In Business Model, Internet Access, Mobile

Not every generation of mobile networks has been as “successful” as the others, measured in terms of accounts, customers or revenue generation. The 2G network arguably has been the most profitable, with the longest life cycle. The 3G network arguably has been less successful than 4G.

So one question is where 5G will fit. There is at least some reason to argue that 5G will be more like 3G than 2G or 4G. And that likely will cause some business model problems, as incremental revenues might not easily match incremental investment.

GSA researchers have identified at least 36 operators from 23 countries that have demonstrated 5G technologies, or announced 5G tests, or trials. More significant are the early commercial deployments.

MTS now expects to have a 5G network in Moscow at 2018 Football World Cup. SK Telecom plans to launch a pre-5G network by the end of 2017, and a 5G network by 2020. Telefonica is likely to launch 5G first the U.K. market. Japan will have commercial deployments by 2020, with targeted deployments before then. U.S. carriers likely will deploy pre-5G for fixed wireless in 2018, with more-limited commercial deployments in 2017.

Widespread commercial launches likely will not happen until 2020, in most countries that say they will deploy “soon.”

But 5G is likely to be quite different from 4G. The big new use cases and revenue streams will come from enterprise customers, not consumers. And, to an extent we have not seen since 3G, use cases must be created; they are not obvious extensions of current demand.

The coming 5G era is likely going to prove even tougher than 2G and 4G, in terms of business model, for one key reason.

Most “human user” requirements will be satisfied by 4G. The big new revenue opportunities for 5G are going to come from “non-human” users (internet of things sensors and applications) and enterprises. Mobile operators in markets with fewer enterprise customers are going to find the business model more challenging.

That might mean 5G is more akin to 3G than to 2G or 4G, in terms of adoption. Arguably, 3G, which was supposed to lead to a wave of app and service innovation, did not immediately do so. Instead, many would argue, those benefits were deferred to 4G.

In similar manner, 5G, it is hoped, will lead to a wave of app, service, product and revenue innovation. The similarities are that both 3G and 5G assume a shift of demand.

The 5G network’s real upside is “non-human” use cases, as 3G’s real upside was “new digital apps and services.” But there was an innovation lag with 3G, and some might say that is the danger with 5G as well.

Still, 5G is coming. A reasonable rule of thumb for mobile network generations is that the next-generation network (in the post-2G networks era) tends to be initially deployed when adoption of the prior network has not even reached 40 percent of customers, globally. That is likely to be the case for 5G as well.

The point: 5G is coming fast, but will pose huge business model challenges, beyond those typically seen when amortization of the prior generations is not complete.

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