Many observers expect that the bulk of net new 5G service revenues and use cases will come from the business use cases and customers, and not consumer customers. The possible debate is over the magnitude of those gains: how big a contribution new enterprise 5G use cases might make, over what time frame.
Net revenue changes are key, as much consumer and business spending on 5G simply replaces former 4G spending. What matters is the amount of incrementally-new spending. Most observers believe that consumer 5G net revenue impact likely will be modest, since 5G largely replaces consumer 4G.
New use cases such as augmented reality or virtual reality could affect consumer revenues by creating new demand for low-latency internet access and higher data rates, though possibly within the existing framework whereby performance increases over time but retail prices remain about the same, or drop.
In contrast, most of the new 5G-enabled or supported use cases such as industrial internet of things, edge computing, autonomous vehicles, unmanned aerial vehicle control networks or private networks represent 5G products sold to business, commercial, government or other organization buyers, not direct to consumers, even if used to create products sold to consumers.
Hence the widespread belief that most of the incremental 5G revenue will come from enterprise use cases. So how big is that potential change? The denominator in this case is the installed base of spending on mobile services. The numerator is the spending delta created by enterprise 5G.
Historically, in the fixed networks segment of the industry, “business customer” revenues sometimes represented as much as 30 percent to 40 percent of tier-one provider total revenues, though an outsized share of actual telco profits.
Smaller consumer-focused service providers might have earned less, while specialized business-focused providers might have earned substantially all revenue from business customers.
“Large, integrated operators such as AT&T, Vodafone and Telstra typically see B2B revenues contributing around 30 percent of overall revenues, while for smaller, mobile-only or fixed-only operators, it is closer to 15 percent, Deloitte consultants have said.
So the issue is how much new 5G enterprise or business services can change the distribution of revenue sources, even if new 5G revenue streams are disproportionately generated by enterprise use cases.
Some believe the growth of enterprise fixed network revenue--for example-- could be in the seven-percent annual range through perhaps 2030. That is a good thing, of course. On the other hand, legacy products sold to enterprises also are expected to decline through 2030, perhaps to the tune of a negative 17 percent compound annual growth rate.
In that case, new use cases help offset legacy revenue declines, but the overall impact of new revenue sources is offset by legacy revenue declines. The same sort of process should happen in the mobility business.
Some believe 5G and related services supporting business customers could approach mobile internet revenues in magnitude. That would be significant indeed, as mobile data now represents half of total mobile revenue.
In turn, mobility services represent more than half of global telecom service provider revenues, and virtually all the revenue growth. IDATE estimates mobile drives 80 percent of revenue growth.
The point is that enterprise services and attendant revenue is viewed as so strategic because it is the way incremental new revenues can be wrung out of the mobile platform. Among the key issues is how much of that upside can come from connectivity services, as opposed to other roles in the ecosystem.
Some might argue that unless new roles are assumed by connectivity providers, even enterprise 5G might fail to replace half of total revenues over 10 years.
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