Assessing Where to Play and How to Win in 5G

How big is the 5G opportunity? This is literally a trillion-dollar question today. 5G promises mobile connections that are at least 10 times faster, with vastly improved levels of reliability, as well as latency that is up to 20 times lower, which enables applications to respond instantly to commands.

These capabilities can enable hundreds of exciting new use cases across a range of industries, from manufacturing, to healthcare, to retail and transportation, as well as vastly improving existing consumer applications such as video and gaming. As the current crisis shows, we need strong and reliable connectivity more than ever.

5G Opportunity in Enterprise

It's the incremental 5G opportunity in enterprise that excites the most. For example, Ericsson estimates that investments driven by the value 5G is providing across all industries are expected to be around $1.5 trillion in 2030, of which $700 billion is "addressable" by service providers.

McKinsey finds that implementing the most promising use cases in just four very broadly defined areas of mobility, healthcare, manufacturing, and retail alone could increase global GDP by $1.2 trillion to $2 trillion by 2030.

These figures are breathtaking — but also raise some important questions. If 5G is such a massive opportunity, why aren't mobile operators getting more excited about it? Why aren't more operators racing to upgrade their existing networks to 5G within a year or two? The GSMA, the mobile industry trade body, counts 79 active 5G networks globally. But apart from a few exceptions, most of these have tiny — and slow growing — 5G population coverage, and largely act as capacity backfills to existing 4G networks in large urban areas.

We think this service provider caution stems from their recognition that 5G is a big opportunity — but one with an uncertain payout for them.

Rolling Out 5G Networks Is Expensive

This payout uncertainty arises from both sides of the 5G ROI equation. First, rolling out 5G networks is expensive: the GSMA estimates that 5G network rollouts can be up to 71% more expensive than 4G on a like-for-like basis. This is because they require a lot denser radio network, much "fatter" transport network, and a lot more energy to meet the expectation to carry up to 10–20 times more traffic in the next decade.

Second, while new 5G use cases do enable tremendous economic value, the ability to precisely estimate and then plan a way to effectively monetize a fair share of that value in each local market is the big question that every operator must address.

5G Industry Use Cases

The complexity of sizing the local 5G addressable markets stems from multiple factors. There are hundreds of 5G use cases across dozens of industries, and the potential of each one needs to be evaluated.

We have extensively studied the 5G use cases in a range of industry verticals. Many of these use cases require collaboration and coordination across service providers, technology vendors, and enterprises. These are efforts that will vary by country amid vastly different local ecosystems, agendas, and incentives.

The 5G deployment constraints must be anticipated and addressed differently in light of the diverse market, regulatory, and spectrum availability issues.

All of this complexity led to the current very cautious "wait and see" industry approach to 5G, which has only been amplified by the existing health, economic, and geopolitical dislocations. The industry has been guilty of an over-enthusiastic "build-it-and-they-will-come" approach to rolling out new mobile generations in the past (remember 3G?). However, the current ultra-cautious "wait-and-see" approach to 5G may well be a pendulum swing too far to the other extreme.

We think the mobile industry needs more ambition in both assessing and addressing the 5G opportunity. And now is the time for the future leaders of the 5G ecosystem to carefully assess where to play and how to win in 5G.

ABOUT THE AUTHOR: Angel Dobardziev is a senior director at IDC European Consulting based in London and is also a judge of the World Communication Awards, organised by Total Telecom. He can be contacted at adobardziev@idc.com