5G: Big-Bang or Slow-Burn?

by | Monday 18th February 2019

5G: BigBang or Slow-Burn? 

5G has arrived in the USA starting with 28GHz mmWave spectrum and spreading to sub-6GHz spectrum in the next few years. As did previous mobile generations, 5G will eventually displace the legacy technologies over a period of years.  

According to its boosters, 5G will change everything. Commissioned studies project eye popping economic benefits with which lobbyists persuade national and state officials to strong-arm local democracies for telecom-friendly license fees and zoning regulations, all in the name of winning the race to 5G.   

In the March 2013 HBR article, Big-Bang Disruption ( https://hbr.org/2013/03/big-bang-disruption) authors Downes and Nunes describe a new kind of innovator that can wipe out incumbents in a flash, a Big-Bang Disruptor. This BRAINwave examines those Big-Bang observations with a view toward 5G mobile technology: Big-Bang or Slow-Burn?   

Interpreting IHS Markit’s white paper, which argues for 5G as a General Purpose Technology (GPT), and Ericsson’s Mobility Visualizer for comparing 4G and 5G uptake, delivers surprising insights.  

Note: SAR Insight has the 5G Explorer, which equips product managers and strategic marketers with insight to understand “What If” scenarios rather rely on a single point forecast.  

The 5G Path to Untold Wealth? 

IHS Markit’s 2017 white paper, The 5G economy: How 5G technology will contribute to the global economy, ( https://cdn.ihs.com/www/pdf/IHS-Technology-5G-Economic-Impact-Study.pdf) makes these projections, and more, for 5G: 

  • In 2035, 5G will enable $12.3 trillion of global economic output. 
  • The global 5G value chain will generate $3.5 trillion in output and support 22 million jobs in 2035.  

Qualcomm commissioned this study but does not clearly identify the target market audience, though it states from the start it is “intended to contribute to the dialogue on the role of 5G in promoting global economic growth.” It is hard to imagine anyone in the telecom ecosystem making investment decisions based on a 2035 outlook, so the intent must be to nudge regulators, legislators, and the public to near-term action – such as constraining small cell zoning regulations and municipal license fees. A cynic might see equipment vendors, mobile phone vendors, and mobile network operators promoting enthusiasm (or hype, if you prefer) for 5G as the next big thing since the current saturation of the telecom market leaves them desperately seeking new growth opportunities.   

GDP From the World Bank 

If 5G is that next big thing, could it be a Big-Bang disruption that changes everything, or perhaps it will play out as a slow-burn and just another “G”? Interpreting the IHS paper from the perspective of global GDP provides new insights.  

The World Bank Global GDP shown below provides perspective for the IHS GDP claims. The white paper uses inflation-adjusted dollars (assuming constant 2016 US$) while the World Bank GDP is in constant 2010 US$ adjusted to constant 2016 US$. The World Bank GDP data from 1969 suggests an accelerating curve, but this assessment uses a conservative linear extrapolation after the 2008 Great Recession. This approach estimates 2035 GDP = $177 trillion in constant 2016 US$. If telecom’s contribution to the 2035 global GDP is similar to today’s, ie, around 2%, then telecom’s contribution to global GDP will be $3.5 trillion, aligning nicely with the IHS estimate of $3.2 trillion. This simple top-down extrapolation suggests 5G as business-as-usual.  

 

Source: GDP (Constant 2010 US$, adjusted to constant 2016 US$) World Bank Development Indicators

 

Source: GDP (Constant 2010 US$, adjusted to constant 2016 US$) World Bank Development Indicators 

Insight From the Ericsson Mobility Visualizer 

The Ericsson Mobility Visualizer (https://www.ericsson.com/en/mobility-report/mobility-visualizer) provides a peculiar insight.  Here is a chart showing data extracted from the visualizer and compares global LTE and 5G subscription uptake.  

 

Notice the slope of the 5G curve – it is a bit shallower than LTE. If the 5G hype leads to mass disillusionment for the mass market, the uptake may be slower than shown. If one chooses 2009 as the launch of 4G LTE, the 5G curve does look sooner, but the shallowness suggests slower than 4G LTE.  

Characteristics of Big-Bang Disruption 

Can 5G play the role of Big-Bang disruptor a mobile operator, or even equip an enterprise as big-bang disruptor? Per the authors, characteristics of Big-Bang disruptors include:  

Cheaper than established offerings. Much is made of 5G lowering the $/Mbyte by 10x or more, but don’t expect to see that reduction in phone bills. Even if 4G usage patterns continue on the 5G network, operators still need to prop up revenues. Furthermore, most subscribers on sub-6GHz 5G networks won’t notice much performance difference from 4G LTE-A Pro, and 5G mobiles might command a premium price.  

More inventive. Much thought has gone into outfitting the 5G standard to address a broad swath of potential use cases to future-proof the technology with many innovative concepts.  

Better integrated with other products and services. This depends of operator willingness to collaborate with third parties. This is wasn’t the case with the so-called OTTs and 4G, so it remains to be seen how the global internet titans will partner with regional or national telecom operators.  

Exploit consumers’ growing appetite for information and access. There is no end to consumer demand for mobile data – faster, better, cheaper. Only those operators that deploy wide swaths of spectrum will show performance benefits when compared with 4G LTE-A Pro. 4MHz of sub-6 GHz 5G will have about the same performance characteristics as 40MHz of carrier aggregation using LTE-A Pro.   

Additionally, Big-Bang disruptors accelerate market penetration and move the curve to the left, much to the detriment of legacy offerings as shown by the authors in the chart below. This affirms a continuing evolution view of 5G and not a Big-Bang disruption. 

Source: Big-Bang Disruptors, HBR, March 2013 

 

 

5G Pre-Mortems: Now What 

The insights uncovered in this analysis and interpretation of IHS and Ericsson analysis suggests 5G will manifest as another “G” in the continuing evolution of mobile telecom, and hopefully contribute to the continuing dialogue.   

If you are an enterprise looking to springboard new business plans, new services, worried about P&L, etc, you would do well to look beyond the 5G hype. Business planners and strategists need more than just a single point scenario to wisely anticipate the changing economic landscape.  

The SAR Insight 5G Explorer helps decision makers analyze a wide range of 5G uptake scenarios to factor into business case and pre-mortem analyses.    

 

Contact the author:  Joe Hoffman | Joe@sarinsight.com 

Contact the author:

Joe Hoffman

|

joe@sarinsight.com