5G is being deployed in many parts of the world, and has reached some significant coverage in the North America, Europe and Far East Asia (China, South Korea and Japan). Among all these Countries South Korea is leading in terms of coverage and penetration of 5G enabled devices.
Looking at 2020 data it is possible to start drawing some trends.
The CAPEX for 5G network deployment is impacting profits and this is going to continue in 2021. So far most 5G cells have been co-located with existing 4G towers thus minimising installation cost. As deployment will become more “dense” new -smaller – cells will require additional tower sites and that will further increase cost. In South Korea the Government is sustaining the 5G deployment through de-taxation. This has helped the local Operators to afford the increased CAPEX (3B$ spent in the 2015-2018 framework, versus 4.8B$ in the 2019-2020 period). Yet the deployment has been focussed on Seoul and other 6 metropolitan areas delivering an average 4-5 fold increase of speed (average download around 330 Mbps/peaks at 660Mbps – notice that less than 20% of devices are 5G enabled, as their number increases many more cells will need to be deployed to keep this average download speed. Indeed several customers are already lamenting poor quality in 5G connectivity in certain areas, as traffic increases).
The real issue is that the 5G offer has trouble in setting higher prices. Significantly higher prices were set in South Korea as the service launched at the end of 2019 but the price difference is now rapidly decreasing, in the US the initial 10$ (average) mark up for 5G access has been forfeited (as a launch offer) and it remains only to access UW 5G (mm waves that provide a real fast speed but do not work indoor). In Europe you get 5G at the same price of 4G. In all Countries the Operators’ approach has been basically to include 5G in the higher level plans, so that people may be enticed to pay for the more expensive plans also because they include 5G. This is understandable considering that the 5G coverage is still limited and that in many cases users will have to use 4G just for keeping their smartphone battery alive through the day. Over the longer period of time we can expect no difference in pricing for 5G.
The graphic shows the expected revenues over the next 3 years (up to 2024) and the history since 2010. It is clear that the revenues have kept increasing in the period 2010-2014 and then they have levelled out. Actually, starting in 2019 they have started to decrease a bit (and this trend is likely to continue to the end of this decade and in the following ones). What the graphic shows is that the revenues have shifted from 2G/3G (dark green/orange) to 4G (purple) and will be shifting to 5G (blue). It is important to notice that 4G has been instrumental in the levelling out of revenues growth and in the incipient decrease, because of the increased capacity offered that resulted in an increased competition among Operators to grab a larger market share (and the only lever once you deliver hight quality commodity products is price). 5G is going to increase the overall capacity and will result in a further price decrease over time, unless demand will pick up in ways that so far haven’t happened.
The advent of the iPhone (and its siblings) generated a strong bandwidth demand that drove the revenues in the 209-2014 period. Unless we see a new mass market device (AR glasses?) stimulating a massing demand for bandwidth I do not see how the trend towards a decreased price (and decreased Operators revenues) can be stopped.