5G Adoption in Germany Might Lag, and Not Because There is No Coverage

It actually is not so surprising that 5G demand is low in Germany, Austria and Switzerland. Even 4G has been less popular in Germany, for example. 

source: Statista

In 2019, for example, a study by Opensignal found that as many as half of German subscriber identity modules (mobile accounts) are not enabled for 4G service.

According to Opensignal, perhaps 81 percent of those non-users have for some reason elected not to buy  4G service. According to Germany’s Federal Network Agency (Bundesnetzagentur),  at the end of 2018, there were 107.5m active SIM cards in Germany (excluding M2M and IoT cards), but only 50.5m 4G/LTE SIM cards in active use. This would indicate that roughly half of the active SIM cards were not LTE-enabled

According to Opensignal, 81.4 percent of users that have never connected to 4G had a 4G-capable phone and spent time in 4G-covered areas. “These users likely did not upgrade to a 4G subscription or have disabled 4G connections on their phones,” says Opensignal.

As always, consumer adoption of next-generation network services hinges on the perception of value. If 4G provides an example, 5G adoption might lag in Germany.

Does Mobile Experience Inform AI Development?

Does our experience with mobile computing have relevance for our predictions about artificial intelligence? Possibly. 

Initially, mobile internet, for example, was sort of a “mobile version” of the desktop experience, allowing users to keep doing things they were doing at their desks. Then we moved into an era where the mobile device was the preferred device for many use cases, including photo sharing and social media. 

The proliferation of mobile apps was a characteristic of that era, where hotel check-in, for example, was expected to be invoked on a mobile device. 

Now there are many use cases where mobile was itself the native environment, preferred to desktop use cases which do not work as well, if at all.  Turn-by-turn driving instructions or ride-hailing services provide examples. 

source: Medium 

The difference in the case of AI is that development has not been strictly linear. At least in terms of expectations, we have moved through alternating periods where expectations were greater or lesser. 

It might be quite fair to say that interest in the near-term value of artificial intelligence has moved through periods of inflated expectations before, even if we are at present in a period of high anticipation. 

source: Saegus 

Historically, interest in the immediate value of artificial intelligence has waxed and waned. 

source: Medium

Disaggregation Benefits App Developers, So Why Aggregate?

Typically aggressive marketing from T-Mobile. There may well be ways to make incorporation of 5G access easier for app developers. But upside is limited. By definition, apps are now designed to be independent of internet platforms. No app developer requires the permission of an access provider to reach users and customers. 

As a deployment matter, tighter integration might make sense for private network apps or use cases where one wishes to use the public network for some reasons, but confine data to the local network for other reasons. It is not clear how much more support needs to be provided, in that sense. 

How much easier can it be for developers to create apps that run over 5G? 

How Much B2B Revenue Will 5G Really Generate?

When one hears observers speculating about 5G revenue growth, business or enterprise revenues always loom large. What is less clear is the meaning of that observation. 

It might mean that new use cases develop mostly in the enterprise segment, but that total revenue remains generated by the consumer segment. It could mean the historic mix of revenues changes, and that business revenue becomes a larger percentage of total.

Globally, revenue amounts and growth are led by mobility services, and most of that is earned from consumers rather than businesses. But one constantly hears the argument that 5G is going to be different, because of the internet of things, edge computing or private networks. 

Just how different is the issue. 

source: Ovum 

It never is completely clear whether 5G produces, or can produce, enterprise revenues fast enough to change the historic share of revenue in fixed or mobile segments of the business. 

It is easy enough to find projections of total mobile connections that suggest sensors will outnumber phone users by quite a wide margin. But connections are not directly related to revenue on a one-for-one basis, as IoT connections generate revenue an order of magnitude or sometimes two orders of magnitude less than phone accounts. 

source: Strategy Analytics 

Also, many IoT connections will not directly use new wide area networks for access. Instead, local area connections of various types might actually predominate. Ericsson, for example, has estimated that about 15 percent of IoT devices will use mobile networks for connectivity. 

source: Ericsson 

In fact, that seems relatively unlikely, Rather, the emphasis on enterprise revenues typically refers to incremental growth. Some estimate business revenues represent only about 25 percent of total revenues. In some markets business revenue might reach close to 40 percent. 

source: TM Forum 

For a decade or so, service providers also have been urged to consider a range of changes in their operations, from separating retail and network functions to simplifying retail offers. Rarely is specific strategic advice given to emphasize business customer connectivity revenue over consumer revenue sources. 

Service providers are, of course, encouraged to explore new roles and revenues in internet of things, private networks or edge computing, all of which might fall under the “explore market adjacencies” objective. 

source: McKinsey 

It seems unlikely to me that new business segment revenues are going to be substantial enough to fundamentally change revenue dynamics that have most of the total revenue being generated by consumers using phones.

Technological Determinism and Mobile Generations

Technological determinism is a well-attested approach to describing why change happens. Broadly, the thinking has been that technology drives social and cultural change.  As applied to business and economics, we might postulate that technological determinism explains why industries grow and die; products get adopted or discarded. 

In a sense, we might view the “broadband drives economic growth” assumption as a form of technological determinism, in the same way that the invention of the wheel is said to have revolutionized human mobility, allowing humans to travel greater distances and carry greater loads with them. 

The invention of language, ironworking, double-entry bookkeeping and the steam engine are cited as other examples. As always, we might err in trying to reduce highly-complex changes to a single source of causation. Even important innovations such as the printing press have impact based on a variety of other underlying trends, all operating simultaneously.

So we might argue that the way we code symbols on various mobile networks explains why 3G was replaced  by 4G, or 4G replaced by 5G. It is more complicated than that. 2G mobile networks used either frequency division or time division. 3G switched to code division or used time-division-based GSM.   

4G substituted orthogonal frequency division multiplexing. So we might infer that the technology change drove the business change. 

source: Freethink 

It is more logical to argue that business changes drove the technology innovations. As use of mobile phones became mainstream in the 2G era, usage grew, which necessitated additional capacity on the supply side. 

Mobile operators responded by increasing the effective use of spectrum by moving to smaller cells. Shrinking cell diameter by 50 percent boosted spectrum reuse by about four times. Assignment of additional spectrum has been the other big driver of capacity increase, though.

But Moore’s Law also plays a role. With each passing decade, computing and storage costs fall by more than an order of magnitude. As a practical matter, that means complex computational tasks are cheaper to execute. 

So each generation of networks has been able to use more-complex signal processing to boost effective capacity. Some might be tempted to argue that Moore’s Law, therefore, is an example of technological determinism. 

It is complicated, but the driver has more to do with the growing use of mobility services and use of  the internet and its apps that create the demand for more capacity, which in turn drives the search for more-effective air interfaces and multiplexing techniques. 

All of that is underpinned by the ability on the part of mobile service providers to generate more revenue from end user demand, which also rose. 

Technology often enables changes of a wider sort. But there is almost nothing “deterministic” about that process.

5G Battery Issues Might Be Mostly Due to Changes in User Behavior

All other things being equal, 5G probably will not drain your battery faster than did 4G. And that includes having one more radio to power. 

Of course, all things are often not equal. If your behavior changes, if you start using much more data, for any combination of reasons, then battery load might increase.  

According to Ericsson, 5G behavior does change. In addition to reducing Wi-Fi use--which automatically increases use of mobile networks-- early adopter 5G users also spend an average of two hours more on cloud gaming and one hour more on augmented reality (AR) apps per week compared to 4G users, says Ericsson. 

source: Ericsson 

But early adopters, by definition, do not behave as do mainstream users. They are heavier users. 

“On average one in five users upgrading to 5G have decreased Wi-Fi usage at home and other locations,” says Ericsson. Data plans also affect usage. 

“In markets like the United States, Taiwan, Switzerland, Finland and South Korea, where a higher proportion of 5G users are on unlimited plans, 22 percent have decreased their home Wi-Fi usage, while 10 percent claim they have stopped using Wi-Fi on smartphones after upgrading to 5G,” says Ericsson.

Households with three or more members actively using home broadband were more likely to report a decrease in their reliance on Wi-Fi once they upgraded to 5G, Ericsson reports. 

It remains to be seen how more-mainstream consumers behave. The point is that the observation that having 5G decreases battery life is mostly caused by a change in user behavior.

5G Advances Coming

It is easy enough to find fault with the availability, quality or value of 5G. But that will change over time. What we do not know yet is what use cases--intended or not--will arise during the 5G era that really do add value for consumers and businesses. 

Where Millimeter Wave Makes the Most Sense

Much debate remains about the value of millimeter wave spectrum as a platform for mobility service use cases. There is good reason to argue that millimeter wave spectrum will perhaps “never” be very useful for coverage. 

source: Bell Labs 

Nokia Bell Labs, for example, believes the highest near-term value for native mobile network access is coverage in indoor locations such as shopping malls where subscriber density is between 1,000 and 3,000. 

That is sound logic, as outdoor cell site usage also is highly concentrated. Where it comes to traffic, a highly-unequal pattern is seen, looking at daily use by any single person, for example. About half of all traffic happens from one cell site. 

About 80 percent of traffic uses just three cells. Some 20 percent of traffic then is carried by 28 different cells. 

According to Ericsson, five percent of cell sites support 25 percent of total traffic. About a quarter of sites handle half of all traffic, while 70 percent of sites are required for 25 percent of total traffic. 

“The top 30 percent of sites--including high- and medium-capacity sites--in the network account for 75 percent of the total traffic, whereas the bottom 70 percent of sites carry only 25 percent of the total network traffic,” Ericsson says. 

source: Ericsson 

That relates to use of millimeter wave spectrum as it will have the most value as a capacity tool for a relatively small number of cell sites. That does not preclude other uses as support for fixed wireless, but does suggest the nearer-term uses will be to augment capacity at about five percent of cell sites.

Millimeter Wave Eventually Becomes Essential for Some 5G, 6G and xG Use Cases

Cost per gigabyte always matters in the mobility business. Though the argument can be made that mobile bandwidth does not have to match that of the fixed networks, since mobile use cases generally require less bandwidth, "more" will always be needed.

Smaller cell sizes are a traditional way of increasing the intensity of use for any block of spectrum, but there remain physical limits to the capacity possible using low-band spectrum, and even mid-band spectrum, eventually. 

Millimeter wave and higher-frequency assets do have propagation issues. But aside from use of small cells, the capacity possible using millimeter wave and higher-frequency spectrum is very hard to match. 

"Four to Three" is Today's Question but "Three to Two" is Coming

Consolidation remains a key issue in the global mobile operator segment of the connectivity business. Profit pressures are likely to fuel more consolidation over the next decade. In most markets, smaller providers increasingly are unable to make a profit and are hard pressed to figure out ways to grow out of those positions. 

As a practical matter, policy debates about how to sustain competition in the mobility business while also sustaining the supply of services often focuses on whether the number of suppliers should be consolidated from four to three. 

Most of us forget how complicated the early mobile “phone” business was, and how much asset rearrangement produced the current pattern. Consider the changes between 2005 and 2015, alone. 

source: Fierce Wireless 

Over a longer period of time, the asset reshuffling was even more complex. 

source: Deadzones 

In the fixed networks business the dilemma is whether two viable facilities-based contestants can support themselves over the long term, or whether the only choice is a monopoly wholesale provider with retail competition. 

It’s complicated. Some 25 years ago, U.S. policymakers believed that two national mobile operators were providing too little in the way of competitive benefits, leading to the granting of additional spectrum to enable a third national competitor. 

Then market dynamics changed and a four-leader market developed, though a duopoly remained at the top of the market. With the merger of Sprint and T-Mobile, a three-supplier pattern now holds, though support for a fourth national provider (Dish Network) also was part of the deal-making around the merger. 

In the fixed network market, however, just two competitors have provided genuine innovation and competitive benefits for consumers, perhaps assisted in part by the use of different infrastructure solutions. U.S. cable operators found ways to boost internet access speeds faster, and cheaper, than telcos could, leading to an installed base share as high as 70 percent. 

Like the U.S. mobile industry, the fixed networks business was once more fragmented than at present. The AT&T breakup in 1984 resulted in eight large suppliers, AT&T in long distance and manufacturing and seven regional access companies. 

source: Hoot and Hollah 

These days, cable operators have emerged as key competitors for the remaining telcos, both in the fixed networks business and now are emerging as contestants in the mobility segment as well. 

source: The Wall Street Journal 

Where the wholesale, single-network framework has been used, competition has indeed developed as well, though one might argue that facilities-based competition tends to result in higher rates of innovation. 

In the wholesale framework every retailer has access to the same products, purchased wholesale at the same prices. There is some room for differentiation of offers, but not much based on infrastructure features. 

One certainty remains: a capital-intensive business such as “network access” tends to feature just a few providers. Periodic efforts to increase the number of suppliers always seems to result in reconsolidation. 

It remains to be seen how much consolidation can happen while still providing competitive benefits.

5G Device Sales Surpass 4G Sales in January 2022

With the caveat that device sales do not correlate fully with network connections, 5G device sales surpassed 4G device sales for the first time in January 2022. That is one more data point showing the 5G adoption process proceeding in the early stages of growth. 

source:Counterpoint Research 

Consumer product adoption typically follows an “S” curve. The S curve suggests that any new product has a nonlinear growth pattern.

Initial customers are the bleeding edge of people who “have to have the latest thing.” Somewhere around 10 percent adoption of households or users, an inflection point is reached and the product enters the growth phase where it becomes mainstream. 

The S curve describes product life cycles, suggests how business strategy changes depending on where on any single S curve a product happens to be, and has implications for innovation and start-up strategy as well. 

S curves explain overall market development, customer adoption, product usage by individual customers, sales productivity, developer productivity and sometimes investor interest. It often is used to describe adoption rates of new services and technologies, including the notion of non-linear change rates and inflection points in the adoption of consumer products and technologies.

source: Semantic Scholar 

Growth rates continue at high rates until about 85 percent adoption is reached.  

source: Wikipedia

The point is that 5G--despite complaints--is an innovation that so far follows the typical adoption pattern. The growing sales of 5G-enabled devices is part of that early development.

Consumer Product Adoption Patterns are the Same, for 5G or Anything Else

It is not hard to find critics citing slow 5G uptake as a problem. It might be more accurate to say 5G adoption is slower in some markets than in others. 

Though we are not yet at peak 4G in every market--4G subscriptions are growing in Latin America, Asia Pacific, CIS, MENA and Sub-Saharan Africa--we likely are past peak 4G in China, Europe and North America, according to GSMA estimates. 

source: GSMA 

Right now, by an old rule of thumb, 5G already has reached the point where consumer adoption has reached and passed a key inflection point. Generally speaking, once any popular consumer technology or product reaches 10 percent of households, the mass market begins to adopt as well. 

source: GSMA 

Consumer uptake in most markets has yet to reach the point where consumer adoption accelerates. So we can expect to see “5G has failed” storylines for some time. Not until consumer take rates approach 10 percent will we see an adoption inflection point for 5G. 

That is the pattern for virtually all successful consumer product innovations. 

source: GSMA 

source: LikeFolio 

If Monopoly is the Problem, is a Monopoly You Partly Own Any Better?

After facing mobile operator opposition to a new monopoly wholesale 5G network framework, the Malaysian government now says it will offer up to a 70 percent equity stake in the state-owned 5G wholesale network Digital Nasional Berhad to mobile operators.  

It does raise a question. If the perceived downside was a monopoly, is the monopoly better because some industry participants own it? 

Axiata Group's Celcom, DiGi.com Berhad and Maxis Berhad have expressed concern about monopoly supply of 5G network infrastructure as it could affect wholesale pricing power. 

For starters, DNB has been given 100 percent control of all 5G spectrum, so the licenses cannot be gotten by the mobile operators themselves. 

Globally, mobile operators have generally agreed that ownership of cell towers does not confer business advantage great enough to make ownership of such sites necessary. But very few mobile operators would tend to agree that access to spectrum licenses is similarly optional. 

In fact, the opposite view prevails: spectrum assets are the foundation of business strategy. 

Up to this point, the mobile operators have been able to build their own networks, which might arguably be more important than ownership of towers, but less vital than the right to control  specific blocks of spectrum. 

Sanctioned monopolies--public or private--typically exist because there is some market barrier to sustaining multiple suppliers. Roads, airports, seaports, electricity and natural gas supply, water and sewage systems provide obvious examples. In the decades prior to 1980, telecommunications was widely believed to be such a case. 

Virtually all telecom operations globally were official government monopolies, and often also operated directly by the government. All that began to change in the 1980s, gathered force globally in the 1990s and now competition is the common pattern in communications. 

Still, some believe growing capital investment, low growth and challenged profit margins will lead to a lessening of competition, at best, and re-monopolization at worst. And that is the issue in Malaysia.

That presumably also means future generations of mobile networks, such as 6G, will also be supplied as a monopoly by the DNB, even if ownership extends to some of the mobile service providers. 

If viability really is an issue, then a wholesale framework is better than a single-retail-provider framework. But where viability is not an immediate and clear issue, facilities-based competition likely will provide better consumer outcomes, economic theory suggests. 

In the end, the monopoly on spectrum licenses is arguably the biggest stumbling block.

Private 5G, IoT, Edge Computing Look Like "10% of Market" Opportunities for Telcos

No matter where one looks--private 5G networking; internet of things or edge computing--it seems observers believe system integrators, hyperscale cloud computing suppliers, solution specialists and infrastructure providers are positioned to reap about 90 percent of revenue in those businesses. 

Mobile platforms, for example,  are being leveraged for private networking. Non-carrier 5G and networking offerings are gaining momentum, says Dan Bieler, Forrester principal analyst. By about 2025, perhaps 90 percent of private 5G revenue will be earned by hyperscalers, system integrators and solution providers, not telcos, predicts TBR. 

source: TBR 

“All major hyperscalers showcased (at Mobile World Congress) how they are getting more heavily involved in the networking  arena,” says Bieler. 

Google is working on network slicing on Android 12 for providing access to Google Cloud. 

Microsoft’s Azure for operators is a 5G overlay on Azure cloud WAN where Microsoft’s internet backbone carries the customers’ traffic.

Amazon Web Services is offering  private 5G solutions and cloud WAN and edge application offerings. 

“A new threat for telcos is on the horizon,” says Bieler. Importantly, “the lines are blurring between cloud computing and networking.”

No matter the stumbles telcos routinely have had in attempting to diversify their business models, or wring more value out of their positions in value chains, such movement remains necessary, if exceedingly difficult. 

Estimates for the total 5G opportunity range from $4 trillion to $6 trillion by 2030, says Dan Bieler, Forrester principal analyst. But the connectivity part accounts for only five percent to 10 percent of this opportunity. 

You can see the pattern in forecasts of internet of things revenue in Africa and the Middle East. 

source: GlobalData 

Or look at “smart city”  IoT revenue by platform.

source: ABI Research 

In one sense, that should come as no surprise. Connectivity typically represents about 10 percent of market opportunity for any network-based product. The rest is devices, operating systems, platforms, enablement and applications. 

To gain more than about 10 percent of the revenue upside, connectivity providers have to move outside that role. That never has proven easy, or successful.