The Economics of Mass Market 5G Networks

The transition from LTE to 5G is becoming more vocal, yet challenging economics limit expansion to small-sized market trials and launches. While these deployments will most certainly be utilized for headlines and advertisements, forecasts don’t expect a mass-market rollout until the 2020s.

Fiber/Spectrum availability on a national and local level as well as regulation limit the economics of deployment. On a technical level, constant connectivity is limited for high-band 5G due to propagation losses at higher frequencies. As a result, operators will begin slowly implementing mostly low-band 5G (spectrum below 6 gigahertz), with high-band 5G (spectrum above 6 gigahertz) deployed in micro markets. The low-band expansion would only carry similar costs to those as current LTE networks. High-band, on the other hand, would carry costs four to six times higher than for LTE macro-cell deployment.

Even though there remains no clear definition for 5G, it promises speed improvement, low latency, and a high connection capacity. Existing LTE networks are expected to be augmented rather than replaced.

Taking a look at the consumer’s perspective, investors might be hesitant to invest given that prices of wireless data prices are falling, and additional demand can be met through LTE densification and Wi-Fi off-loading. Yet 5G might open up new markets to broadband; the Internet of Things, Time-sensitive devices, and fixed wireless sector are all factors of growth. The Internet of Things would benefit from the ability to have up to one million connections per square kilometer. The low latency of 5G could be vital for medical devices or (autonomous) vehicle safety features. Finally, 5G’s ability to provide speeds of more than 100Mbps could replace wired broadband, an industry that has suffered strong adversity from consumers.

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