Commentary: Recent data from China suggests 5G is on track, but will it pay off?
Have questions about 5G, billed as "a capital improvement project the size of the entire planet" and "a quantum leap compared to 4G" in terms of mobile communications? Nearly every question you might think to ask is covered in ZDNet's What is 5G? The business guide to next-generation wireless technology--except one: When are we going to get this magical 5G, particularly in the world's largest mobile market (China)?
For this it's worth looking at Credit Suisse's equity research, "Key takeaways from China 5G Supply Chain Tech Tour" (the report is only for subscribers). The result? We may well be on track to see 290 million 5G-enabled mobile phones shipped in 2020, giving a whole lot of people a lot more data throughput and consuming dramatically less battery life--that is, if the telecom providers can figure out how to pay for it.
SEE: 5G mobile networks: An insider's guide (free PDF) (TechRepublic)
Much better, but at a price
Credit Suisse recently met with a range of providers and experts in Hong Kong and Shenzhen. Included in these meetings were China Communication Services, Comba Telecom, Mobi, Trigiant, Gfk Boutique Research, and industry experts. The purpose was to check on the status of 5G roll outs in China. What did they find?
First, 5G roll outs are on track. In fact, China's 5G roll out looks to be a bit ahead of the original pace forecasted by Credit Suisse. The number of 5G base transmission systems (BTS) shipping is a good indication of how much capacity the carriers will have, and also indicates how much demand they think they'll have. As such, Credit Suisse's finding that 150,000 BTS will ship in 2019 (vs. a projected 136,000) and 600,000 in 2020 (compared to projections of 681,000, though more optimistic scenarios peg this at up to 1,200,000 units) suggests demand is high, and telecom providers will be able to meet it.
This corresponds with Credit Suisse's estimates that China could see 290 million 5G phones shipped in 2020, compared to an earlier estimate of 176 million. Which phone providers will see the most sales? According to industry observers in China, Apple will top the market with three 5G-compatible iPhone models, with Huawei shipping 80 to 100 million (compared to Credit Suisse's initial forecast of 44 million for Huawei).
So that's good. And bad.
After all, for carriers the price for rolling out 5G may be hard to recoup. As Credit Suisse points out, there are three related challenges for 5G for carriers:
High capex (about 2x of total cost for 5G vs. 4G under same coverage)
Increased energy consumption (2-3x higher for 5G's active antenna unit), i.e., utility fees
Limited ability to increase the average revenue per unit/customer, given #1
Verizon has estimated the cost of rolling out 5G to its network will cost over $100 billion. That's a lot more than it cost AT&T to light up iPhones with a "5G E" icon at the top of screens this past year. AT&T hadn't actually given its customers (like me) 5G--it turns out that costs serious money. Instead, it was just a marketing gimmick.
SEE: 5G Research Report 2019: The enterprise is eager to adopt, despite cost concerns and availability (TechRepublic Premium)
Paying off the 5G investment
Such gimmicks aren't going to work for long. 5G promises dramatically faster speeds, enabling all sorts of real-time communication for telemedicine, entertainment, and more. It also offers lower latency, which will allow things like automobile systems to talk to each other in real-time to avoid accidents and improve traffic flow. It means that wireless will just become how we communicate, always, unlike today where a tethered desk phone will deliver more reliable call quality than a mobile phone.
But will people pay for it?
Probably not--at least, not for typical services offered today. Yes, consumers are used to paying more for more data or faster speeds, but probably not enough to cover Verizon's $100 billion tab. Instead, it's more likely that instead of paying more for existing services (like our phone plan), we'll pay to connect new services (like the automobile service or telemedicine mentioned above). We won't pay for petabytes but rather for instant access to a bevy of content on our different devices.
Or so the thinking goes. For now, it's worth watching mobile-centric markets like China to see how 5G plays out and pays off. According to the Credit Suisse data, the infrastructure will be in place in 2020 for a real test. The question is whether consumers will line up to pay for 5G-enabled services in 2020, thereby justifying the investments.
Disclosure: I work for AWS but nothing herein relates directly or indirectly to my work there.