5G's Economic Impact on Service Providers - 2 April 2020 - Omdia
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5G’s Economic Impact on Service Providers 2 April 2020
5G’s Economic Impact on Service Providers 01
Contents
Executive Summary 2
Introduction: 5G is happening now 4
Defining 5G 9
5G revenue impact 12
Capex impact 20
Service provider spending strategies 26
5G operator profiles 29
Conclusions 53
Appendix 56
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5G’s Economic Impact on Service Providers 02
Executive Summary
This white paper assesses the economic impact of 5G on mobile service providers. To
achieve this objective, Omdia analysed the spending plans and revenue opportunities of
global service providers deploying 5G. We conducted interviews with 15 of the 18 largest
operators (responsible for 50% of global capex) and we reviewed the deployment plans
of 23 operators worldwide covering each region. This paper reflects the results of these
studies, as well as Omdia’s extensive market and forecasting insights.
Key Findings
• More than $140 billion in revenue is at stake. We have identified more than $140
billion in realistic revenue opportunities for mobile operators to address with 5G
technology through 2024. Consumer-centric opportunities range from the largest,
immersive display advertising ($66 billion), to the smallest fixed wireless broadband
(FWB) ($6 billion).
• Operators will spend over $100 billion on 5G by 2023. With more than 400
operators in 119 countries investing in the technology in the next few years, it is no
surprise that 5G will have an outsized impact on capital expenditures. While the
impact will vary by region and size of deployment, Omdia forecasts that global
investment in 5G RAN and core alone will exceed $100 billion between 2018 and
2023.
• Fixed Wireless Broadband is the low hanging fruit. Ironically, 5G first mover
operators are targeting the lowest value new service (FWB) because it is both more
feasible to launch with current 5G infrastructure and it is easily controllable by
operators who already have a dominant share in service revenue. Other revenue
opportunities (enhanced video, advertising, gaming, industrial IoT, smart cities, etc.)
require more complex technology, business models flexibility and reliance on partner
ecosystems. That said, these services are also in the rollout strategies of the
operators studied in this research. Their plans are included in the profile section.
• KPI-based and shared data plans will emerge as monetization models. On the
subject of business models, service providers widely believe monetization models will
evolve to incorporate KPI-based monetisation and shared data plans: 86% of service
providers (including 89% in EMEA) believe that key performance indicator or KPI-
based monetisation will be the leading approach, followed by shared data plans
(79%). Americas service providers showed far more interest in revenue sharing
(100%) than shared data plans (50%) and hardware/connectivity bundles (25%).
• Diverse business models, but no premium over LTE. Generally, service providers are
© 2020 Omdia. not charging a premium over LTE for 5G-based smartphone plans. However, there
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reproduction prohibited. are some examples of shared data plans (e.g. Swisscom), zero-rating specific content
(e.g. Telstra), unlimited and speed-based plans (e.g. Elisa). Operators are also seeking
5G’s Economic Impact on Service Providers 03
to leverage proprietary entertainment and sports content, including introducing
immersive experiences based on AR/VR. In other words, service provider 5G business
model and pricing strategies are diverse, reflecting factors such as the domestic
competitive and regulatory environment, their spectrum holdings and content
ownership among others.
• Partnerships are more crucial than ever to innovate and control costs. There is
widespread recognition that joint innovation (partnerships) will be required. As
discussed in this report, service providers see both capex and opex management and
revenue generation as priorities. Joint innovation with other operators (e.g. Elisa’s
partnership with LGU+ on developing network automation techniques, and network
sharing initiatives) and cities will be critical to the efficient deployment and
management of 5G networks. Extensive collaboration with partners (including system
integrators) will be pertinent to address the requirements of IoT verticals and design
compelling new consumer experiences.
• AI and cloud key to operator 5G cost management. Alongside 5G, many of the 23
operators profiled in this whitepaper note the importance of AI, ML, cloud and edge
to their strategies. Omdia expects that as 5G develops, these technologies will be
increasingly be used in collaboration to manage network performance and underpin
new services.
• Total capex will be kept in line. Though it will likely outstrip LTE in the pace of the
roll out, 5G will not significantly increase total capex. Rather, spending will be drawn
from other areas to concentrate on 5G. For example, 5G hardware spending is
expected to peak as soon as next year (2021) at $36.1 billion. Spending on software
as a share of total capex will increase - driven by 5G.
• Network Sharing leading cost mitigation strategy. Network and spectrum sharing
are viewed as key cost mitigation strategies: 71% of service providers highlighted
network sharing as the most promising cost mitigation strategy, followed by
spectrum sharing (64%), mobile backhaul and energy efficiency (both 57%) and BTS
simplification and network automation (both 44%). In the context of this whitepaper,
mobile backhaul refers to the transportation of mobile traffic between the macro
base transceiver station (BTS)/NodeB and base station controller (BSC)/radio network
controller (RNC) or between the NodeB and the evolved packet core (EPC) site).
• Spending will shift to sales and marketing with expectations of lower opex over
time. Operators interviewed expect spending to quickly shift from deployment to
sales and marketing to drive monetization by 2022 to 2024. They also expect that
reductions in operation costs, through efficiencies enabled by 5G technologies, will
eventually reduce the rate of opex increase.
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5G’s Economic Impact on Service Providers 04
Introduction: 5G is
happening now
5G is attracting widespread and growing
interest among service providers,
enterprises and industry verticals
It’s a 5G world already. The year 2019 witnessed the first wave of standards-based 5G
commercial launches. According to the Global mobile Suppliers’ Association (GSA), at the
end of the 2019, 61 operators had launched 3GPP-compliant 5G commercial services
across 34 countries. GSA also noted that 348 operators in 119 countries were investing in
5G.
The development of the 5G device ecosystem has been ramping up quickly. As of January
2020, according to the GSA, 78 vendors had announced over 200 5G devices. These came
in no less than sixteen different form factors, such as smartphones, indoor and outdoor
CPE (customer premises equipment), laptops/notebooks, robots, drones, enterprise
routers, IoT routers and dongles/adapters. Of the over 200 announced 5G devices, 60
were commercially available, including 35 smartphones.
5G is occupying the thoughts of service providers and more. According to a 2019 Omdia
survey, enterprises across the world are also pursuing the opportunities enabled by 5G;
78% of decision makers from six key industries (automotive, consumer, healthcare,
manufacturing, power & energy and telecoms) believed there is strong to significant
interest in adoption of 5G within their industry.
There are several reasons for the widespread and growing interest in 5G:
• Unlike previous generations of mobile technology, 5G has been designed from the
outset to serve the requirements not only of consumers and enterprises, but industry
verticals too.
• 5G promises to deliver performance levels that greatly exceed those of previous
generations of cellular technology. These include, but are not limited to, 1–10Gbps
connections to endpoints in the field (bandwidth); 1 millisecond end-to-end round-
trip delay (latency) and perception of 99.999% availability.
• These enhanced performance levels open the potential for a range of applications,
use cases and experiences that could not be reliably supported by legacy cellular or
© 2020 Omdia.
other wired and wireless technologies.
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• 5G has the potential to be a catalyst for digital transformation across many different
industry verticals, including service providers. Across every industry vertical and
geography, enterprises of all types are seeking to remain relevant and profitable in
highly competitive markets that face constant disruption from digital-first entrants;
changing customer behavior and new regulatory and environmental requirements.
• 5G, in combination with other technologies and capabilities such as Artificial
Intelligence (AI) and Machine Learning (ML), IoT, cloud and edge, holds the potential
to assist enterprises manage their processes and resources more efficiently, design
and launch smarter products more rapidly and develop new business models based
on deeper insight into customer behavior and requirements.
Realising 5G’s potential will be complex and challenging
Realising the full potential of 5G will be costly, complex and challenging for the 5G
ecosystem and their customers alike. Omdia forecasts that global investment in 5G RAN
and core alone will exceed $100 billion between 2018 and 2024. Some of the high-level
technical and commercial challenges for the 5G service providers include:
• The deployment and ongoing management of 5G networks that use multiple
spectrum bands, including mmWave. Also, ensuring interoperability of 5G (e.g.
smooth handover) with legacy 2G, 3G and LTE networks.
• Meeting the very stringent and diverse performance requirements of the three
iterations of 5G: eMBB (better than LTE bandwidth); Massive IoT (long battery life
and simultaneous full duplex connections across hundreds of devices) and uRLLC
(very low latency and high levels of availability).
• Managing both the upfront (capex) and ongoing (opex) cost of deploying and
operating 5G networks to meet shareholder expectations.
• Making the transition from “telco” to digital service provider of solutions that
address customer pain points and align with their operational processes and strategic
objectives. This transition, or digital transformation, goes well beyond 5G. It will span
the development of agile (or automated) customer service, sales teams able to sell
solutions rather than products and services and management of a partner ecosystem
that can address the diverse needs of customers across many verticals.
• A crucial aspect of this digital transformation will be moving from traditional pricing
based on consumption (of data and voice) towards business models that more closely
align with customer business processes and outcomes.
Addressing these challenges will require innovation and collaboration
Meeting these and other challenges will require constant innovation and collaboration
between the ecosystem of service providers, component, network and device vendors,
software, datacentre and cloud vendors and customers and systems integrators across a
wide range of verticals.
© 2020 Omdia. As service providers deploy 5G networks and develop new service offerings, the
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reproduction prohibited. management of both capex-related and opex-related 5G costs will be a priority.
Automation, AI and ML will be among the tools used to manage these costs. In5G’s Economic Impact on Service Providers 06
combination with other technologies and capabilities such as cloud and edge computing
and network slicing, they will also underpin the provision of new 5G-enabled service
offerings.
AI and ML have the power to identify patterns from huge volumes of data – including
from mobile networks and devices. This learning can be applied, for instance, to
recognise the patterns leading up to events such as a spike in network traffic. This, in
turn, can be used to allocate additional capacity to meet increased demand on the
network and prevent an unplanned downtime.
Indeed, network automation is a strategic priority for operators across the world. In
Omdia’s Digital Transformation Strategies Service Provider Survey – 2019 (July 2019)
automation and big data analytics were ranked the most important digital transformation
enablers among service providers. Automation and big data analytics both scored 90%,
leading Machine learning/deep learning and artificial intelligence (80%), Network
function virtualization (NFV) and Software-defined networks (SDN) (both 80%) and Cloud
(75%).
Automation was also identified as a top service provider trend came in Omdia’s Telecom
Trends & Drivers Market Report - Update H2 2019 (December 2019). Automation came
third after Trend #1: “It’s an ultra-broadband world” and Trend #2: “Unrelenting data
traffic growth”. Omdia’s expectation for 2020 and beyond is that telco network
automation gains momentum due to “increasing scale and complexity in networks and
the delivery of network services combined with the need to look at new paths to reduce
TCO are putting a renewed focus on network operations and opex”. The report notes that
network automation use cases are “built on a foundation of ML/AI, analytics…”.
There are many reasons why 5G will be inherently more complex than previous
generations of cellular technologies. Among these are the expected large growth in data
traffic, the requirement to meet guaranteed performance levels (e.g. availability and
latency), particularly for mission critical services use cases, the expanding range of device
form factors and the need to provide seamless handover between 5G and legacy
2G/3G/4G networks. Although 5G is still nascent, its potential to stimulate large volumes
of traffic is already evident. South Korea’s Ministry of Science and ICT notes that in
January 2020 5G accounted for 22% of mobile network traffic, more than double 5G’s
share of mobile subscriptions.
Automation is as critical to revenue generation as it is to capex and opex management.
Telco digital transformation, the alignment of operating business processes, customer
interactions and new services with the digital era pioneered by Alibaba, Amazon, Apple,
Baidu, Facebook, Google and Tencent, requires a shift from human-controlled processes
to agile service design and deployment based on AI-powered automation. Put simply,
operators need to become as agile as their online counterparts in developing and
launching new services and enhancing existing ones.
The telecoms industry is in the early stages of the network automation journey. Despite
the complexity involved in network automation, there is widespread understanding that
there needs to be a transition away from human-controlled processes. Many of the
© 2020 Omdia.
world’s leading telecoms operators have developed strategies in which automation plays
All rights reserved. Unauthorized a central role. For instance, T22, Telstra’s strategy that was launched in June 2018 “is
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underpinned by our multi-billion-dollar strategic investment program to digitise and
automate our systems and deliver the networks for the future, including 5G” (Telstra5G’s Economic Impact on Service Providers 07
annual report 2019). Telstra’s SDN/NFV Evolution Network (SEN) Project, also introduced
in 2018, directed investments into SDN/NFV evolution, network compute and
programmability and media optimisation: the initial focus was to automate processes
such as (network) testing, build, deployment and configuration.
Softbank is seeking to “improve the efficiency of work processes in the
telecommunications business to free up personnel for reassignment to strategic fields”
(Softbank annual report 2019) through “automating work processes using robotic process
automation (RPA), AI and other cutting-edge technology”. In 2018 SoftBank said that it
was using network automation technologies from Ericsson for the design of radio access
networks in the Tokai region of Japan. China Unicom and Huawei have jointly developed
a system called TianShu, based on Huawei’s Collaboration Workspace Realisation (CWR)
solution, which integrates AI to assist in network planning, construction, maintenance
and optimisation.
All three leading global telecoms equipment vendors have introduced network
automation strategies. Although each vendor’s approach is slightly different, they all seek
to reduce complexity and cost for the telco.
In November 2018, at the Mobile Broadband Forum in London, Huawei introduced its
autonomous mobile driving network solution Mobile Automation Engine (MAE). MAE
consists of three concepts: a transition to scenario-oriented network operation (All-
Scenario Oriented); the creation of an intelligent engine based on AI that converges
network management and control and gives the network new skills such as scenario
awareness and identification, network prediction and self-learning (AI Inside); and
Autonomy by Layer: closed-loop autonomy that ringfences the various scenarios but
allows for collaboration between them. The objective is to allow the customer (the telco)
to focus on intentions and policies.
Ericsson’s zero-touch vision foresees increasingly intelligent automation and AI
technologies taking over repetitive, mundane and physically risky tasks from humans. For
instance, shifting from physical inspection of tower sites to surveillance by intelligent
drones equipped with the AI and ML capabilities to recognise anomalies and faults. The
transition to zero-touch networks, in Ericsson’s view, saves time, reduces cost, decreases
complexity and frees up time for humans to focus on more complex tasks.
Nokia sees massive data growth and multiple co-existing layers of network technologies
leading to ever more complex networks. Human resources alone, in Nokia’s vision, will be
insufficient to manage such complexity: analytics, AI and automation will be required.
The vendor has launched Nokia Cognitive Services, which aims to increase operational
effectiveness and improve the customer (consumer, business) experience. These are
delivered via the Nokia AVA Telco AI Ecosystem – cloud-based solutions designed to
automate network functions and service assurance.
Automation technologies such as SDN, NFV, AI, ML, zero-touch automation and
provisioning, and many others, will play a key role across different network layers
(access, transport and core) to support several different functions. Along with network
planning, these include network operations and management; the creation of 5G
© 2020 Omdia.
network slices, which require specific performance levels (e.g. availability and latency) for
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customers. Network operations and management alone consist of many areas in which
automation technologies could play a role: proactive anomaly or fault detection, the5G’s Economic Impact on Service Providers 08
optimisation of massive MIMO (see a description later in this white paper) and multi-
access edge computing (MEC).
The ultimate vision is one of end-to-end operations and management in closed-loop, fully
autonomous networks. There are many stages between where we are today and this
ultimate destination. Innovation and collaboration between operators, network
equipment providers, software vendors and many other different types of companies will
be required. The development of AI and ML techniques that can understand context, run
inference, deal with anomalies and make predictions will be particularly important.
According to Omdia forecasts (Artificial Intelligence Market Forecasts – Q4 2019), AI
software revenue in the telecoms industry will exceed $11 billion in 2025 (representing
CAGR of 60% between 2018 and 2025).
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Defining 5G
The three types of 5G
5G, as its name suggests, is the fifth generation of mobile technology. Unlike previous
generations of mobile technology, 5G has been designed from the outset to serve the
requirements not only consumers and enterprise, but industry verticals too.
The graphic below shows the 3 broad types of use cases that 5G is designed to serve:
enhanced mobile broadband (eMBB), Massive machine type communications (Massive
IoT), and ultra-reliable and low latency communications (uRLLC), which is also commonly
referred to as Mission Critical Services (MCS).
Figure 1: 5G Use Case Examples
The technical requirements for eMBB, Massive IoT and uRLLC are diverse. MBB use cases
like 4K video streaming and cloud gaming are bandwidth intensive. Massive IoT use cases
such as smart metering typically requires deep coverage and extended battery life.
Industrial automation, an MCS use case, demands very low latency and very high levels of
availability. 5G’s targeted technical characteristics seek to address these diverse use
cases through performance levels that include 1–10Gbps connections to endpoints in the
field (bandwidth); 1 millisecond end-to-end round-trip delay (latency); perception of
99.999% availability or 10-5 packet loss rate and up to 10-year battery life for low-power,
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Figure 2: 5G Capability Targets
Source: 3GPP
Release 16 and 17 will add a raft of new performance features
3GPP Release 15 introduced the first set of 5G standards. The specification of 5G non-
standalone (NSA) NR in Stage 3 was completed in December 2017, 6 months ahead of
schedule due to a strong push from various stakeholders that wished to deploy 5G as
soon as possible. The remainder of 5G Stage 3 (also part of 3GPP Release 15), including
Next Generation Core Network (5G CN), also abbreviated NGCN, was completed by 14
June 2018, during 5G World in London, and enables 5G deployments in a standalone (SA)
mode.
Today’s commercial standards-based 5G networks are based on 5G NSA NR, which
leverages existing LTE networks, and primarily serve eMBB use cases. Further work items
addressing Massive IoT and MCS requirements and a host of other features, such as
multicast/broadcast, positioning and C-V2X (Cellular V2X) will come in Releases 16 and
17, which are currently set for completion in 2020 and 2021 respectively. This
standardization work will gradually facilitate the expansion of the 5G ecosystem of
chipsets, modules and devices and pave the way for industry verticals to develop proof of
concepts (POCs).
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Figure 3: 5G Commercialization Timing
Source: 3GPP, status as of January 2020
3GPP’s 5G NR uRLLC specifications introduce new technical features that can provide a
minimum level of reliability and latency required to support MCS. The group has been
developing 5G NR uRLLC features for four verticals: Industrial IoT (smart factories,
process automation), Energy and utilities (electric grid), Medical (connected hospitals)
and enhanced Cellular Vehicle-to-Everything (eV2X), which will be the first verticals to
deploy 5G NR uRLLC commercially. Release 16, which is set to be completed in 2020,
includes features that span all layers of the cellular network and uRLLC network solutions
for the core network.
Examples include process control - closed-loop control, an Industrial IoT use case that
requires 99.999% availability and maximum 50 millisecond end-to-end latency;
distributed automated switching, an electric-power distribution use case that required
99.9999% availability and up to 5 millisecond latency; robotic aided diagnosis - a medical
use case that requires 99.9999% availability and maximum 20 millisecond latency and
remote driving; and an eV2X application that needs 99.999% availability and maximum 5
millisecond latency. In all, 3GPP has specified the performance requirements of over 20
discrete MCS use cases.
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5G revenue impact
In the following pages we assess the following five 5G service revenue opportunities.
These are ordered in terms of worldwide 5G service revenue opportunity by 2024:
– Immersive mobile display advertising
– Enhanced video
– Advanced mobile gaming
– Fixed wireless broadband
– Cellular IoT
For Immersive mobile display advertising, Enhanced video, Advanced mobile gaming and
Fixed wireless broadband, the service revenues refer to the ecosystem opportunity
enabled by 5G. For example, in the case of Immersive mobile display advertising, the
service revenues refer to opportunity presented to major players such as Facebook and
Google, as well as telecom operators.
In the case of Cellular IoT, the service revenue numbers refer to connectivity service
revenues that are generated by telecoms operators and IoT/M2M mobile virtual network
operators. This is part of a broader cellular IoT service revenue opportunity that also
includes IoT connectivity, application enablement and data brokerage platforms, systems
integration and related services.
5G to drive immersive mobile display
advertising
Introduction
5G will drive growth in mobile display advertising by accelerating the transition from
traditional banner advertising to higher-value video advertising; supporting new ways of
monetizing engagement and interaction through AR/VR; and greater automation,
targeting and personalization enabled by AI.
Mobile display advertising is already a fast-growing segment as advertisers continue to
transition more of their spend from traditional to digital ads – specifically, from digital
desktop PC to mobile formats. 5G will drive more growth as advertisers take advantage
of its new features to deliver ads that are more immersive, interactive and personalized.
5G global mobile display advertising revenues will hit $66 billion in 2024
Global mobile display advertising revenues based on ads delivered by 5G networks and
viewed by 5G subscribers will reach $66 billion in 2024, up from $49 million in 2019, as
detailed in Figure 5. That will be based on 1.9 billion 5G mobile subscribers worldwide in
© 2020 Omdia. 2024, up from 13 million in 2019.
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Figure 5: 5G global mobile subscriptions and display advertising revenues, 2019-24
Outlook
As 5G helps to accelerate growth in mobile display advertising revenues, the key
challenge for mobile service providers will be to capture some of this growth in the face
of competition from the digital giants dominating the segment – Google, Facebook and
Amazon. While some large-scale providers such as AT&T are building their own end-to-
end ad platforms to compete for digital and other ad revenues, most need to focus on
using 5G to develop and sell new network feature sets, also known as network slices, that
will enable more immersive and valuable mobile display ads.
5G enhanced video will be core 5G use case
Enhanced video will be key to driving 5G deployment, adoption and usage
Enhanced video is one of the most important 5G use cases, given video dominates usage
on today’s mobile networks; 5G will help service providers improve existing video
services and launch new ones with new levels of quality, immediacy and interactivity.
Examples include higher-quality streaming, telemedicine, interactive live concerts,
immersive video conferencing and remote training via virtual and augmented reality.
5G enhanced video services will come to market in phases based on the capabilities of 5G
networks, with early services launched in 2019-21 mainly taking advantage of the higher
throughput of 5G radio access networks. Services launched in 2021-22 onwards will also
benefit from the lower latencies enabled by 5G core networks launching in that
timeframe.
5G enhanced video will drive $34 billion in revenues by 2024
With video already accounting for the vast majority of usage on mobile networks, the
ability of 5G to support a wide range of enhanced video services will be a fundamental
© 2020 Omdia. driver of 5G adoption and revenues. That helps to explain why Omdia forecasts that 5G
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enhanced video service revenues will jump from $85 million worldwide in 2019 to $345G’s Economic Impact on Service Providers 14
billion in 2024, as seen in Figure 4. Over the same period 5G global mobile subscriptions
will increase from 13 million to 1.9 billion.
Figure 4: 5G global mobile subscriptions and enhanced video service revenues,
2019-24
Mobile service providers need to maintain or increase their role in the video value chain
One of the key challenges for mobile service providers will be maintaining or increasing
their position in the value chain for video services during the transition to 5G, in
competition with content providers and others. Successfully navigating this transition will
be key to the strategic outlook for service providers.
5G will expand advanced mobile gaming use
case
Introduction
Mobile gaming is already a massive market with revenues of close to $70 billion
worldwide in 2019 based on end-user spending. 5G will open new opportunities for
growth with its higher throughput and lower latency supporting everything from faster
downloads of mobile games apps to AR/VR and cloud gaming.
5G services aim to deliver significantly lower latencies than 4G, creating the potential for
cloud gaming to move from niche to mainstream. However, this will only happen from
2022 onwards following the deployment of 5G NR SA and 5G core, enabling low latency
and network slicing.
Gaming service revenues will hit $24 billion worldwide in 2024
Omdia forecasts that 5G advanced mobile gaming revenues will reach $24 billion
worldwide in 2024, up from $125 million in 2019, as detailed in Figure 6. This is spending
© 2020 Omdia. by 5G mobile subscribers on mobile games apps and on in-app purchases made through
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reproduction prohibited. those mobile games apps. It does not include revenues from in-app advertising in mobile5G’s Economic Impact on Service Providers 15
games. The spending is based on Omdia’s forecast that 5G subscribers worldwide will
download 14 billion mobile game apps in 2024, up from 97 million in 2019.
Figure 6: 5G global mobile gaming apps revenues and downloads, 2019-24
Outlook
While the success of the dominant app store owners, Apple and Google, is highly likely to
continue with the transition to 5G, mobile service providers need to seize the
opportunity to provide app developers with 5G network slices and data they can use to
add value to their mobile gaming apps.
5G set to expand fixed wireless broadband
market
5G FWB services live in multiple markets and more planned
Fixed-wireless broadband (FWB) is one of the strongest early use cases for 5G. FWB
services can typically run on the same network as larger-scale mobile broadband services
with different end-user devices. 5G FWB services are already offered commercially by
Verizon in the US, Elisa in Finland, Sunrise and Swisscom in Switzerland, Vodafone in the
UK and STC in Saudi Arabia. Several other service providers have also committed to
launch 5G FWB services.
Fixed Wireless Service revenues to top $6 billion worldwide in 2024
Omdia forecasts that the 5G FWB market will generate global service revenues of more
than $6 billion in 2024, up from $59 million in 2019, as seen in Figure 7. These will be
driven by 5G FWB global subscriptions which will increase from 156,000 at end-2019 to
14 million at the end of 2024. According to Omdia, there is already a large global base of
FWB users. At the end of 2019, 4G and 5G FWB subscribers, including those using MiFi,
exceeded 100 million.
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Figure 7: 5G FWB global service revenues and subscriptions, 2019-24
The Americas will be the dominant region for 5G FWB through 2024, driven by the US,
where Verizon launched its 5G Home service in 2018, and T-Mobile US committed to
regulators to aggressively deploy 5G FWB in rural and other areas as part of its efforts to
win approval of its acquisition of Sprint.
Segment could outperform as technology matures and adoption accelerates
There is significant upside potential in the 5G FWB market as technology matures and
device costs decline - potentially accelerating adoption. The transition from outdoor to
indoor customer premises equipment and from professional to self-installation will
significantly improve the 5G FWB business case - leading to wider deployment and faster
adoption. The business segment could also accelerate take-up of 5G FWB as more
companies use it as a back-up or in some cases as the primary broadband connectivity for
certain locations.
The diverse cellular IoT opportunity
Efficiencies, new revenues and compliance driving demand for cellular IoT
Cellular IoT represents a broad universe of use cases and already is a significant global
opportunity of over 1 billion connections and over $11 billion in connection revenue in
2019 according to Omdia’s Cellular IoT Market Tracker – Q3 2019.
There are three main drivers of or incentives behind the adoption of cellular IoT across
many verticals, applications and use cases: driving greater efficiencies, creating new
sources of revenue and complying with regulatory or contractual obligations. For
instance, the tracking and condition monitoring of perishable goods in transit can help
reduce financial losses due to theft, misplacement or wastage – greater efficiencies.
© 2020 Omdia. Original equipment manufacturers (OEMs) that have traditionally sold products such as
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ongoing monitoring and maintenance of the product for a recurring fee – new sources of5G’s Economic Impact on Service Providers 17
revenue. There is a legal requirement to monitor the time spent at the wheel by long-
distance drivers in many countries across the world – regulatory obligations.
Asset management and automotive will drive 5G cellular IoT connections in the near
term
As Figure 8 shows, Omdia expects the shipment of 5G modules for cellular IoT use cases
to begin in 2020 and gain considerable traction by 2024, in terms of connections across
asset management, automotive, smart cities, consumer and energy and utilities.
Figure 8: 5G Cellular IoT Number of Connections
Major asset management use cases include tracking goods in transit; the remote
monitoring of the condition of industrial and commercial equipment (such as solar panels
or industrial gas turbines) and tank and pipeline monitoring, where the primary purpose
is to monitor the flow of liquid, gas or other materials, rather than the equipment itself.
Automotive (light vehicles) spans broadband to the car; vehicle diagnostics; and location-
based services such as stolen vehicle recovery, crash alerts, usage-based insurance and
concierge services.
With the drive towards increasingly aware and autonomous vehicles, automotive and
related applications such as smart cities and transportation also include connectivity that
allows vehicles to communicate with each other (Vehicle-to-vehicle or V2V); roadside
units (RSUs) installed on roadside infrastructure like traffic lights and street lamps
(Vehicle-to-infrastructure or V2I); long-range, indirect applications such as real-time
traffic routing and cloud services (Vehicle-to-network or V2N) and with pedestrians
(Vehicle-to-pedestrian). V2V and V2I encompass use cases like safety warnings: hard
breaking required or slippery surfaces ahead (V2V) and traffic congestion information
and speed limit changes (V2I). Smart cities include streetlamps, smart parking and shared
motorcycles/bicycles.
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All rights reserved. Unauthorized Consumer spans monitoring the location of pet and people (e.g. children, offenders and
reproduction prohibited. lone workers); video surveillance – typically using commercial and public cameras rather5G’s Economic Impact on Service Providers 18
than consumer solutions to monitor residential areas and managed home automation
services – “as-a-service” offerings by telecom, cable or security operators.
Energy and utilities include a long-established use case – automated meter reading for
electric, gas, water and heat meters and the emerging applications of demand response
services and distribution automation. The former involves residential or commercial
participation in programs that allow a utility or demand response provider to manage
demand (e.g. cycling down a piece of equipment) at times of peak demand. The latter
enables utilities to control critical elements of the distribution network between the
meter and the head-end (e.g. synchrophasers and reclosers). Example use cases include
real-time switching on a smart grid or automated rerouting of power due to storm
damage to infrastructure.
Automotive, consumer and transportation will dominate 5G cellular IoT connectivity
revenue
By 2024, automotive will account for around 70% of 5G cellular IoT connectivity revenue,
compared to around 20% of connections. Of the 10 applications tracked by Omdia,
automotive has among the highest levels of annual ARPU (over $40 in 2019) – reflecting
the more demanding bandwidth requirements of use cases like broadband to the car and
vehicle diagnostics compared to the low bandwidth needs of many asset management
use cases like asset tracking, which had an annual ARPU of less than $3 in 2019.
Figure 9: 5G Cellular IoT Revenue by Application
5G – Massive IoT and C-V2X will at first dominant; 5G – eMBB, uRLLC will exceed 10% of
5G connections by 2024
As Figure 10 shows, 5G – Massive IoT will account for over two-thirds of 5G cellular IoT
connections by 2024.
There are several reasons for the dominant share of 5G - Massive IoT. First, the largest
© 2020 Omdia. applications like asset management, smart cities and energy and utilities typically require
All rights reserved. Unauthorized the low-power characteristics of long-battery life, deep coverage and low cost of
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ownership. Already, tens of millions of 2G connections host asset management, energy5G’s Economic Impact on Service Providers 19
and utilities and smart cities use cases. As 2G networks are gradually shuttered, there will
be a gradual migration to 5G - Massive IoT networks.
Second, the growing availability of LTE-based NB-IoT and LTE-M networks. These are
software-upgradeable to 5G-Massive IoT and therefore will be able to support 5G –
Massive IoT-compliant chipsets, modules and devices as they become available from
2020.
Figure 10: 5G Cellular IoT by Technology
Third, in Omdia’s view, 5G-uRLLC will commercialize only 2023 and initial node
deployments will be in small volumes. The standardization and 5G - uRLLC will not be
complete until 2021. The cost of 5G – eMBB/uRLLC modules will initially be high (over
$50 in 2023) – it will take several years to realize economies of scale. Extensive proof of
concepts and trials will be required to ensure that the stringent performance
requirements of MCS applications like closed-loop control or remote driving are met.
Outlook – operators must seek to diversify their revenue streams
Connectivity service revenue is a small part of the cellular IoT revenue pie that also
includes IoT connectivity and application enablement (device and data management)
platforms, systems integration, devices, analytics and end-to-end solutions. Service
providers play a very strong role in the connectivity space but will seek to diversify their
revenue streams into adjacent areas to drive recurring revenue growth. Several
operators have in-house systems integration/ICT units and made selective acquisitions of
vertical specialists in areas like automotive, fleet management and healthcare. As a rule,
most service providers will lack the resources to scale in multiple verticals, so
partnerships and the willingness to share the revenue opportunity will be critical to
successful diversification.
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reproduction prohibited.5G’s Economic Impact on Service Providers 20
Capex impact
Over 60 operators have launched 5G, with more in the pipeline
The investment of more than 400 operators in 119 countries in 5G in the next few years
will have an outsized impact on capital expenditures. The impact will vary by region and
size of deployment.
Based on Omdia’s assessment during the first half of 2019, there are three types of
fundamentally different 5G deployments: large-scale, small-scale and laggards. Large-
scale deployments of over 10,000 5G NR/gNBs have occurred in China and South Korea.
In Australia, UK, Saudi Arabia, Switzerland, UAE and the US, there have been small-scale,
tactical deployments of 100s of 5G NR/gNBs. Among the laggards are operators in
countries such as Argentina, Colombia and Uruguay where LTE is underdeveloped and
may be leapfrogged by 5G.
All existing 5G commercial deployments are based on 5G NSA NR, but according to
Omdia’s Evolution from 4G to 5G Service Provider Survey – 2019 (July 2019) in 2020,
around a third of 18 leading service providers (accounting for half of the world’s telecom
capex and revenue) will move to NG SA NR, paving the way for network slicing.
Network slicing is defined by Omdia as “a logical partition or a virtual piece of a physical
network, including fixed and mobile, physical and virtual, that has connections, capacities
(bandwidth), and characteristics (e.g. Service Level Agreements or SLAs) that make the
slice look and act like a physical network to the user, program or process that is using it”.
3GPP has identified a list of more than 12 network slicing requirements. These include
the ability to dynamically create slices for different scenarios and devices, the ability to
access different slices, that each slice will not negatively impact another and guarantees
around flexibility, customization and API access.
Network slicing is not a new concept, but 5G’s very high bandwidth and very low latency
capabilities make it relevant for a range of scenarios that have exacting performance
requirements. Potential consumer applications leveraging 5G network slicing include
video and broadcast (advanced formats and resolutions – 4K, UHD, 360/VR immersive
video, as well as live broadcast events and interactive content) and gaming: advanced
multiplayer mobile gaming, VR and AR games, VR esports and cloud gaming.
The same survey (Omdia’s Evolution from 4G to 5G Service Provider Survey – 2019) found
that most existing 5G NR commercial deployments and service launches and those
planned for the rest of 2019 would use mid-band spectrum (3–6GHz), particularly 3.5GHz
and 4.5GHz. Mid-band is the most widely used spectrum in Asia Pacific and EMEA. 6–
39GHz spectrum, which includes the mmWave bands of 28GHz and 39GHz, is the next
widely used spectrum (e.g. deployments from AT&T and Verizon in the US). Sub-1GHz
and 1–3GHz represent the least commonly utilized spectrum.
The deployment of both mid-band spectrum and 6-39GHz for 5G NR represents a
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departure from 3G and LTE, where sub-GHz bands and spectrum in the 1.7GHz, 1.8GHz,
reproduction prohibited. 1,9GHz, 2.1GHz and 2.6GHz bands were most commonly utilised. 3-6GHz and 6–39GHz
lack the range of lower band spectrum but are central to the 5G’s ability to deliver very5G’s Economic Impact on Service Providers 21
high bandwidth and low latency. Because of their shorter range, 3-6GHz and 6–39GHz
will require the deployment of more base stations than lower band spectrum to cover
the same geographic area. As a result, 5G will see greater network densification. As 5G
standards develop and more spectrum becomes available for 5G, an increasing number
of operators will deploy 5G in more than one band to build out capacity, coverage,
speeds and latency.
5G will surpass 2G/3G/LTE spend in 2021
Although 3GPP-compliant 5G service launches accelerated in 2019, initial 5G service
provider spending on 5G began in 2018. Omdia tracks and forecasts 5G hardware-related
capex (5G RAN and 5G Core) in its quarterly updated mobile infrastructure market
tracker. (This tracker does not include data on micro cells, which is covered in a different
tracker).
According to the latest tracker (Q4 2019, published in March 2020), 5G hardware
revenue accounted for nearly 3% of total global mobile infrastructure hardware supplier
revenue in 2018; this share will rise to over two-thirds in 2023. As such, 5G hardware’s
share of global supplier revenue will increase more rapidly than that of LTE in the first six
years after investment. Investment in LTE began in 2009. That year, LTE accounted for
0.2% of global mobile infrastructure hardware revenue, rising to around 48% in 2014.
Figure 11: 5G’s share of cellular hardware supplier revenue vs. LTE
According to Omdia’s mobile infrastructure market tracker, 5G will not in itself lead to
higher levels of global mobile infrastructure hardware revenue. Since 2009, the peak year
for global mobile infrastructure hardware was 2015 ($48.2 billion). This fell to $33.6
billion in 2018. Omdia expects that during the 2019-2024 period, 2021 will see the
highest level of global mobile infrastructure hardware revenue ($36.1 billion).
5G drive other forms of hardware and software spend
However, the deployment of 5G NR will drive other forms capex and opex spending.
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Omdia has tracked mobile infrastructure software since 2007. Mobile infrastructure
reproduction prohibited. software (an opex cost for operators) allows for the management, monitoring and
optimization of mobile networks. For instance, In the LTE world, software enables the5G’s Economic Impact on Service Providers 22
upgrade to LTE-Advanced. In the 5G world, US, EMEA and Australia have seen the
upgrading of existing 4G baseband units through software to enable 5G non-standalone
(NSA) operations.
Unlike hardware, revenues from mobile infrastructure software have grown every year
since Omdia began sizing the market in 2007. According to Omdia’s Mobile infrastructure
market tracker, Q4 2019, global software revenues will grow from $18 billion in 2018 to
nearly $24 billion in 2023. The ongoing trend towards virtualization and cloud-native
infrastructure will drive this growth. In 2023, software will account for over 40% of total
global mobile infrastructure revenue, up from 35% in 2018.
Figure 12: Hardware and software share of mobile infrastructure
As mentioned before, the utilisation of mid-band and 6–39GHz spectrum for 5G will make
for denser networks, particularly in areas where coverage, bandwidth and latency
requirements are the greatest. These factors, alongside the anticipation that 5G will
generate larger volumes of data (per device or connection) than previous generations of
cellular technology, will drive the requirement to upgrade capacity in other parts of the
network, such as mobile backhaul. Omdia expects 5G to be a significant driver of
investment in mobile backhaul, which in the context of a macro cell refers to the
transportation of mobile traffic between the macro BTS/NodeB and BSC/RNC or the
eNodeB and the EPC site. According to Omdia research, the market for macro cell mobile
backhaul equipment will grow from $9 billion in 2020 to $9.7 billion in 2023. According to
a survey of 15 operators conducted for this white paper, microwave technology plays a
key role in mobile backhaul and this will continue as 5G networks get deployed and
commercial services expanded. Over 60% of the 15 operators will use microwave for the
current and planned deployments. The 15 operators were also asked what factors
determined the choice of backhaul technology: the top two factors were capacity
requirements (79%) and fast deployment time (79%). This implies that microwave meets
© 2020 Omdia. operators’ requirements for flexibility and agility: adding capacity within tight
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reproduction prohibited.5G’s Economic Impact on Service Providers 23
The role of carrier aggregation and massive MIMO
Two other technologies that will play an important role in the 5G world are carrier
aggregation and massive MIMO. Carrier aggregation refers to the creation of bigger
“pipes” by combining two frequency channels together. Binding channels together like
this enables faster data speeds than could otherwise be achieved with just a single
channel. With 5G, networks operating at greater than 6 GHz spectrum will have up to 400
MHz component channels (“component” in this example simply means there can be up
to 400 MHz of channel available without any aggregation necessary).
Moreover, 5G will allow for additional carrier aggregation from that already generous
starting point, with the potential in 3GPP Release 15 to combine different bands up to an
800 MHz channel and in Release 16 all the way up to an enormous 1.2 GHz channel. In
other words, “pipe” size and capacity with mmWave 5G has the potential to be eight to
twelve times greater than what is available under today’s LTE configurations.
Multiple Input, Multiple Output (MIMO) refers to using multiple radio antennas at both
the tower and the device. MIMO helps minimize transmission errors and improves
capacity, coverage, and transmission speed. LTE currently makes use of either 2x2 or 4x4
MIMO. In a 2x2 system, there are two antennas on both the tower and device; in a 4x4
system, there are four antennas on both the tower and device. Massive MIMO sees a
leap in scale in the number of antenna elements that could be installed (up to 256) on a
given base station and therefore more transmission paths, which equates to better data
rates and reliability.
In essence, carrier aggregation and massive MIMO can help operators to optimize their
RAN footprint (via hardware simplification and efficient use of spectrum) to deliver better
experiences for end users. For operators, optimizing RAN footprint is particularly
important, not least because of the unpredictable time and costs involved in gaining
access to new sites and establishing new infrastructure. The need to optimize resources
also applies to the transport of traffic from the cell site to the core network – mobile
backhaul. As discussed previously in the report, 60% of the 15 operators surveyed for this
white paper will use microwave for current and planned mobile backhaul deployments
(including 5G). Ensuring that mobile backhaul infrastructure meets the demanding
latency and bandwidth requirements of 5G applications will be critical. Carrier
aggregation and MIMO will therefore play a growing role as microwave evolves to meet
5G’s future requirements.
Regional trends: APAC and Americas will drive near-term 5G capex
Omdia expects by 2024, globally, 5G will account for just 70% of mobile infrastructure
hardware revenue. By that time, APAC driven by China, Japan and South Korea, will
account for around two-thirds of global 5G mobile infrastructure hardware revenue,
followed by Americas (17.4%) and EMEA (16.7%). North America, particularly the US, will
be the main driver of mobile infrastructure hardware revenue in Americas.
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reproduction prohibited.5G’s Economic Impact on Service Providers 24
Figure 13: Share of 5G mobile infrastructure hardware revenue by region - 2024
China and South Korea lead the way in APAC
China’s three main service providers China Mobile, China Telecom and China Unicom
unveiled their respective 5G plans at Mobile World Congress Shanghai in June 2019.
Based on these plans and subsequent announcements, Omdia noted in its Q3 2019
Mobile infrastructure market tracker that it expected over 100,000 5G NR to go live by
the end of 2019. In its Q3 2019 Mobile infrastructure market tracker, Omdia said that it
expected China to end 2020 with the world’s largest 5G footprint: 1 million 5G NR. in
their respective 2019 interim results presentations China Mobile and China Telecom
stated that they would concurrently deploy both non-standalone (NSA) and standalone
(SA) 5G networks.
As mentioned above, South Korea is the other country engaged in large-scale 5G
NR/gNBs deployment. In its Q4 2019 and 2019 earnings release KT Corp noted a 65%
increase in total capex, including a more than doubling of access network capex. By the
end of 2019 it had attracted 1.4 million 5G subscriptions (out of a total of 21.9 million
wireless subscriptions spanning MVNO, second device/IoT and handset).
The leading US carriers start with Fixed Wireless Access
The US’ two largest service providers entered the commercial 5G fray with fixed wireless
access (FWA) services. In December 2018, AT&T launched limited, invitation-only 5G
service in 12 cities via the Netgear Nighthawk Mobile Hotspot. In June 2019, it offered
smartphone-based services (via the Samsung Galaxy S10 5G) to business customers only.
AT&T’s initial 5G deployments are based on 39GHz mmWave spectrum but it has been
field trialing sub-6GHz: in July 2019 it announced its first such field data transfer using
this spectrum. By early February 2020 it was offering 5G services in 35 cities across 17
states. In its Q4 2019 earnings call in January 2020, AT&T said that its 5G network
covered 50 million people and that it expected nationwide 5G coverage by mid-2020.
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In October 2018, Verizon launched 5G commercial FWA services in 28GHz and 39GHz in 4
reproduction prohibited. cities: Indianapolis, Houston, Los Angeles and Sacramento, using its proprietary 5G TF
specification. In April 2019, Verizon launched its mobile 5G network initially in limited5G’s Economic Impact on Service Providers 25
areas of Chicago and Minneapolis using 3GPP 5G NR standards with only one device
available at the time, a mod case attaching to Moto Z3 handset. By the end of 2019,
Verizon had launched 5G in 31 cities.
Swisscom moves from “5G-wide” to “5G-fast”
The largest European markets of France, Germany, Italy, Spain and the UK have seen a
handful of limited coverage commercial 5G launches, mainly based on 3.5GHz spectrum.
At the time of writing, no French service providers had launched. Telekom Germany had
launched mobile services, as had TIM in Italy and Vodafone in Germany, Italy and Spain.
In Germany, Vodafone recently reminded its investors that it faces the regulatory
obligation to reach 98% of households with speeds of 100 Mbps by December 2022,
100% highway coverage the same year and the remaining roads and railways by
December 2024. The UK has seen three service providers launch initial 5G services - 3 has
launched FWA and EE (BT) and Vodafone both mobile and FWA.
Beyond Europe’s 5 largest markets, the leading Swiss operator Swisscom noted in its
2019 results that by the end of that year it had reached 90% coverage with “5G-wide”,
which offers speeds of up to 1 Gbps, and in 2020 was rolling out “5G-fast”, offering 2
Gbps or more over a smaller coverage area. Its Dutch peer, KPN, stated in its own Q4
2019 results that it expects 5G and FTTH deployment between 2019 and 2021 to drive
access share of total capex to move from around 35% to around 50%.
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reproduction prohibited.5G’s Economic Impact on Service Providers 26
Service provider spending
strategies
Background to service provider survey
In February 2020, Omdia surveyed managers/directors of network operations or
procurement at 15 of the 18 leading service providers (that account for half of the
world’s telecom capex and revenue) across Americas, Asia Pacific (APAC) and Europe,
Middle East and Africa (EMEA) to determine their spending strategies ad expectations
regarding 5G.
The survey questioned them on the financial, technical and commercial aspects of their
5G strategies, namely:
– the current and planned status of their 5G deployments in 2020;
– the new consumer use cases their companies are targeting for 5G revenue;
– besides consumer, the industry verticals their companies are targeting for 5G
revenue;
– how their business models will evolve to address new 5G use cases;
– their expectations on the impact of 5G on capex and opex in 2020, 2022 and
2024;
– their investment strategies for mitigating 5G capex and opex;
– how 5G will impact on their plans for macro cell and microwave deployment;
– how they manage power supply backup for high density networks.
Survey findings:
Fixed wireless, enhanced video, transportation and industrial seen as key opportunities
• Full steam ahead with 5G: across every region, all 15 service providers surveyed are
in full 5G deployment mode or expect to be by the end of 2020.
• Fixed wireless broadband is the leading consumer target: fixed wireless broadband
(93%), followed by enhanced video (79%) are some way ahead of immersive display
advertising (64%) and advanced gaming (50%) among 5G consumer revenue targets.
© 2020 Omdia.
All rights reserved. Unauthorized There are some significant regional variations. Advanced gaming (25%) is perceived
reproduction prohibited. to be a less attractive revenue opportunity in Americas than APAC and EMEA.You can also read
