Consumer or enterprise market first for 5g monetization?

There is limited clarity on how to best monetize 5G assets: focus on consumer services at a premium or on enterprises and partners? In my latest post, I shed some light on where 5G monetization is coming from (or not).

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Jan 10, 2020
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The latest Ericsson Mobility Report released in November 2019 brings us quite interesting figures on 5G subscriptions: by October 2019 there were already 10 million 5G users in the world and this number is forecasted to be 2.6 billion globally in 2025. There are 26 operators already offering 5G plans in 16 countries and 284 are already investing in 94 countries.

But what happened in 2019 doesn´t indicate the success of 5G until CSPs can start getting extra or new revenue streams to monetize their 5G investments. And the key question now is: Where to focus first on this new monetization journey? On one hand consumer services is the current cash cow where operators feel safe to create new 5G offers. Alternatively, there is a huge untapped enterprise and partners market – very promising but quite uncertain. Let´s take a closer look at both of them.

 

The case for consumer services at a premium

Buckets of data are the basis of offerings from nearly every service provider. The amount of data traffic in packages has increased and – in most markets – voice and text messaging are included in the package. Recently, service providers have been creating packages that cater to the usage of specific services or devices in various combinations. Some of them are even unlimited. CSPs are making money from consumer services for quite some time and still want to monetize their 4G (and even 3G) investments. As my colleague Graham Cobb noted in his recent blog post “5G is coming but service providers still need to generate new revenues from their existing business” and upgrades to existing BSS may not only lead to a bigger baseline from where the 5G story will begin but also prepare the BSS ecosystem for the new 5G demands.

Many service providers are creating packages aimed at capturing extra value when launching 5G. One option involves the bundling of specific services, although many are simply pricing 5G packages higher than their 4G alternatives. So far, a majority of the 5G launch markets are charging a premium averaging almost 20 percent for 5G subscriptions. Even though this is not the huge market potential that 5G promises it is already a good starting point for operators to monetize their early 5G investments. Add also the chance to offer new consumer services, the buzz generated among early adopters, the possibility to create differentiated bundles and the expected growth in data usage among other benefits that 5G for the consumer market will bring. In the 5G consumer potential report published in May 2019 it was revealed that consumers in the US would prefer to cut the cord from cable TV and instead use streaming services via 5G, Chinese consumers expect to live in a 5G-connected smart home, and South Korean consumers would love to go shopping in mobile VR. Not only will existing services bring premium revenues once 5G is rolled out, but new sources of revenue may come up based on early customer adoption and new consumer lifestyles. This shouldn´t be overlooked and is the safest starting point for 5G monetization.

 

But enterprises and partners promise even more

5G monetization goes way beyond consumer services. The addressable market increases exponentially with the introduction of faster, extremely low latency mobile networks that will allow enterprises from different business segments to provide new and revolutionary services by either purchasing from or partnering with a CSP – that in turn will also have other partners to provide more or enhance those services. "Ericsson´s 5G for business: a 2030 market compass report" shows that among 10 industries (manufacturing, energy and utilities, public safety, healthcare, public transport, media and entertainment, automotive, financial services, retail, and agriculture) the investments driven by the value 5G is providing is expected to be around USD 1.5 trillion in 2030. But not all of this is expected to be addressable by service providers, as the ability to take a role in the value chain will differ by industry and be subject to the speed of disruption, geographic relevance and the complexity of applications that the addressed use cases entail. As service providers work to move up the value chain, the ability to address any specific market will be reduced due to increased competition from IT vendors, many of which already have established roles within different industries. Still there is a significant potential for service providers to go after new revenue within the industry verticals. The total value of the global addressable 5G-enabled market for service providers across those 10 industries is projected to be USD 700 billion in 2030, beyond mobile broadband. Service providers may find new sources of revenue in various B2B2X opportunities, given that 5G excels in many key technology areas, such as peak speeds, latency and positioning accuracy to mention a few. Many industry use case applications can be created or enhanced by 5G. A shift in the value chain is therefore possible, with service providers able to address many new vertical use cases driven by the business transformation that new advanced technologies such as 5G, AI and IoT will bring.

 

The journey to monetize 5G starts now

When will these advanced technologies be adopted by the masses for CSPs to address those markets profitably? Right now, expectations are that around 2022 we will see real use cases implemented around them. As 5G becomes part of industrial businesses, there is a clear rise in service provider opportunities for new 5G-enabled revenues. But still uncertainties are there – to capture a share of the 5G business potential, service providers need to consider what role in the value chain to take, what industry or use case cluster to address, as well as getting the right go-to-market models and organizational adaptation in place. In the mean time the consumer market is their bread and butter and provides plenty of opportunities to start monetizing their 5G investments right now and also to “test the waters” when providing new services and offers to a big customer base.

So, you don´t need to choose between consumer services or enterprise and partners business. The former is a more or less certain thing with limited upside while the latter will start later but promises a huge addressable market. The certain thing is that the 5G monetization journey is already starting!

Read the full Ericsson´s 5G for business: a 2030 market compass report!

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