CO - Techinnovation

The business case for 5G

The business case for 5G

As of 2018 ,33 MNOs have been involved in 5G trials within Asia Pacific, accounting for 44% of 77 trials globally. Mobile operators are looking with mixed feelings of hope and fear .Most spectrum auction dates are in 2020, unlikely for 5G to be roll out commercially in the same year. Developed countries such as Korea, Japan and Australia, plan to roll out 5G by 2020. While other APAC countries the roll out may be much later.

So what Is about 5G which makes it a different proposition from the previous generational shifts -2G->3G or 3G->4G?

I do agree its an unfair comparison .We have to be mindful, that each shift in these technologies has to be considered given the conditions prevalent in that generation. But 5G is a fundamental shift to previous generations wrt latency, data rate, and handling of multiple devices.

So what sets 5G apart ?

The answer is in the new use cases 5G allows Service Providers to think about : These use cases are exciting from the opportunities 5G opens up for Service Providers esp from enterprise use case perspective.

Use case 1 – Smart city

One big use case which 5G opens up is arguably the biggest opportunity for Service providers in the next half a decade. APAC is a hub for Smart city projects with more than 140 Smart city projects being announced. While many of these projects undeniably are still at Concept /Roadmap stage but the agencies in most countries are moving fast 5G networks though not essential for some of these Smart city use cases do open up a faster and a more cost effective use cases. The most immediate /early impact areas will be Smart Connectivity , Smart Living and Smart mobility.

Use case 2 – IoT

Connectivity is the backbone of most of the “smart” initiatives and devices, enabling different components of IoT infrastructure like sensors, broadband networks, datacenters and platforms for data aggregation and analysis to continually communicate with one another. It is only when robust connectivity networks are in place that IoT assets can function to their full potential, given how much they rely on the underlying network infrastructure to deliver real-time data and execute timely requests.

Connectivity has grown rapidly in recent years, and is projected to continue growing strongly into the future. For example, when we examine the cellular Internet of Things (IoT) market in terms of the number of global connections, there were 798.6 million cellular IoT connections in 2018, and that is forecasted to grow to over 3,145.5 million connections in 2024 at a CAGR of 25.8 percent.[i] The adoption has been accelerated by the falling costs of sensors and data processing, and this drives IoT devices to be installed more extensively. Smart city development is directly accelerated.

Use case 3 – New vertical opportunities e.g. Automotive

5G Standardization—5GAA the First Vertical Association

The 5G Automotive Association (5GAA) is a global, cross-industry organization of companies from the automotive, technology, and telecommunications industries (ICT), working together to develop end-to-end solutions for future mobility and transportation services.

Created on September 2016, the 5GAA unites a large member base, including 8 founding members: AUDI AG, BMW Group, Daimler AG, Ericsson, Huawei, Intel, Nokia, and Qualcomm Incorporated.

Since its inception, 5GAA has rapidly expanded to include key players with a global footprint in the automotive, technology and telecommunications industries. This includes automotive manufacturers, tier-1 suppliers, chipset/communication system providers, mobile operators and infrastructure vendors.

A big mind shift for Service Providers will be the shift in focus from Consumers to Enterprise.and vertical strategies. While many Service Providers have already started this shift in focus but 5G would force a paradigm shift in the revenue/business models for Service Providers.

So 5G is a generation shift and opens up new use cases and revenue models , What is the catch ?

A big risk for 5G is the Business case with yet to be determined overall investments required

Risk factor 1 – Investment

Pricing for 5G equipment by mobile network equipment vendors are yet to be released, but preliminary research uncovered some estimates and the Spectrum costs which will be a huge investment. This is a big red flag in many of the developing economies where the Operators are still trying to recoup the break even from previous 3G/4G investments. In countries like Thailand operators have already walked away from Spectrum Auctions last year forcing regulators to relook at the base price and future Spectrum auctions roadmap. This is a warning bell for regulators across to stop regarding Spectrum as a free cash reserve for government. Regulators/agencies will have to work with Service providers to enable a viable business value proposition.

Risk factor 2 – The complexity of Spectrum variance

Again can look back at my developer days 15 years back when we used to dread the complexity of 2-3 bands for 3G then for the complexity it opened up on the RNCs as well as device layer complexity. (Anyone remembers the issue…of Blind spot for 3G handover !!.).

Agreed that now the issues on multiband spectrum switchover has been addressed , we have had 2 generations ( Technology generations – 3G and 4G ) of learning to work with , manage and innovate on the complexities of multiple spectrum ( and maybe developers have also become way smarter ).

But the sheer range of the spectrum choices ( sub 3 GHz to 80 GHz + ) is onfounding. Most vendors will do the lab trials across spectrum but I am sure actual commercial launches will open up various real time baffling complexities for the Telcos.

Risk factor 3 – The elephant in the room : Security !!!

The other big aspect which Service Providers have not thought through is the Security risk. 5G leads to new challenges for securing traditional Service Provider environments. The use cases for 5G esp on IoT/Connected ecosystem esp in the Enterprise context make cyber-physical security threats even more difficult to detect and remediate. So Service Providers need a different mindset and approach to Security in the new 5G world

  • Ajay Sunder
    Ajay Sunder
    Vice President - Head of Digital Transformation Frost & Sullivan

    Ajay Sunder, Vice President- Digital Transformation, Frost & Sullivan has 12 years of consulting / investment expertise across South East Asia. Prior to Frost & Sullivan, he worked as Investment Manager with New Zealand Trade & Enterprise, the economic development agency for New Zealand in promoting investments in ICT sector and raising Capital for the New Zealand tech start-ups and also Worked as Senior Telecom Engineer with Hughes Software Systems.

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