What is Driving 5G ARPU Upside?

If there seems to be an contradiction between the statements “most 5G launches are still lacking the use cases needed to truly highlight the value of 5G” and “early rollouts have emphasized and underlined the importance of the consumer market when it comes to monetizing 5G,” then something other than “new use cases” is driving revenue and “average revenue per user” trends.

One might argue that “faster access” is the difference. But in some markets--especially where 5G relies on low-band spectrum for coverage and millimeter wave for capacity--that advantage is not so meaningful. In countries where 5G rolled out using mid-band assets, the speed differentials are clear, compared to 4G. 

But it is arguable whether the faster speeds have dramatically changed user experience. 

Still, there are signs that 5G adoption has boosted ARPU. Some might point to higher data consumption as evidence of ARPU change, but, as always, usage and revenue are not related in any linear way. 

In South Korea, close to 30 percent of the country’s 5G mobile data traffic was created by only 11.3 percent of subscribers, Ericsson notes. 

As always, when multiple changes are at work, it is hard to pinpoint the specific contribution 5G usage plans are playing.  South Korean service providers have launched premium 5G plans which have increased revenues. 

In some cases, though, the incremental revenue is gained not especially by 5G speed advances but by enhanced roaming features, loyalty rewards, multi-device features and handset insurance that add value and revenue. 

South Korean telcos also are offering 5G-rich apps, including augmented reality 3D shopping, virtual reality cloud-gaming and other AR and VR apps that are bundled with 5G. 

So the issue is whether it is the actual speed increase supplied by 5G, or lower latency that has spurred adoption, or whether it is the wrap-around of other features that actually is driving the revenue upside. 

In the U.S. market, for example, some suppliers market 5G as a feature of unlimited usage plans that cost more than defined-usage plans. In other words, higher-cost plans offering unlimited usage might reasonably be the driver for more-costly 5G plan adoption, not the specific features of 5G as such.