AH Tech Talk: How Are 5G Networks Going To Be Paid For?

The 2015 Mobile World Congress starts next week. At this show in Barcelona we may expect many businesses and presenters to demonstrate all sorts of technology relevant to the mobile industry. Whilst the headline stories will gather the most attention - typically, manufacturers unveiling their latest products including the Samsung Galaxy S6 and HTC One M9 - there will be many other exhibitors showing off their latest products and ideas. And there will be a lot of discussion about 5G technology.

As a technology, 5G has yet to be standardized and finalized according to the International Telecommunication Union - Radiocommunication Sector (usually shortened to ITU-R). This is scheduled to happen later in the year under the IMT-2020 flag just as we've seen with the 3G (IMT-2000) and 4G (IMT-Advanced) standards. Although it might see a side issue to the topic of 5G networking, LTE is on a technicality not a 4G service because the data transfer speeds are not high enough for the 100 Mbps to 1 Gbps standard - and this is why you should always see "4G LTE" rather than simply "4G." Of course, you don't: billions spent from worldwide carriers is the reason why "4G" has become synonymous with the term "LTE" for many parts of the world.

And this leads me to my point about 5G. In and amongst the discussions about Massive MIMO, MU-MIMO, millimetre waves, modulation standards and duplexed formats, carrier aggregation, MTC, IoT and all the other confusing acronyms associated with the mobile industry, we don't yet have an established standard for the technology. More to the point, it doesn't matter: the money involved is more important than the IMT standard. Just as the 4G LTE networks that we know and use across the world don't match up to the IMT standard, it's these networks that are deployed, maintained and paid for by customers. We may see networks branded as a 5G technology when in reality they fall short of the standard definition. As long as these networks are worth the billions of dollars of investment, it won't matter.

Who's going to pay for the next generation networks? When it came to the adoption of 3G and LTE technologies, it was ultimately the carrier subscription based business model. In other words, customers paid for the networks via increases in their 'phone bills. However, the market has now changed and customers expect a high speed data network included with their tariff. Critically, they don't want to pay extra but are using more and more data every month. The old business model of getting the customer to pay more and restricting their data allowance isn't working: we won't be seeing cell 'phone plans jump by 40%; carriers are trying to keep bills where they are and competition remains fierce. Instead, the money needs to come from the customer in a different way - it won't be as simple as the carrier selling an additional $15 a month line to cover a smartwatch and IoT technology. And a smartwatch won't need a 10 Gbps Internet connection.

The mobile sector is going to have to reinvent its own wheel and there are two examples of how this could happen. The first is for MTC (Machine-Type Communications) data to be commercialized and sold on to enterprises. Those small data bursts could be worth a lot of money for the right application and customer base. The second way is that the mobile operators will start to compete with cable and fixed line operators for broadband access to homes and businesses. This business model has a couple of advantages in that it will allow rapid revenue growth as well as keeping check of the data used. It will allow the carriers to deploy 5G networks in a much more targeted way. Instead of deploying the technology to every available tower, the service could be deliberately pointed at particular businesses, towns, villages or neighborhoods. This will ease the deployment cost and raise revenue for the new service: it's going to be used in this given area, it will turn a profit.

Haven't we seen this before? When a carrier rolls out a new network technology, it is usually applied to the areas with the highest levels of demand first. It is then rolled out for the surrounding area. At first, the take up of new devices that support the technology is slow but increases as customers realize the advantages. Of course, when customers start to enjoy the benefits of higher speed networks so they start to use more and more data. What we may see with the deployment of 5G networks is very few, if any mobile devices, supporting the technology in the way that we saw 3G and LTE devices popping up. Ultimately, it has to be worth the carriers investing the necessary sums of money in deploying the new generation networks. Yes; new products and devices are exciting aspects of the mobile sector and there is huge potential in the Internet of Things and getting our fridges, heating systems and cars to understand our needs and communicate with one another without our involvement, but the next generation mobile networks are likely to be paid for by less glamorous ways.

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About the Author

David Steele

Senior Staff Writer
I grew up with 8-bit computers and moved into PDAs in my professional life, using a number of devices from early Windows CE clamshells and later. Today, my main devices are a Nexus 5X, a Sony Xperia Z Tablet and a coffee cup.