Home5G & Beyond5G capacity expected to drive prices down, not up

    5G capacity expected to drive prices down, not up


    5G is unlikely to deliver significant new revenues for operators, according to a new report from Strategy Analytics.

    The report finds 5G’s expected benefits in terms of capacity and network efficiencies are “compelling”. However, the analysts say that 5G’s new attributes are unlikely to enable new service value propositions that will create significant new revenues.

    Inherent forces

    Harvey Cohen, President of Strategy Analytics, said at its core, the issue is around whether the technological advantages offered by 5G will “overcome or aggravate the industry structure and competitive forces” that are “inherent” in the regulated telecoms industry.

    He commented: “Regardless of the technological power of the offering, if the service portfolio is offered without value proposition differentiation, the results will be predictably below average due to the increasing commoditisation of the market.”

    Analysis from IHS Markit found that global telecom revenue grew just 1.1% in 2017, “despite unabated network usage”. The report noted that every region showed either revenue decline or low single-digit growth at most. According to giffgaff, by 2025, each consumer will use an average of 98.34GB of data a month, up from just 1.26GB in 2016 – an increase of 720%. They said these stats  give a real impression of just how much of an impact 5G is going to have.

    David Kerr, Vice President, added: “There is no question that the volume of traffic has skyrocketed during the last ten years. However, as operators transformed their networks to video-capable 4G and pushed their fixed broadband towards gigabit speeds, competition drove prices down faster than even the impressive growth in GBs was able to accommodate.”

    Segmentation pays

    Phil Kendall, Director of the Service Provider Group at Strategy Analytics, said operators can create new value through behavioural segmentation. He said this includes identifying actionable market segments and their needs, improving brand positioning to create differentiated emotional themes that relate to buyer needs and pain points, and focusing on innovative value propositions “that are derived from segment-specific requirements and willingness-to-pay.”