5G Revenue Model is Largely "Replace 4G"

Lots of mobile industry executives have worried about 5G monetization. The concern is real, but arguably exists because the payback from new capital investment to support dense backhaul networks and small cells is a concern, not the actual revenue from 5G. 

The industry-standard high-level argument has been that 5G would enable faster speeds, lower latency and support for dense networks of sensors.  All that is true, but arguably does not speak to the ways revenue will be earned in a concrete sense. 

source: STL Partners 

As a rule of thumb--as shocking as it might seem at first--service providers tend to replace about half of their existing revenue every decade. 5G provides one very concrete example, as did 2G, 3G and 4G. 

5G accounts will eventually replace half of all other accounts--primarily 4G but also 3G and 2G--over a decade. 

source: Statista 

The same process happened for analog mobile, 2G, 3G and 4G. By design, each successive mobile next-generation network displaces the older networks. A common pattern is for the latest generation to get about 50 percent share of accounts within five to six years. 

source: Strategy Analytics

The same process arguably also held for home broadband and fixed network internet access services. As typical speeds increase over time, customers upgrade. The product we called “dial-up internet access” was replaced by “broadband” access at single-digit or low double-digit rates. 

But speeds keep increasing. And customers gradually replace older services with newer services operating at higher speeds. 

source: Ofcom 

Access speeds  in the U.S. and other markets have grown by an order of magnitude (10x) every five years, since about 1990. 

source: iconnect007 

So, in a real sense, both mobile and fixed network internet service providers do replace at least half of all existing revenue every decade, looking only at a single product: consumer internet access. 

source: Openvault

For example, about a third of U.S. home broadband customers in early 2019 bought services operating at 100 Mbps to 150 Mbps. Two years later nearly half were buying services operating between 100 Mbps and 200 Mbps. 

source: Openvault  

In early 2019 some 54 percent of U.S. households purchased services operating at speeds less than 75 Mbps. By mid-2021, all customers buying services at less than 50 Mbps had fallen to 10.5 percent. 

Enterprise data services show the same trend. Where enterprises once bought X.25, they later switched to ISDN, also frame relay, then to T-carrier, followed by ATM, then witching to dedicated internet access and MPLS. Now many are moving to SD-WAN. 

The point is that the products enterprises purchased--and service providers sold--evolves over time. The same general pattern--replacement of half of current products--every decade also holds. 

So, to answer the question about where 5G revenue will come, it will mostly come from the same places it does now. There will be new revenue sources over the decade, including fixed wireless, sensor connections and edge computing revenues. But the mainstay will remain consumer and business mobile connections.