3 ways CSPs will grow recurring revenues with 5G

Written by on January 11, 2017 in Guest Blog with 0 Comments

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If you are looking forward to 5G so you can stream movies while downloading Madonna’s discography and controlling a dozen IoT devices from your phone, you might want to slow your roll. Wide-scale deployment of 5G, or fifth generation wireless, is not expected to happen for another 8 to 10 years. Technology specifications won’t even be agreed upon until 2019 at the earliest. Nonetheless, communications companies eying vast recurring revenues from the ubiquitous high-speed connectivity 5G represents are already making plans and launching trials and initiatives.

5G represents a giant step up from today’s 4G mobile technology. Its offers speeds 100 times faster, enormous capacity (on the order of billions of simultaneous device connections), and 10x lower latency.

By 2025, worldwide revenues from 5G services are expected to top nearly $250 billion annually, according to forecasts from ABI research. A significant portion of those revenues will go to communications service providers (CSPs). It’s impossible to predict all the ways carriers will monetize 5G, but here are the leading possibilities.

Ultra-fast mobile broadband

Like its predecessors, 5G is primarily a mobile technology. Communication service providers (CSPs) are expected to generate substantial recurring revenues from a mix of subscription- and usage-based fees tied to incredibly fast data speeds and massive data volumes. Monetization opportunities include:

HD mobile video – Mobile customers will be able to download an entire HD movie in about five seconds (compared to eight minutes with 4G) and with no lag time and no buffering.

New content services – CSPs can monetize new data-intensive over-the-top (OTT) services through partnerships with OTT providers or by charging them for access to their networks. In addition, they’ll realize new advertising revenues with the ability to support location-based services that can deliver highly targeted multimedia content to customers in their cars and in retail, sporting event and concert settings.

Immersive experiences – 5G will pave the way for the widespread adoption of 3D technologies such as augmented reality (AR) and virtual reality (VR), which may well transform the way we experience HD movies, TV, sports, video games, and business content.

Internet of Things (IoT) connectivity

5G’s blistering speeds will certainly play a key role in IoT deployments. But in many IoT situations, speed won’t be that critical. For example, 4G already provides more than enough speed for people to remotely monitor their homes while they’re away. Instead, the value of 5G in IoT deployments will be in its ability to support massive numbers of simultaneous connections, and to do so with extremely low latency. CSPs stand to gain significant recurring revenues by connecting hundreds of millions and perhaps billions of embedded sensors, beacons, and devices.

With higher data capacities, telecoms will also generate new revenues by deploying specialized virtual networks for highly specific uses. For example, over the same radio spectrum, CSPs will be able to offer networks that handle only low volume sensor data, while simultaneously providing higher functioning networks (at higher fees) for data-heavy services, such as telemedicine.

In addition, the low latency of 5G (2 milliseconds or less) will enable an array of IoT scenarios, such as near real-time crash alerts for systems that stream traffic data to drivers and to law enforcement and emergency responders. Low latency is also seen as a must have for the deployment of innovations such as autonomous cars, trucks, and drones.

Fixed wireless broadband

One major stumbling block to the recurring revenue possibilities mentioned thus far is that, by and large, they’re at least five years out. Most won’t be deployed until industry standards have been established. But there’s one area of 5G that’s already in the works: fixed wireless broadband. For many carriers, it represents the shortest route to 5G monetization.

Unlike most other 5G scenarios, which target mobile devices, fixed wireless is designed for static locations such as homes and businesses. A growing market already exists for ultra high-speed broadband access. Google launched the first one-gigabit-per-second (1Gbps) Internet service in Kansas City in 2011 with Google Fiber. Since then providers such as AT&T, CenturyLink, and Cox have been gradually deploying gigabit fiber in select cities across the U.S. But these rollouts are still in their early stages.

The promise of fixed wireless is that it can potentially deliver even faster speeds, while costing far less to deploy. That’s because it eliminates the substantial expense involved in running physical cables from hook ups on utility poles into homes and buildings. Instead, it uses radio frequencies to transmit “last mile” broadband connectivity.

One big caveat. “Last mile” is quite stretch; the technology’s most likely incarnations are effective only over relatively short distances, 1000 meters or less. In addition, the radio waves used in fixed wireless have trouble penetrating through walls and can be adversely affected by trees and even rain, snow or fog.

Major equipment makers and carriers are undaunted. The technology is currently undergoing trials in the U.S., Europe, and Asia as key stakeholders work to resolve technical roadblocks. Some carriers expect to begin commercial deployments in a little over a year. For example, Verizon plans to offer fixed wireless services by late 2017 or early 2018.

Amidst uncertainty, a few givens, and one big question

The unknowns of 5G are legion. Enormous technical issues have yet to be resolved. Many initiatives won’t move forward until after 2020. But a few things are certain. In the bold new world, 5G portends, the planet will be even more connected than it is today. And not just in terms of connecting people to each other, but machines to machines and people to machines. 5G services will also involve unprecedented interdependence among CSPs, OEMs, content providers, and vendors. Increasingly, they will need to share service delivery, responsibilities, and revenues.

It begs the question: In the midst of such pervasive interconnectivity and technical prowess, will CSPs be able to build lasting connections with individual customers in ways that are mutually rewarding? The answer may well determine which telecoms thrive in a 5G landscape and which get left behind.

The author is Sean Kirk, an Aria Systems consultant, who has been analyzing evolving business and technology trends for more than 25 years.

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