By James Joiner, Analyst, Core Mobility Research, GSMA Intelligence
North American operators home in on 5G opportunities
The arrival of 5G in North America brings the promise of an array of new services and applications, transforming networks and offering incremental revenue opportunities.
The region reached a major milestone in the first half of 2019, with the four largest US operators all launching mobile 5G services. As coverage expands across the US, and with Canada expecting to deploy 5G in 2020, 5G adoption is expected to gather pace in North America.
In its latest North America Mobile Economy report, GSMA Intelligence (GSMAi) predicts 24 per cent of connections on the continent will be on 5G networks at the end of 2022, rising to 46 per cent by 2025 (equivalent to 200 million 5G connections). Increasing levels of operator investment in networks will underpin the fast adoption of next generation services.
Mobile operators in the region are expected to invest $305 billion in 5G capex in the period to 2025, with 2019 the first year where 5G accounts for more than half of the figure, reflecting the shift from LTE. This trend will continue between 2020 and 2025, when 87 per cent of operator capex in the region is expected to be allocated to 5G.
New revenue opportunities
With this level of network investment, it is vital operators capture incremental revenue from 5G services. This will lead operators to pursue opportunities in new areas, such as the use of 5G as a last-mile technology to provide fixed broadband connectivity. Verizon is leading in this field, having launched 5G fixed wireless services in four cities in October 2018, with other US mobile operators set to follow. This will provide a platform to launch further in-home services, such as video streaming and smart home functions.
The 5G era will see operators increasingly target the enterprise sector, which represents the largest opportunity for incremental revenue. Initial enterprise deployments are likely to focus on faster data speeds, which US enterprises identified as the most compelling feature of 5G in GSMAi’s 2018 Enterprise Survey. As new 5G capabilities are added with the release of future standards, other features will increase in importance: for instance, 5G will support enhanced quality of service and lower latency, enabling applications that require ultra-reliable low-latency communication (URLLC) and time-sensitive networking.
To realise the 5G enterprise opportunity, operators need to accelerate their attempts to move beyond connectivity to capture value in adjacent areas. A key part of this will be expanding their role in the IoT value chain, with revenues for applications, platforms and services expected to grow by more than 20 per cent each year between 2018 and 2025 in the US. As a result, operators will add capabilities to offer additional IoT services including security, data analytics and professional services.
For instance, Sprint’s Curiosity platform aims to reach developers and enterprises by offering a range of IoT services across the connectivity and device management layers.
To meet the high performance requirements of many 5G services, computing power will need to be delivered to the extreme edge (within a user device or at user premises). Operators have been at the centre of discussions around the edge deployments because of their connectivity networks, including network assets at the edge. As the 5G era progresses, operators are likely to increase edge deployments. Verizon is already testing its own edge computing platform in New York City, where it has recorded sub-10 millisecond latency. Replicating this in other locations, however, will require considerable capex, which must be justified through new revenue or savings elsewhere.
Centralised and virtualised RAN architectures will also be at the centre of future mobile networks to allow for more capacity, network flexibility and scalability. Operators in North America are virtualising network management through SDN and NFV. AT&T is at the forefront of several industry initiatives around these, as it aims to virtualise and software control 75 per cent of core network functions by 2020.
Operators are competing in an increasingly complex market for connectivity services. In the US, this is reflected by the Citizens Broadband Radio Service (CBRS) initiative, which introduces shared spectrum with local allocation in the 3.5GHz band. This significantly reduces the barriers to network deployment, opening up new connectivity options for enterprises from direct builds to commissioned networks. In the case of the latter, operators are one option but they will face fierce competition from global cloud companies like AWS and Microsoft.
There also continues to be a level of uncertainty in the US regarding access to mid-range spectrum, which provides a healthy mix of coverage and capacity benefits, allowing operators to extend 5G services to more people. The FCC continues to have consultations with incumbent users of the 2.5GHz band (Educational Broadband Service) and the 3.7GHz to 4.2GHz bands (currently used for satellite operations), however, the issue remains unresolved.
As a result, initial 5G launches in the US (with the exception of Sprint) have been limited to high-frequency spectrum, which requires a very high density of small cells to work at scale. This has limited high-frequency deployments to pockets of urban areas requiring additional capacity and faster speeds.