When I think about innovation to come, it’s hard not to consider the underlying technology that will be the foundation of the products and services we haven’t even imagined. The next generation of wireless network technology, better known as 5G, promises to bring the connectivity experience to a new level, completely upending the way we digest media, purchase products and services, and even operate our homes and businesses. The communications industry realizes the massive opportunity 5G brings, which is why we are already seeing significant investments in building higher network density, adding spectrum, and upgrading active equipment.
With industry investments projected to reach up to $275 billion (according to CTIA), it begs the question — who will pay for all of this infrastructure and how will they recoup their investment? What is the strategy for continued revenue growth? With some 5G mobile networks launching this month and pricing plans taking shape, it’s critical we begin answering these questions today.
Preparing for the price wars
Efforts to monetize the technology face some fundamental challenges as revenues have traditionally been consumer-driven. With price plans and mobile devices starting to be announced, consumers want to know exactly what they’re getting for the extra money per month they’ll spend both on the service and new devices, especially as 5G coverage promises to be spotty, at best, in the early years and months.
Recent research on 5G consumer attitudes conducted by PwC shows that significant headwinds are ahead for 5G pricing. Indeed, fully two-thirds of consumers indicated that they would not be willing to pay anything additional for the increased speeds and capabilities delivered by 5G. When combined with those who would be willing to pay, the average premium barely approached $5 per month, less than half of the initial pricing recently announced.
As 5G continues to roll out nationwide and additional device options materialize, we see a significant risk of backsliding in 5G pricing. While this may be good for consumers, such a challenge could spell disaster for the continued expansion of 5G networks, slowing deployment to unserved and underserved areas throughout the country. Expect to see mobile network operators seizing every opportunity for differentiation, whether through exclusive devices, new value-added services, or bundles that obscure the true price, in an effort to hold their ground on pricing.
Awareness of 5G (still) needs improvement
Despite what happens with consumer pricing strategies, there is one major obstacle impacting the entire industry — lack of consumer awareness of 5G in the first place. In our recent study, PwC found that only 46 percent of respondents were familiar with the term “5G” without prompting, with awareness heavily skewing toward males in urban areas. This lack of awareness has contributed to the fact that consumers don’t see the urgency in adopting 5G. In a scenario where a new mobile device would be required to access 5G, only 26 percent said they would rush out to buy one. Indeed, expect to see marketing of both new 5G devices and services ramp up significantly in late 2019, particularly in cities such as Chicago and Minneapolis where the networks are rolling out first. This will likely reach a fever pitch once 5G makes it into more mainstream, flagship smartphones for the masses.
If the industry continues to point to the obvious — just “faster and more reliable service,” many consumers will wait to adopt. They need to see and understand the other products and benefits, like longer battery life or portability of a fast home broadband connection. Additionally, how will their day-to-day lives including entertainment options be improved? Take mobile gaming as a use case. While many of us love the simple pattern or racing games we can play for a few minutes while on our commute home, the mobile gaming experience is only becoming more advanced. If we were to take the life-like graphics of those we can see in the latest console games onto mobile, the experience wouldn’t hold up. But with 5G, this can become a new reality for mobile gaming.
A new path to 5G monetization
To navigate the increasingly complicated world of 5G, companies must have a firm sense of the 5G-enabled services and experiences that consumers, businesses, and public agencies will want in the future. Indeed, the rollout of 5G may well enable new capabilities such as augmented reality that have been heretofore infeasible on most mobile networks. From there, network operators and over-the-top service providers must develop monetization models and required partnerships and platforms. Doing so will require the creation of a culture of mass collaboration that has historically been anathema to telecom service providers, a significant change in the industry’s norm.
Additionally, the advent of 5G is an opportunity for the mobile industry to rethink its operating models and how it delivers service. Why build yet another bespoke network when you could utilize the virtualized approach already employed at scale by the Internet world? Better yet, why build three, four, or even more overlapping networks when sharing models are well established? And why continue to pay the price for thousands of retail stores when smartphones and mobile services are now well-known quantities among consumers who are otherwise flocking to online channels for other major purchases? These questions and more will need to be thought through as the 5G revolution gets underway.
Optimizing 5G’s Potential
After years of research and speculation about the next generation of wireless technology, we are finally starting to see the widespread activation of 5G networks. And while the development of the technology was certainly a long road, the work to truly expand and optimize 5G will only continue.
In the months ahead, the conversation will shift from simply how to develop 5G — or who will be the first to develop and widely deploy the technology — to more thought-provoking issues around commercialization, including pricing approaches, promotion of the new service, and compelling use cases that take advantage of 5G’s capabilities. How the industry chooses to strike the balance between a simple evolution and a full-scale revolution will not be easy, and it certainly will not be completed overnight. What is certain, however, is that the decisions and strategies chosen will ultimately determine the fate of 5G and its impact on our society.
The post The looming 5G price wars and industry path to monetization (Analyst Angle) appeared first on RCR Wireless News.