5G Speed: Different Product, Same Story

A recent study of 5G speeds by Opensignal found U.S. and U.K. speeds lagging those of several other countries that have deployed 5G. Some of the disparity in the U.S. market is based on the spectrum assets used to deploy 5G (low band and millimeter wave) rather than mid-band spectrum. 

source: Opensignal

But the “U.S. lags” story is quite typical. In fact, the “U.S. is behind” meme never goes away, where it comes to communications. The latest assertion in some quarters is that the United States is falling behind in 5G. That claim has been made many times about other key technologies and always has proven wrong.

In the past, it has been argued that the United States was behind, or falling behind, for use of mobile phones, smartphones, text messaging, broadband coverage, fiber to home, broadband speed or broadband price.

Consider voice adoption, where the best the United States ever ranked was about 15th globally, for teledensity (people provided with phone service). A couple of thoughts are worth keeping in mind. First, large countries always move slower than small countries or city-states, simply because construction of networks takes time and lots of capital. 

With the caveat that some rural and isolated locations never got fixed network phone service, not many would seriously argue that the supply or use of fixed network voice was an issue of any serious importance for the nation as a whole, though it is an issue for rural residents who cannot buy it.

Some even have argued the United States was falling behind in spectrum auctions. That seems almost silly given the amount of spectrum not being released for use in the U.S. market, roughly an order of magnitude more spectrum than previously available for mobile services. 

What such observations often miss is a highly dynamic environment, where apparently lagging metrics quickly are closed.

To be sure, adoption rates have sometimes lagged other regions. 

Some assertions are repeated so often they seem true. Among such statements are beliefs that U.S. internet access is slow and expensive, or that internet service providers have not managed to make gigabit speeds available on a widespread basis. In fact, gigabit coverage is about 80 percent, but take rates might be as low as two percent. 

Other statements, such as the claim that U.S. internet access prices or mobile prices are high, are not made in context, or qualified and adjusted for currency, local prices and incomes or other relevant inputs, including the comparison methodology itself. 

Both U.S. fixed network internet prices and U.S. mobile costs have dropped since 2000, for example. 

The bottom line is that it is quite typical for U.S. performance for almost any important new infrastructure-related technology to lag other nations. It never matters, in the end. Eventually, the U.S. ranks somewhere between 10th and 20th on any given measure of technology adoption. That has been the pattern since the time of analog voice. 

We often forget that six percent of the U.S. landmass is where most people live. About 94 percent of the land mass is unpopulated or lightly populated. And rural areas present the greatest challenge for deployment of communications facilities, or use of apps that require such facilities.

5G Value for Enterprises Based on Latency

With the caveat that industry professionals can be quite wrong about the future, there is a fairly substantial consensus on the value of 5G for end users. 

When asked to name the 5G use case with the strongest consumer appeal, over half (51 percent) of the respondents to a Telecoms.com survey chose “high speed mobile connectivity/fast internet access”. 

“5G-based fixed wireless access” was deemed to be the most-appealing consumer service, selected by 18 percent of respondents. So consumer value is really about fast internet access, with perhaps some nuances. 

When asked to select which technology will have the strongest appeal to business customers, 47 percent of survey respondents picked ultra-reliable low latency communications.

source: Telecoms.com 

Some 25 percent of the respondents believed massive machine type communications such as industrial internet of things. Also, 24 percent chose faster broadband. 

The value to mobile service providers might lie elsewhere. As was true for 4G, the strategic value of 5G might mostly be its ability to lower cost per bit, since service providers basically have to keep supplying more bandwidth at roughly equivalent prices. 

As a platform, 5G might prove most useful for enterprise and business services requiring either ultra-low latency or ultra-reliable performance. The ability of mobile operators to move into additional roles might determine how much incremental new revenue is generated by such use cases. 

In the consumer market, revenue upside might come from the way 5G is packaged. In the U.S. market, 5G requires purchase of unlimited usage plans, often priced higher than fixed usage plans, for example.

CBRS PAL Auction Ends

The Citizens Broadband Radio Service priority access license auction has ended. On a nationwide basis, licenses cost 21.6 cents per MHz-POP (MegaHertz per potential user). Prices in highly-populated counties were higher. 

Los Angeles county saw 53 cents per MHz-POP prices, while New York city saw prices of 62.7 cents per MHz-POP, for example. Prices in the District of Columbia reached $1.03 per MHz-POP. 

Those prices are important as the latest “comparable” prices that should influence prices in upcoming auctions for C-band spectrum, as spectrum is “real estate.” The rules of “location, location, location” apply: spectrum at 3.5 GHz is comparable to C-band spectrum at 4 GHz, in terms of propagation characteristics, bandwidth and amount of spectrum to be auctioned.

Wi-Fi Versus Mobile Internet Access Value Proposition is About to Change

Value propositions are a moving target. Consider Wi-Fi and mobile network speeds since the 3G era. In a number of countries where 5G is deployed, 5G offers much-faster speeds than Wi-Fi. That also was the case for 4G, since about 2018, Opensignal reported.

In 2008, Opensignal notes, Wi-Fi was faster than mobile almost all of the time, and had been since 2G and 3G. That was true of U.S. 4G and Wi-Fi speeds in 2014, for example. 

It is hard to remember, but the first Apple iPhone relied on 2G networks for internet access. When 3G was launched, people routinely switched back to Wi-Fi in public places, for example, as Wi-Fi was typically faster than 3G. 

Then there is cost per bit, which “always” has been higher for mobile, lower for fixed network access. 

Also, mobile data, up to this point, has cost much more than fixed network bandwidth, and public Wi-Fi cost was “essentially free.” If for no other reason, it continues to make sense to default to Wi-Fi, for reasons of cost (not depleting a mobile data usage allowance), if not speed advantages. 

source: Opensignal

All that appears likely to change as 5G networks are used to support home broadband services. Internet service providers have every incentive to price and package mobile-delivered home broadband at prices, terms and conditions similar to that offered by fixed network ISPs. 

That is a big change in value proposition for mobile-delivered home broadband.

What Comes Next When Mobility Declines?

What comes next as the core revenue driver after mobility reaches the declining phase of its life cycle? Though it might seem impossible, that will happen. We know this because the product life cycle works in networking and telecom as in all other industries. 

It also has happened before. Long distance revenue from businesses once provided all the profit allowing firms to provide universal service. Deregulation and competition undermined the business model. In a span of 20 years, mobility emerged as the global revenue driver in the place of voice. 

But mobility itself will saturate, with declining average revenue per user, as impossible as that might now seem. Whatever emerges as the replacement revenue driver will have to be big: very big. Nobody can yet be sure what comes next. But we will try and outline the range of possibilities at the PTC Academy. 

The PTC Academy provides training for mid-career professionals in telecom and networking who want exposure to “C-level” perspectives on core business issues from core business opportunities and threats and how those issues shape fundamental strategy and competitive response. 

The online course runs from 14 September to 30 September 2020 and offers 1.2 Continuing Education Units administered by the IACET-accredited continuing education provider.

At the completion of this course, participants will understand:

• Key business model changes in the telecom industry since deregulation and privatization

• Business models and revenue drivers in key industry segments

• The ways OTT apps and services shape provider strategy

• How the telecom ecosystem has changed since deregulation and Internet emergence

• How cloud computing and data centers shape the connectivity business

• How C-level executives can satisfy key stakeholders and constituencies while growing revenue

• Thinking like a top executive about revenue, competition, cost, innovation, and social responsibility

• Tips for making the transition from mid-level to C-suite

• How changes in regulation, consumer demand, technology, and the Internet shape the connectivity business.

My own content focuses on key business model challenges in the telecom industry, especially related to the core revenue model, competition and urgent future challenges; mobility and beyond, especially what the next big revenue drivers will be, after mobility enters its declining phase of the product life cycle. 

More information is here.

Near Term, 5G is About Capacity and Lower Cost per Bit

Despite lots of presently-hypothetical use cases, much of the early enterprise demand for 5G still relies on the traditional value of “more capacity.” 

New use cases will develop, but require the simultaneous availability of software, hardware, platforms and skills that can be deployed within the confines of existing firm budgets. So the value of many large venue 5G deployments is simply capacity. Sports and entertainment venues, college campuses or airports provide examples. 

In other cases the business case likely hinges on deployment of new applications that make use of 5G, including private 5G networks. Manufacturing plants, warehouses or enterprise headquarters locations might provide examples. 

None of that would be historically unusual. Since 3G, each successive mobile platform has been touted for its ability to support new applications. To be sure, new use cases did eventually develop. And one observation is likely apt: the more  futuristic apps did not actually develop within a decade of being proclaimed as possible. 

source: IEEE

Early on in the 3G era, video calling was a hoped-for new killer app. That did not happen. But it has become commonplace on 4G networks. In a similar way, content services were expected to flourish in the 3G era. That did not happen until 4G.

Mobile operators expected that video calling and movie downloading would be big killer apps for 3G. That did not happen until 4G, but even then, streaming replaced downloading as the use mode for entertainment video. 

Augmented reality apps were supposed to develop on 3G networks. That still has not happened.

In fact, many would find it hard to point to a killer app for 3G. But mobile email and internet access, albeit at slow speeds, often are cited as 3G key apps. 4G has mostly given us the value of mobile internet and entertainment video. 

Eventually, new apps do emerge, but often not the predicted apps. The near term business case always involves the simple matter of increasing capacity while lowering the cost per bit. And some might say the early value of 4G was just speed.  

You might argue text messaging was the new killer use case for 2G. You might suggest mobile email and Internet access was the legacy of 3G. Video entertainment is developing as the singular new app that defines 4G.

In fact, some would argue the killer app for 3G was mobile access to email (remember BlackBerry). Others imagined 3G mobile phones would coordinate with traffic cameras to suggest the best routes for drivers to take, while 3G camera phones allowed photos to be sent websites. Music and video streaming were other potential killer apps that became widespread realities in the 4G era, however, not in the 3G era. 

Indeed, some even argued that consumers did not need the bandwidth 3G would provide. That arguably was not claimed as the 4G era approached. 

As 4G was becoming a reality, some argued 4G killer apps might include live mobile video, mobile gaming, cloud-based apps, navigation with augmented reality or telemedicine might develop as killer apps. Several of those predictions arguably proved correct, especially the usefulness of cloud apps of all sorts. 

Apps expected for 3G actually appeared in 4G, it is safe to say. And virtually nobody seems to have anticipated apps such as Uber.

U.S. Mobile Customers Appear Less Satisfied than U.K. Customers

Customer satisfaction typically is thought of as a predictor of customer buying intentions and loyalty, propensity to desert one provider in favor of another, account longevity, revenue per relationship and financial performance. 

“Customer satisfaction is a leading indicator of company financial performance,” says the American Customer Satisfaction Index. “Stocks of companies with high ACSI scores tend to do better than those of companies with low scores.” 

That may be less valid than most assume, but to the extent that customer satisfaction is a useful metric, U.K. communications service customers might be more satisfied than U.S. customers. 

A survey by Ofcom found that, on average, 85 percent of broadband customers were satisfied, the highest scores gotten by plusnet, the lowest by TalkTalk.  

source: Ofcom

The American Customer Satisfaction Index is a long-running effort to measure customer satisfaction across many industries. But one finding has not, in my experience, changed very much: every communications service sold to consumers ranks at the bottom of industry rankings, with the exception of mobile phone services and video streaming subscriptions, which manage to score in the bottom third of all industries. 

source: ACSI

The ACSI scores are based on a scale of 100, so the figures might be comparable to Ofcom’s rankings, also based on a top score of 100. Other studies also confirm the relatively low satisfaction of mobile services in the recent past. 

source: 451 Alliance

After 63 Rounds, CBRS PAL Licenses Range from $1.03 per MHz-POP to Just 5 Cents per MHz-POP

After Round 63, Citizens Broadband Radio Service priority access licenses vary significantly by state. Prices in the District of Columbia are highest, at about $1.03 per MHz-POP, while in Alabama prices are only 23 cents per MHz-POP. 

As you would guess, it often is the most-populated states that have higher prices. But not always. Nevada is not hugely urban or heavily populated. Neither is Hawaii or Arizona. But all three have prices in the top-10 of U.S. states. 

state_abbreviation	population	supply	aggregate_demand	price_mhz_pop
DC	601,723	7	7	$1.029773
CA	37,253,956	406	418	$0.421844
IL	12,830,632	714	711	$0.377003
NV	2,700,551	119	110	$0.360040
AZ	6,392,017	105	109	$0.347375
HI	1,360,301	35	35	$0.326045
NY	19,378,102	434	315	$0.295139
TX	25,145,561	1,778	1,722	$0.277574
RI	1,052,567	35	36	$0.255759
AL	4,779,736	469	440	$0.237931

source: Sasha Javid

As spectrum is real estate, some of the same rules of value apply: “location, location, location.” That applies both to geography (population density matters) and frequency (lower frequencies cost more, very-high frequencies cost less, mid-band is in the middle.. 

The CBRS PAL auction of licenses at 3.5 GHz offers the latest market transaction data of importance for estimating 4-GHz C-band spectrum prices.