By the end of June there were more than 90 commercial 5G networks deployed but there are still challenges in identifying the best opportunities for B2B and B2C value creation. Deployments are proceeding well, Phil Kendall, the executive director of the Service Provider Group at Strategy Analytics, told participants at Huawei’s Better World Summit, pointing out that, at a similar time in 4G’s life, there were only 27 commercial networks deployed and, at the same stage in 3G, there were only 11 commercial networks.
“South Korea and China dominate 5G adoption today as 5G smartphone availability in particular grows,” said Kendall. “In South Korea, 10% of subscribers and 27% of traffic was on 5G by May. In the first quarter, average 5G data use was 27 gigabytes per month compared to 11 gigabytes on 4G. In China very strong growth in 5G package subscriptions have, in part, been a result of 4G subscribers taking new cheaper 5G plans, rather than actually migrating to 5G networks. However 5G device connections are starting to catch up as the retail environment improves.”
Kendall also highlighted Finnish operator Elisa’s aggressive and early launch of 5G in its home market. The deployment and the device ranging the operator has achieved has helped it reverse the slow downward trend in its postpaid market share over last year. “Operators need to deploy networks in a way that allows them to address a broad set of business opportunities for 5G,” said Kendall. “There's no one-size-fits-all in terms of what needs to go into a successful 5G network.”
That diversity in deployment approaches is affected by regulation, spectrum availability, GDP and the models of a market’s existing players. T-Mobile USA, for example, has a layer cake approach across millimetre wave, mid band and low band spectrum. That is a long term model many will move to, maximizing coverage and capacity to meet diverse business model needs.
“Within that layer cake we see low band spectrum as critical,” added Kendall. “It will also be a key complementary alternative for early 5G launches. Vodafone Ziggo, has launched 5G in low band spectrum while it waits for mid-band auctions in The Netherlands and, in Switzerland, Swisscom is using dynamic spectrum sharing (DSS) in low bands to deliver 5g coverage while keeping to strict electro-magnetic field (EMF) limits.”
Wider availability of 5G devices will help stimulate user uptake. “As we move towards the end of 2020, the 5G iPhone combined with falling 5G smartphone prices will start to make 5G a default purchase for some mass market segments,” said Kendall. “In this scenario, good 5G coverage will be critical for operators and low band spectrum will be critical for that good 5G coverage.”
Kendall then split the opportunities into B2B and B2C categories. “We see opportunities for operators in B2B connectivity, remote working, IoT and security and operators need to develop new business models and solutions along with pricing that takes account of new 5G dimensions and performance characteristics,” he said. “Operators should prioritise 5G B2B services targeting core enterprise digital transformation needs. We're seeing a number of 5G operators target B2B connectivity as part of their enterprise services portfolio, either for enhanced connectivity or for mobile backup or temporary site connections. There are also opportunities in supporting the demands for improved remote worker productivity through more robust connectivity and more smart devices.”
Strategy Analytics expects 5G to support more complex use cases built around high performance requirements as it matures. Examples include the automated processes of mission critical environments, or applications requiring precise indoor location or large uplink bandwidth. Some of these need to wait for 5G enhancements in order to meet strict SLA requirements.
In the B2C market, the drivers and opportunities are different. “Building 5G consumer value propositions will incorporate an incentive to pay more for a better experience across connectivity and content,” explained Kendall. “Prioritising optimised and differentiated content to showcase 5G capabilities, drive demand and stimulate upsell. 5G pricing must contain more elements to enable operators to layer value and upselling to 5G connectivity and related services and to increase stickiness and reduce churn.”
To succeed with consumers, operators need to build compelling content and service bundles to stimulate demand, encourage higher spend and showcase 5G capabilities. Content strategies have, Kendall said, so far generally involved prioritising one or more of these three categories: cloud gaming, virtual and augmented reality content and high definition video streaming, either bundling services into 5G plans or offering supplementary subscriptions.
“Multiple business models will need to be brought into play and partnerships with established providers such as Netflix, YouTube or Microsoft Xbox will be needed,” said Kendall. “5G pricing strategies need to meet the diverse requirements of target segments. We continue to see growth from the availability of unlimited data plans and these will be important to stimulate use of hero services that may have high bandwidth requirements such as cloud gaming or your HD video.”
