Making 5G pay
December 18, 2019 - Openet
The full-blown commercial launch of 5G in southern Asia, indeed the world at large, is drawing closer.
One question remains and that is how will operators and other stakeholders finance this exciting new technology ? Robert Shepherd, Jon Howell and Smita Sarkar investigate.
Looking back on 2019, one would be hard pushed to find a topic more spoken about than 5G (unless you are a keen follower of the European Union, in which case Brexit would certainly take some beating). Whether it’s which country would roll it out first commercially, the opportunities it will present us with, what infrastructure will be needed to make it a success or why we are even talking about it when much of the world is still struggling with 3G-4G migration, talk of 5G is inescapable. That said, the yards of newsprint dedicated to 5G does make sense, because it’s a technology like nothing we’ve seen before. To put this into context, 3G networks had or have (depending on where you live) a typical response time of 100 milliseconds, while 4G is around 30 milliseconds. Now 5G is promising to offer as low as one millisecond. Another way of looking at it from a technology point of view is the speeds will be 100 times faster, the capacity 1,000 times higher (billions of simultaneous device connections) and latency much lower. This is virtually instantaneous, opening up a new world of connected applications and great news for consumers and businesses across every industry. Although 5G has begun deployment in 2019 – four million Koreans had 5G phones in October, with five million expected by year end, while China has deployed over 100,000 base stations – most of us will have to wait until well into 2020 to get a taste of this technological advancement. David Peters, SVP and head of SEA & ANZ region at mobile solutions business Comviva, says: “Operators globally are investing in 5G to offer a huge lead forward from today’s 4G mobile technology.” However, this moves us on nicely to cost, because when commercial 5G does finally arrive, operators and other key stakeholders will have to find ways to monetise it. In other words, if they are providing it, who is paying for it? Asia is arguably ahead of the rest of the world when it comes to 5G. China and South Korea are both very quick to announce a 5G global first whenever the opportunity arises. However, look a little further south at a map of the continent and you’ll find that there are some smaller economies talking a good game. For example, Thailand is expecting 5G to be a staple in 2020 with the two major Bangkok airports having the service ready by May. Then there’s Vietnam, which is unashamedly keen to say it wants to be the first southeast Asian country to have commercial 5G in place. Rémy Pascal, senior analyst, research at Analysys Mason says there’s a clear distinction between countries such as China and South Korea which are 5G leaders, other developed Asia Pacific countries such as Japan and Singapore that are “fast-followers” and emerging Asia Pacific countries, which are also followers. However, when it comes to funding 5G, Pascal says monetisation of the service will also be challenging, as is the case in advanced countries. “Early launches indicate that 5G is not necessarily priced at a premium compared to equivalent 4G, however 5G tariffs are usually positioned at the high end which means that 5G tariffs will be as unaffordable as premium 4G tariffs are for many in these countries,” he says. “5G will be first reserved to high end consumers and it will take time for it to reach the mid-end and ultimately low-end segments of consumers.” Biju Nair, president and chief executive officer (CEO) of HYLA Mobile, which provides lifecycle management for used mobile devices, concurs. He also believes that some southern Asian countries are better positioned than others when it comes to monetising 5G. “Take India as an example - there is a huge population and there are corporations like Reliance which wants to get into the opportunity gap left by insufficient infrastructure in mobile telecommunications,” he adds. Nair gives an example of how Reliance launched Jio with a huge vision, in that it wanted to build the first 4G LTE network in the country and make voice and text a commodity. “Jio then made a range of digital services available, such as watching cricket on a mobile phone,” he continues “This completely changed the landscape in India. Today India is the largest mobile data consumer in the world and at the same time they have the lowest tariffs in the world, at about 26¢ (US) per gigabyte that they are consuming. The Asian telco market is a combination of political stability, R&D investment and larger corporations taking advantage of the opportunity to offer new digital services.” Africa, in contrast, will have to wait till 2022 to be introduced to the new generation of 5G cellular mobile technology, poised to offer reliable delivery of much higher data speeds than current data networks, a theoretical 20Gbps download and 10Gbps upload along with enhanced coverage. “5G rollout in Africa will be much slower than Asia and Europe,” says Kim Craven, managing director of Lifecycle Software. “There is less demand for highspeed, higher-cost bandwidth, more need for lower cost and accessible mobile services.”
Back to southern Asia then and Martin Morgan, VP marketing at Openet, a supplier of digital and 5G BSS to mobile operators, says there is a strong move by operators in the region to get customers using increasingly more digital services directly through digital channels such as an operator app. “Recently in Indonesia, the leading operator Telkomsel launched a new digital first mobile service called by.U,” he adds. “This is aimed at the Gen Z market which have grown up with the internet and are digital natives. Getting more customers to use a wider range of digital services (from music, to TV and e-sports) as part of their mobile offering will help with the uptake of 5G.” Indeed, Morgan believes that “as 5G gets rolled out and operators launch an increasing number of digital services” that are enabled by high speed networks, having a strong base of customers who see their mobile operator as a digital services company – “not just a traditional telecoms company” – will make a difference. “This will increase uptake of 5G services as the operators will not just be selling 5G data services,” he says. “They will be selling the services enabled by 5G. For example, in South Korea 5G has been very successfully rolled out as the operators are providing a large range of services that people want to buy.” Paul Hodges, senior vice president, Asia Pacific at Syniverse, which provides telecoms and enterprises worldwide with mobile connectivity services, says most of the advanced mobile operators in Asia have planned to invest in 5G to enable the future of the IoT and business applications, which usually require high-speed data transmission and ultra-low latency. He says that from a technical viewpoint, with mobile operators, local breakout for 5G will be critical for the support of those business applications. “In this area, though, Syniverse sees that operators will still need an interim solution during the transition to the emerging 5G network,” he continues. “From a commercial perspective, based on lessons learned from the 3G-4G migration, operators may decide to offer different usage plans – such as a special entry price or unlimited data plan – and wait for the further adoption of new applications in 5G that they could monetise and help offset the cost of 5G technology implementation as far as network usage, subscriber base growth, and services needed.” Morgan names “innovative operators” like Telkomsel and Globe as examples of businesses rolling out a range of digital offerings. “This increases data usage, and perhaps more importantly helps their customers see them as a digital services company rather than a traditional telecoms company,” he says. “This change in attitude is key to customers using more digital services supplied from their operators, which in turn augurs well for uptake of 5G. The message for operators is get customers using operator supplied digital services on 3G and 4G, as this will pave the way for increased use of digital services on 5G.” Although Asia has four of the strongest economies in the world, with a handful of notable exceptions, southern Asian nations are nowhere near that level – so how do you monetise a service in nations with high levels of poverty? “In Asia, developing countries that have recently migrated to 4G won’t monetise 5G quickly,” says Hodges. “Operators will monetise 5G once the ecosystem matures, once an increase in 5G devices and applications occurs.
The developing 5G ecosystem will probably be shaped by those applications that have the most impact on people’s daily life.” Hodges says operators target businesses and the IoT instead because both have a strong demand for applications with high-speed data transmission and minimal latency. If that’s the case, is the business user marketplace ready to pay for this? “No, the business user marketplace is satisfied overall with 4G now,” says Hodges. “Business users won’t be ready to pay for 5G unless a specific 5G-powered service or tool emerges as a game-changer and delivers exceptional value.” Then, of course, there are many who remain unconvinced about the viability of 5G – at least at this stage – and Kevin Brown, senior vice president of innovation and CTO at Schneider Electric, secure power division is most definitely one of those. “What is the reality of 5G?,” he says. “As far as I can tell from working with people across the data centre and telco industry, there is no real application driving 5G yet. With regards to the hype around the build-up, I tend to be more of a sceptic at this point. That’s because it’s unclear how fast it is really going to happen, especially when you consider the sheer volume of data centre infrastructure required to deliver the service. For 5G to deliver ultra-low latency applications it is totally dependent on edge computing and this is even more important in smart cities.” Brown says that for consumers it’s a marketing exercise and a race to own the fastest or newest technology first. “However, some of the 5G phones drain very quickly when they’re searching for a 5G signal, which is another interesting point,” he adds. “When you think about 4G, which is built out, the bandwidth is pretty good, so the ‘killer app’ for 5G is not just a bandwidth story, it’s a latency story. What’s not yet clear is the application that consumers are going to need that will require such low latency, the one that will propel the big build out of 5G. That’s yet to be decided.” Another concern Brown points out is the fact “5G is also line of sight”. He continues: “If I was walking around a building and trying to use the service, I would need 5G antennas inside it, or it would just switch back to 4G. And, with 4G you need antennas every one-to-two miles, but 5G antennas will be needed every 1,500 feet or closer. So, in time, there will be little antennas everywhere, from houses, light posts, and maybe on the corners of streets like the phone booths everyone used to depend on that are now obsolete.” While Brown has his doubts, Peters says there is in “no doubt” that the technical capabilities of 5G create the potential for entirely new service offerings, use cases, business models, and revenue opportunities, with ample benefits to the end users, whether they be consumers, enterprises or governments.
However, he adds that the challenge for operators is to define how these benefits can be monetised for the benefit of the telco, and how the telco can create the environment to capture that value for themselves. “With the advent of 4G demand was high and the benefits were also clear for all to see,” says Peters. “However, it seems clear that the largest beneficiaries of the 4G technology were not the telcos themselves. Instead the winnings went to the handset manufacturers and OTT players who have captured the vast share of the value created with higher speed mobile connectivity for all. Apple was a great example of an innovative player who created not only the handset and the operating software, but also the entire App Store ecosystem which enabled app developers globally to reach their audience, and monetise their apps. Apple was truly selling shovels to the gold miners.” Peters is also convinced that when 5G becomes a commercial reality, operators will need to take the leadership position to create the ecosystem which drives collaboration and innovation, and captures a large part of the value for themselves. “Which operator will create the ‘App store’ of 5G?” he asks. “5G will enable the planet to be even more connected than it is today - not only between people, but machine to machine device connectivity. Its [5G’s] services will involve an ecosystem of CSPs, third party content providers, vendors and value adding partners who share service delivery, responsibilities and revenues.”
Peters says telcos that can create this ecosystem are the ones to watch. “So, look out for the ones who are getting ready - they are innovative, they are well on the way to digital transformation to a real-time environment, they have opened APIs to third parties for data and API monetisation and they are creating win-win partnerships with local and global partners for delivering innovative services to consumers, business and enterprise,” he adds. Brown is of the opinion that “people are talking about 5G like it’s already happened”, but it’s a big challenge to deliver on the service and build out the infrastructure. “Overall, it requires greater collaboration from all stakeholders in the ecosystem,” he adds. While it definitely hasn’t “happened” yet, assuming southern Asia and the rest of the world can monetise 5G and the technology is everything it’s cracked up to be, which industries will benefit most from 5G and why? “Specifically, industries related to AI, robotics, VR, remote diagnosis, and automation will benefit the most from it, as long as they continue to be heavily reliant on high-speed data connectivity with ultra-low latency,” says Hodges. “An important point to keep in mind is that, in addition to the separate challenges of a 5G network, many mobile solutions still face ongoing challenges related to regulatory compliance involving areas like technical infrastructure and privacy.” If consumers are to be charged a premium, 5G has to offer something tangibly more for their money come 2020. That is unless US president Donald Trump has his way and we go straight to 6G instead. Then we’ll start a whole new debate.
Southern Asian Wireless Communications - Q4 2019 - Volume 12 Number 4: Page 20-23
Full Publication here: http://kadiumpublishing.com/archive/sasia/2019/SASIA19Q4.pdf