Will Enterprise 5G Really be the Growth Driver?

5G IoT often is touted as a growth opportunity for mobile service providers, and rightly so. Sensors, appliances and computers supporting internet of things applications will generally have to communicate. 

So the need for internet and data connectivity is not really an issue. How big the revenue opportunity might be is the key question.  

The core problem for new 5G services in the edge computing, private networks or internet of things areas, for example, is that these lines of business will contribute almost non-measurable revenue increases for most mobile operators in the near to medium term. And even long term, one might argue that substitute products will satisfy much of the demand. 

Keep in mind that mobile service represents about 75 percent of global service provider revenues. And that business is close to saturated in many markets.

The new revenue streams will be small in magnitude, while even a modest decline in a legacy service can--because of the larger size of the existing revenue streams--can pose big problems. 

Still, many service providers, for example, expect big opportunities in business services, which underpin hopes for private networks, edge computing and IoT. But revenue magnitudes matter.  

Mobile consumer revenue always drives the bulk of mobile operator service revenues. Fixed services add about 25 percent. And revenue growth is the key issue for both types of business. 

Multi-access edge computing has been touted as a new value driver and revenue source for access providers. But how big a contribution might be possible is the issue. No matter how big the recurring service revenue becomes, it seems likely that most of the revenue will be reaped by the same sorts of firms that presently offer cloud computing as a service, and not access providers. 

Private networks and internet of things connections always are said to be growth opportunities, and that remains correct. The only issue is “who” earns those revenues and “how much” revenue can be generated. 

No matter how important internet and data connections are for IoT sensors and devices, most of that demand will likely be fulfilled by rival platforms, not mobile networks. Wide area network connectivity will play a role, but possibly mostly as indirect transport for devices that connect locally using Wi-Fi and other wireless in-building and in-home technologies. 

And even when the mobile operator does provide the connections, per-device revenue is going to be a fraction of what we are accustomed to seeing from phone accounts. 

The point is that it will be hard for new 5G services for enterprises and business to move the service provider revenue needle.

Mobility Drives 75% of Service Provider Revenues, Essentially All Revenue Growth

Since mobile services now represent at least 75 percent of total industry service revenues, what happens in the mobility segment arguably drives overall revenue performance these days. But what happens in the fixed networks segment also matters, as fixed networks still represent about a quarter of industry revenues.

MTN Consulting says that service provider revenues declined about six percent in the third quarter of 2022, after a similar six-percent decline in revenues in the third quarter of 2021, “largely due to weak service revenues.”

Recurring service revenue in the third quarter of 2022 actually dropped about seven percent, while equipment revenues grew two percent (largely mobile device sales). But services account for nearly 90 percent of total revenues.

Nor are the quarterly figures unusual. And there is a major nuance to consider when looking at revenue growth. As global mobile subscriptions have added billions of new accounts, total global revenue has grown modestly.

But discrete service providers in many markets have actually seen negative revenue growth rates. The trend also is complicated because fixed network revenue growth became negative as early as 1990, as competition ate away at profit margins and gross revenue. The counterbalance has been the growth of newer sources such as mobile phone service and home broadband. In the U.S. market, the trend has been pronounced. 

Year	Fixed Network Revenue Growth %
1980	10.0
1981	9.0
1982	8.0
1983	7.0
1984	6.0
1985	5.0
1986	4.0
1987	3.0
1988	2.0
1989	1.0
1990	0.0
1991	-1.0
1992	-2.0
1993	-3.0
1994	-4.0
1995	-5.0
1996	-6.0
1997	-7.0
1998	-8.0
1999	-9.0
2000	-10.0
2001	-11.0
2002	-12.0
2003	-13.0
2004	-14.0
2005	-15.0
2006	-16.0
2007	-17.0
2008	-18.0
2009	-19.0
2010	-20.0
2011	-21.0
2012	-22.0
2013	-23.0
2014	-24.0
2015	-25.0
2016	-26.0
2017	-27.0
2018	-28.0
2019	-29.0
2020	-30.0
2021	-31.0
2022	-32.0
2023	-33.0

Looking at all fixed and mobile services, global growth probably will average up to two percent annually for the foreseeable future. Given the challenges in the fixed networks segment, it is reasonable to argue that overall revenue growth will be driven by the mobile segment.

How Big a Revenue Stream Might Mobile Operator APIs Represent?

Application programming interfaces (APIs) now are seen by many as a way to create new connectivity service provider revenue streams based on the licensing of access to network features.  But how big a revenue stream is possible. The answer depends partly on how we count such revenue and partly on the value developers see in using and paying for such APIs.  “How we count” matters.  Some forecasts seem to suggest very-large 2022 markets for APIs, but also seem to assume that the revenue is for the actual services or features an API might invoke, rather than the licensing revenue for using an API. That seems to be the case for forecasts of global telecom API revenue potential of “$209.17 billion in 2021,” expected to reach “$829.26 billion by 2030, growing at a CAGR of 16 percent during the forecast period, 2022-2030.” That clearly is based on an assumption of connectivity revenues using an API of some sort. 
http://dlvr.it/Sp9kRs

Faster Wi-Fi Matters: 50-60% Faster Speeds Without Outside Plant Investments

The gap between Ethernet and Wi-Fi performance inside homes and offices affects speed tests that generally are taken by mobile or untethered devices. In other words, the measured device-delivered speeds--typically measured on a Wi-Fi-connected device--are between 30 percent and 40 percent of the actual capacity delivered to the location by the internet service provider. 

source: Ookla 

So improving indoor Wi-Fi performance could, theoretically, boost an ISP’s speed performance by huge margins, perhaps in the range of 50 percent to 60 percent, without making any additional changes to the outside plant.