5G: An Analyst Perspective

• Mobile operators under pressure to seek out new revenue streams derived from innovative new services
• It is clear that there will be some fundamental shifts in the industry as a result of 5G

5G is clearly on its way. It is just a matter of time. It may be closer to 2019-2020 for some but for others, it may be 2023-2025 before it materializes. Meanwhile, there is a dizzying pace of updates in the media and at conferences with mobile network infrastructure vendors and mobile network operators doing their best to leverage on the limelight to showcase technological developments and trial updates. Interviewing mobile network operators across Asia Pacific, it quickly became evident that 5G will be a big thing not only within developed countries such as South Korea and Japan but also within developing countries such as China and India.

A lot of time and effort is being invested on 5G and the reason becomes apparent if one takes into account the current backdrop. In all the countries that are front runners of 5G in Asia Pacific, 5G is benefiting from local government support coupled with local demand or at least the potential for demand for 5G services.

The demand may be incentive or market driven. The drive for governments and industry regulators to push for faster internet speeds through 5G comes from the angle of its potential contribution towards a country’s economic growth and digital economy transformation, which is always a good reason.

The perspective of the mobile network operator is slightly different. The scenario for them is such that markets are saturating, competition is increasing and revenues and/or profitability especially from traditional core services is declining.

Mobile network operators are under pressure to seek out new revenue streams that can be derived from innovative new services and the reduction in cost to serve. Their interest in 5G stems from the fundamental shift in communication network architectures that will trigger a quicker transition to distributed, cloud native networks that leverage on NFV, SDN and MEC to reduce cost to serve and improve on efficiency and profitability for mobile network operators.

Further with 5G offering latency below 1ms and larger bandwidths, mobile networks can gain an edge over fibre networks and regain competitiveness. It is no doubt that 5G is perceived as a positive disruption. However, justifying the investment case for 5G may not be straightforward particularly taking into account that 5G would be an add-on network that is required only if there demand for 5G services that cannot be addressed with 4G networks. Even trickier if the mobile network operator is in the developing world where the demand for 5G services is finite or limited.

Another key issue lies in fitting 5G efficiently into mobile network operator’s existing networks i.e. 2G/3G/4G, and services portfolio while managing the necessary customer migration.

The doubling of sites with 5G will require mobile network operators to turn to site diversification and more efficient use of network assets e.g. spectrum and network. It is for this reason that spectrum and network sharing may feature in 5G and is most suited for mobile network operators in developing countries where the demand for 5G services is finite and limited.

In fact, mobile network operators in these countries may need to share spectrum and network in order to launch 5G and regulators may mandate this in order to introduce 5G to their markets earlier. Some mobile network operators may go a step further and even divest their network altogether to focus on services.

In summary, without even going into the details, it is clear that there will be some fundamental shifts in the industry as a result of 5G. As internet speeds go up and data costs come down, the entire industry will transform and new industries will emerge. All is well and good until one questions whether mobile network operators are really considering the feasibility of an individual approach to 5G. Maybe a combined approach might be the way forward.

Quah Mei Lee is the Industry Principal at Frost & Sullivan

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