Will 5G allow mobile operators to create speed tiers as fixed networks routinely offer? And, if so, what happens to mobile service provider revenue and profit expectations? So far, nobody is really able to say. It is not yet clear how much consumer demand could exist for 5G services featuring speed tiers that run with some minimum floors of performance.
But such plans clearly have some revenue upside in the fixed network internet access business. In principle, three main sources of 5G revenue lift exist in the consumer segment: a higher price for 5G plans that offer usage similar to 4G. Verizon plans to rely on that tactic.
T-Mobile US plans to offer 5G for no price premium, in which case the revenue lift is from subscriber account gains and reduced churn (fewer lost accounts).
The third source of potential revenue lift is any demand from consumers for 5G services that offer a higher minimum speed, as is the case for consumer internet access plans, where consumers can buy plans at lower speeds for less cost, or faster speeds at higher cost. Though it is hard to quantify mobile consumer demand for higher speed tiers, in the fixed network domain that segment could represent 20 percent of accounts.
While an argument can be made that perhaps 10 percent of consumers will buy the fastest speed tier, most would agree that it is logical for some 20 percent of accounts to have interest in a tier of service that is faster than average. Where multiple speed tiers, sold for different prices, are available, most consumers buy the standard or middle tier of service.
There is little reason to believe such behavior will be different for 5G customers able to buy tiers of service that offer a differentiated and higher speed, compared to standard best effort.
Some logic also exists for possible tiers featuring low latency, for gaming apps, for example. That is harder to foresee, based strictly on 5G access performance, which will be ultra-low by definition. The key to gaming tiers of service might be edge computing, not 5G, as it is the localized edge computing that is the key factor in assuring ultra-low latency for gaming.
You might wonder why mobile operators have not offered such speed tiers in the past, assuming it was lawful to do so.
Technology actually was an issue. On a fixed network, the router controls speed tiers. Think of your home internet access gateway and router, or the router in your office’s communications or server closet.
In those cases, it is easy to set up speed tiers, as each location has its own router.
How to set up individual user accounts with different speed privileges on a mobile network is more complicated, since a mobile tower will typically have one or more routers that serve all the radios on a tower. In principle, some way has to be created for each user device connecting with radios on a single tower to have its own “virtual router.”
According to Cisco, the solution includes an intelligent core network, policy suite that can control charging and apply the service tier rules, plus analytics and network orchestration.
Perhaps another way is to use network slicing to create several different virtual access networks, supporting access at differing rates, and directing customers to connect with the virtual network corresponding to their rate plan.
In that case, each speed tier corresponds to a service instance.
We shall see. The big question is what use cases actually benefit from higher-speed-assured tiers, or latency-assured tiers of service, when basic 5G will offer both speed and low-latency performance to begin with.
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