a very narrow subset of IoT use cases involving high data rates and low latency.
Gartner also note another area of confusion by their respondents, of whom 84% believe it will become widely available around 2020 when the standards are approved. They predict only 3% of networks will have launched commercial service by then (and I’d add that this would only be in quite limited geographic areas).
This isn’t because any lack of preparedness to invest in mobile technology, which continues at a high level. China Mobile plans to spend $26 billion next year and will have 630 million LTE subscribers, 1.7 million basestations and 150 million VoLTE users before the end of this year. Verizon and AT&T also have budgets in the $20 billion range.
A different path ahead
So if investment isn’t so high in 5G, where will the money be spent?
William takes a different outlook from me, expecting public Wi-Fi to increase in use and complement further LTE expansion. He thinks that easier access to Wi-Fi when away from home will offload data traffic and improve service. Frankly I disagree, having witnessed the technical success but limited business takeup of HotSpot 2.0.
Instead, I think we can expect more attention for in-building cellular whether provided directly by operators, using lower cost solutions or via partners. Watch out for private LTE networks initially enabled through CBRS in the US. If that is a success, the potential for useful business models and a growing partnership with existing operators could dramatically expand capacity and improve coverage.
In short, LTE has a long life ahead of it and I’m not as convinced that we need to replace it with 5G just because 10 years elapse from launch. Those involved in designing it did a great job, bringing a lot of experience learnt from previous generations.
Whether I’d go so far as to suggest that 5G should become rebranded as the age of the Small Cell, I don’t know, but it’s a thought.
William Webb’s book can be bought in old-fashioned hardback for about $25 or in electronic Kindle format for about $10 and read in less than a day.