Is 5G real? No. Will it be soon? There are a few trillion reasons why a lot of people want it to be.
Network operators’ revenue opportunity for wireless connectivity is likely to exceed $3 trillion by 2026, with the vast majority of revenue growth coming from new industrial applications powered by 5G, according to a new report published by Ericsson. Meanwhile, the 5G-enabled health services segment alone will be worth $1.1 trillion by 2035, according to Qualcomm. If anyone is wondering why there’s so much hype about 5G, consider all that potential money (mostly) dependent on 5G that is tantalizingly almost in reach.
The 3GPP is getting closer to ratifying the first 5G specifications, but has yet to do so. Manufacturers who want to supply 5G products hope that semiformal guidelines from organizations like the 5G Open Trial Specification Alliance (initiated by SK Telecom and Verizon) will be very close to the imminent standards, but keep in mind a saying popular in your grandparents’ day: close only counts in horseshoes and hand grenades.
And there will be more 5G standards still to come after those initial specs are ratified. It all leaves suppliers having to interpret signs and portents as best they can. Hence the scrutiny of the activities of network operators and the appetite for surveys of carriers about their 5G plans.
The first use of 5G will almost certainly be for wireless telephony and broadband services, which is to say providing more of the same, only faster. Media and entertainment is moving to 4G; the increase in consumption of 4K video and virtual reality video applications being shifted to 5G is a natural evolution, Ericsson said.
But operators’ in-house needs to improve existing services are only half the story – actually much less than half, by one measure. To get the full story, recall that 5G is as much a means for new applications as it is an end unto itself.
Ericsson calculates that the compound annual growth rate (CAGR) for revenue through 2026 associated with current services will be 1.5 percent. Meanwhile, the revenue CAGR associated with industry digitalization – largely but not exclusively the IoT – will be 13.6 percent. Talking dollars, that would be service revenue going from $1.4 trillion in 2016 to $1.7 trillion in 2026, and industry digitalization revenue going from $968 billion in 2016 to $3.4 trillion in 2026.
If the revenue opportunity with fixed broadband is incremental, why are companies like AT&T and Verizon pursuing it so aggressively? Part of the answer is that the evolution to 5G has to be monetized. Two of the ways to do that are to seize market share from rivals with superior performance or with superior price (or both).
Even with that, it remains apparent why the IoT aspect of 5G is intriguing to network operators of all kinds. While many of these applications appear to be economical only with wireless connectivity, for some applications, a wireline connection will do just fine. Do not forget that wireless carriers are not only racing each other, they are also racing their wireline rivals.
Ericsson has taken to characterizing business of providing communications services to industry verticals as B2B2X, or business to business to (business or consumer). The company surveyed 50 companies around the world, and considered over 400 use cases, 5G enabled or not.
In a webcast to introduce the report, Peter Linder, Ericsson’s director of business development, business area digital systems, North America, compared the state of the 5G market today to its state last year. “Operators are past planning stage. Development activity is down,” he said, “activity is shifted to trials and building up readiness. Commercial deployment is the next big wave. That’s the big shift.”
The other big shift is that while last year the majority of survey respondents were pursuing 5G for consumer services, this year there’s a more even distribution of interest in both consumer and industrial applications.
“It’s not that consumer is going down so much,” said Ericsson 5G marketing director Monkia Bylehn, who co-hosted the webinar with Linder. “Mobile broadband will continue to be important, but to capture growth, operators want to target the business cases.”
The business cases – the digitizing industries – that Ericsson identified, in order of projected size in 2026 (largest to smallest), include energy & utilities, manufacturing, public safety, healthcare, public transport, media & entertainment, automotive, financial services, retail, and agriculture. The last two categories are new additions to Ericsson’s 2017 report on the subject, its second annual.
Separately, Qualcomm published a report quoting IHS Market’s projection that 5G will enable more than $1.1 trillion in sales for the health market by 2035.
The opportunities will include continuous monitoring of sensors tracking health conditions; predictive analytics that take advantage of monitoring data to improve care; and remote diagnostics and imaging. The report refers to this as the Internet of Medical Things (IoMT).
IoMT could improve health care in general, and it could be used to develop new business models that could help in controlling health care costs.
Part of that problem, for both carriers evolving to 5G and their suppliers, is a surfeit of choices. The top two business cases listed above (energy and manufacturing) together represent close to 40 percent of the opportunity just by themselves, by Ericsson’s calculations. That makes them compelling, but each of the next five represent roughly 10 percent of the opportunity, making them attractive as well.
When 4G came out, the driver was the smartphone, Linder observed. “The network was there, and then there were apps developed to fuel growth. As we look to what 5G will look like, there will be significantly more devices, and more ways to slice the network, and a variety of applications. There will be more to capitalize on, but more choices because you can’t do them all at once.”
The task of planning is complicated further. Take the retail segment, for example. There might be a large opportunity using VR and augmented reality (AR) for showing people how a sofa might look in their living room or how a garment would look on the customer when worn. That will likely require 5G connectivity. 5G isn’t necessary connecting point-of-sale (POS) equipment, however. The total opportunity for wireless connectivity in retail might be large, but the opportunity for 5G might be significantly smaller, Bylehn cautioned.
“You have a choice,” Linden concluded in the webinar. “Will you go for mobile use cases first, or fixed wireless? Will you target consumers, enterprise, or industry verticals, or two of those? Operators can vary from region to region. There will be differences from operator to operator.”
Brian Santo has been writing about science and technology for over 30 years, covering cable networks, broadband, wireless, the Internet of things, T&M, semiconductors, consumer electronics, and more.