Impact of 5G in One Picture

Getting ready to do a briefing on 5G at the PTC18 conference, I wanted one single graphic to explain how 5G can be used by enterprises connecting many remote locations, including sites in developing nations, as a full alternative to fixed network access. This is it:

source: Economist

Where latency, bandwidth, cost per Mbps and Mbyte, coverage and availability have been barriers in the past, 5G (in principle) will be something different by orders of magnitude.

I think this fundamental change is underestimated by observers of the fixed network segment of the industry. There are, to be sure, many arguments why it might take some time for 5G to become a widespread alternative to fixed networks.

It will be easiest to prove in the orders of magnitude changes in urban areas. Rural areas will be a bigger challenge, as always. Use of small cells, requiring dense optical backhaul, is a requirement.

That will take lots of new capital, at a time when the fundamental business model will have to be reshaped in major ways. Orders of magnitude better performance is one thing. Consumer ability to pay is quite another matter.

Networks will improve by orders of magnitude. Consumer willingness to pay more will change by fractions of a percent.

Millimeter wave propagation will be an issue in many locales. And the highest performance will require use of millimeter waves.

Still, the 5G era will be a watershed. As mobile substitution has become a reality first for voice, other substitutions have happened as well. Over-the-top messaging has displaced first email and then carrier text messaging.

IP voice is making that function a “feature,” not a “revenue driver.” Now video entertainment and content are shifting to “mobile-first” modes.

Beyond those shifts, “value” now is shifting away from “access” to towards “applications.” That is going to reshape not only what gets done, and how, but also revenue and profit dimensions of “access.”

The 5G era will be the first where retail communications actually shifts from “humans communicating” to “machines, sensors and servers communicating” as the driver of revenue growth and activity.

That’s the key takeaway.