5G: the network economics of reality

From early discussions on its future makeup, 5G communications will be an evolution of what we have all experienced on 3G and increasingly on 4G today. More high-speed video, and perhaps less reliance on Wi-Fi fed from fixed broadband networks. As a user of a supposed 200Mbps broadband home service my Wi-Fi connection never reaches the theoretical speeds – and is often outstripped by 4G speeds on my iPhone.

Thinking about our mobile subscriptions here in the UK, our devices (often subsidised as part of our subscriptions) are increasingly complex and expensive. Our expectations increase exponentially year-on-year; the services and volumes of data, the data speeds and locations where we expect full coverage all put more stress on the financial model of our mobile networks.

In the UK (perhaps not uniquely) we seem unwilling to finance essential network improvements by paying more for the enhanced services. Mobile networks accept this is an inevitable state of affairs in the highly competitive industry, rather than take a step back and say no.

So let’s jump forward a few years to 2020 and start to think about how 5G will be constructed. The default is that we’ll see more of the same, as mentioned. Initial plans for 5G improvements focus around lower latency (smoother, faster mobile user experience) – and the big one: ubiquitous connectivity (everywhere). To achieve anything close to this dream, significantly more network infrastructure is required, and specifically to achieve the combination 5G will demand, there’s a need for smaller basestations in more places. The economics of this model work only if that infrastructure investment is financed by increased subscriber revenues – unless that investment or revenue stream comes from somewhere else.

In the move from 3G to 4G, the services were boosted significantly, but the prices weren’t. There’s no reason to believe there will be a sudden shift in the fundamental economics in places like the UK. The market in the UK is so competitive that no single network dares to take the bold step forward and increase its prices to allow it to invest significantly in its infrastructure development.

So how will the networks fund plugging the gaps and providing services in rural and remote areas, along railway lines, or along motorways? And what about coverage deeper in buildings and shopping centres when mobile coverage is increasingly described as a basic utility?

Well, another ‘strand’ of 5G developments is to bring together the mobile networks for us humans, with more integral support for machine-to-machine (M2M) communications or, should I say, the internet of things (IoT).

Consider this an overhyped, undefined area of technology if you wish, but there is an unstoppable momentum in the wider technology industry ready to bring this to the fore. 5G developments are likely to embrace this and the industry is keen to see it formally embedded into the fabric of the 5G mobile network infrastructure. But, given the requirements of the IoT (ultra low power, low data rates, machine-focused) why should the IoT form part of a communications standardisation process that is ultimately at odds with this specification, which is all about higher-speed, ubiquitous, data-driven, consumer-focused mobile communications?

Well one of the answers brings me back to that latency point: real-time communications is essential for all sorts of IoT/M2M applications and devices (especially some of the more demanding applications such as vehicle-to-vehicle communications).

If an operator can offer real time M2M services for IoT devices running across the same fundamental 5G network, funded by business requirements as much as for its consumer needs, then there’s a profitable additional revenue stream to make the investments possible and hopefully to make the economics work. Perhaps?

Written by David Marsden of Wildfire PR