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Building the 5G Business Case

Oct, 10, 2018 Hi-network.com

2018 to date has been the year when 5G came out of the standards and into reality, with many trials throughout Asia Pacific (APAC). The learnings from these trials have shown us not only what services could be supported, but how 5G should be deployed and what the likely investments will be required for a commercial launch. During the recent 5G Asia event, the 5G discussions have moved from how and when 5G will be deployed, to how are we going to pay for it. So what will a 5G investment business case look like?

The way I see it, there are three broad areas of focus for the initial 5G business case, considering both top-line and bottom-line drivers:

  1. First, the initial focus area is the economics of meeting the current projected data capacity growth requirements at a lower cost per bit. 3G/4G traffic is still growing at more than 100% year-over-year in some APAC markets and even jumped over 400% in India last year. The amount of capacity that 5G will enable of course depends primarily on the amount of new spectrum that regulators make available, but looking at allocations to date, we expect 5G to open up around 5x more bandwidth than 4G has today. Based on our modeling, 5G cost per bit could be less than half of what it is for 4G, and a quarter of 3G costs. This will drive traffic migration and spectrum re-farming initiatives once 5G is launched.
  2. Second, 5G enables more customized services, or so-called slices. Most 4G services today are supported over the same generic "bearer" regardless of the requirements or value of that service. With 5G networks, attributes like bandwidth (BW), latency, resiliency and security can be customized, like per over-the-top (OTT), enterprise or Internet of Things (IoT) application, etc. The business case drivers here are both increased revenue share with new and differentiated services, and further improved cost to serve.
  3. Third is the monetization of completely new services beyond what 4G can support today. This is where the new cool applications come in, like lower latency, Augmented Reality (AR)/Virtual Reality (VR), tactile internet, super high-definition media with Gbps bandwidth, and massively dense machine-to-machine (M2M) deployments. In this area, we have the most uncertainty for Return on Investment (RoI). Traditionally, the mobile industry hasn't been great at predicting the next "killer" application, but we do know 5G is a step change in mobile capabilities and with the right device and application ecosystem, the next killer app will come.

 

As we move from trial, to deployment, to launch of 5G services, the business model will continue to evolve, but at least for now, we have an initial view of how 5G will benefit service providers. Investment business cases based on lower cost per bit capacity and service differentiation are enough to show positive RoI, and monetizing the next 5G killer app will be the future icing on the cake.

Learn more about Cisco Ultra 5G Packet Core Solution, and how you can unlock new revenue opportunities of the mobile internet with Cisco.


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