The return on investment for 5G mobile technology “remains opaque” as operators weigh up how they can underwrite 5G’s significant investment with innovative use cases, according to a new white paper from Axicom.
Some of these business cases have been examined and the early signs suggest there will eventually be good reason for operators to make the jump to 5G. But when that occurs remains unclear, according to the Axicom research.
For operators, jumping to 5G may eventually be the simple cost of doing business.
“If a smart phone customer can download series eight of Game of Thrones on a competitor’s network in seconds while it takes hours do so on yours, then you will have a hard time maintaining customer loyalty,” the white paper said.
However, the Axicom white paper, 5G: How ready is Australia for the next generation?, also says defining business models for 5G is arguably “the biggest challenge” facing operators in the early days of 5G.
“Much of the current push behind the value of 5G is coming from the supply side – vendors who provide the physical equipment for the network infrastructure. For now, at least, carriers and operators themselves are still struggling to justify the huge investment in spectrum and infrastructure required,” the authors write.
5G technology unlocks several new innovative use cases because of significant upgrades outside of the speed and data capacity advances of previous generation jumps. According to the Axicom research, demonstrating the viability of these use cases will be critical, as speed and capacity upgrades alone won’t be enough to justify investment.
“The dominant business model in today’s mobile networks is the simple sale of network services — voice and data. This will neither sustain the investments required for 5G nor will it fully exploit the potential of the technology,” the authors said.
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5G enabled use cases has seen some preliminary research, mainly from motivated vendors.
The Business Case For 5G
The Axicom white paper references research from Nokia and Ericsson which both found the transformative potential of 5G is clear and there are several viable business cases. Taking the plunge, however, was a challenge.
According to Nokia, “Recognizing the potential for 5G performance to run innovative services is one thing, squaring these against the financial commitments needed to turn in a profit is more difficult, simply because no commercial deployments yet exist.”
“At the same time, delaying investment risks losing a competitive advantage that will be hard to regain.”
To address this challenge, researchers at Nokia and Ericsson investigated areas where 5G could provide a viable business case for communication service providers. One of the cases investigated by Nokia, 5G for Industry 4.0, provides a good example of one of 5G’s core use cases – Internet of Things (IoT) – in action.
5G for Industry 4.0
Industry 4.0 is the current trend towards automation and data exchange in manufacturing industries. The technology underpinning the smart factories is IoT, which allows equipment to ‘talk’ to each other and greatly improve automated processes and reporting.
According to the Nokia research, 90 per cent of current industry connectivity is wired. But 5G is a cheaper and more flexible “drop-in replacement” for Industry 4.0 connectivity because of its “high throughput, low latency and extreme reliability”.
Indeed, 5G has been designed with IoT in mind, according to the Axicom white paper.
“5G is designed from the outset to cater for the specific requirements of IoT: the ability to support simple low cost devices that can run for a decade or more on battery power and that send and receive only small packets of data.”
Industry 4.0 is one example of a possible business case for 5G and both Nokia and Ericsson have examined several others. While the benefits appear clear, operators are still weighing them up against the substantial investment in spectrum and infrastructure that 5G requires.
Joseph Brookes is a writer for the Which-50 Digital Intelligence Unit, of which Axicom is a Corporate Member. Our members provide their insights and expertise for the benefit of the Which-50 community. Membership fees apply.