Mobile Experts sees the move to 5G as a change in business models, not just a move for higher speeds
Each generation of technology adds something new to the picture: 1G gave us a phone in the car; 2G put the phone in your pocket; 3G was an early attempt at data; and “4G” put the full Internet in your pocket. What about 5G?
Don’t get fooled by the “5G” hype that is so focused on high data speed. Instead, our analysis clearly points to a different direction for 5G: it’s about low cost data, not just about faster data.
There are many dimensions to this. Here are a few:
The business view
Mobile operators achieved peak average revenue per user in 4G (and sometimes in 3G), so the average revenue per user is now declining worldwide. Simply offering faster data to the same devices will not increase revenue, so it’s a doubtful return on investment.
The technical view
Services using 5G technology below the 6 GHz band may penetrate the walls of your building adequately, but a 5G signal at 30 GHz won’t reach you inside your office or home. People are indoors. A 5G service that is only useful outdoors would be a giant failure.
The competitive view
There’s a collision taking place between the cable operators and the mobile operators. Cable and fixed operators are now capable of Wi-Fi-first smartphone services and are likely to bid in upcoming spectrum auctions. At the same time, mobile operators are starting to invest in media companies (like AT&T with DirecTV) to control the content. While the radio guys are debating the details of 5G architecture, we have a bigger drama playing out at the high level.
The app view
LTE has been a success because it has enabled smartphones to do almost everything that we do on PCs. Ten years ago, people did MySpace on the wired Internet and sent text messages on phones. Now, we do Facebook on all platforms interchangeably. The only problem with LTE is its cost, not its speed or reliability. People point to augmented reality as a new driver for the market, but I don’t buy it. The LTE market succeeded because there was an existing Internet market to be converted into a mobile Internet market. There’s no $100 billion app that people do on wired PCs, which needs new technology to jump to smartphones.
So, Mobile Experts has come to the conclusion that the primary thrust of 5G is not about faster data to your phone. Instead, we believe 5G is a step in terms of the business model for wireless. This is the generation where the mobile operators can compete at low cost, coming in with last-mile data services for homes and offices where metro Ethernet, DSL or cable modems are weak.
This does not mean that you will “cut the cord” with your cable company and rely only on the radio in your pocket. We are very likely to see 5G customer premise equipment that is deployed in a way that’s similar to satellite TV operations. A technician will come and screw a box onto the wall of your office, or on the roof of your house. The data will be fed indoors and redistributed, possibly with 802.11ad WiGig or with a low-power 5G connection indoors.
Mobile Experts has been tracking the cost of wireless for three generations. We believe 5G will bring cost down enough to break down the distinction between “wired” and “wireless.”
Joe Madden is Principal Analyst at Mobile Experts LLC. Madden provides most of the business analysis behind our forecasts, as well as primary research in semiconductor areas. Madden graduated, cum laude, from UCLA in 1989 and is a Silicon Valley veteran. He has survived IPOs, LBOs, divestitures, acquisitions and mergers during his 26 years in mobile communications. Madden oversees research at Mobile Experts and is responsible for synthesizing the input from other team members.
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