Sometimes 5G Take Rates are Not Driven by 5G

Some observers note that 5G demand at present is lower in Europe than in China or the United States. Ookla notes that uptake is driven by network coverage, device availability and use cases. 

Some of us might add “consumer demand” to that list, as there is evidence European consumers valued 4G less than costumers in other regions as well. The data even suggests 3G uptake, generally considered an area of European leadership, did not happen as fast as many assume, either. 

It is worth recalling that it took 10 years--in Europe--for 3G to reach adoption levels ranging from 30 percent to 60 percent. Take rates for 4G took a decade to reach 80 percent, and about five years to reach 50 percent adoption. 

Anecdotally, U.S. mobile service provider executives also seem more confident about 5G adoption than executives in other regions. Germany, for example, is one country where past adoption rates suggest customer demand is a bigger issue. 

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.

The point is that consumer demand plays a role in 5G adoption. Network coverage matters. Device availability and perceived value also matter. Use cases might matter and prices always matter. 

But demand in some markets might be higher or lower, for local reasons. Supply, in other words, is not the full driver of adoption. Demand also matters. It might seem unnecessary to argue that not every consumer will see value in 5G, but that will be the case. 

In some markets, the perception of value might even be driven by some considerations other than use cases or even speed and latency advantages. Sometimes 5G is a feature that will come with some other value driver, such as unlimited usage, higher value-price relationship or feature bundling (phone, apps, content). 

So 5G take rates are not all about “5G.” 5G take rates could be a consequence of some other value driver.