Economics of 5G Still Don't Make Sense

The continuing lack of a business case for 5G technology means it remains to be seen whether the substantial costs of 5G rollouts will be justified, according to TBR senior analyst Chris Antlitz.

With the digital era dawning, operators are under substantial pressure to drive down costs and find new revenue streams to stay above water, Antlitz said in a research note.

“The hyperconnected, 'intelligent' world will challenge long-held societal beliefs and will create significant moral and ethical debates, such as how hyperconnectivity will impact people’s privacy and who owns whose data. This world will also upend and challenge tried-and-true business models that have been around for decades.”

The mobile industry is increasingly pinning its hopes on 5G to address key challenges, generate new revenues, manage exploding mobile data traffic volumes and better compete against OTT providers.

“This hope appears to be premature, however, as the economics of 5G still do not make sense, evident in the lack of a viable business case for the technology,” he said.

“Said differently, it remains uncertain whether the revenue generation possibilities from 5G will be attractive enough to justify the infrastructure cost to deploy 5G.”

In light of these pressures, equipment vendors are facing ongoing price pressure and disruption challenges as operators continue to seek to drive down costs.

“Vendors, especially incumbent vendors, will face ongoing price pressure and significant disruption from new technologies and architectures in areas such as NFV/SDN (virtualization and the white-box threat), SaaS, automation, AI and analytics,” Antlitz said.