Mobile operators may be losing faith in 5G

Telecom Asia

More than half of mobile operators worldwide risk putting themselves at a financial and competitive disadvantage due to pessimism about the near term potential for the technology, new research indicates.

A survey of public statements by executives of the world’s 20 largest mobile operators, conducted by Bain & Company, found that more than half (53%) see no near term business case for 5G.

But because 5G has the potential to dramatically increase network speed and capacity and give early adopters a competitive edge, operators left playing catch-up could face both market share and cash flow consequences.

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“Generation after generation, we’ve seen network operators invest capital to upgrade their infrastructure with the firm belief that those investments would lead to more satisfied customers, a reinvigorated top line, and higher profits,” said Herbert Blum, who leads Bain & Company’s telecommunications practice in the Americas. 

“Given the potential 5G technology has to bring about a step change in network performance and thereby new uses, the reluctance of some operators to commit to this new technology is striking.”

Skeptics are concerned that the technologies that will require 5G, such as augmented or virtual reality streaming and autonomous vehicles, are still years from being commercially available, he said.

But what this misses is that operators can develop a compelling rationale for 5G based on the improvements it will bring to existing services, such as by relieving 4G congestion or allowing the mobile network to act as a substitute for fixed line services.

Concerns about the large capex requirements for 5G rollouts also tend to make the faulty assumption that a contiguous canopy of 5G coverage and that operators will need to build large numbers of 5G cell sites.

In reality 5G can co-exist with existing 4G networks, most operators already have sufficient node density in urban markets to accommodate 5G over 3.5-GHz or even millimeter wave spectrum, and 5G is expected to evolve to be able to coexist with 4G on the same equipment.

Indeed, winning 5G operators are expected to be those that build the networks to make full use of their existing physical and spectral assets, Bain & Company said.

Finally, the company noted that some operators believe that the main reason to invest in 5G is to improve efficiency rather than increase revenues. But the most successful 5G operators will also use 5G deployments to increase revenue and create a cycle of 5G reinvestment.

This article first appeared on Telecom Asia December July 2018 Edition

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