Though we are early in its life cycle, some argue 5G remains “revolutionary,” a “transformative leap” that will “reshape” connectivity. Others say it is a disappointment, either as a driver of near-term enterprise use cases, or as an enabler of higher-value, higher-revenue consumer mobile services.
The eventual “truth” is likely to be far more nuanced. Some valuable new lines of business eventually could emerge. By design, 5G supports device density quite a bit higher than was available on 4G or earlier networks. By design, 5G supports network slicing, which enables private networks with some quality of service features.
But 5G was always going to be a bit of a disappointment for most consumer accounts, which drive roughly 60 percent of total mobile operator revenues, for reasons related to the dynamics of all internet access and transport services.
At a high level, demand for data consumption does not have a revenue elasticity that matches the consumption elasticity. In other words, mobile and fixed network operators cannot assume that increases in supply will produce increases in average revenue per unit that match the rate of consumption.
To be sure, typical recurring charges for home broadband, for example, have increased since 1990, and access speeds for home broadband have risen as well. The cost to supply, on a per-unit basis, arguably is less important than the ability to charge more for higher consumption or higher speed.
In the U.S. home broadband market, for example, per unit prices have plummeted, but typical home broadband speeds have grown by an order of magnitude about every decade. Retail prices for stand-alone home broadband have not increased that fast, taking five decades to grow an order of magnitude.
The key business takeaway is that supplied capacity must continue to increase, but will happen faster than price increases to match.
Mobile operators have arguably had better outcomes where it comes to capacity supply and retail prices. In the U.S. market, it has taken three decades for prices to increase by an order of magnitude, as capabilities have grown three orders of magnitude.
For such reasons alone, revenue expectations for faster mobile or fixed network internet access are likely to remain challenging. The argument that 5G would bring significantly-higher revenues, in the form of the ability to “charge more” for access speed, always was going to be quite difficult.
It remains to be seen how much incremental new revenue might be created by internet of things connections, private networks or edge computing, the services most-often cited as “new” enterprise features of 5G.
As it has happened, an unexpected “new” revenue source of some significant magnitude--in the form of 5G fixed wireless for home broadband--has developed rather quickly.
Whether one views such new revenue sources as “revolutionary” or “merely” significant is the issue. Still, the growth of 5G fixed wireless for home broadband clearly is important for contestants in the home broadband space.
And 5G fixed wireless remains, at the moment, the clearest “new” revenue source for mobile operators. It always is conceivable that other enterprise-focused revenue streams will emerge as well, though the magnitude of those revenue streams remains more uncertain.
The point is that we likely err when arguing either for “revolutionary” or “disappointing” outcomes for 5G. We still are early in global deployment. New revenue sources generally take time to develop.
But 5G remains vitally important for other reasons. All internet access providers, all data transport providers and data centers must increase capacity on a sustained basis. Each new mobile generation is the way that capacity increase happens.
Mobile operators may indeed be disappointed at the revenue outcomes from 5G so far. But 5G is essential for protecting the value of the business, as will be true of 6G and subsequent platforms.
“You get to keep your business” might sound like a rather-trivial outcome. It is not.
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