Some who are optimistic about 5G creating new use cases and revenue opportunities believe traditional consumer mobile broadband, wireless substitution for fixed networks, new ultra-low-latency apps and internet of things will drive overall revenues.
But in the early going, it is likely to be traditional mobile broadband and fixed wireless that drive either value or appreciable amounts of new revenue. The former might mostly take the form of capacity augmentation for 4G users; the latter might include both personal hotspot service that displaces fixed, as well as 5G fixed wireless.
Researchers at Ovum believe 5G fixed wireless makes it a potential substitute for as much as 85 percent of the fixed network internet access market. Using millimeter wave spectrum, Ovum estimates large-scale deployments supporting routine speeds of 80 Mbps to 100 Mbps.
Three UK therefore expects that 5G will replace home broadband in what it anticipates to be the biggest shake-up to the industry since 3G launched 15 years ago.
But there is another issue in the U.K. market: price arbitrage. Customers of fixed network internet access services pay about £240 a year in the form of fixed network line charges that will not have to be paid on 5G fixed wireless connections.
Such upside exists mostly for attackers without large incumbent market share, as is the case for Three UK and also Verizon in the United States.
“5G will allow us to create more revenue streams,” said Matthew Ellis, Verizon CFO. Where 3G and 4G were mostly about consumer internet access, 5G will bring fixed wireless and then enterprise IoT apps.
For some service providers, such as 3UK and Verizon, fixed wireless represents a new revenue source that directly cannibalizes other carrier fixed network internet access services and market share.
In other words, mobile substitution for fixed network internet access represents a new market that is not a zero-sum game with other mobile operators.
In the early going, Verizon says it has been getting about half its 5G fixed wireless customers from the ranks of non-Verizon customers, according to Ronan Dunne, Verizon Wireless EVP.
In the four initial launch markets for 5G Home, the customer base is split about 50-50 between those who have an existing relationship with Verizon and those who don’t. Of course, that early take rate is boosted by a three-month free trial, followed by standard pricing of $50 per month for customers who have a Verizon Wireless plan and $70 per month for those who do not.
Many would point out that, initially at least, not much market share in the fixed network internet access business is going to change, simply because the percentage of U.S. homes Verizon presently can reach with its 5G fixed wireless network is limited to portions of four U.S. cities. That obviously will change over the next few years as coverage ramps up to perhaps 30 million U.S. homes outside Verizon’s fixed network footprint.
It would be fair to characterize the Verizon 5G fixed wireless service as an overbuilder effort, as it competes with both cable and telco incumbents. Past experience suggests that a competent overbuilder, in the right markets, can expect to gain up to 20 percent market share within a couple of years.
It will ultimately matter greatly how much of that share is taken from cable or telco suppliers.
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