ANALYST Q&A: REFLECTIONS ON 5G – WHAT’S HOT, WHAT’S NOT, AND WHAT’S NEXT?

James Joiner

Analyst - Mobile Operators and Networks GSMA Intelligence

Dimitris Mavrakis

Senior Research Director ABI Research

Kevin Restivo

5G and Enterprise Mobility Research Manager IDC

Dario Talmesio

Research Director – Service Provider Strategies, Regulation, 5G Accelerator Omdia

Experts from four top analyst companies share views on the lessons learnt from early adoption of 5G and how operators can unlock revenue benefits from the next-generation technology deployments.

Q: What are the main lessons learnt from the early adoption of 5G – the missteps and the milestones?

James Joiner (JJ)

Our quarterly Global 5G Landscape report highlighted that 107 operators in 47 markets had launched commercial 5G services at the end of Q3. It’s still early days for adoption, but there have been promising signs, particularly in China and South Korea. However, there is still more work to do on refining the messaging around the benefits of 5G to consumers and enterprises.

Dimitris Mavrakis (DM)

There haven’t been many missteps in the deployment of 5G so far, mainly because most deployments have been quite slow to start with. This has given infrastructure vendors adequate time to improve their products and services, which are now in a very good state. The biggest milestone for 5G deployments was the South Korean network launches, which were the first to offer a nearly nationwide coverage footprint. This allowed the rest of the world to understand the implications of deploying a large scale 5G network and what the associated pitfalls and opportunities are. South Korea deployed aggressively from 2019. I would also say that the deployment of 5G in China was a major milestone in 2020, where mobile operators there are expected to deploy an excess of 200,000 5G base stations in 2020 alone.

The only misstep was that certain vendors were not ready for large scale commercial deployments and their products needed further evolution to be considered for these nationwide deployments. However, these have now been addressed and all vendors are providing high-quality 5G infrastructure.

Kevin Restivo (KR)

There have been fewer missteps compared to previous launches of generational network technology despite the fact 5G was released rather quickly on a relative basis and 5G was split into two phases – non-standalone (NSA) and standalone (SA). Early adoption of 5G has been a success; operators have rolled out networks successfully and subsequently switched gears successfully despite geopolitical issues involving Huawei, which is reflective of how the industry has matured.

The good news is that operators are ready the way we see it for the coming demand for 5G. However, the outcome we’re looking for is not to have the equipment in place and running properly as feedback we’ve received from the operators suggests. The outcome we’re looking for is how operators generate more revenue from it. We’re still a long way from knowing whether that will be the case.

Dario Talmesio (DT)

Despite the Covid-19-induced delays, 2020 was a year of significant milestones for 5G. Most notably, we now have all major smartphones OEMs commercially supporting 5G; we have more than 100 5G commercial networks. Operators which led the market, notably South Korean, are already recording financial benefits from 5G in average revenue per user (ARPU) and wireless revenues. With some operators deploying 5G SA and bringing edge computing to the market, we can say that all the foundations for 5G have been placed, while service providers are more collaborative.

Q: What are the main challenges currently standing in the way of building a perfect 5G network?

JJ The use of higher frequency spectrum in 5G deployments means indoor coverage is the main challenge in building the perfect 5G network. In-building 5G coverage will vary depending on construction types and 5G deployment models. Some buildings that already have dedicated indoor systems will need to upgrade their solutions to keep up with 5G’s performance demands.

The biggest challenge is by far the business case. 5G is currently positioned towards consumers, meaning smartphone users. However, mobile service providers may not be able to charge an additional fee for 5G (on top of existing 4G subscriptions). At the same time, deployment of a perfect nationwide 5G network is very expensive. This is the reason 5G deployments so far are small scale, until mobile operators discover new revenue opportunities, perhaps in the enterprise space.

Site acquisition, power and backhaul have always been primary considerations in network design and 5G networks are no different. Site acquisition is particularly important given the need for small cells to provide coverage. Mobile network operators need to keep cost per bit per area in mind when designing networks, which dictates network deployments in terms of location and timing, as well as the bands the network will operate on.

Assuming a service provider employs a high band, the cost per bit can drop, but the area decreases, so more cells are required, thus making the network more expensive for the operator. If mid-band or low-band spectrum are employed to decrease costs, they don’t have to deploy as many cells to cover the same area. However, the cost per bit can increase as the bandwidth of the radios is significantly less. 5G networks also need in-building systems and metro cells to be bolstered. There’s a movement from the core toward the edge to mitigate network congestion but it’s early days. Nevertheless, powering such locations is crucial in terms of time and cost.

Spectrum, latency and throughput can also present challenges. In the case of spectrum, high frequency mmWave requires high-site density that can help enterprises fulfil demanding use cases, like remote diagnosis for healthcare.

There are still many challenges. Simplification, cost of deployment, and spectrum availability in low and high-frequency bands are significant challenges. For the consumer segment, especially in emerging markets, affordability (devices) can be an obstacle.

Q: Which are the main 5G features that will really bring a global transformation in the future and when do you see them going live?

JJ The move to 5G SA promises to enable features such as network slicing. We are already seeing early 5G SA deployments; however, in most cases, 5G networks in SA and NSA modes will live alongside one another for years to come. In addition, 5G hardware based on Release 16 will be commercially ready by 2022, which will enable operators to go to market with features, such as ultra-reliable low-latency communication (URLLC).

5G is designed to be a lot more than a connectivity technology. It is designed to include edge computing and advanced enterprise services, both of which are designed to transform both B2B and B2C domains. Some technical features of 5G that will transform these domains are: enhanced mobile broadband (eMBB), massive machine-type communications, ultra-reliable and low-latency communications, support for time-sensitive networking, service-based architectures, control and user plane decoupling, support for unlicensed spectrum and private cellular networking.

We need 5G SA networks to be introduced before the global transformation you noted can be addressed. Early 5G, or phase one if you will, is a technical success but it won’t trigger widespread changes within enterprises. For many organisations, private LTE/4G will suffice given comparative speeds and latency.

However, the technical benefits – namely ultra-reliable low-latency connectivity and connection density – promised with SA networks bring a range of transformative possibilities into the realm of reality.

With 4G networks today, latency in the 40-50ms range is fine for making a phone call or sending an e-mail but it’s not alright for stopping a car in other words.

Very low latency (i.e. sub-10 millisecond) is needed for remote command and control. Meanwhile, massive machine-type communication means a lot more connections that people aren’t using – IoT connections or what have you – a lot more devices using the cell site.

Also, denser connectivity is really going to apply to the expansion of IoT. Current networks running out of room for sensors that IoT applications in need of connectivity when current networks run out of capacity. As a result of new capabilities that advanced 5G networks will be able to offer over the next year or two, we expect to expand the scope and scale of the enterprise opportunity for mobile operators in Europe, and globally for that matter. The opportunity for mobile operators will expand as more capabilities are offered.

Each of these things enables you to do something new – eMBB can help transfer more files readily, lets you stream high-definition video content more readily and, because there’s more capacity on the network and there are so few users on 5G networks at the moment, less contention for capacity as well. You’re not fighting for capacity as you are with 5G which is why unlimited works as a tariff option. The merits of eMBB aren’t to be undersold either.

But the more revolutionary capabilities are what brings truly transformative enterprise possibilities in the realm of reality. Until that time, the potential of applications running on 5G networks will remain largely that.

5G is by design a programmable network that can be customisable according to the requirement of the end users. With a global Covid-19-accelerated digital transformation of every aspect of private and public life, 5G can be mass-curated to cater to every need. Like any other previous generations, 5G is the connectivity backbone of the digital experience, but it adds something more. That is intelligence and adaptability.

Q: What possibilities will a fully developed 5G network unlock both for consumers and businesses?

JJ One of the key 5G use cases for consumers is cloud gaming, given the latency and bandwidth demands of streaming games directly from servers to smartphones.

From an enterprise perspective, there are a number of opportunities to use 5G in private network deployments. Our Operator in Focus survey revealed that operators view manufacturing as the most attractive sector for private networks.

For consumers, it will offer a better user experience and in time, new types of services such as AR/VR and higher definition video. For enterprises, it will allow new types of services, including network slicing and specific enterprise vertical-related services. Mobile operators will be able to use 5G to provide SMEs as well as large enterprises with tailored value-added services.

The 5G use case possibilities are nearly endless, which has led to much anticipation. It’s important to keep in mind that 5G isn’t a ‘one-size-fits-all’ proposition though. Consumers and enterprises will have a unique relationship with, and individual needs relative to, 5G. Use cases across many different industry verticals stand to benefit from incorporating 5G connectivity. However, the timeline to achieving those use cases requires a long-term outlook. Purveyors of 5G use cases must develop a specific and compelling vision for what 5G will mean for each customer and how the individual performance features mesh with each use case.

It’s important to note that for use cases to develop, multiple technology vendors need to be involved in the development thereof. Commercial 5G connectivity originated with the operators but the development of new services and use cases will arise as a result of collaborative partnerships.

The imagination is the limit.

Q: What actions should the industry take to bring affordable 5G devices to market, including in unconnected and emerging regions?

JJ The industry has already made good progress on bringing affordable 5G devices to market. Chinese vendors, in particular, are pushing prices down. In addition, Apple and Samsung are also taking steps to make 5G more affordable through the lower-cost iPhone 12 Mini and Galaxy A51.

With regards to emerging markets, mass adoption of mobile 5G is not imminent in most countries. The focus will be on scaling adoption of 4G devices, with smartphone financing models set to play a significant role.

This can only happen once 5G reaches the mainstream in developed markets, so that chipsets and devices reach economies of scale. The barrier of entry for both developed and developing markets is devices, far more than networks. Devices need to evolve and reach very low prices in order to be able to address developing markets. This typically happens many years after a new generation goes live.

There are signs the economies of scale of the 5G ecosystem are kicking in quickly as 5G-ready mobile prices are dropping sharply as the industry works to expand its total addressable market. We’re projecting the average selling price of 5G-ready smartphones shipped to the channel to drop 33 per cent year-over-year in 2019 compared to 2020 globally. Handset makers, such as Vivo, Oppo and Realme, are marketing under €300 phones on next-generation networks already. Realme introduced a $148 phone in China as further evidence.

Average prices of phones compatible on 5G networks have fallen sharply, though handset prices will need to drop a lot further to become affordable for emerging markets. As far as phones go, there are signs 5G-ready phones prices will fall faster than phones compatible on previous network generations. We’re forecasting the average selling price of 5G phones to fall to $472 in emerging markets by the end of year as evidence of greater affordability.

More chipsets and handsets need to be released with emerging markets in mind. 5G-ready phones should become increasingly affordable thanks partly to Qualcomm’s upcoming 4-series platform which has been incorporated into devices from producers such as Xiaomi. I’d expect Qualcomm’s competitors, such as Mediatek, to introduce more affordable 5G chipsets.

Despite falling prices, phones running on next-generation networks in unconnected and emerging markets are likely out of the range of affordability for now.

All told, the value proposition of 5G-ready equipment – phones or otherwise – will need to be clearly enunciated; it’s an issue for the industry globally. Networks will need to be rolled out with clear purpose for users in unconnected and emerging markets.

Affordable 5G phones are on the horizon, but we are sometime away from genuinely low-cost 5G devices. Standardisation, scale and integration (think SOCs) are always the right levers to reduce cost-related barriers.