Is 5G on Track?

5G adoption seems to be following the standard S curve of new technology embrace, if Morgan Stanley is correct. The S curve and other models suggest adoption hits an inflection point when about 10 percent of people have started using an innovation. 

South Korea 5G adoption has passed the 11 percent point. “Despite concerns related to perceived network speeds and a lack of killer apps, take-up of 5G services has been robust in the two earliest markets,” says Morgan Stanley. “South Korea had 8.7 million 5G subscriptions as of August (2021), already accounting for approximately 15 percent of the country's handset base.”

Assuming China has more than 300 million 5G subscribers and 1.6 billion total mobile accounts, 5G adoption in China possibly has reached 19 percent, by some accounts.  “We estimate that China had more than 100 million 5G subscriptions as of August, accounting for roughly 10 percent of the country's subscriber base in just 10 months since 5G launched,” notes Morgan Stanley. 

Significantly, though many fear 5G accounts will have a price premium, early adoption in lead markets has come with increases in average price per account. “Customers seem to understand the value proposition—more data at faster download speeds, but at a lower unit price—and wireless operators are seeing 10 percent to 30 percent increases in average revenue per user, as subscribers upgrade to 5G,” says Morgan Stanley. 

In some cases, price increases come about because 5G is offered in tandem with unlimited data usage or other values, such as free streaming service access. 

New use cases will take longer to emerge, as has been the case for 3G and 4G. Though new use cases did develop, many innovations lagged a generation. 

We might argue that mobile web access or email were the use cases that 3G enabled distinctly from 2G. 

Anecdotally, I can remember the day 4G smartphones became truly useful. Many would argue that mobile video or mobile apps (especially social media) were the signature 4G development. As a traveling worker, the ability to tether to 4G at workable speeds--compared to 3G--was compelling. 

As a mobile device, 4G became more valuable when Google Maps offered “no additional fee” turn-by-turn navigation, obviating the need for a separate Garmin GPS device with an attached recurring subscription.

Later, Uber, Lyft and ridesharing added more value, building on Google Maps. For some consumers mobile entertainment video might have been the value driver. 

Not to be discounted is the ability to use mobile internet access as a substitute for fixed network access. Already, 15 percent to 20 percent of homes are mobile-only for internet access. That should increase in the future, as mobile speeds reach terabit levels.  

On occasion, device demand also has changed because some new use case became compelling. Many business users could tell you they chose to use a Research in Motion BlackBerry in the 3G era because it offered the best mobile email experience.

Many of those same users might also tell you they switched away to other devices that provided a better web experience. That arguably was true both of moves away from BlackBerry and the Nokia Symbian operating system in the 4G era, precisely because web browsing had become the crucial use case, not email access. 

The key point might be that, so far, lead users understand the early value proposition of faster speeds and lower unit costs; unlimited usage allowances or bundled content features. 

Sometimes “speed” is all the “killer app” required. Mobile substitution; tethering, social media, email, turn-by-turn navigation; music player functionality all can be killer apps for some users. 

Such trends only emerge after some time and higher adoption. Despite skepticism, 5G seems to be on track in that regard.