Telcos are struggling to properly monetise their 5G offerings, particularly in the consumer sector
Delaying the role out of 5G mobile network services could help operators to make a better return on their investment, according to industry experts.
Speaking exclusively to Total Telecom last week, Angus Ward, CEO digital platform solutions, BearingPoint, said that telcos were being rushed into rolling out 5G services by their consumers, despite the fact that 5G use cases in the consumer sector have not yet been proven to be profitable.
Ward believes that over 65 per cent of use case for 5G will sit in the enterprise sector, as that is where customers are willing to pay a premium.
“5G is fundamentally different than what has gone before. There is a lot of fantastic innovation happening at the moment and some of the trials that are ongoing at the moment are showcasing some really fantastic stuff,” he said.
“However, with 3G and 4G – 4G specifically – there was this massive pent up demand for much better on device performance and quality from the consumer. There was no need to challenge the business model – consumers just needed things to run faster. That meant that operators were able to stick with the same use cases that had made them successful in the past.
“If you fast forward to 5G – the GSMA are saying that the build out cost of a 5G network are 4 times as high as they were for 4G. It’s a much higher investment cost.
Now, people love their phones, but they don’t need them to run 100 times faster than they do on 4G and they are certainly not prepared to pay four times as much for them.
“Our perspective is that 5G is different – there will be much higher costs and that 2/3rds of the use cases will sit in the enterprise market – because that is where people are willing to pay a premium. Yes, there is demand on the consumer side, but a lot of the consumer technology is not there yet – things like AR, VR, the high functioning wearables – they’re not quite there yet.
Telcos now face a challenge to make a sufficient return on their investment for their 5G rollout programmes, as Ward explains.
“The dilemma is that most of the telcos need the consumer side of the business to justify the investment in 5G but the profitable use cases are actually on the enterprise side of things.
“When it comes to the enterprise market, there are a number of challenges. They are new use cases and the question is how do you create those use cases? Typically, you need to have a deep understanding of the industry verticals that you are dealing with and then you need to have the innovation and R&D capacity to imbed connectivity into those solutions.
“From what we see, there is just not enough happening. If you take Smart Cities, there are virtually no cities in the world that are making Smart City initiatives profitable at the moment. The challenge is going to be: How do telcos monetise that space and make a sufficient return on their investment.