MNOs must clear 5G confusion to maximize revenue
5G has the potential to generate billions in revenue, but MNOs must first clear up 5G applications and technologies -- such as FWA and IoT -- for customers and partners.
Mobile network operators, or MNOs, have spent billions of dollars in 5G investments to date, but without proper intervention, those billions could bust.
Experts believe that, because 5G requires less power, the technology will cost less to operate and save organizations more compared with previous generations of cellular technology. However, there has been mounting fear in the MNO space about whether 5G will be profitable. A new report from PwC suggested that 5G can yield significant profits, but in order to capitalize on a considerable return on assets (ROA), MNOs must clear up lingering 5G confusion for partners.
MNOs struggle to profit from 5G
In February 2022, the GSM Association predicted that 5G will generate a global revenue of $960 billion by 2030. That, among the many other benefits of 5G, has prompted MNOs to invest billions in 5G infrastructure and services. In April 2019, Reuters reported that MNOs will invest $275 billion in 5G by 2026. Much of that money has already been invested: In March 2022, Bloomberg reported that major MNOs AT&T, T-Mobile and Verizon had spent over $100 billion on 5G upgrades yet have received little return on those investments.
PwC maintained that MNOs currently find it difficult to monetize 5G due to limited understanding of the technology and market among customers. But it isn't just customers who are confused. MNOs also find it challenging to create networks and share revenue between partners, such as customers, carriers, end users, stakeholders and other members of the 5G ecosystem. It's also difficult for MNOs to define service-level agreements and guarantee quality of service for various network services.
Additionally, a PwC report from January 2023 surveyed 4,410 CEOs worldwide and found that 46% of telecom service provider CEOs said they believe their businesses will not be economically viable in 10 years or less.
PwC identified two major problems MNOs currently face as they monetize 5G:
- High costs of 5G applications.
- A low revenue potential of fixed wireless access (FWA), IoT and 5G applications.
5G-enabled technologies, such as FWA and IoT, can support a host of use cases. But some ambiguity remains about how much it will cost to enable these services and the potential revenue MNOs can earn from them.
Ambiguous costs of FWA, IoT and 5G apps
FWA and IoT rank as some of the top use cases for 5G. FWA delivers network connectivity to rural areas, and IoT seamlessly interconnects smart devices into a LAN. Both can enable high-speed 5G network connectivity, and MNOs are moving to deploy 5G to support these services. But the potential ROA for either connectivity option is currently unknown.
According to a September 2022 report from Juniper Research, FWA generated $515 million in revenue in 2022. That number will continue to rise to $2.2 billion in 2023, the report said. On the IoT side, research from Statista found that the IoT market will generate a revenue of $5.27 billion in 2023.
Despite these projections, PwC said MNOs are unclear about how much it will cost to enable FWA, IoT and other 5G applications. For example, according to PwC, augmented reality experiences could cost three to four times as much as typical mobile connectivity services. FWA, on the other hand, could cost 22 times as much as mobile connectivity services. Consumers are willing to pay the same price for FWA as they do for wired plans, but FWA could generate somewhere from 30 to 40 times less revenue than typical mobile connectivity apps.
The costs of IoT services are even more difficult to estimate because of the range of applications. Some IoT applications require low data rates, while other intelligent IoT devices perform critical tasks, such as remote surgery or factory floor management. Such tools require high bandwidth and low latency, and they could cost as much as 70 times more than traditional mobile services. Additionally, the revenue potential MNOs could earn from IoT is just as vague. IoT could generate a revenue of somewhere from 70 times less to four times more than mobile connectivity apps.
Tackle 5G confusion with collaboration, education
MNOs are stumped about how to monetize 5G, but consumers also lack an understanding of 5G services and applications. The PwC report emphasized that collaboration between MNOs and partners is key to monetizing 5G. MNOs should create plans to communicate with subscribers and other members in the 5G ecosystem about the size and costs of 5G applications.
This strategy can help educate partners about 5G and increase interest in 5G applications and services. PwC said this arrangement should work mutually -- as MNOs educate partners on 5G offerings and costs, MNOs should learn the most important 5G features for their consumers.
Such an arrangement could enable MNOs to identify use cases and industries that could benefit from FWA, IoT or 5G apps. Not only could this help reduce confusion about 5G, but it could enable MNOs to improve their market understanding of 5G, revamp their 5G offerings to support various consumer needs, adequately price 5G services and, ultimately, build stronger relationships with partners.