2024 is a pivotal year for 5G-Advanced

TIM: 5.5G, or 5G-Advanced, the next iteration of 5G, brings a number of technical capabilities not previously possible. They mostly involve lower latency, and that opens up 5G to use cases that haven’t yet been monetized at scale. 

GAVIN: Higher bandwidth, lower latency, greater reliability—is that the trio we should focus on? 

TIM: It is. You can get into other capabilities, such as network slicing, or deterministic service. But whether 5G “works” comes down, not to technology, but to business ROI. That's where we need to see more action from the telcos and their vendor partners.

GAVIN: So, can businesses make any money out of this? 

TIM: That's the big question. 5G has been successful, insofar as take-up has risen, and it's given the operators some level of pricing premium and justification over 4G. Most people do see it as a speed upgrade, rather than anything else. 

But what hasn't happened is the enterprise dimension. It's been experimented with—in China, it's certainly much more advanced than in other countries. But everywhere else, it's still relatively early days. Things like private networks, and massive IoT—this is really where the rubber hits the road.

If you're on a 10-year infrastructure cycle—from the time you start putting infrastructure in the ground until the next cycle happens, 6G, which will be in the late 2020s—then you've got to start to see an ROI midway through that cycle. And for the whole telecom industry, that’s the focal point of efforts being made to reap that growth. So, 5.5G should be seen within that context of helping the monetization effort, rather than just another fancy list of technological mechanisms.

GAVIN: You said at the MWC back in February that this would be a pivotal year for the mobile sector, potentially a year of take-off, as the industry tapped into 5.5G and expanded 5G. Is it going in the right direction, with signs that there could be profitability in this? 

TIM: There are generally positive signs from Korea, and China, and some US operators are reporting reasonably good results around their enterprise clients for things like ports, airports, and manufacturing. 

The question, though, is whether that moves the overall needle. We need to see how the data plays out and whether it's ultimately able to do it. The other thing the industry's got to bear in mind is that the revenue balance tilts about 70:30 between consumers and businesses. So, if you're trying to increase the B2B side to make it a bigger portion of the business, then, just by the math, any growth within that small business makes it harder to affect the overall total. It takes a lot of work. And that will still be a multi-year story, rather than something that allows us to reach a verdict at the end of 2024. 

GAVIN: What might enterprises need—and pay for—that 5.5G could provide?

TIM: Things like private wireless networks with a higher quality of service. Things like better edge-compute deployments, particularly for running AI at that edge. And it also creates a greater addressable market for buyers of that technology. 

We often talk about fintech, manufacturing, and healthcare, and this broad range of industries that could leverage 5.5G. That's valid. But what we're looking for are actual proof points—specific operators with specific clients, demonstrating how 5G deployment contributes to operator revenue and solves problems for clients. 

GAVIN: Is it about 5.5G as a new money earner? Or about increasing profits by enabling greater efficiencies?

TIM: It’s both. I think the revenue side will always be paramount, because that’s the fundamental goal of any company. But on the other side, being able to streamline operations through automation—meaning less manual labor and more energy savings—is a key part of that disruption as well. 

Just on the energy front, we estimate that 5G and IoT combined can enable about 40% of the CO2 savings required by 2030 to stay on track for net zero. 

GAVIN: The technology may be greener per device, but with more things connected, there’s more overall consumption. Do those energy-saving sums still add up?

TIM: It depends on a company’s energy profile. For the telecom industry, only about 25% to 30% of power comes from renewables, with 60% to 70% coming from the grid, and 10% from diesel. The telco sector is actually a leading industry in renewable power usage. And as that renewable figure starts to grow for other industries, then the power drain from having more connected devices starts to recede.

GAVIN: Where do you think the revenue could come from for operators?

TIM: I think it will be a whole mix. There's still untapped consumer business in the virtual reality domain and high-definition video. There's still a lot more to go with FWA, which is not reliant on 5.5G but is certainly helped by it. From a B2B sector perspective, you’ll see more from edge computing. We’ll likely see a resurgence of network slicing, where companies want guaranteed network resources for their sole exclusive use, but don’t want to buy a private network deployment in full. A slice offers them good value for money for what they're trying to do. And I think we'll see more live broadcasts where instead of having BBC trucks with aerials outside Wembley Stadium, we’ll use cellular spectrums to transmit that information.

5G-Advanced is very important, because of the slicing and the latency characteristics there. So, I think there's a bunch of different ways you're going to see it monetized. The question is how much that adds up to overall. And that's a two- to three-year story. 

GAVIN: I don't know if you're a betting man, but when you look at that—profitable vs. not profitable—where’s your money?

TIM: It really is sector-dependent. As users of 5G, some sectors will be more fruitful than others. It also depends on the overall level of economic growth. The world’s been a tough place for business since 2019, and a constrained growth environment doesn't help technology spending. 

There are still political instabilities and other considerations to factor in, but we see the take-up path for 5G in the business sector as generally positive. It's more a question of whether operators can build the case at scale, together with their cloud partners, rather than going it alone. A lot of the target use cases are also being addressed by players like Amazon and Microsoft, creating a co-opetition model. One minute your partner is your partner and the next, they’re a competitor. I think that’s something we're going to be living with for a long time. 

GAVIN: Research suggests that by 2030, 75% of mobile base stations will be upgraded to support the 5G-A standard. Does that feel right to you? 

TIM: When a technology upgrade is standardized worldwide, as 5G is, eventually everybody will have it. It's only a matter of time. Our own survey data found that 95% of operators expected to have deployed 5G-Advanced within four years of the standard’s release, which was this year. So, I’d call it the end of the decade to be conservative. But it's going to be in place.

GAVIN: 5G-A is the first mobile standard specifically built to take advantage of AI and machine learning. Is there a risk of businesses missing opportunities, or thinking it won’t impact their sector, only to get quickly overtaken if they're not careful?

TIM: That's a good observation. To be successful, telcos will have to work with their clients to think about how the technology helps their clients’ business, rather than just responding to RFPs (Request for Proposals). This consultative approach is a new way of working, and it’s already starting. You’ll see more operators working like Accenture, Tata, and other IT consultancies that have multi-year projects with their clients. 

GAVIN: To avoid a sort of "rolling jeopardy"?

TIM: Exactly. I think the biggest thing to watch is the take-up rate of 5G-Advanced across different industries, and what that is doing to business revenue for mobile operators. Is it broadly increasing revenue, or not affecting it?

What excites us is that 5G-A offers new use cases that have been talked about for years but weren’t previously possible. What still concerns us is that, especially on the consumer side, people see 5G as primarily a speed upgrade, which history has shown gets competed away and doesn't generate long-term revenue. 

We're looking for a “wow” factor that can start to change people's perceptions about what is possible, and therefore what customers are willing to pay more for, compared to what they already have. And we haven't seen that yet.

GAVIN: Is that an issue with how the technology is being sold?

TIM: No, it's just the reality that people haven't yet been able to land on a "killer app" or something as instantly visible, simple, and compelling as the iPhone or Netflix. I don't mean to compare operators to internet companies, as they’re completely different business models. It’s just that they introduced a new product category that completely changed the way entire industries work.

I’m not saying telco operators can necessarily do that. But the more they can work with partners to show people, "Here's something that wasn't possible before, and it's really cool, and your friend is using it," then that will make a really big difference. And we haven't seen that yet.