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Ovum » Analyst opinion: 5G: It’s different this time

Analyst opinion: 5G: It’s different this time


Ovum view

Whenever there’s been a new “G” in the mobile industry (be it 2.5G, 3G, 3.5G or 4G), the performance improvements have been about speed and capacity. As such it has been relatively easy for the operator to understand the business benefits. 2.5G and 3G enabled email; 3.5G made the Internet usable on mobile devices; and 4G has been about mobile video and a consistent data experience.

But what about 5G? We are less than five years from the first 5G launches but we seem to be further away than ever in terms of agreeing what spectrum it will use, whether it will need a new air interface, and which applications it will support. It is hard to imagine that virtual and augmented reality – which some early 5G protagonists are touting as key 5G applications – are going to be enough to drive 5G investment decisions.

There are some important differences between the state of the mobile market now and the last time we were contemplating the next leap forward, when LTE was first demonstrated in 2007.

  • Most mobile broadband usage now, even on mobile phones, is over WiFi rather than cellular. As we look ahead to the Internet of Things (IoT), the likelihood is that the majority of connections will use WiFi or other technologies operating over unlicensed spectrum.
  • The increasing ubiquity of WiFi is pushing cellular out into the wider network. But the only available new spectrum for 5G is in higher frequencies more suited to indoor coverage.
  • Changes in the operator landscape mean that by 2020 many mobile operators will be parts of larger groups offering integrated services across consumer and enterprise markets. In 2007 most mobile operators were standalone businesses predominantly focused on consumers.

In the last year these changes have started to influence discussions around 5G. There is a recognition that 5G needs to operate in other parts of the radio spectrum. This could mean sharing spectrum with 4G or refarming 2G or 3G spectrum. Telecoms operators and their use of unlicensed spectrum is becoming a major discussion point. One technology under development is License Assisted Access (LAA), which uses unlicensed spectrum on the downlink in LTE networks. Meanwhile, Korean operator SK Telecom has a 5G vision for billions of IoT devices using unlicensed spectrum to connect into its 5G network that will offer benefits around quality of service and latency.

5G is increasingly being seen as a technology to support IoT. As such, the capabilities that 5G needs to deliver are changing. Improved latency is emerging as important a benefit as faster speeds. Concepts such as the industrial Internet and Industry 4.0 are emerging as hooks on which to hang the 5G business case.

The network vendors are doing most of the strategizing around 5G today. It has always been this way in the telecoms industry. However, whereas previous “next-G” discussions were based on a (sometimes) misguided belief that a new network technology will generate revenue growth, there is now a growing acceptance that it will (probably) not. Vendors are coming at 5G differently from before. It needs to be a technology designed to make operators more profitable – or at least, not less profitable.

This new reality is manifesting itself in discussions around which parts of the network need to be new rather than evolutions of existing networks. It may also influence discussions around where 5G is initially deployed in the radio spectrum. New spectrum will not come cheaply.

5G will create less of a capex bubble than previous generations of wireless technology because a greater proportion of the cost will come from software upgrades. Furthermore, the transition to 5G will be part of a bigger software-based evolution of telecoms networks. When it comes to understanding which (new) services 5G can support, Ovum’s advice is that operators start to involve more of the companies that will ultimately provide the end-user services to consumers and businesses – the likes of Amazon, Google, Facebook, IBM, and Oracle.

To find out more contact us here.