Who Wins, in 5G Era?

In the 5G era, it is possible that European firms will lag. It is by now obvious that 5G networks are going to be deployed at scale in Asia and the United States. That  5G network deployment will begin at scale in 2020, while Europe as a region will lag behind, according to research and consulting firm GlobalData.  

The company’s forecast is that more than  half of all mobile subscriptions will be 5G-capable in South Korea by 2022, compared only around seven percent in Europe.

“In Europe, operators are keen to obtain a good return on the substantial capital expenditure made in 3G and 4G investments,” says Upin Dattani, GlobalData senior manager, Europe.

So who will win, and who will lose, in the 5G era?

Ignoring for the moment broader answers, such as “users, society, the economy were the winners,” and looking only at the “telecom” part of the ecosystem, one might argue 3G was one thing, and 4G another, so 5G might not produce winners where one expects to find them.

The winners might be found disproportionately in the applications or device segments of the  business, and less in the network infrastructure or service provider parts of the business, for example, and for different firms in each era.

Roughly speaking, one can argue that 3G produced the biggest winners in the network infrastructure and handset segments of the business, mixed results in the service provider part of the business, and important new inroads by application providers.

One problem is that it is not clear there has been any single killer app, killer use case or killer capability that clearly defines the 3G and 4G eras.

For example, if you had to name a single “killer app” for 3G, what would that be? Some would say there was no killer app for 3G.

So some would say it was “mobile broadband ” or “mobile internet access” was the key advance beyond 2G. And many hoped-for new applications did not materialize in 3G, and arguably only became common features in the 4G era (think video calling).

In fact, some might say text messaging (first introduced by 2G networks) that became something of a killer capability for 3G, even if the 3G network did not introduce it.

Others might say the best example of a killer app was  mobile email (think BlackBerry). In fact, it arguably was the rise and fall of that killer app in the 4G era that lead to the demise of Research in Motion (BlackBerry) as a lead force in the devices portion of the ecosystem.

That might lead some to argue it was the “easy to use smartphone” (think Apple iPhone) that suggests the killer feature of 4G networks, or social networking, or multimedia social networking.

Likewise, the killer app for 4G is similarly elusive. Some might argue it was tethering (internet access) that was a killer use case. And it might well turn out that it is entertainment video that ultimately becomes the killer app for 4G.

Right now, we can only guess at whether a 5G killer app, feature, use case, capability or business model might actually emerge. There are two areas where supporters currently believe such developments could occur: internet of things and full substitution for fixed network internet access.

And there is the worrisome 3G precedent: the hoped-for innovation in value and revenue really did not happen until 4G. So it is unfortunately possible that 5G will be more like 3G than 2G or 4G: producing less than hoped for innovation in new services or revenue.

Or, perhaps more accurately, might 5G produce less new revenue than older revenue streams are cannibalized? At a very high level, voice revenue is being cannibalized by mobile data revenue because better mobile internet access means substitute products are available.

The safest bets right now are that internet application providers are going to win, as well as some handset suppliers. Some infrastructure suppliers will benefit, for a while. But it is not so clear that all service providers will win, or will win to the same degree. In fact, there always is the precedent of 3G.

Though the problem with 3G in some markets was operator overpaying for spectrum, and though that is not likely to happen in the 5G era, the business model could still emerge as a big issue.