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5G: picking up steam or slowing down?

According to the most recent Ericsson forecast 5G penetration will keep increasing to reach 45% of users by 2025. Image credit: Ericsson Mobile Report June 2020

The Ericsson Mobile Report June 2020 is out and it makes for interesting reading. Clearly one should keep in mind that Ericsson perspective is the one of a company that need the equipment market to pick up steam as soon as possible…

Here the points that I found notable:

  1. The epidemic has led to a decrease in mobile traffic in central urban areas (mostly because of people working from home) and a small increase in sub-urban areas.
  2. The overall mobile traffic during the epidemic has seen an increase of 10-20% with an increase of up to 60% of mobile voice data. This means that people went back using voice and that the cellphone was largely used for voice communication from home. The number of voice calls increased as well as their average length, with a marked increase in Voice over WiFi (due to people using VoIP in their home).
  3. The overall traffic in many Countries under lock-down increased by 50% to 100% on the fixed network meaning that most people are using fixed network connectivity from home for data traffic. The fixed network proved to be resilient, particularly the backbones that were subjected to the highest increase in traffic.
  4. Overall the traffic increase can be attributed to higher streaming use (watching videos, with some service/content providers signalling difficulties in copying with the traffic increase due to servers availability), and bidirectional traffic (video conferencing) whilst the traffic for surfing the web remained stable.
  5. The slow down in 5G deployment is temporary and a recovery, with rebound, may be seen in the second half of 2020, leading to a total of 190 million 5G subscription by year end. Notice that with subscription Ericsson means availability of 5G network radio infrastructure and device with 5G radio capability (basically the expected number of 5G enabled smartphones sold in areas where some sort of 5G connectivity exist).
  6. By 2025 25% of 5G traffic will be related to Fixed Wireless Access -FWA- indicating that 5G will play a significant role in bringing connectivity to areas where fixed lines is not making economic sense. This is a very important message to Countries that are struggling today with infrastructure digital divide. Rather than spending on costly fibre connectivity to sparsely populated areas it makes more sense to plan for 5G coverage.
  7. By 2025 there will be an expected 8.9 billion wireless connections (i.e. wireless terminals in use) with 2.8 billion expected to have 5G capabilities and operating in areas providing 5G connectivity. The lion’s share in terms of 5G penetration in 2025 will be taken in North America, Western Europe and North Far East Asia.
  8. Overall the ramp up of 5G is expected to be faster than the one of 4G.

For more insights and data look at the Ericsson report.
As mentioned in the opening of this post the report is interesting, there is a part with factual data on the changes in traffic density and type pre and during the lock down and then a part making forecast. The critical point here is the definition of “5G subscription”.
From an equipment vendor point of view, the expansion of the network is the interesting aspect, from a smartphone or device chip maker is the number of pieces sold (and their percentage with respect to 4G devices). From an Operator point of view a “subscription” actually is of interest as far as it is associated to a premium charge and here the story is not in the pink. As far as we can tell very few Operators have been able to charge a premium on 5G and if past experience matters even those few will end up removing the premium charge. This is the big issue facing Operators: they have to invest for the new network but this is unlikely to generate extra revenues. An exception to this is the FWA and this is why the expectation of a 25% of subscriptions tied to FWA is so relevant for Operators (but of course different Countries will show different demand for FWA).

Unless some killer application in the residential market comes up (possibly in the area of Augmented Reality) the future of 5G revenues for Operators is not bright.

In the industry sector there is a strong expectation of 5G picking up steam in factories and warehouses but it remains to be seen if this will bring money to Operators’ coffers or to Industry Infrastructure providers (industry IoT, robots), like Siemens (who has already applied for 5G spectrum license in closed environment).

An interesting rendering of mobile traffic changes in the Paris area. The first two images show traffic density two weeks before the lock down (left) and during the lock down (center). The image on the right shows the change in percentage of traffic in various areas in that same period with reddish indicating an increase and greenish indicating a decrease. Image credit: Ericsson -based on crowdsourced data

About Roberto Saracco

Roberto Saracco fell in love with technology and its implications long time ago. His background is in math and computer science. Until April 2017 he led the EIT Digital Italian Node and then was head of the Industrial Doctoral School of EIT Digital up to September 2018. Previously, up to December 2011 he was the Director of the Telecom Italia Future Centre in Venice, looking at the interplay of technology evolution, economics and society. At the turn of the century he led a World Bank-Infodev project to stimulate entrepreneurship in Latin America. He is a senior member of IEEE where he leads the Industry Advisory Board within the Future Directions Committee and co-chairs the Digital Reality Initiative. He teaches a Master course on Technology Forecasting and Market impact at the University of Trento. He has published over 100 papers in journals and magazines and 14 books.