Making 5G pay

Monetizing the impending revolution in communications infrastructure

Scoping the 5G opportunity

The next generation of cellular mobile communications technology has arrived. 5G, which is set to succeed the 4G standard over the next few years, offers an exponential improvement in functionality over 4G — it is 100 times faster and has 1,000 times more capacity. The results will be mobile networks that offer far higher capacity and reliability, much lower latency, reduced energy usage, and massive connectivity for devices.

Over the coming four years, companies will invest heavily — up to US$57 billion — to build higher network density, add spectrum, and upgrade active equipment. As they do so, they will seek to avoid a repeat of the 4G rollout experience. Although 4G, launched in 2012, catalyzed a revolution in the adoption of data services, operators struggled to generate additional revenues from end-users to cover the investments. Consumers continually expect to have more — more data, more connectivity, more functionality — while paying the same or less. This is one of the reasons that the total shareholder returns of the top 39 telecom companies have lagged that of wider stock indices over the past three years. And since telecom companies compete strongly on having the best networks, they face competitive pressure to make 5G investments, even if they try to do so in the most cost-effective way.

To ensure they reap a fair return for their enormous investments in 5G, operators must think holistically about the monetization opportunities, going beyond simply charging consumers more for faster data. While 5G may present fixed wireless access (FWA) broadband opportunities in certain circumstances, it will be difficult to realize attractive returns on overall 5G investment. In fact, 5G offers not just higher speed but also other valuable — and monetizable — attributes. Upcoming releases will deliver a number of 5G attributes, such as higher reliability, segmented network performance, and much lower latency. As a result, 5G creates the potential for entirely new service offerings, use cases, business models, and revenue opportunities. Instead of relying mainly on end-users paying telecom companies directly for connectivity, operators in a 5G world could generate substantial revenues by charging the companies that are providing 5G-reliant services to their customers. Variants of this model, which is widely termed business-to-business-to-X (B2B2X), where X can be a consumer, a business, or a public agency, will be suited to a vast array of widely differing use cases. By identifying and tapping into these opportunities, operators have the chance to ensure that the returns on their 5G investments exceed those from 4G. But to achieve this, operators will need to develop or acquire several vital capabilities.

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Leveling up to 5G

The era of 5G is upon us. The first 5G standards — defining communications networks that promise to be far better and faster than the current system — were finalized in June 2018, and standards for critical and massive machine-type communication are expected by 2020 or 2021. For this reason, the full technological potential of 5G will be realized over a five- to 10-year horizon due to the timing of the relevant standards and the required scale of investment.

Today, many operators around the world are pressing ahead with technical trials and commer-cial deployments. South Korean telecom carrier KT Corporation collaborated with Intel to offer 5G services at the PyeongChang Winter Olympic Games in February 2018. 1 In late 2018, Verizon launched a 5G-based FWA service in four locations.2 The majority of operators are aiming for commercial launches of 5G at some point in 2019. This timing reflects the likely introduction of 5G-enabled smartphones, the first of which were expected to be available in markets such as the U.S. early this year. 3

Telecom companies around the world are poised to invest tens of billions of dollars in 5G. A report by research house IDC projects that mobile service providers will collectively spend nearly US$57 billion on the rollout of 5G through 2022. 4 Although anticipated benefits will drive this investment, there are also challenges that must be overcome if companies are to realize a sufficient return on investment (ROI). To help develop and inform our point of view on the future 5G business models, we conducted a series of interviews with participants in the global 5G ecosystem.

Act now

As 5G services are launched, the most immediate use cases in the short to medium term will likely be in fixed wireless access broadband, extreme mobile broadband, manufacturing, and support of emergency services. But these will just be the start, as new experiences and appli-cations enabled by 5G emerge. “5G will give rise to new business models, which will become more clear after a period of commercial and technological innovation,” said VIshal Dixit, director of strategy and wholesale at Vodafone U.K. “To take a leading role in this evolution, operators need to gain experience in platforms and platform business models, add non-telco sector knowledge to their DNA, and hire people from diverse backgrounds to build a more diverse, future-focused talent base.”

For operators, it will be imperative to define the way to play, looking holistically at the potential business models and use cases in the 5G services market. This in turn will dictate the capabil-ities they’ll require. To monetize 5G efficiently and effectively, we believe operators will need to ramp up and excel in the use of B2B2X business models applied to the right use cases. Having defined their way to play, operators should build or strengthen the four key capabilities set out above: the right 5G network, commercial innovation, vertical industry engagement, and a culture of mass collaboration. They should appreciate that 5G is not the answer on its own. For full monetization, 5G needs to be coupled with other technological capabilities such as edge com-puting, cloud computing, AI, and automation — and it will demand real insight generation, rather than just data collection and transmission from A to B.

Whatever way to play they choose for a 5G world, few operators looking to take these steps will have all the required capabilities readily available to them internally. So they likely will need partners, including entrepreneurs with the ambition to invent new commercial models using 5G. It is from this mutual dependency that the possibility for operators to fully monetize 5G will arise.

"The main capability gaps with 5G are around the availability and wide spread of devices and the availability of verticalized applications. We haven’t yet been approached with any use cases or applications."




4IDC, “Market Analysis Perspective: Worldwide Carrier Network Infrastructure, 2018,” Sept. 2018.

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Rolf Meakin

Partner, PwC United Kingdom

Stephen Wong

Partner, PwC China

Darren Shea

Director, Strategy& US

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