| Notes |
THE 5G GUIDE
A REFERENCE FOR OPERATORS
APRIL 2019
INTRODUCING
THE 5G ERA
READINESS
AND ENABLING
CONDITIONS
VALUE
CREAT OI
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CAPTURE
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CASE
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Legal notice
5G rollout remains a critical competitive differentiator
between operators which must be decided at an
individual level, based on prevalent market conditions
in the relevant country and operators’ individual
business decisions. Only the continuation of interoperator competition can ensure the degree and pace
of innovation, value and quality of service customers
rightly expect.
Please note that it is not the role of the GSMA to
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and networks. Rather, the purpose of this report and
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will probably need to consider in elaborating their
individual strategies to ensure efficiency of their
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innovation in the best interest of customers.
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1
Acknowledgements
The 5G Guide and its associated business case model
and 5G Readiness tool were developed by the GSMA’s
5G Task Force.
The team is grateful to all the organisations, institutions,
companies and individuals who provided insights to
help develop these resources. In particular, we thank
the GSMA Board for providing the direction and
guidance for this work, and appreciate all the insights
from the discussions at the GSMA Policy Group,
Strategy Group and Technology Group.
We will also like to specifically acknowledge the inputs
from the following Board Member Operators (both
current and former) who are supporting GSMA 5G
activities.
América Móvil AT&T
Bharti Airtel China Mobile
China Telecom China Unicom
Deutsche Telekom Etisalat
Hutchison Whampoa (Europe) Limited
KDDI KPN
KT LG U+
Megafon MTN
MTS NTT DOCOMO
Orange SK Telecom
Softbank STC
Telecom Italia Telefónica
Telenor Telia Company
Telstra Turkcell
Verizon Vodafone
In addition, the Task Force wishes to acknowledge
the insights from the ecosystem (especially Ericsson,
Facebook, Google, Huawei, Nokia, Qualcomm, Samsung
and VMWare), the over 30 enterprises that participated
in the study and the universities that have supported
GSMA 5G activities - especially Kings’ College London
and University of Surrey.
Members of the GSMA 5G Task Force were drawn from
Strategy, Technology, Policy, Mobile for Development,
Legal, Marketing and GSMA Intelligence.
Emeka Obiodu
Editor and Project Lead
GSMA 5G Task Force
April 2019
Acknowledgements
2
Contents
2 5G Readiness and Enabling Conditions 50
2.1 Technology Readiness 51
2.1.1 Standards completion schedule 52
2.1.2 5G deployment models 53
2.1.3 SA vs NSA 5G 54
2.1.4 Equipment readiness: 5G NSA 54
2.1.5 Equipment readiness: 5G SA 54
2.1.6 5G technical features 55
2.1.7 5G coverage using 4G Infrastructure 56
2.1.8 Millimetre wave deployments 56
2.1.9 Backhaul upgrade for 5G 57
2.1.10 5G voice & messaging 58
2.1.11 Voice service continuity 59
2.1.12 NB-IoT and LTE-M as part of 5G 60
2.1.13 Cellular Vehicle-to-Everything (C-V2X) in 5G 60
2.1.14 Identity & Access Management in 5G 61
2.1.15 eSIM in the 5G era 62
2.1.16 Delivering on virtualisation 63
2.1.17 Vendor ecosystem for 5G 63
2.1.18 Security considerations for 5G 64
2.1.19 Energy efficiency in the 5G era 65
2.2 Policy Readiness (including Spectrum) 66
2.2.1 5G era policy framework 67
2.2.2 Network deployment regulations 68
2.2.3 Regulatory flexibility 68
2.2.4 Spectrum in the 5G era 69
2.2.5 Regulatory costs 72
2.3 Market Readiness 73
2.3.1 Market readiness and timing 74
2.3.2 4G maturity trigger 74
2.3.3 5G competitive landscape 75
2.3.4 5G and benefits of scale 76
2.3.5 Success factors for 5G handsets 77
2.3.6 Lessons from 3G/4G: first mover advantage 78
2.3.7 Lessons from 3G/4G: late mover risks 79
2.3.8 Lessons from 3G/4G: optimal rollout plan 80
2.3.9 Operational complexity with 2G/3G/4G/5G 81
2.3.10 Leapfrogging to 5G 81
2.3.11 Collaboration and new skills for 5G 82
Contents
List of Figures 6
List of Tables 9
Glossary 10
Foreword 12
Executive Summary 14
Imagine the future 18
Headlines from the future 19
A typical day for Mr G in the 5G era 20
1 Introducing the 5G Era 22
1.1 What is the expectation for the 5G era? 23
1.1.1 5G: a network of opportunity 23
1.1.2 The post-2020 5G era 24
1.1.3 Goals of the 5G era 25
1.1.4 Industry expectations for the 5G era 26
1.2 How is 5G different? 27
1.2.1 5G design specifications 28
1.2.2 Comparison with 4G 29
1.2.3 Coexistence with 4G 30
1.2.4 5G latency & speed 31
1.2.5 5G and heterogeneous networks 32
1.2.6 5G and Intelligent Connectivity 33
1.2.7 5G use cases 34
1.3 Why does 5G matter? 35
1.3.1 The importance of mobile 36
1.3.2 Economic value created by 5G 36
1.3.3 5G as a Digital Economy enabler 37
1.4 When is 5G coming? 38
1.4.1 Standardisation roadmap 39
1.4.2 5G connections forecast 40
1.4.3 5G vs 4G connections growth 41
1.4.4 5G Journey as a marathon 42
1.4.5 Replacement of legacy networks 43
1.4.6 5G era revenues forecast 44
1.5 Where is 5G happening? 45
1.5.1 5G trials and commercial launches 46
1.5.2 Regional/Country 5G forecasts 47
3
2.4 The BEMECS Framework 83
2.4.1 Introducing the BEMECS framework 84
3 5G Value Creation and Capture 86
3.1 The 5G Opportunity 87
3.1.1 The 5G opportunity framework 88
3.1.2 Economic benefits of 5G 89
3.1.3 5G revenue projections 90
3.2 5G Value Capture 91
3.2.1 5G Value capture for operators 92
3.2.2 5G and the ‘Core’ operator business 93
3.2.3 5G and new use cases 93
3.2.4 The ecosystem investment/innovation
opportunity 94
3.3 What do consumers want? 95
3.3.1 Consumer engagement 96
3.3.2 Key survey insights 96
3.3.3 Lessons for operators 98
3.4 What do enterprises want? 99
3.4.1 5G enterprise opportunity 100
3.4.2 Enterprise engagement 100
3.4.3 Key interview insights 108
3.4.4 Lessons for operators 110
3.5 The eMBB Opportunity 113
3.5.1 eMBB products & services 114
3.5.2 eMBB drivers 115
3.5.3 eMBB economics 118
3.6 The FWA opportunity 121
3.6.1 FWA products & services 122
3.6.2 FWA drivers 124
3.6.3 FWA economics: opportunity mapping 127
3.7 The Enterprise Opportunity 129
3.7.1 Enterprise products & services 130
3.7.2 Enterprise drivers 132
3.7.3 Enterprise economics: operator revenue mix 134
3.8 Enterprise Opportunity - IoT deep dive 135
3.8.1 IoT products & services 136
3.8.2 IoT drivers 137
3.8.3 IoT economics 137
3.9 5G Value Enablers – Resilient Networks
and Services 139
3.9.1 Importance of resilience 140
3.9.2 Predictive resilience: designing for resilience 141
3.9.3 Preventive resilience: frameworks to
assure resilience 142
3.9.5 Corrective resilience: business continuity
and disaster recovery 143
3.10 5G Value Enablers: Horizontal APIs 144
3.10.1 Importance of APIs 145
3.10.2 Technical landscape for APIs 146
3.10.3 APIs, platforms & commercialisation 147
3.11 5G Value Enablers: Operator Cloud 148
3.11.1 Importance of the Operator Cloud 149
3.11.2 The case for MEC 150
3.11.3 Drivers for the Operator Cloud 151
3.11.4 Operator Cloud: infrastructure
vs. innovation strategy 152
3.12 5G Value Enablers: Network Slicing 154
3.12.1 Importance of Network Slicing 155
3.12.2 Network Slicing: prerequisites for success 156
3.12.3 Network Slicing: Go-to-Market Strategy 157
3.13 5G Era Business Models 158
3.13.1 Evolving the cellular business model 159
3.13.2 5G assets and capabilities 160
3.13.3 Six key business models 161
3.13.4 Cloud AR/VR: an example of a 5G Era
business model 165
Contents
4
Contents cont.
4 5G Cost Considerations 166
4.1 Cost Considerations 167
4.1.1 Cost considerations framework 168
4.2 Network Capacity 169
4.2.1 Network capacity drivers 170
4.2.2 Spectral efficiency 171
4.2.3 Spectral capacity 171
4.2.4 Spectral reuse: network densification 172
4.2.5 Transport (Backhaul/Fronthaul) 173
4.3 Network Coverage 179
4.3.1 5G spectrum coverage range 180
4.3.2 Network coverage: hotspots 181
4.3.3 Network coverage: urban 181
4.3.4 Network coverage: rural 183
4.3.5 Network coverage: transport Links 184
4.4 Network Flexibility 185
4.4.1 Flexibility in 5G era networks 186
4.4.2 NFV/SDN 186
4.4.3 Network slicing 188
4.4.4 Cloud RAN 191
4.5 Network Latency 192
4.5.1 Latency in 5G era networks 193
4.5.2 Enabling low latency: edge computing 194
4.5.3 MEC as part of 5G capex 195
4.6 Network Energy Efficiency 196
4.6.1 Towards ‘Greener’ 5G era networks 197
4.6.2 Network energy costs: industry debate 198
4.6.3 Benefits of renewable energy 199
4.6.4 Leveraging alternative energy sources 199
4.6.5 Optimising the network load 200
4.7 Network Automation 201
4.7.1 The age of network automation 202
4.7.2 AI-based network automation 202
4.7.3 Network automation in action 203
4.7.4 Mechanism of AI-based network automation 204
4.7.5 Limitations of network automation 204
4.8 Network Ownership 205
4.8.1 Evolution of network ownership and
management 206
4.8.2 Infrastructure sharing (incl. Towercos) 207
4.8.3 Neutral Host: Single Wholesale
Networks (SWF) 209
4.8.4 Aerial networks (incl. LEO satellites) 209
4.8.5 Neutral Host: hotspots & 5G corridors 210
4.8.6 Private 5G networks 211
4.8.7 Wi-Fi: the road to Wi-Fi 6 212
4.8.8 Bring-Your-Own-Small Cells (BYO-Small Cells) 212
4.9 Network Equipment Sourcing 213
4.9.1 Open Source for flexibility: a dose of realism 214
4.9.2 New lock-in phenomenon 215
4.9.3 Mobile operators as system integrators 215
4.9.4 Proliferation of open source organisations 216
4.9.5 Engaging and leveraging open
source organisations 217
4.10 Capex and Opex evolution 218
4.10.1 5G Capex evolution 218
4.10.2 5G Opex evolution 219
Contents
5
5 Business Case Considerations – Hypothetical Model 220
5.1 5G Business Case Model: Setting
the context 221
5.1.1 The objective for the model 222
5.1.2 The objectives behind the model 222
5.1.3 Methodology for the model 223
5.2 Archetypes & Deployment Scenarios 224
5.2.1 Operator archetypes 225
5.2.2 Deployment scenarios 226
5.3 Cost Model – Assumptions 227
5.3.1 Cost mechanics 228
5.3.2 CAPEX 228
5.3.3 OPEX 230
5.4 Revenue Model – Assumptions 232
5.4.1 Revenue mechanics 232
5.4.2 New consumer use cases 233
5.4.3 Enterprise/IoT use cases 233
5.4.4 New Broadband Markets 233
5.5 Model Outputs & Results 234
5.5.1 High level results 234
5.5.2 Cost results 236
5.5.3 Revenue results 238
5.5.4 Cost intensity results 240
5.5.5 Deployment cost model simulation – example 242
6 Key Messages and Positions for the Industry 246
6.1 GSMA’s Perspective 247
6.1.1 GSMA Leadership’s Views 247
6.2 Industry-level Messaging 248
6.2.1 Generic 5G elevator pitch 249
6.2.2 Messaging for enterprise customers 250
6.2.3 Use case examples from a customer
benefits perspective 251
6.3 GSMA 5G-era Policy Positions 255
6.3.1 Policy Actions to Support 5G Implementation 256
Appendix 258
7.1 5G NR Spectrum Bands 259
7.2 NB-IoT and LTE-M requirements 260
7.3 The BEMECS Framework 262
7.4 Lessons from IT virtualisation 266
7.4.1 Best Practices for telcos learned from the IT
Datacentre virtualisation market 266
7.4.2 Technical Advantages: A production-proven
NFV platform is essential for 5G success 268
7.4.3 A Multi-Service Multi-Tenant Platform
Returning ROI for NFV 269
7.5 Network Slicing - Making It Happen 270
7.5.1 Executive Summary 270
7.5.2 Recommendations 270
7.5.3 A technical background 272
7.5.4 Use cases and benefits of network slicing 275
7.5.5 The challenges and deployment constraints 277
7.5.6 Vision for network slicing: a laundry list of
work items 280
7.5.7 Conclusion 282
7.5.8 References (Network Slicing contribution
from KCL) 282
5G Task Force Team 283
Steering Committee 283
Project Team 283
Contributors 283
Contents
6
List of Figures
Figure 1.1.1 The 5G era will begin fully from 2020 24
Figure 1.1.2 Mobile Industry goals for the 5G era 25
Figure 1.2.1 The 5G advantage and comparisons with 4G 29
Figure 1.2.3 4G and 5G are based on the same technology philosophy 30
Figure 1.2.4 5G will support low latency and high throughput services 31
Figure 1.2.5 5G is at the centre of the heterogeneous network of the future 32
Figure 1.2.6 5G and Intelligent Connectivity 33
Figure 1.2.7 5G will support existing and new products and markets 34
Figure 1.3.1 Contribution of 5G to the global economy (Source: GSMA Intelligence) 36
Figure 1.3.2 Key enablers of the digital economy in the 5G era (Source: BCG, GSMA) 37
Figure 1.4.1 The 3GPP roadmap for Release 15 and 16 39
Figure 1.4.2 Coverage and adoption for 5G (Source: GSMA Intelligence) 40
Figure 1.4.3 Adoption of 5G vs 4G (Source: GSMA Intelligence) 41
Figure 1.4.4 Reaching the 10% market share milestone – 3G, 4G and 5G 42
Figure 1.4.5 Market shares by 2025 – 2G, 3G, 4G and 5G (Source: GSMA Intelligence) 43
Figure 1.4.6 Mobile revenue forecast (Source: GSMA Intelligence) 44
Figure 1.5.1 Projected plans for 5G launches per country (Source: GSMA Intelligence) 46
Figure 1.5.2 Regional 5G adoptions by 2025, excluding IoT and FWA connections (Source: GSMA Intelligence) 47
Figure 2.1.1 5G NR Technology Roadmap 52
Figure 2.1.2 NSA configuration (option 3). NR connected to, and controlled by existing 4G core network 53
Figure 2.1.3 SA configuration (option 2). NR connects to the 5G core only.
The standalone 5G system interworks at core network level with legacy 4G system 53
Figure 2.1.4 Timeline of 5G Features 55
Figure 2.1.5 Total mobile backhaul by method (Source: ABI Research) 57
Figure 2.1.6 Evolution of IMS-based IP Communications Services 58
Figure 2.1.7 Interworking among radio accesses 59
Figure 2.1.8 Traditional SIM Cards vs. Remote SIM Provisioning of eSIM 62
Figure 2.1.9 Security controls outlined in 3GPP Release 15 65
Figure 2.2.1 Key policy considerations for the 5G era 67
Figure 2.2.2 Spectrum allocations in the 3.5GHz band 70
Figure 2.3.1 Mobile revenues and forecasts in $ billions for selected countries and regions (Source: GSMA Intelligence) 75
Figure 2.3.2 Average connections and mobile revenues for operators in China, EU and US (Source: GSMA Intelligence) 76
Figure 3.3.3 4G era market share evolution in the UK (Source: GSMA Intelligence) 78
Figure 2.3.4 Capex and cash flow evolution in the US (Source: GSMA Intelligence) 79
Figure 2.3.5 Capex and OFCF evolution in Canada (Source: GSMA Intelligence) 80
Figure 2.4.1 BEMECS Framework Indicators 84
Figure 3.1.1 The 5G Opportunity Framework 88
Figure 3.1.2 Economic contribution of 5G (Source: TMG, GSMA) 89
Figure 3.1.3 5G business potential per cluster (Source: Ericsson) 90
Figure 3.2.1 Three value capture opportunities for operators in the 5G era 92
List of Figures
7
Figure 3.2.2 Operational excellence versus differentiation strategies for 5G 93
Figure 3.2.3 Operator CVC Investment Sectors 2016 – 2018 94
Figure 3.3.1 Consumer expectations of 5G (Source: GSMA Intelligence) 96
Figure 3.4.1 Where will new operator revenues in 5G come from? (Source: CEO 5G Survey; GSMA; February 201739) 100
Figure 3.4.2 Insights from enterprises across eight key sectors (Source: GSMA) 101
Figure 3.4.3 1. Automotive and Mobility 101
Figure 3.4.4 2. Media and Content 102
Figure 3.4.5 3. Public / Smart City 103
Figure 3.4.6 4. Healthcare 104
Figure 3.4.7 5. Manufacturing 105
Figure 3.4.8 6. Energy & Utility 106
Figure 3.4.9 7. Software & Technology 107
Figure 3.4.10 Enterprise insights 108
Figure 3.5.1 Four ‘video’ traffic types for the 5G business case 114
Figure 3.5.2 Average data traffic per smartphone (Source: Ericsson) 115
Figure 3.5.3 Revenue/GB versus Cost/GB for mobile data (Source: GSMA Intelligence) 116
Figure 3.5.4 World Smartphone Average Selling Price (Source: Statista) 117
Figure 3.5.5 Mobile ARPU will stabilise in the 5G era (Source: GSMA Intelligence) 118
Figure 3.5.6 Demand variation for mobile network capacity – 24 hours (Source: Kings College London43) 119
Figure 3.5.7 Evolution of pricing for eMBB services 120
Figure 3.6.1 FWA product offerings for operators 122
Figure 3.6.2 FWA is a lower cost alternative than greenfield FTTx 123
Figure 3.6.3 FWA as an incentive to deepen fibre usage in 5G (Source: Solon Consulting) 124
Figure 3.6.4 Spectrum for new FWA entrants in Nigeria (2018) - nearly a quarter of assigned spectrum is held by
operators with a combined market share below 1% (Source: GSMA Intelligence) 126
Figure 3.6.5 FWA mass market opportunity for 160 countries (Source: GSMA) 127
Figure 3.7.1 Operator enterprise offerings in the 5G era 130
Figure 3.7.2 ARPU growth vs GDP/capita and iPhone ASP 2007 – 2017
(Source: Asymco, World Bank, GSMAi, GSMA analysis) 132
Figure 3.7.3 5G and the 4th Industrial Revolution 133
Figure 3.7.4 The operator revenue mix in the 5G era 134
Figure 3.8.1 Mobile IoT in the 5G future 136
Figure 3.8.2 Operator role in the IoT Value Chain 138
Figure 3.8.3 Operator role transformation 138
Figure 3.9.1 Designing networks to minimise downtime 140
Figure 3.10.1 Horizontal API as the vehicle for mass customisation in the 5G era 145
Figure 3.10.2 APIs – standardisation, platformisation, commercialisation 147
Figure 3.11.1 The Operator Cloud is a distributed edge/cloud infrastructure 149
Figure 3.11.2 MEC vs Cloud – a requirements perspective 150
Figure 3.11.3 Operator Cloud as, firstly, an infrastructure play
(Source: GSMA analysis, adapted from Deutsche Telekom) 153
List of Figures
8
List of Figures cont.
Figure 3.12.1 Network Slicing use cases 155
Figure 3.12.2 Stages of the Network Slicing Go-to-Market strategy 157
Figure 3.13.1 Customer-centric roadmap for 5G Era business models 159
Figure 3.13.2 Operator assets and capabilities as a platform proposition 160
Figure 3.13.3 5G era business models for operators 161
Figure 3.13.4 Business model options for Cloud AR/VR in the 5G era (Source: GSMA analysis, adapted from Huawei) 165
Figure 4.1.1 Cost impact & considerations framework for 5G business case 168
Figure 4.2.1 Three ‘Spectral’ Outcomes that define network capacity hypothetical values to realise a
1000x capacity increase 170
Figure 4.2.2 Theoretical maximum cell throughput for 30MHz bandwidth and 100MHz bandwidth cases 171
Figure 4.2.3 Installed Cell Sites by Cell Type Source: ABI Research 172
Figure 4.2.4 Backhaul economics per site (10-year NPV of costs in EUR): Fibre vs. IP microwave
(Source: Ofcom, BT Openreach, Bernstein) 176
Figure 4.2.5 Macro Backhaul by Method - Regional (Source: ABI Research) 177
Figure 4.2.6 Small Cell Backhaul by Method - Regional (Source: ABI Research) 178
Figure 4.3.1 5G NR Spectrum bands and coverage/capacity provided 180
Figure 4.3.2 Network deployment varies in four megacity archetypes (Source: BCG, GSMA) 182
Figure 4.3.3 Mobile data traffic growth in megacities (Source: BCG, GSMA) 182
Figure 4.3.4 Share of capex to deliver 50Mbps in the UK (Source: Oughton and Frias) 183
Figure 4.3.5 Hypothetical cost of 5G coverage of major UK transport links as a percentage of
total annual capex (Source: Oughton & Frias; GSMA analysis) 184
Figure 4.4.1 Traditional Networks to Virtualised Networks 187
Figure 4.4.2 Concept of Network Slicing 188
Figure 4.4.3 The role of collaboration in the investment case for Network Slicing 189
Figure 4.4.4 5 years cumulative TCO for Cloud RAN – capex and opex (Source: Mavenir, Senza Fili Consulting) 191
Figure 4.5.1 Latency performance for LTE compared to latency requirement for 5G 193
Figure 4.5.2 The cost of MEC at different ‘edge’ locations 194
Figure 4.5.3 MEC could account for 2-4% of 5G capex in a hypothetical scenario 195
Figure 4.6.1 Projected impact of energy optimisation in 5G networks (Source: Orange) 197
Figure 4.6.2 Total cost of ownership, based on the GSMA’s Network Economics Model estimate for a
hypothetical operator in a mostly developed market 198
Figure 4.7.1 The different fields of AI 203
Figure 4.8.1 Large scale vs Small scale network ownership considerations 206
Figure 4.8.2 Technical classification of infrastructure sharing 207
Figure 4.8.3 Cumulative Infrastructure Sharing Deals (Source: Coleago) 208
Figure 4.8.4 Aerial networks – wider area coverage, weaker signal, lower capacity (Source: GSMA Intelligence) 210
Figure 4.8.5 A neutral host small cell system 211
Figure 4.9.1 Network Slicing standardization landscape 216
Figure 4.10.1 Global mobile data traffic growth (Source: Ericsson) 219
Figure 5.1.1 High-level structure of the 5G business case model 223
List of Figures
9
Figure 5.2.1 Operator archetypes for the 5G business case model 225
Figure 5.2.2 Three 5G deployment scenarios 226
Figure 5.3.1 Summary of the Capex and Opex assumptions for the model 228
Figure 5.3.2 Summary of the cost of spectrum for 3.5GHz (Source: GSMA Intelligence) 229
Figure 5.3.3 Summary of the cost of spectrum for mmWave (Source: GSMA Intelligence) 230
Figure 5.5.1 Summary of outputs from the 5G business case model 235
Figure 5.5.2 Cost projections for operator archetypes in a developed market 236
Figure 5.5.3 Cost projections for operator archetypes in a developing market 237
Figure 5.5.4 Average revenue projections of operator archetypes in a developed market 238
Figure 5.5.5 Average revenue projections of operator archetypes in a developed market 239
Figure 5.5.6 Cost Intensity (indexed) projections of operator archetypes in a developed market 240
Figure 5.5.7 Cost Intensity (indexed) projections of operator archetypes in a developing market 241
Figure 5.5.8 Cost results for a major, integrated operator in a developed market 242
Figure 5.5.9 Cost intensity results for a major, integrated operator in a developed market 243
Figure 5.5.10 Revenue results for a major, integrated operator in a developed market 244
Figure 5.5.11 No of years of capex required for a major, integrated operator in a developed market 244
Figure 6.2.1 Towards a world of Intelligent Connectivity 251
Figure 6.3.1 Summary of GSMA Public Policy considerations relating to 5G 256
Figure 7.5.1 Example of three slices sharing common spectrum (taken from [7]) 274
Figure 7.5.2 Difficulty of addressing different vertical sectors and use cases within those sectors 276
Figure 7.5.3 Slice template to be used for setup of a slice and can be exchanged for negotiation between
two operators in establishment of a cross-operator slice 280
Table 1.1.1 Top 10 expectations for the 5G era 26
Table 1.2.1 IMT-2020 5G requirements (Source: ITU-R) 28
Table 3.7.1 Selected differentiated connectivity mechanisms (1974 – 2018) 131
Table 4.2.1 4G and 5G bandwidth and latency requirements (Source: Ericsson) 174
Table 4.2.2 Comparison of 5G mobile backhaul technology options (Source: ABI Research) 175
Table 5.4.1 Summary of the assumptions for the best-case incremental ARPU inputs for the model
(5 years post 5G launch) 232
Table 7.1.1 5G New Radio Spectrum Bands 259
Table 7.2.1 Technology Specifications for LTE-M and NB-IoT 260
Table 4.3.2 The BEMECS framework – the full details 262
List of Tables
List of Figures/Tables
10
Glossary
AI Artificial Intelligence
API Application Programmable Interfaces
AR/VR Augumented Reality / Virtual Reality
ARPU Average Revenue Per User
B2B Business-2-Business
B2C Business-to-Consumer
BBF Broadband Forum
BBU Baseband Unit
BEMECS Basic, Economic, Market, Enterprise,
Consumer, Spectrum indicators
BYO (X) Bring-Your-Own-X
CBRS Citizens Broadband Radio Service
CDN Content Delivery Network
Cloud RAN Cloud Radio Access Network
COTS Commercial Off-The-Shelf
CPE Customer premises equipment
CSFB Circuit Switched Fallback
CVC Corporate Venture Capital
DAS Distributed Antenna Systems
DL Deep Learning
eMBB Enhanced mobile broadband
EMF Electromagnetic field
EPC Evolved Packet Core
ETSI European Telecommunication
Standards Institute
FTTH/P Fibre-To-The-Home/Premises
FWA Fixed Wireless Access
Gbps Gigabits per second
GCC Gulf Cooperation Council
GDP Gross Domestic Product
GDPR General Data Protection Regulation
GEO Geosynchronous
GHz Gigahertz
GST Generic Slice Templates
HTTP/2 Hyper Text Transfer Protocol 2
IAB Integrated Access Backhaul
IEEE Institute of Electrical and Electronics
Engineers
IETF Internet Engineering Task Force
IMS IP Multimedia Subsystem
IMT International Mobile Telecommuincations
IoT Internet of Things
IT Information Technology
ITU-R International Telecommunications Union
Radiocommunications Sector
JSON JavaScript Object Notation
KT Korea Telecom
LEO Low Earth Orbit
LPWA Low Power wide Area
LTE Long Term Evolution
LTE – M LTE –for Machines
MEC Multi-access Edge Computing
MENA Middle East and North Africa
MHz Megahertz
MIMO Multiple input Multiple output
MW Megawatts
NB - IoT Narrowband – Internet of Things
NDAF Network Data Analytics Function
NEF Network Exposure Functions
NFV Network Function Virtualization
NFV/SDN NFV/software defined network
NPV Net Present Value
NR New Radio
NSA Non- standalone
OEM Original Equipment Manufacturer
OFCF Operational Free Cash Flow
OFDMA Orthogonal Frequency Division Mulitple
Access
OPEX Operating Expenditure
OTT Over The Top
PC Personal Computer
PMP Point –to –Multipoint
Glossary
11
PPP Public Private Partnership
QoS Quality of Service
RAN Radio Access Network
REST Representational State Transfer
ROI Return on Investment
SA3 Service and System Aspects
SCEF Service Capability Exposure Function
SDO Standard Defining Organisations
SD-WAN Software Defined-Wide Area Network
SMS Short Message Service
SON Self-organising Networks
SRVCC Single Radio Voice Call Continuity
SWN Single Wholesale Network
TCP Transmission Control Protocol
TLS Transport Layer Security)
TQM Total Quality Management
URLLC Ultra-reliable and Low-latency
Communications
VNF Virtual Network Functions
VoLTE Voice Over LTE
VoNR Voice Over New Radio
WAC Wholesale Application Community
WiMAX Worldwide Interoperability for Microwave
Access
WOAN Wholesale Open Access Networks
WRC World Radio Conference
Glossary
12
THE 5G GUIDE
Foreword
Foreword
13
Our purpose as the mobile industry is to Intelligently Connect everyone
and everything to a better future and 5G is the next major step in
delivering on this goal. 5G, building upon and working together with
4G, provides the ability to connect people and things faster and more
efficiently as part of a 5G Era. 5G will drive new innovation and growth
– it will be an evolutionary step with a revolutionary impact, delivering
greater societal benefit than any previous mobile generation. This
technology will fundamentally improve the way we live and work,
enabling new digital services and business models to thrive.
The 5G journey is a hugely exciting one for the mobile industry to
embark upon, to the benefit of all in society. At the same time, it
presents a complex landscape for operators who will need to make
careful judgements about investments and timing. As such, and at the
request of the GSMA board, this unique 5G Guide has been produced
by the GSMA to assist operators with their journeys; we think of this
resource as being like a compass to help assist operators in navigating
the 5G Era landscape.
We would like to thank the GSMA board steering group, including Juan
Carlos Archila from América Móvil, Hatem Dowidar from Etisalat and
Serpil Timuray from Vodafone, for the helpful guidance, counsel and
support that they provided to the GSMA team in relation to the creation
of this guide.
With 4G networks already covering 81% of the global population across
208 countries, and 5G networks set to cover nearly 40% of the global
population by 2025 (GSMA Intelligence), the 5G Era is truly upon us.
The GSMA looks forward to continuing to support its members in
realising the benefits of the 5G Era and Intelligent Connectivity to the
benefit of society as a whole.
Sunil Mittal Mats Granryd
Chairman, GSMA Director General, GSMA
2017/2018
Foreword
14
Executive
Summary
THE 5G GUIDE
The 5G era is upon us!
The mobile industry has begun the periodic journey to upgrade its infrastructure
and services to the next-generation of technologies. This is the story of 5G
– an inevitable, next generation technology upgrade that all operators will
eventually adopt. It is, thus, a question of ‘when’ rather than ‘if’ 5G will become
mainstream around the world.
Executive Summary
15
5G is usually discussed from five perspectives:
• First, the technology-focused narrative seeks
to showcase the superiority of 5G technology
compared to previous generations;
• Second, the focus to pinpoint definitive, yet
somewhat elusive, new 5G use cases has almost
become a cause célèbre;
• Third, the debate on spectrum availability, how it is
allocated, to whom, and at what cost is particularly
topical in the run up to WRC-19;
• Fourth, there is the political nexus, with talk of ‘5G
races’, and simmering debates over patents, security
loopholes, trade wars, urban versus rural coverage
dichotomy and the competitive advantage of
nations;
• Fifth, there is the less headline-grabbing, yet
practical task of upgrading the mobile infrastructure
with the latest technology (i.e. 5G) based on a
sustainable business case. This perspective is often
missing from the news and commentary about 5G.
But it is the key driver for The 5G Guide – an indepth reference resource to support operators as
they evaluate their plans and timings to sustainably
evolve their business to 5G.
The GSMA has developed The 5G Guide, the
accompanying Business Case Considerations Model
and the Readiness Database for 160 countries, to
provide a summary of the economic case for 5G, and to
provide support to operators and the industry as they
decide how to deliver 5G sustainably.
The guide builds on GSMA’s extensive body of
knowledge in supporting operators. In that sense, it
builds upon every 5G-related paper/report written
or commissioned by the GSMA since 2016. This also
includes insights from the future megatrends and
scenario planning work of the GSMA Strategy Group,
the policy positions developed and adopted by the
GSMA Policy Group, and the technology strategy
frameworks developed by the GSMA Technology
Group.
In addition, the guide includes insights from recent
interviews with 25 operators, 8 leading telecoms
equipment vendors, 30 enterprise companies and a
consumer survey of 36,000 respondents in 34 markets.
It also integrates the insights from the GSMA global
survey of 750 operator CEOs in Q4 2016 which led
to the development of the mobile industry’s 5G era
vision in the 2017 report “The 5G era: age of boundless
connectivity and intelligent automation”.
The 5G Guide is primarily for operators, especially
C-level executives in operators who will take the critical
‘when’ and ‘how’ decisions on 5G. It is designed to be
used by operators regardless of where they are on
their 5G journey – whether they are planning to launch
5G in 2019 or those who need to lay the foundation
to launch after 2025. In the guide, operators will also
find support for their discussions with policymakers,
vendors, customers, industry analysts/consultants and
other stakeholders.
The core thrust of the 5G Guide is different to many
other 5G reports. Instead of a technology-led narrative
that focuses on the constituent 5G technological
features and how these may be implemented, the
GSMA has used a typical business-focused framework
to structure the guide. Hence the book focuses on
the timing (readiness) for 5G launch, how 5G will
create value for the benefit of all, and how to optimise
deployment and operational costs.
Executive Summary
16
There are six chapters (comprising of 41 sections) in the
book, and each of these can be read as a standalone
guide. Each of the sections also has a ‘Key Takeaways’
summary at the start. The details of the 6 chapters are
as follows:
1. Introducing the 5G era - five key questions: The
answers to the five questions provides a quick
roundup of the most important issues on 5G.
2. 5G Readiness: As 5G is a question of ‘when’
and not ‘if’, this chapter provides clear guidance
on what factors influence readiness from a
technological, policy and market perspective. The
GSMA has developed the accompanying ‘BEMECS’
5G Readiness tool which provides 40 Readiness
indicators for 160 countries.
3. 5G Value Creation and Capture: This is the heart and
soul of the 5G Guide. It explores the different value
segments and opportunities in the 5G era (from the
evolutionary to the revolutionary), identifies the value
enablers, and highlights six potential business models
for operators in the 5G era.
4. 5G Cost Considerations: Explores how innovations
in 5G architecture, capability and ownership will
impact the operator business case. The impact of
some of these factors (e.g. network coverage) can
be clearly assessed. There also will be factors of less
clear impact in the 5G era – from the prospect of
private networks to AI-based automation that are
also assessed.
5. Business Case Considerations Model: A
hypothetical model that explores the costs and
revenue potentials for 8 operator archetypes based
on 3 deployment scenarios. The model suggests a
capacity-optimisation, evolutionary rollout plan as
the optimal option.
6. Key Messages and Positions: As a member
organisation, the GSMA seeks to highlight the
key messages and positions for the industry.
Operators can rely on this resource to develop and
complement their own perspectives and positions
on 5G.
Executive Summary
Executive Summary 17
18
Imagine the future
Imagine the future
THE 5G GUIDE
19
Industrial digitisation and
automation drive GDP growth
to 5%
Final figures for 2029 show that GDP grew by 5% and
unemployment hit a 10-year low thanks to continued
growth in industrial productivity. The economy is
benefiting from digitisation and automation across
almost all sectors as businesses embrace new
technology to drive productivity growth. Economists
predict that the trend will continue as the full scale of
the 5G Internet of Things device explosion is only just
beginning to become clear.
Mobile World Times (01/03/2030)
A billion postal deliveries
signed for via augmented
reality
Post Delivery Inc’s ‘Away from Home’
service has hit the 1 billion landmark four
years after launch. The popular service,
which is available to customers with a
5G device, enables customers to confirm
and remotely sign for their parcel using
augmented reality. “We are delighted to
reach the 1 billion landmark a year ahead
of target, demonstrating the appetite of
our customers for the innovative services
we offer them”, a company spokeswoman
said. Customers who have signed up
to the service receive a video call and
are able to sign for their parcel on their
device’s augmented reality interface to
acknowledge delivery. Away from Home is
available for deliveries by postal delivery
staff or post drones.
Mobile World Times (01/03/2030)
Scientists announce
breakthrough in human-tomachine communication
Scientists at the National Laboratory
for Science Research have announced a
miniaturised computer for eye glasses that
can interpret non-verbal facial communication
from humans. “This is a significant advance
that paves the way for super-intelligent eye
glasses that bring powerful capabilities for
users in their daily lives”, the lead researcher
said. The technology relies on advances in
machine learning, plus biological and quantum
computing. As with other wearables, experts
expect the computers to be linked to users’
personal cloud storage via 5G networks,
enabling each user to capture, process, upload
and store their daily emotions. Human-tomachine communication is already widely used
for ads that react to human emotions.
Mobile World Times (01/03/2030)
Hackers go on shopping spree
with 10 million hacked avatar
assistants
The scale of the hacking of personal avatar
assistants is becoming clearer. A report from
security experts AvatarSecure warns that up
to 10 million avatars may have been hacked,
and the volume of illegal transactions could
reach $10 billion. The hackers targeted people
whose avatars regularly and automatically
made orders for them, and were careful to
keep within the typical spending limits to avoid
detection. “As people increasingly rely on
their avatar assistants to manage their lives, it
is important that avatars are registered with
the home 5G small cell gateway to ensure that
avatars are protected by the robust security
features of 5G”, the report advised.
Mobile World Times (01/03/2030)
Headlines from the future
Imagine the future
20
A typical day for Mr G in the 5G era
Imagine the future
Mr G wakes up to natural light and the sound of a piano concert playing softly. His
automated home has raised his bedroom blinds early to let in the sun as recommended by
his doctor. His holographic display projects his calendar for the day on the wall next to his
breakfast table for him to see as he eats. It highlights important meetings and adds work
items for him to do on his commute. His avatar assistant follows him around as he gets
ready for work, telling him the latest news, trac updates and warning him not to wear
that red tie because it wouldn’t be appropriate for his dinner date.
Before he leaves home, his Z-Phone syncs with the cloud to save a local copy of his current
working files. It does this over his combined Wi-Fi and 5G Small Cell home gateway. His
driverless car notes when he is about to finish his breakfast, and starts warming up in the
cold winter morning.
As the car drives o, his avatar provides companionship while he works on his latest
presentation. When he needs a new video file, his Z-tablet pulls the 2GB video via 5G in less
than 20 seconds and allows him to edit and embed it in his presentation on the fly. As he
drives through remote areas, the 5G core network integrates with a satellite backhauled 4G
cell to provide a heterogeneous, boundless connectivity experience. His avatar
recommends and books a training session at the gym near his oce for before lunch.
His day in the oce is normal. He is connected to the Bring-Your-Own 5G Small Cell in the
oce which his Z-Phone prefers over the oce Wi-Fi. The hot-desk space recognises him
and configures the seat and desk to his own personalised ergonomic settings. The coee
maker ‘sees’ him as he comes over and says: “Hey, Mr G, same as usual?”. As he chats with
his colleague over coee, he projects the presentation he is working on onto the table. His
avatar transforms the table into a touch screen.
As evening draws near, Mr G’s avatar orders flowers for his date, books the table and
checks with the avatar of his date that she would enjoy vegetarian cuisine. His connected
fridge had originally scheduled a delivery of groceries for 7pm in the evening, but his avatar
rescheduled it for 10pm once his date had confirmed – it will continue to monitor his
location and amend the delivery further if necessary. He has a wonderful evening, returns
home happy and wonders what life must have been before the 5G era!
His avatar ends the day by sending a message to his doctor detailing his medical signs,
showing her that he was very happy and positive today, and that his blood pressure was on
average down 5%. His avatar then sends a message to the government’s “Oce for the
Promotion of National Happiness” telling them that Citizen G had a happiness index of
9.5 today.
Imagine the future 21
22
Introducing the 1 5G Era
Chapter 1 of the 5G Guide addresses five key questions about the
introduction of 5G:
• What is the expectation for the 5G era?
• How is 5G different?
• Why does 5G matter?
• When is 5G coming?
• Where is 5G happening?
Readers will get an insight into the capabilities of 5G and why 5G will
fundamentally transform the role of mobile across industry and society.
22 Introducing the 5G Era
THE 5G GUIDE
23
1.1 What is the expectation for the 5G era?
5G is more than just an evolutionary step to a new
generation of technology; it represents a fundamental
transformation of the role that mobile technology plays
in society. As demand for continuous connectivity
grows, 5G is an opportunity to create an agile, purposebuilt network tailored to the different needs of citizens
and the economy.
Deploying 5G is an opportunity for operators to move
beyond connectivity and collaborate across sectors
such as finance, transport, retail and health to deliver
new, rich services to consumers and businesses. It is
an opportunity for industry, society and individuals to
advance their digital ambitions, with 5G a catalyst for
innovation.
5G will naturally evolve from existing 4G networks,
but will mark an inflection point in the future of
communications, bringing instantaneous high-powered
connectivity to billions of devices. It will be designed
specifically for the way users want to live and will
provide a platform on which new digital services and
business models can thrive. It will enable machines
to communicate without human intervention in an
Internet of Things (IoT) capable of driving a nearendless array of services. It will facilitate safer, more
efficient and cost-effective transport networks. It will
offer improved access to medical treatment, reliably
connecting patients and doctors all over the globe.
From low-power, sensor-driven smart parking to
holographic conference calls, 5G will enable richer,
smarter and more convenient living and working. It
is a giant step forward in the global race to digitise
economies and societies.
1.1.1 5G: a network of opportunity
5G represents a fundamental transformation of the role that mobile technology plays
in society
KEY TAKEAWAYS
• 5G is the next generation mobile technology and will transform the role of mobile in society.
• The 5G era will commence in full from 2020, creating huge opportunities for consumers,
enterprises, operators, vendors and all stakeholders.
• To deliver on its promise, the mobile industry has five clear goals for the 5G era:
– Provide boundless connectivity for all
– Deliver sustainable network economics & innovation
– Transform the mobile broadband experience
– Drive growth in new use cases for massive and critical IoT
– Accelerate the digital transformation of industry verticals
• Based on the insights from a survey of 750 CEOs of mobile operators, the GSMA has distilled
the top ten industry expectations for the 5G era.
Introducing the 5G Era
24
1.1.2 The post-2020 5G era
Commercial 5G networks will be widely deployed in the post-2020 period: the 5G era
Thanks to technology advances in many different fields,
5G networks will be at the centre of an ecosystem
that pushes society’s continued digital transformation.
The mobile industry has demonstrated its ability to
connect and transform society through its 2G, 3G and
4G networks over the last 30 years. 5G will build on
these successes by delivering a platform that enhances
existing services, and enables new business models and
use cases. The GSMA expects commercial 5G networks
to be widely deployed in the post-2020 period, the 5G
era, as outlined in Figure 1.1.1 below.
FIGURE 1.1.1
THE 5G ERA WILL BEGIN FULLY FROM 2020
Over
3 billion
4G takes
the lead
1.35 billion 5G
connections
Early 5G commercial launches
across many markets
5 billion Nearly
6 billion
5 billion MOBILE INTERNET
USERS
TECHNOLOGY
UNIQUE MOBILE
SUBSCRIBERS
2017 2019 2020 2025
Introducing the 5G Era
25
1.1.3 Goals of the 5G era
The mobile industry’s five goals for the 5G era align with the industry’s purpose for society
Following consultation with 750 operator CEOs in
2016/171
, and in line with the Mobile Industry’s Purpose
to “Intelligently Connect Everyone and Everything to
1.1.3.1 Provide boundless connectivity for all
5G networks will coexist with 4G networks and
alternative network technologies to deliver a boundless,
high-speed, reliable and secure broadband experience,
and support a plethora of use cases for society.
1.1.3.2 Deliver sustainable network economics &
innovation
The mobile industry will strive to cost-effectively
deliver better quality networks either independently
or through sharing and partnerships. 5G era networks
will rely on a combination of established and innovative
technologies, and use both licensed and unlicensed
spectrum, across different spectrum bands.
1.1.3.3 Transform the mobile broadband experience
5G networks will provide an enhanced broadband
experience with speeds of up to 1 Gigabit per second
and latency of <4 milliseconds, and provide the
platform for cloud and artificial intelligence (AI) -based
services.
1.1.3.4 Drive growth in new use cases for massive
and critical IoT
5G era networks will support the massive rollout of
intelligent IoT connections for a multitude of scenarios
and provide an enhanced platform to support the
widespread adoption of critical communications
services.
1.1.3.5 Accelerate the digital transformation of
industry verticals
The mobile industry will provide the networks and
platforms to accelerate the digitisation and automation
of industrial practices and processes (incl. supporting
the Industry 4.0 goals).
BOUNDLESS
CONNECTIVITY FOR ALL
NETWORK ECONOMICS
& INNOVATION
ENHANCED
BROADBAND
MASSIVE IOT & CRITICAL
COMMUNICATIONS
VERTICAL / INDUSTRIAL
TRANSFORMATION
VOICE ORIENTED
5G ERA
GOALS
5G
REQUIREMENTS
1 ms
LATENCY
1,000X
MORE
CAPACITY
10-100X
CONNECTED
DEVICES
PERCEPTION
OF 99.999%
AVAILABILITY
PERCEPTION
OF 100%
COVERAGE
1G 2G
2G
3G
3G
DATA ORIENTED
4G 5G
90%
REDUCTION IN
ENERGY USE
10 YEAR
BATTERY FOR
SENSORS
10-100X
DATA RATES
1. “The 5G era: Age of boundless connectivity and intelligent automation”, GSMA, February 2017
a Better Future”, the GSMA has identified five mobile
industry goals for the 5G era:
FIGURE 1.1.2
MOBILE INDUSTRY GOALS FOR THE 5G ERA
Introducing the 5G Era
26
TABLE 1.1.1
TOP 10 EXPECTATIONS FOR THE 5G ERA
1.1.4 Industry expectations for the 5G era
The operator community is clear on its expectations for the 5G era
The GSMA has been engaging with its members since
2016 to help focus the wider debate on 5G and align its
members around a core set of expectations for the 5G
era. The expectations, outlined after the engagement
with operator CEOs, and other senior managers, in
2016/17 is distilled into key insights for the 5G era as
shown in Table 1.1.1
These ten insights illustrate both the concerns that
operators share in terms of putting in place the
foundations to support sustainable investment and
innovation during the 5G era, and the potential
opportunity that 5G presents to the industry and
society. Together they form a holistic view of the key
factors that will shape the debate on 5G over the
coming years and beyond.
Basics 1 5G will transform the mobile broadband experience in early deployments and drive new intelligent automation use
cases in later phases.
2 5G as a technology will evolve over time and leverage a variety of spectrum ranges, plus robust security, to support
new use cases.
Opportunity 3 Enterprise services and solutions will drive 5G’s incremental revenue potential.
4 5G will start as an urban-focused technology and integrate with 4G to provide boundless connectivity for all.
5 5G will deliver revenue growth to mobile operators, with at least a 2.5% CAGR in the early period of the 5G era.
Market Structure 6 Competition and collaboration between operators and other ecosystem players to provide services will intensify in
the 5G era.
7 New models for infrastructure ownership, competition and partnerships will be required for the 5G era.
Sustainability 8 Regulation, licensing and spectrum policy will make or break the 5G opportunity.
9 The industry should strive to avoid spectrum and technology fragmentation for 5G.
10 Interoperable and interconnected IP communication services should be supported as default in the 5G era.
Introducing the 5G Era
27
1.2 How is 5G different?
KEY TAKEAWAYS
• As an evolutionary technology, 5G will do all the things that 4G can do; and it will do it even
better.
• But 4G is not going away just yet. It will coexist with 5G well into the 2030s and together
they will be the bedrock of next generation mobile networks.
• The definitive 5G design goals (IMT-2020) defines a set of specifications that will deliver new
capabilities and possibilities beyond what 4G can deliver.
• 5G’s superior throughput (speed), latency, device density, flexibility, heterogeneity and
energy efficiency will support a plethora of existing and new use cases.
• These new or improved capabilities will provide additional opportunities for operators to
develop new use cases for niche segments within industry verticals.
Introducing the 5G Era
28
TABLE 1.2.1
IMT-2020 5G REQUIREMENTS (SOURCE: ITU-R)
Requirement Value
Data rate
Peak Downlink: 20Gb/s
Uplink: 10Gb/s
User experience Downlink: 100Mb/s
Uplink: 50Mb/s
Spectral efficiency
Peak Downlink: 30 bit/s/Hz
Uplink: 15 bit/s/Hz
5th percentile user Downlink: 0.12~0.3 bit/s/Hz
Uplink: 0.045~0.21 bit/s/Hz
Average Downlink: 3.3~9 bit/s/Hz
Uplink: 1.6~6.75 bit/s/Hz
Area traffic capacity 10 Mbit/s/m2
Latency
User plane 1ms~4ms
Control plane 20ms
Connection density 1,000,000 devices per km2
Energy efficiency Loaded: see average spectral efficiency
No data: Sleep ratio
Reliability This is 1-10^(-5) success probability of transmitting a layer 2 PDU (protocol data
unit) of 32 bytes within 1ms
Mobility 0km/hr~500km/hr
Mobility interruption time 0ms
Bandwidth 100MHz
5G is a global and multi-stakeholder technology
development with a range of design goals. Diverse
stakeholders within and across different countries
and regions have been working hard since 2012 to
define and shape what 5G should become. However,
the IMT-2020 requirements in Table 1.2.1, proposed
by the International Telecommunications Union
Radiocommunications Sector (ITU-R), are the definitive
5G design goals2
.
1.2.1 5G design specifications
The IMT-2020 goals steer 5G design
2. https://www.itu.int/en/ITU-R/study-groups/rsg5/rwp5d/imt-2020/Pages/default.aspx
Introducing the 5G Era
29
1.2.2 Comparison with 4G
5G will provide a superior experience to end users
5G networks will provide between 10-times and
100-times faster data rates, at latencies of up to 10
times smaller when compared to current 4G networks.
This improved performance will come from a more
advanced core network and by using more efficient
radio technologies (i.e. spectral efficiency), using more
spectrum bandwidth (i.e. spectral capacity) and more
network densification (i.e. spectral reuse).
A superior experience from 5G will not only enhance
the experience for existing users and use cases: it looks
set to unlock new, currently unimaginable, possibilities.
As a comparison, consider the step-change in
performance as 4G replaced 3G networks. This
unleashed a wave of innovation across society,
bringing to life real-time messaging (e.g. Line, WeChat,
WhatsApp), the sharing economy (e.g. Airbnb, Didi,
Uber), streaming services (e.g. Deezer, Netflix, Spotify)
and a raft of services that make use of the enhanced 4G
capabilities (e.g. always on, IP centric design, location).
Figure 1.2.1 summarises the comparison of 5G with 4G.
FIGURE 1.2.1
THE 5G ADVANTAGE AND COMPARISONS WITH 4G
BOUNDLESS
CONNECTIVITY FOR ALL
NETWORK ECONOMICS
& INNOVATION
ENHANCED
BROADBAND
MASSIVE IOT & CRITICAL
COMMUNICATIONS
VERTICAL / INDUSTRIAL
TRANSFORMATION
VOICE ORIENTED
5G ERA
GOALS
5G
REQUIREMENTS
1 ms
LATENCY
1,000X
MORE
CAPACITY
10-100X
CONNECTED
DEVICES
PERCEPTION
OF 99.999%
AVAILABILITY
PERCEPTION
OF 100%
COVERAGE
1G 2G
2G
3G
3G
DATA ORIENTED
4G 5G
90%
REDUCTION IN
ENERGY USE
10 YEAR
BATTERY FOR
SENSORS
10-100X
DATA RATES
Introducing the 5G Era
30
FIGURE 1.2.3
4G AND 5G ARE BASED ON THE SAME TECHNOLOGY PHILOSOPHY
BOUNDLESS
CONNECTIVITY FOR ALL
NETWORK ECONOMICS
& INNOVATION
ENHANCED
BROADBAND
MASSIVE IOT & CRITICAL
COMMUNICATIONS
VERTICAL / INDUSTRIAL
TRANSFORMATION
VOICE ORIENTED
5G ERA
GOALS
5G
REQUIREMENTS
1 ms
LATENCY
1,000X
MORE
CAPACITY
10-100X
CONNECTED
DEVICES
PERCEPTION
OF 99.999%
AVAILABILITY
PERCEPTION
OF 100%
COVERAGE
1G 2G
2G
3G
3G
DATA ORIENTED
4G 5G
90%
REDUCTION IN
ENERGY USE
10 YEAR
BATTERY FOR
SENSORS
10-100X
DATA RATES
1.2.3 Coexistence with 4G
5G and 4G networks will coexist well into the 2030s
While 5G offers superior performance over 4G, both
will coexist comfortably into the 2030s as the bedrock
of next generation mobile networks. There are three
perspectives that help to underline this point.
Firstly, unlike voice-oriented 2G and 3G (which
were primarily circuit-switched networks with
varying attempts to accommodate packet-switching
principles), 4G is a fully packet-switched network
optimised for data services. 5G builds on this packetswitching capability as is shown in Figure 1.2.3.
Therefore, 4G and 5G networks can coexist for a long
while because the transition from 4G to 5G does not
imply or require a paradigm shift in the philosophy of
the underlying technology.
Secondly, as the parallels with fibre rollout for fixed
broadband show, Fibre-To-The-Home/Premises
(FTTH/P) coexists with variations of copper-based
Digital Subscriber Lines (DSL) and customer migration
to the superior FTTH system is a long term, multidecade project. In many markets, 5G coverage will be
less than complete for at least a decade until the late
2020s and users will continue to rely on the 4G network
for 5G non-spots (see Section 1.4.5 for forecasts).
Thirdly, given the absence of a philosophical
paradigm shift, it was always envisioned that 4G is a
futuristic project; hence the acronym LTE (Long Term
Evolution), a registered trademark of the European
Telecommunications Standards Institute (ETSI). As the
first fully packet-based mobile network technology, LTE
laid the foundation for future iterations of packet-based
mobile networks.
Introducing the 5G Era
31
1.2.4 5G latency & speed
Faster speed and lower latency will define the 5G era customer experience
5G will provide much higher data throughput, enabling
a significantly better customer experience. Most of the
headlines, marketing pitches and even official targets,
will be based on the faster speeds delivered by 5G
networks.
Faster speeds, however, are not the only determinant
of overall customer experience3
. In particular, the
reduction in latency (delay) for data’s transit across
the 5G networks and to end users will play a major role
in unlocking new use cases in the 5G era. The Tactile
Internet and Immersive Communications services are
examples of use cases that will benefit from 5G’s lower
latency capabilities, as outlined in Figure 1.2.4.
While the headline speed and latency will be
regularly promoted, what will matter most for 5G era
services is the consistency in achieving the claimed
service performance. For example, suppose tactile
internet can work with 10ms latency, this can be
achieved in modern 4G networks, however only on
a few occasions and in ideal scenarios. In contrast,
5G networks should be able to meet the same
performance levels most of the times.
<1Mbps
–
–
+
+
1Mbps 10Mbps 100Mbps
1000ms
100ms
10ms
1ms
>1GB
Bandwidth
Throughput
Services
deliverable by 4G
and evolved 4G
Services requiring
5G capabilities
Person to person
Person to machine
Machine to machine
Delay
Disaster alert
Automotive
ecall
Real time
gaming
Multi-person
video call
Tactile
internet
Virtual
reality
Autonomous driving
Augmented
reality
First responder
connectivity
Video streaming
Personal cloud Wireless cloud
Bi-directional
remote
controlling
Device
remote
controlling
Monitoring sensor
networks
ARTIFICIAL
INTELLIGENCE
+
5G
Personal
assistants
Machine Robotics
learning
Speech, image
& video
recognition
Contextual and Logistics
recommendations
Surgery
& healthcare
Gaming
Virtual,
augmented reality,
computer vision
FIGURE 1.2.4
5G WILL SUPPORT LOW LATENCY AND HIGH THROUGHPUT SERVICES
3. https://www.econstor.eu/bitstream/10419/148707/1/Stocker-Whalley.pdf
Introducing the 5G Era
32
FIGURE 1.2.5
5G IS AT THE CENTRE OF THE HETEROGENEOUS NETWORK OF THE FUTURE
0.98
1.00
1.02
1.04
1.06
1.08
1.10
1.12
1.14
1.16
Mobile revenues (USD, trillions)
2018 2019 2020 2021 2022 2023 2024 2025
Premises City Motorway Rural
Wi-Fi
zone
5G
Fibre LPWA LPWA
Small
cell
Aerial networks
5G + 4G
1.2.5 5G and heterogeneous networks
A flexible framework, and modularised design puts 5G at the centre of the
heterogeneous network
5G networks will utilise and integrate a mixture of
spectrum and access networks to meet customers’
capacity and coverage needs. This possibility puts 5G
at the centre of the heterogeneous network (HetNet)
in a way that has not been feasible with previous
generations.
This new role at the centre of the HetNet is because,
unlike previous generations, 5G networks have been
designed from inception to be multi-access. For
example, the 5G core network can be accessed by
the 5G New Radio, 4G, Wi-Fi or the fixed broadband
network. At the radio level, several 5G deployment
options envisage that 5G will work with 4G.
It also follows that, by design, 5G networks will
be flexible and modular, with technologies such
as Network Slicing; Software Defined Networks
(SDN); Network Function Virtualisation (NFV);
and Cloud Radio Access Network (Cloud RAN). A
flexible architecture makes it feasible to increase
overall network capacity by adding small cells to
complement macro networks. In addition, completing
the standardisation of APIs towards underlying
infrastructure will be key for automated connectivity to
hetnets. These are discussed in detail in Section 4.4 on
Network Flexibility.
A 5G HetNet provides several benefits. First, it makes
it possible to add 5G hotspots or small cells to an
existing 4G network to increase capacity. This is likely
to be the early deployment scenario for 5G and is
explored in detail in Chapter 5. Second, a 5G HetNet
can synergistically incorporate Wi-Fi offload and
Fixed Mobile Convergence, bringing these into play as
network operations and management options.
Introducing the 5G Era
33
1.2.6 5G and Intelligent Connectivity
The combination of 5G, AI and IoT will usher in a new age of Intelligent Connectivity
5G is developing in parallel with rapid advancements in
AI and IoT. The combination of flexible, high-speed 5G
networks with AI and IoT will underpin the new age of
Intelligent Connectivity.4
Figure 1.2.6 illustrates the central role that 5G and AI
will play in powering the intelligent connectivity era.
This era will be defined by highly contextualised and
personalised experiences, delivered on demand. It will
have a significant and positive impact on individuals,
industries, society and the economy, transforming the
way people live and work.
<1Mbps
–
–
+
+
1Mbps 10Mbps 100Mbps
1000ms
100ms
10ms
1ms
>1GB
Bandwidth
Throughput
Services
deliverable by 4G
and evolved 4G
Services requiring
5G capabilities
Person to person
Person to machine
Machine to machine
Delay
Disaster alert
Automotive
ecall
Real time
gaming
Multi-person
video call
Tactile
internet
Virtual
reality
Autonomous driving
Augmented
reality
First responder
connectivity
Video streaming
Personal cloud Wireless cloud
Bi-directional
remote
controlling
Device
remote
controlling
Monitoring sensor
networks
ARTIFICIAL
INTELLIGENCE
+
5G
Personal
assistants
Machine Robotics
learning
Speech, image
& video
recognition
Contextual and Logistics
recommendations
Surgery
& healthcare
Gaming
Virtual,
augmented reality,
computer vision
FIGURE 1.2.6
5G AND INTELLIGENT CONNECTIVITY
4. https://www.gsma.com/IC/wp-content/uploads/2018/09/21494-MWC-Americas-report.pdf
Introducing the 5G Era
34
FIGURE 1.2.7
5G WILL SUPPORT EXISTING AND NEW PRODUCTS AND MARKETS (NOT EXHAUSTIVE)
Mass Market
Evolution New Opportunity
Verticals
New Horizons
Extended Opportunities
Core Business
Sensors
networks
UHD content
delivery
Private
networks
First responder
connectivity
Virtual
presence
Immersive video
communications
Mobile
hot spots
Low cost
mobile
broadband
IMS-based
services
Mobile
broadband
Connectivity
Cloud
services
Thin clients
Augmented reality
Wearables
Smart
metering
Remote
control
Real-time
video uplink
Real-time
telematics
Automated
controls
eHealth
Person to person Person to machine Machine to machine
MANUFACTURING &
UTILITIES
34%
PROFESSIONAL &
FINANCIAL SERVICES
28%
PUBLIC SERVICES
16%
ICT & TRADE
15%
AGRICULTURE
& MINING
7%
$2.2 TRILLION
BY 2034
1.2.7 5G use cases
5G will empower operators to target niche opportunities without undermining the mass
market proposition
5G will support a plethora of new use cases, in
addition to evolving the current use cases supported
by previous mobile generations. The business
opportunities for operators that will be supported
in the 5G era are enhanced along both product and
customer dimensions, as illustrated in Figure 1.2.7.
Firstly, operators will evolve their current business
while tapping into new opportunities that have been
enabled by a more efficient technological framework.
The evolutionary consideration is crucial to ensure that
customers continue to enjoy the services that they do
today. The lesson from the 4G era is that the delay in
standardising and rolling out voice over LTE (VoLTE)
undermined operators’ voice market share. For 5G, the
final version of the user-network-interface (UNI) profile
for voice over 5G is being finalised.
Secondly, while operators have historically focused
on use cases that appeal to the mass market, new
capabilities will provide additional opportunities
for operators to develop new use cases for specific
segments within industry verticals.
Some of these opportunities can be addressed by
evolving the 4G network. However, as explored in the
Unlocking Commercial Opportunities from 4G Evolution
to 5G paper5
, these opportunities will come to full
fruition in a mature 5G system.
The GSMA is creating a “5G Resolution Centre”, to
provide an online repository of issues that GSMA
members have come across while testing and launching
5G Era networks and services, and the solutions to the
issues raised.
5. https://www.gsma.com/futurenetworks/4g-evolution/gsma-unlocking-commercial-opportunities-4g-evolution-5g/
Introducing the 5G Era
35
1.3 Why does 5G matter?
KEY TAKEAWAYS
• 5G matters because it is a necessary upgrade of the biggest consumer technology that is
used by over 5 billion users globally.
• The mobile industry contributes immensely to society. GSMA estimates that this was worth
$3.9 trillion to the global economy in 2018 alone.
• As the latest and most capable mobile network, 5G will underpin the growth of the digital
economy in many countries.
• In particular, 5G alone is forecast to create $2.2 trillion of economic value by 2034.
Introducing the 5G Era
36
FIGURE 1.3.1
CONTRIBUTION OF 5G TO THE GLOBAL ECONOMY (SOURCE: GSMA INTELLIGENCE)
Mass Market
Evolution New Opportunity
Verticals
New Horizons
Extended Opportunities
Core Business
Sensors
networks
UHD content
delivery
Private
networks
First responder
connectivity
Virtual
presence
Immersive video
communications
Mobile
hot spots
Low cost
mobile
broadband
IMS-based
services
Mobile
broadband
Connectivity
Cloud
services
Thin clients
Augmented reality
Wearables
Smart
metering
Remote
control
Real-time
video uplink
Real-time
telematics
Automated
controls
eHealth
Person to person Person to machine Machine to machine
MANUFACTURING &
UTILITIES
34%
PROFESSIONAL &
FINANCIAL SERVICES
28%
PUBLIC SERVICES
16%
ICT & TRADE
15%
AGRICULTURE
& MINING
7%
$2.2 TRILLION
BY 2034
With more than 5 billion unique mobile users at the
end of 2018, mobile has a greater reach than any other
technology, and is thus the most important consumer
technology product today. In that sense, 5G is a
necessary upgrade to the mobile product, ensuring
that it continues to remain relevant to consumers,
enterprises, governments and society in general.
The importance of mobile, and its centrality to daily
life, will become even more profound in the 5G era as
more and more of society’s services are digitised and
accessible via the mobile platform.
1.3.2 Economic value created by 5G
5G will create $2.2 trillion of economic value by 2034
1.3.1 The importance of mobile
5G is a necessary upgrade of the biggest consumer technology
The mobile ecosystem created $1.1 trillion in economic
value in 2018, while additional indirect and productivity
benefits brought the total contribution of the mobile
industry to $3.9 trillion (4.6% of total global GDP).
Mobile operators account for more than 60% of the
economic value created by the mobile ecosystem. The
rest, including infrastructure providers; retailers and
distributors of mobile products and services; mobile
device manufacturers; and mobile content, application
and service providers, contribute the remaining 40%.
The direct economic contribution to GDP of the mobile
ecosystem is estimated by measuring their value added
to the economy, including employee compensation,
business operating surplus and taxes. Most of the valueadded increase will be due to productivity gains. In
the developed world, the adoption of IoT solutions will
drive increased productivity. In developing countries,
productivity growth will be mostly driven by the
adoption of mobile internet services.
Looking further ahead, 5G alone is forecast to contribute
$2.2 trillion to the global economy over the next 15 years6
.
6. For more information, see the GSMA report ‘Study on Socio-Economic Benefits of 5G Services Provided in mmWave Bands’
Introducing the 5G Era
37
INFRASTRUCTURE
Reliable, fast
and ubiquitous
telecommunication
networks
Supporting physical
infrastructure (energy,
logistics, ...)
DIGITAL SAFETY
AND SECURITY
Trust into digital
systems, no data misuse
Well-functioning cybersecurity systems
LOCALLY RELEVANT
CONTENT AND
SERVICES
Broad choice of local
language and locally
relevant digital content
and services
PEOPLE ABLE
TO COPE WITH
DIGITALISATION
Broad digital literacy
Strong technical, interpersonal and higherorder cognitive skills
DIGITALISING
COMPANIES
Broad and proactive
adoption of
digitalisation by local
companies
Government and public
support for company
digitalisation
2017
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2018 2019 2020
RELEASE 15, 5G PHASE 1
RELEASE 16, 5G PHASE 2
Rel-14, St.3
Release 14
Rel-15, St.2
Rel-15, St.3
Rel-15 ASN.1
Rel-15, St.1
Rel-16, St.2
Rel-16, St.3
Rel-16, ASN.1
Rel-16, St.1
Extensions
5G Phase 1
– New Radio access
– New core network (Service based
Architecture for CP)
– SA scenario 2, NSA scenario 3
– Cloud native RAN
– Scenarios 4 and 7
5G Phase 2
– Radio enhancements
– Service based Architecture
enhancements
– Trusted non-3GPP access
– Better network slicing
– Ultra Reliable Low Latency services
0%
5%
10%
15%
20%
25%
30%
35%
40%
-
200
400
600
800
1,200
1,000
1,400
1,600
2019 2020 2021 2022 2023 2024 2025
5G connections (millions) Coverage
Freeze of
Non-standalone
(NSA) radio
5G adoption (in millions)
5G coverage (% of geography)
1.3.3 5G as a Digital Economy enabler
5G is the next-generation enabler of the Digital Economy
It is universally accepted that a high-speed, reliable and
robust network infrastructure is a critical requirement
for the growth of the digital economy.7
From
shopping to entertainment, socialising to managing
the household (and household finances) the digital
economy has fundamentally altered human behaviour.
Users have been, and remain, ever ready to embrace
and integrate new digital tools in their daily lives.
As the latest and most capable mobile network, 5G
will underpin the growth of the digital economy in
many countries. This explains a lot of the governmentbacked activities around the world that seek to
influence or accelerate the pace of 5G deployment and
commercialisation.
Figure 1.3.2 identifies the key enablers of the digital
economy in the 5G era.
FIGURE 1.3.2
KEY ENABLERS OF THE DIGITAL ECONOMY IN THE 5G ERA (SOURCE: BCG, GSMA)
7. https://www.gsma.com/publicpolicy/embracing-the-digital-revolution-policies-for-building-the-digital-economy
Introducing the 5G Era
38
1.4 When is 5G coming?
KEY TAKEAWAYS
• The first 5G networks were rolled out in 2018, kicking off the 5G era globally.
• However, the standardisation roadmap from 3GPP sets the schedule on when different parts
of the technology will be ready for deployment.
• Thanks to earlier adoption in China, adoption of 5G will be faster than 4G. GSMA
Intelligence forecasts that there will be a total of 1.35 billion 5G connections by 2025.
• But the 5G journey is a marathon and not a sprint. It will take at least 7 years and 5 3GPP
releases to reach 10% of total global connections by 2024.
• As adoption grows, 5G revenues will grow, reaching $1.15 trillion by 2025.
Introducing the 5G Era
39
1.4.1 Standardisation roadmap
Accelerated agreement of 3GPP specifications
The accelerated schedule agreed to by the 3rd
Generation Partnership Project (3GPP) in 2017 allowed
many operators around the globe to bring forward
their 5G commercial launch plans. Non-standalone 5G
new radio (NSA 5G NR) specifications were officially
approved in December 2017, while the standalone (SA)
version was approved in June 2018, which represented
the full 3GPP Release 15.
The relatively rapid agreement of 5G specifications
has allowed hardware manufacturers, chip makers and
other suppliers to progress their tests further, and to
build and design components that implement the 5G
NR specifications, while awaiting final standardisation
across all NSA and SA models.
The focus of future 5G specifications will be for other
use cases including, for example, industrial IoT use
cases such as robotics and telepresence systems. This
covers 3GPP Release 16 for ultra-reliable and lowlatency communications (URLLC), with the goal that
this should be completed by December 2019. Figure
1.4.1 shows the 3GPP 5G roadmap for Release 15 and 16.
FIGURE 1.4.1
THE 3GPP ROADMAP FOR RELEASE 15 AND 16
INFRASTRUCTURE
Reliable, fast
and ubiquitous
telecommunication
networks
Supporting physical
infrastructure (energy,
logistics, ...)
DIGITAL SAFETY
AND SECURITY
Trust into digital
systems, no data misuse
Well-functioning cybersecurity systems
LOCALLY RELEVANT
CONTENT AND
SERVICES
Broad choice of local
language and locally
relevant digital content
and services
PEOPLE ABLE
TO COPE WITH
DIGITALISATION
Broad digital literacy
Strong technical, interpersonal and higherorder cognitive skills
DIGITALISING
COMPANIES
Broad and proactive
adoption of
digitalisation by local
companies
Government and public
support for company
digitalisation
2017
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2018 2019 2020
RELEASE 15, 5G PHASE 1
RELEASE 16, 5G PHASE 2
Rel-14, St.3
Release 14
Rel-15, St.2
Rel-15, St.3
Rel-15 ASN.1
Rel-15, St.1
Rel-16, St.2
Rel-16, St.3
Rel-16, ASN.1
Rel-16, St.1
Extensions
5G Phase 1
– New Radio access
– New core network (Service based
Architecture for CP)
– SA scenario 2, NSA scenario 3
– Cloud native RAN
– Scenarios 4 and 7
5G Phase 2
– Radio enhancements
– Service based Architecture
enhancements
– Trusted non-3GPP access
– Better network slicing
– Ultra Reliable Low Latency services
0%
5%
10%
15%
20%
25%
30%
35%
40%
-
200
400
600
800
1,200
1,000
1,400
1,600
2019 2020 2021 2022 2023 2024 2025
5G connections (millions) Coverage
Freeze of
Non-standalone
(NSA) radio
5G adoption (in millions)
5G coverage (% of geography)
Introducing the 5G Era
40
INFRASTRUCTURE
Reliable, fast
and ubiquitous
telecommunication
networks
Supporting physical
infrastructure (energy,
logistics, ...)
DIGITAL SAFETY
AND SECURITY
Trust into digital
systems, no data misuse
Well-functioning cybersecurity systems
LOCALLY RELEVANT
CONTENT AND
SERVICES
Broad choice of local
language and locally
relevant digital content
and services
PEOPLE ABLE
TO COPE WITH
DIGITALISATION
Broad digital literacy
Strong technical, interpersonal and higherorder cognitive skills
DIGITALISING
COMPANIES
Broad and proactive
adoption of
digitalisation by local
companies
Government and public
support for company
digitalisation
2017
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2018 2019 2020
RELEASE 15, 5G PHASE 1
RELEASE 16, 5G PHASE 2
Rel-14, St.3
Release 14
Rel-15, St.2
Rel-15, St.3
Rel-15 ASN.1
Rel-15, St.1
Rel-16, St.2
Rel-16, St.3
Rel-16, ASN.1
Rel-16, St.1
Extensions
5G Phase 1
– New Radio access
– New core network (Service based
Architecture for CP)
– SA scenario 2, NSA scenario 3
– Cloud native RAN
– Scenarios 4 and 7
5G Phase 2
– Radio enhancements
– Service based Architecture
enhancements
– Trusted non-3GPP access
– Better network slicing
– Ultra Reliable Low Latency services
0%
5%
10%
15%
20%
25%
30%
35%
40%
-
200
400
600
800
1,200
1,000
1,400
1,600
2019 2020 2021 2022 2023 2024 2025
5G connections (millions) Coverage
Freeze of
Non-standalone
(NSA) radio
5G adoption (in millions)
5G coverage (% of geography)
GSMA Intelligence (GSMAi) forecasts rapid 5G
adoption rates after the initial launches in 2019. Total
5G connections will pass the 1 billion mark by the end
of 2024 and reach around 1.35 billion by the end of the
forecast period in 2025. At this point, 5G connections
will account for close to 15% of the total mobile
connections.
This does not include Internet of Things (IoT)
connections. Separately, GSMAi forecasts 1.9 billion
licensed cellular low power wide area connections by
2025, setting the base for Massive IoT, as both Long
Term Evolution for Machines (LTE-M) and Narrow Band
IoT (NB-IoT) have a long-term status of 5G standards.
FIGURE 1.4.2
COVERAGE AND ADOPTION FOR 5G (SOURCE: GSMA INTELLIGENCE)
1.4.2 5G connections forecast
There will be 1.35 billion 5G connections by 2025
Introducing the 5G Era
41
0%
5%
10%
15%
20%
25%
30%
0 1 2 3 4 5 6 7
Share of connections
Years from launch
4G
2G 3G 4G 5G
5G
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
53%
29%
14%
5G
4G
3G
2G
4%
1.4.3 5G vs 4G connections growth
5G connections will grow faster than 4G because of earlier adoption in China
GSMAi forecasts a faster rate of 5G adoption compared
to 4G in the first five years post launch. This is primarily
due to China’s earlier launch and adoption of 5G
compared to 4G. Also factors such as lower-cost
devices and a rise in non-smartphone connections will
boost growth.
However, as coverage begins to reach the limits of
major urban areas, GSMAi forecasts a slight slowdown
in the rate of adoption compared to 4G, as shown in
years six and seven of Figure 1.4.3 below. This reflects
the challenges to 5G network densification needed for
rural (assuming 5G is deployed on the high frequency
bands - 3.5GHz and mmWave).
FIGURE 1.4.3
ADOPTION OF 5G VS 4G (SOURCE: GSMA INTELLIGENCE)
Introducing the 5G Era
42
Market commentary suggests that there is a race to
5G and announcements about being ‘first’ abound.
However, history suggests the 5G race will be a
marathon, not a sprint. Figure 1.4.4 shows that 3G and
4G both took a minimum of seven years and five 3GPP
releases to reach 10% global market share, and 5G will
only exceed the globally significant 10% mark by 2024.
In this context, announcements and plans within the
industry need a level of realism and maturity to ensure
that in the race to be first to 5G, due consideration is
given to the business case and the sustainability of 5G
era systems.
FIGURE 1.4.4
REACHING THE 10% MARKET SHARE MILESTONE – 3G, 4G AND 5G
1.4.4 5G Journey as a marathon
The 5G race is a marathon whose full impact will be felt by 2024
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
% total connections 0% 0% 0% 1% 2% 3% 5% 8% 10% 13%
3GPP Release 99 4 5 6 7 8 9
Main development UMTS All-IPcore HSDPA HSUPA HSPA + LTE LTE
Small Cell
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
% total connections 0% 0% 0% 0% 1% 3% 7% 15% 25% 31%
3GPP Release 8 9 10 11 12 13 14
Main development LTE LTE
Small Cell
LTE
Advanced CoMP Carrier
Aggregation
LTE
Advanced
Pro
Mission
Critical
Services
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
% total connections 0% 0% 0% 1% 3% 5% 8% 12% 15% 20%
3GPP Release 15
Main development 5G
8 YEARS
7 YEARS
7 YEARS
Introducing the 5G Era
43
0%
5%
10%
15%
20%
25%
30%
0 1 2 3 4 5 6 7
Share of connections
Years from launch
4G
2G 3G 4G 5G
5G
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
53%
29%
14%
5G
4G
3G
2G
4%
1.4.5 Replacement of legacy networks
It is a matter of when, not if, for 5G to replace legacy 2G/3G/4G networks
The mobile industry is committed to 5G and, eventually,
legacy 2G/3G/4G networks will be replaced by 5G
era networks. This is applicable to players in mature
4G markets that launch 5G in 2019, and also players
in markets where 2G/3G are the majority of their
connections.
5G connections will grow from the initial launches in
early 2019 to reach around 15% of the global connection
base by 2025. However, this headline figure masks
significant variations at the country level: some of the
early adopters will see adoption rates close to 50% by
this date. These higher levels of adoption (and implicitly
higher levels of 5G coverage) will give operators in
these leading markets greater flexibility to consider
turning off legacy networks on a more accelerated
timeline when the commercial case allows.
Technology neutrality has been used to enable operators
to refarm their existing spectrum assignments for
use with newer technologies. Expectedly 2G and/
or 3G networks will be the first to be replaced by 4G
depending on the legacy network usage, and this has
already happened in several markets. By 2025, GSMAi
forecasts that only 4% of connections will still be on 2G,
with 3G also tending towards extinction. 4G networks
will exist well into the 2030s before they will ultimately
be replaced.
FIGURE 1.4.5
MARKET SHARES BY 2025 – 2G, 3G, 4G AND 5G (SOURCE: GSMA INTELLIGENCE)
Introducing the 5G Era
44
0.98
1.00
1.02
1.04
1.06
1.08
1.10
1.12
1.14
1.16
Mobile revenues (USD, trillions)
2018 2019 2020 2021 2022 2023 2024 2025
Premises City Motorway Rural
Wi-Fi
zone
5G
Fibre LPWA LPWA
Small
cell
Aerial networks
5G + 4G
While mobile revenue growth has slowed over the
past five years, GSMAi forecast continued single-digit
growth to 2025, at a global CAGR of 1.5%. Growth
will be sustained through connecting more unique
subscribers as additional unconnected people adopt to
mobile services and populations grow.
Furthermore, operators will actively pursue new
business models to improve data monetisation and
seek to unlock the enterprise opportunity. There is a
potential upside to these forecasts if operators capture
more of the growth opportunities in areas such as
IoT and digital identity, which could increase annual
revenue growth to 5% during the 5G era.
A number of operators in the most developed markets
are upgrading their 4G networks to faster speeds
and lower latencies, while 5G investments are still in
their infancy and focused on trial deployments. In
developing countries, many operators are still investing
in increasing the coverage and capacity of existing 3G
and 4G networks.
The level of 5G investment required will depend
on a number of factors, including the model (SA,
NSA or phased approach) selected for 5G network
deployments; the targeted network coverage; the range
of spectrum bands in use; and the availability of fibre
infrastructure and nationwide LTE networks.
The Cost Considerations chapter of this book goes into
more detail, exploring the different cost drivers that will
shape 5G rollout and analysing their potential known
and unknown impacts on operators.
FIGURE 1.4.6
MOBILE REVENUE FORECAST (SOURCE: GSMA INTELLIGENCE)
1.4.6 5G era revenues forecast
5G revenues will reach $1.15 trillion by 2025
Introducing the 5G Era
45
1.5 Where is 5G happening?
KEY TAKEAWAYS
• There is growing momentum around 5G, with over 120 operators globally undertaking 5G
trials, and over 70 announced plans for commercial launches.
• The US and South Korea kicked off the 5G era with 5G service launches in the fourth quarter
of 2018.
• By 2025, GSMA Intelligence forecasts that 5G will account for 50% of connections in the US
while China will have the highest absolute number of 5G connections (450m).
• The launch of commercial Mobile IoT (NB-IoT and LTE-M) networks has established the
foundation for 5G Massive IoT.
• Commercial licensed LPWA networks were available in 40 markets as of the end of November
2018.
Introducing the 5G Era
46
10% 7% 6% 3%
49% 49% 31% 25%
US
CIS
JAPAN
LATAM
EUROPE
MENA
CHINA
SSA
14%
Global
(2025, percentage of connections excluding cellular IoT)
BY 2018 BY 2020 BY 2025
There is growing momentum around 5G, with over 120
operators globally undertaking 5G trials, and over 70
announced plans for commercial launches. Device and
network infrastructure vendors have also been active
in announcements to highlight their 5G readiness,
supporting operators in their trials and with the first 5G
handsets already now slated for launch in 2019.
Approximately 40% of the mobile operators worldwide
that have announced 5G commercial network plans will
launch in 2019 (with the Middle East the earliest hive of
activity), and the remaining 60% plan to launch in 2020
or later, once NR standards are commercially available.
Meanwhile, launch of commercial Mobile IoT (NB-IoT
and LTE-M) networks has established the foundation
for Massive IoT. Commercial licensed LPWA networks
were available in 40 markets as of the end of November
2018, and their global availability will increase further
and be supported via global roaming agreements
during 2019.
Figure 1.5.1 shows GSMAi’s projected number of
countries that will launch 5G by 2020 and 2025.
FIGURE 1.5.1
PROJECTED PLANS FOR 5G LAUNCHES PER COUNTRY (SOURCE: GSMA INTELLIGENCE)
1.5.1 5G trials and commercial launches
Accelerating 5G momentum in developed markets
Introducing the 5G Era
47
10% 7% 6% 3%
49% 49% 31% 25%
US
CIS
JAPAN
LATAM
EUROPE
MENA
CHINA
SSA
14%
Global
(2025, percentage of connections excluding cellular IoT)
BY 2018 BY 2020 BY 2025
1.5.2 Regional/Country 5G forecasts
Wide variations in 5G adoption
GSMAi forecasts significant regional variances in 5G
adoption. This is driven primarily by the readiness
of local markets for 5G, as well as the desire of both
operators and governments in each region to be seen
as leaders in the 5G era. The GSMA provides deeper
coverage of 5G developments in the regional 5G
reports and the Mobile Economy reports.
FIGURE 1.5.2
REGIONAL 5G ADOPTIONS BY 2025, EXCLUDING IOT AND FWA CONNECTIONS (SOURCE: GSMA
INTELLIGENCE)
1.5.2.1 US: leading in 5G adoption
North America, and specifically the US, will have the
highest rate of 5G adoption, driven by early launches
and the propensity of domestic consumers to rapidly
adopt new technologies. By 2025, GSMAi forecasts 202
million 5G connections (predominantly smartphones) in
North America, amounting to almost half of the mobile
connections.
US mobile operators are targeting a phased approach
to 5G network deployments, beginning with an
NSA architecture, where 4G and 5G radio access
technologies will be used in tandem. The provision of
enhanced mobile broadband to the consumer market
will be the core proposition in early 5G deployments in
the US, with massive IoT and ultra-reliable, low-latency
communications gaining scale at a later stage.
5G-based fixed wireless, as well as 5G-based services
targeted at the enterprise sector, represent major
opportunities for incremental operator revenue in
the US. 5G offers a potentially lower cost and faster
means – compared to FTTH – of expanding high-speed
offerings to households and businesses in some areas.
US operators are already working with other tech
players and industrial companies to bridge ICT and
vertical industries, and establish new solutions that can
be initially tested and implemented on 4G networks
with a view to exploiting enhanced 5G capabilities in
the future.
1.5.2.2 Japan: accelerating 5G deployment
Japan will closely follow the US on adoption, with
forecasts of around 49% of connections being 5G by
2025, for a total of 95 million connections. Operators in
the country have accelerated their deployment plans in
recent months, with indications of limited commercial
service in 2019 including a range of services during
the Rugby World Cup running from September to
November. This would represent an acceleration of
previously communicated plans to showcase services
during the summer Olympics of 2020.
Introducing the 5G Era
48
1.5.2.3 South Korea: aggressive and concerted
5G launch
South Korean operators (SK Telecom, Korea Telecom
and LG U+) launched the world’s first commercial
5G services on smartphones in April 2019. They had
earlier set a March 2019 date for commercial launch
but surprised many with the announcement that their
5G services went live, although with limited coverage
and focused on enterprise solutions, in December
2018. The accelerated deployment is a testament to
Korea’s reaction to the intensifying global race to usher
in the 5G era and its push for global leadership. In
September 2017, SK Telecom showcased 360 degree
video over pre-commercial 5G network in Seoul near
Myoung-Dong, one of the densest urban areas in Korea.
Likewise, KT offered a glimpse of 5G at the 2018 Winter
Olympics in Pyeongchang, when it provided immersive
services and 360-degree video over a pre-commercial
5G network.
The 5G services launched in December 2018 are
available only in the form of mobile routers providing
connectivity, while operators plan to make nationwide
coverage and services available to the consumer
market as handsets become available in 2019. For
example, auto-parts manufacturer Myunghwa Industry
is now able to remotely perform real-time quality
control analytics on its production line, by connecting
super-high-resolution cameras to cloud-based AI over
5G connectivity.
1.5.2.4 China: will be the largest 5G market
China will play a key role in driving global 5G adoption
rates, given the size of its market and the impressive
rate at which it adopted 4G. All three Chinese operators
have commercial launches planned by the end of 2020.
Initial 5G launch plans will focus on a limited footprint
of dense urban centres to test network efficacy and
consumer take-up levels before commitments are
made to roll out into suburban and rural areas. In
aggregate, China’s pre-commercial and commercial
launch footprints will be among the largest in the world
in terms of coverage and number of base stations.
China will be the largest projected market for 5G by
some distance, with 450 million connections by 2025.
This will put it on a par with Europe in terms of 5G
penetration at just under 30% of the total connections,
and a little lower than the leading markets such as US,
Korea and Japan. China sees 5G leadership as a key
element in the country’s ‘Made in China 2025’ roadmap,
which envisages 5G as helping to play a transformative
role in China’s ambition to gain worldwide lead in a
range of new technologies such as industrial IoT, cloud
computing and AI. Chinese operators already account
for two thirds of the overall IoT connections and also
lead the adoption of low power wide area NB-IoT
technologies that will become the base of Massive
IoT. As a result, there is potential upside to existing
forecasts if Chinese operators accelerate deployment
plans beyond the main urban areas.
Chinese operators look set to adopt the SA deployment
route for 5G networks from the beginning. This is in
contrast to other regions of the world where most
operators have indicated a preference for a NSA
deployment. Standalone offers larger-scale economies
and high performance as well as less complexity from
legacy LTE integration, but it is more expensive in the
early commercial stage.
1.5.2.5 Europe: efforts to accelerate 5G
Europe is keen to play a leading role in 5G, having
trailed other developed regions in 4G adoption.
Reflecting these ambitions, the European Commission
launched the 5G for Europe Action Plan in 2016
and established the 5G Infrastructure Public Private
Partnership (5G PPP) in conjunction with the region’s
wider ICT industry. National level initiatives are also
underway supported by operators and governments.
5G coverage will reach three-quarters of the population
in Europe by 2025. By this date there will be 203
million 5G connections, accounting for 29% of total
connections. From a regional perspective, Europe will
account for the third largest share of 5G connections by
2025, behind Asia Pacific and North America.
Introducing the 5G Era
49
1.5.2.6 Middle East: host to some of the earliest
5G rollouts
Middle East is a diverse region in terms of mobile
market maturity, mobile internet adoption and 5G
timelines. The major operators in the oil-exporting
Gulf Cooperation Council (GCC) states are looking
to be global leaders in 5G deployments and are
rapidly moving from trials to early commercialisation.
Launch of 5G mobile services in the GCC region will
begin in 2019, when the first 5G smartphones will
be commercially available. Further ahead, 15 MENA
countries have announced plans to launch 5G mobile
services by 2025, which together account for more
than half of the markets in the region. For example,
UAE successfully trialled FWA in 2018 and is ready for
5G mobile commercial launch as soon as 5G devices are
available.
Enhanced mobile broadband will be the key use case
in early 5G deployments in the MENA region, while
applications and services for enterprises are tested.
The opportunity for MENA operators to enhance
the consumer experience through 5G networks, and
hence drive incremental revenue, rests on linking
5G commercial propositions to developments in
applications and content for immersive reality,
eSports and enhanced in-venue digital entertainment
(stadia, music venues). Some Middle East operators
are already showcasing potential applications of
immersive reality.
1.5.2.7 India: getting ready for 5G while
deepening 4G
The Indian market is currently seeing a rapid migration
to 4G, with over half the connection base set to be
running over 4G networks by 2020 and operators
investing heavily in LTE networks. Whilst India is
unlikely to be a first mover in terms of 5G launches,
there is growing discussion amongst operators and
other industry stakeholders around the potential
benefits of 5G. The government has created a high
level forum that has made recommendation around
spectrum, as well as other initiatives to support
5G including the development of India-specific 5G
applications. Spectrum auctions are currently planned
for the second half of 2019 that would potentially
cover a number of bands relevant to 5G, including the
700MHz, 3.5GHz, 24GHz and 28GHz.
Initial commercial 5G launches are currently expected
by 2020, in line with the government’s own targets.
Bharti Airtel has suggested that initial use cases could
include FWA, whilst Reliance Jio has suggested an
early launch of 5G with a focus on enhanced mobile
broadband. Both operators and regulators are focused
on the need to increase fibre deployments across the
country to provide backhaul and enhanced backbone
connectivity for future 5G deployments.
Introducing the 5G Era
50
5G Readiness and 2 Enabling Conditions
Chapter 2 focuses on the enabling conditions for 5G rollouts and provides
guidance to operators on the key considerations ahead of 5G deployments.
While these vary across markets, there are common prerequisites, enabling
conditions and initial considerations. The Chapter is structured around three
key readiness questions: technology readiness; policy readiness; and market/
operator readiness, which in combination are the critical pillars that underpin
the overall viability of the 5G business case.
In order to support the assessment of viability, the GSMA has developed a
framework tool that examines many different indicators of readiness.
50 5G Readiness & Enabling Conditions
THE 5G GUIDE
51
2.1 Technology Readiness
KEY TAKEAWAYS
• Technology readiness is the most pivotal factor for 5G. 3GPP delivered the first phase of 5G
standards in June 2018; commercial handsets will follow from April 2019.
• There are two 5G deployment models that have been standardised to meet initial market
requirements: Non-Standalone Access (NSA) and Standalone Access (SA).
• 5G NSA will be available for deployment from 2019, with full standalone 5G ready from 2020.
• NSA and SA 5G deployments are optimised for different needs:
– NSA configuration is suitable for providing more broadband capacity since 5G NR can
act as a supplementary capacity overlay to the 4G network.
– SA configuration allows operators to fully exploit the features of NR as well as the
capabilities of the new core network architecture.
• Based on the time lag between standardisation and device availability, NSA equipment was
ready from late 2018 and SA equipment will be ready from 2020.
• The different spectrum bands to be used for 5G create interesting perspectives:
– 5G deployment at 3.5GHz can reuse the existing infrastructure for 4G at 1800MHz
– mmWave frequencies can support high bandwidth services. However, due to cost, they
will initially be restricted to localised and specialised deployments.
• Given its high capacity, 5G sites will need fibre or high capacity microwave backhaul
• 5G will inherit services from 4G. For communication, the industry is working to support IMSbased services from Day 1. For IoT, NB-IoT and LTE-M are already part of 5G.
• Identity and access management (incl. e-SIM) are key requirements for 5G success, especially
given the significantly more complex devices and services 5G landscape.
• 5G is an opportunity for the mobile industry to enhance network and service security levels to
better address the threat landscape resulting from the move to all-IP.
5G Readiness & Enabling Conditions
52
2018 2019 2020 2021 2022
STANDARDISATION
CHIPSETS
DEVICES
EQUIPMENT
NR early drop
SA and EPC-based NSA
FWA CPE
VZ5G specs
Devices based on
Qualcomm X50 (sub 6GHz)
Smartphones
> 6GHz
Samsung
Galaxy S10
Apple
smartphones
5G Core
(based on Rel-15)
5G Core
(based on Rel-16)
NR Late drop
5G Core based NSA 3GPP Release 16 3GPP Release 17
3GPP Release 15
Qualcomm X50 (Rel-15) Qualcomm chipset (Rel-16)
Huawei Balong 5G01 (Rel-15)
Intel (Rel-15)
NR gNodeB
LTE enhancements
AT&T
“Puck”
IMT-2020 candidate
submission
2018 2019 2020 2021 2022
RADIO LAYER
FEATURES
SERVICE LAYER
FEATURES
EQUIPMENT
Downlink/Uplink
split
Ultra Low latency,
Ultra reliable services
Enhanced Network Slicing
Cellular IoT enhancements
Trusted non-3GPP access
Enhanced dual connectivity Positioning 5G evolution
Cloud-native RAN Unmanned aerial systems
eMBB Network Slicing
MEC
5G voice service continuity
NR LTE
EPC
LTE
EPC
NR
5GC
User Plane Control Plane
The Technology Readiness for 5G is predicated on its
standardisation process led by the 3GPP, the body
that designs the technical specifications of the radio
access network and core network. 3GPP released a
subset of the specifications sufficient to deploy the NR
access network in NSA mode in December 2017, before
completing the first phase of the 5G specifications with
Release 15 in June 2018.
5G phase 2 (Release 16) is set to be completed
by December 2019. Release 16 will enhance the
capabilities of the NR and introduce additional features
such as enhancements to ultra-reliable low-latency
communications for industrial IoT; integrated access
and wireless backhaul; and more sophisticated network
slicing.
As Figure 2.1.1 highlights, the 3GPP releases kickstart the roadmap for commercialisation of chipsets,
equipment and devices. Commercial volumes
typically lag standardisation by 12-18 months, whilst
development, testing, trials and pre-commercial
activities take place.
Low power wide area IoT technologies are part of the
5G Roadmap, as NB-IoT and LTE-M already meet 5G
requirements.
FIGURE 2.1.1
5G NR TECHNOLOGY ROADMAP
2.1.1 Standards completion schedule
First phase of 5G standards ready in 2018, commercial devices expected from April 2019
5G Readiness & Enabling Conditions
53
2018 2019 2020 2021 2022
STANDARDISATION
CHIPSETS
DEVICES
EQUIPMENT
NR early drop
SA and EPC-based NSA
FWA CPE
VZ5G specs
Devices based on
Qualcomm X50 (sub 6GHz)
Smartphones
> 6GHz
Samsung
Galaxy S10
Apple
smartphones
5G Core
(based on Rel-15)
5G Core
(based on Rel-16)
NR Late drop
5G Core based NSA 3GPP Release 16 3GPP Release 17
3GPP Release 15
Qualcomm X50 (Rel-15) Qualcomm chipset (Rel-16)
Huawei Balong 5G01 (Rel-15)
Intel (Rel-15)
NR gNodeB
LTE enhancements
AT&T
“Puck”
IMT-2020 candidate
submission
2018 2019 2020 2021 2022
RADIO LAYER
FEATURES
SERVICE LAYER
FEATURES
EQUIPMENT
Downlink/Uplink
split
Ultra Low latency,
Ultra reliable services
Enhanced Network Slicing
Cellular IoT enhancements
Trusted non-3GPP access
Enhanced dual connectivity Positioning 5G evolution
Cloud-native RAN Unmanned aerial systems
eMBB Network Slicing
MEC
5G voice service continuity
NR LTE
EPC
LTE
EPC
NR
5GC
User Plane Control Plane
2018 2019 2020 2021 2022
STANDARDISATION
CHIPSETS
DEVICES
EQUIPMENT
NR early drop
SA and EPC-based NSA
FWA CPE
VZ5G specs
Devices based on
Qualcomm X50 (sub 6GHz)
Smartphones
> 6GHz
Samsung
Galaxy S10
Apple
smartphones
5G Core
(based on Rel-15)
5G Core
(based on Rel-16)
NR Late drop
5G Core based NSA 3GPP Release 16 3GPP Release 17
3GPP Release 15
Qualcomm X50 (Rel-15) Qualcomm chipset (Rel-16)
Huawei Balong 5G01 (Rel-15)
Intel (Rel-15)
NR gNodeB
LTE enhancements
AT&T
“Puck”
IMT-2020 candidate
submission
2018 2019 2020 2021 2022
RADIO LAYER
FEATURES
SERVICE LAYER
FEATURES
EQUIPMENT
Downlink/Uplink
split
Ultra Low latency,
Ultra reliable services
Enhanced Network Slicing
Cellular IoT enhancements
Trusted non-3GPP access
Enhanced dual connectivity Positioning 5G evolution
Cloud-native RAN Unmanned aerial systems
eMBB Network Slicing
MEC
5G voice service continuity
NR LTE
EPC
LTE
EPC
NR
5GC
User Plane Control Plane
2018 2019 2020 2021 2022
STANDARDISATION
CHIPSETS
DEVICES
EQUIPMENT
NR early drop
SA and EPC-based NSA
FWA CPE
VZ5G specs
Devices based on
Qualcomm X50 (sub 6GHz)
Smartphones
> 6GHz
Samsung
Galaxy S10
Apple
smartphones
5G Core
(based on Rel-15)
5G Core
(based on Rel-16)
NR Late drop
5G Core based NSA 3GPP Release 16 3GPP Release 17
3GPP Release 15
Qualcomm X50 (Rel-15) Qualcomm chipset (Rel-16)
Huawei Balong 5G01 (Rel-15)
Intel (Rel-15)
NR gNodeB
LTE enhancements
AT&T
“Puck”
IMT-2020 candidate
submission
2018 2019 2020 2021 2022
RADIO LAYER
FEATURES
SERVICE LAYER
FEATURES
EQUIPMENT
Downlink/Uplink
split
Ultra Low latency,
Ultra reliable services
Enhanced Network Slicing
Cellular IoT enhancements
Trusted non-3GPP access
Enhanced dual connectivity Positioning 5G evolution
Cloud-native RAN Unmanned aerial systems
eMBB Network Slicing
MEC
5G voice service continuity
NR LTE
EPC
LTE
EPC
NR
5GC
User Plane Control Plane
2.1.2 5G deployment models
Two 5G deployment models standardised to meet initial market requirements
Although several possible 5G configurations have been
proposed, two deployment models (or options) have
been standardised to meet initial market requirements.
These are the Non-standalone (NSA) and Standalone
(SA) 5G deployment models. With these, different
operators will have different approaches on when and
how to deploy 5G.
Unlike earlier generations, 5G NR is designed to tightly
interwork with the existing 4G system at both radio and
core network levels. The deployment method where
the device is able to connect simultaneously to the 4G
radio network and the NR (a technique known as dual
connectivity) is referred to as NSA.
Conversely, the scenario where the NR capable device
connects to one radio access technology at any given
time, is known as SA deployment. Both are illustrated in
Figure 2.1.2 and 2.1.3.
FIGURE 2.1.2
NSA CONFIGURATION (OPTION 3). NR
CONNECTED TO, AND CONTROLLED BY
EXISTING 4G CORE NETWORK
FIGURE 2.1.3
SA CONFIGURATION (OPTION 2). NR
CONNECTS TO THE 5G CORE ONLY. THE
STANDALONE 5G SYSTEM INTERWORKS AT
CORE NETWORK LEVEL WITH LEGACY 4G
SYSTEM
5G Readiness & Enabling Conditions
54
The NSA configuration is most suitable for providing
enhanced mobile broadband services since NR can act as a
capacity overlay to the 4G network, supplementing existing
network investments. Where an operator aims to focus on
eMBB alone (at least initially), then NSA is suitable.
The 4G Radio and access networks will need upgrades
to support 5G NSA. These will include software; new
hardware to support new 5G frequency bands and to
aggregate the processing capacity in baseband that
5G needs; and antenna systems for MIMO. NSA devices
only need to support the new radio access technology:
the control protocols are the same as those used by
LTE devices.
SA 5G configuration allows operators to fully exploit the
features of NR as well as the capabilities of the new core
network architecture. This will include network slicing
(multiple logical networks on a single physical network),
as well as ultra-reliable and low-latency transmission.
This set of features makes an SA deployment more
suitable to address the enterprise market.
A full 5G system deployment, comprising the new radio
access technology and new core network architecture,
will require new investment cases and market readiness
is critical to these decisions.
It should be observed that while NSA 5G was originally
intended as an intermediate step for operators ahead
of the full rollout of Standalone 5G, market realities will
ultimately shape if, and when, the migration to SA 5G
happens. Both NSA and SA deployments are likely to
coexist over the long term and some kind of upgrading
would be required for a full-fledged 5G (SA) network
(software versions, configuration, transport…).
2.1.4 Equipment readiness: 5G NSA
Equipment for 5G NSA became available in late 2018
2.1.3 SA vs NSA 5G
Non-standalone and Standalone 5G deployments are optimised for different needs
2.1.5 Equipment readiness: 5G SA
Equipment for 5G SA will be ready from 2020
SA requires operators to deploy a completely new core
network that was only defined in the first 5G standards
finalised in June 2018. Given a typical lag of 18 months
from standard completion to commercial introduction
of a new technology, 5G Core will likely be used in
commercial deployments after 2020. All operators
should pay attention to device compatibility with NSA
and SA architectures, as some chipsets will not be dual
mode NSA and SA compatible.
Timely availability of network equipment is essential,
not only for testing but also to plan the integration with
existing sites. With the technical specifications for NSA
NR completed in December 2017, many vendors have
already started testing standards-compliant equipment.
Interoperability testing between major vendors has also
started.
The release of the Snapdragon X50 5G modem8
by
Qualcomm and of the Balong 5G019
by Huawei led
to the expectation that 5G-ready smartphones, from
several vendors, may become commercially available
as early as 201910. Customer Premises Equipment (CPE)
for Fixed Wireless Access became available by the end
of 2018.
8. http://www.trustedreviews.com/news/qualcomm-unveils-snapdragon-x50-world-first-5g-modem-2935894
9. https://www.totaltele.com/499418/MWC-2018-Huawei-launches-worlds-first-commercialised-5G-chip-set
10. https://www.digit.in/mobile-phones/5g-phones-heres-a-list-of-all-5g-ready-smartphones-expected-to-launch-in-2019-44894.html
5G Readiness & Enabling Conditions
55
There are a number of 5G Radio layer features that
improve the coverage, performance, and time to
deploy 5G NR on a 4G cellular site portfolio in the short
term, especially at 3.5GHz (see Figure 2.1.4). Further
development will look to increase the spectrum and
cost efficiency of NR. This subsection introduces
Network slicing, Edge computing and virtualisation:
please refer to Chapter 3 (value creation) and Chapter
4 (cost considerations) for a fuller analysis.
Network slicing, a mechanism that allows operators to
create virtual networks dedicated to a specific service,
use case or customer over a common physical network
infrastructure, is a potentially key 5G capability.
Network slicing is a very attractive tool in operators’
quest to address the different needs of enterprise
customers. For example, the quality of service
requirements of connected car use cases will be vastly
different from the needs of agriculture customers.
Multi-access Edge Computing (MEC), an approach that
deploys computation and storage resources closer to
the edge of the network, will provide lower latency
capabilities to enable real-time control and automation
in various fields (e.g. remote control and real-time
monitoring of heavy machinery, remote surgery in
healthcare).
Virtualisation, which was already in progress, will
accelerate with 5G. The 5G Core Network will be fully
virtualised to support faster service provisioning and
enhanced network maintenance.
Service continuity will need to be considered
collaboratively by operators for network configuration
including communication services on 5G and 5G
roaming.
5G will further evolve Mission Critical Services (defined
in LTE Release 13) to support the next generation
of public safety networks. Such networks will utilise
5G NR, network slicing, the improved positioning,
proximity communication and most importantly the
ability to prioritise communication.
2.1.6 5G technical features
5G technical features will spur new services
2018 2019 2020 2021 2022
STANDARDISATION
CHIPSETS
DEVICES
EQUIPMENT
NR early drop
SA and EPC-based NSA
FWA CPE
VZ5G specs
Devices based on
Qualcomm X50 (sub 6GHz)
Smartphones
> 6GHz
Samsung
Galaxy S10
Apple
smartphones
5G Core
(based on Rel-15)
5G Core
(based on Rel-16)
NR Late drop
5G Core based NSA 3GPP Release 16 3GPP Release 17
3GPP Release 15
Qualcomm X50 (Rel-15) Qualcomm chipset (Rel-16)
Huawei Balong 5G01 (Rel-15)
Intel (Rel-15)
NR gNodeB
LTE enhancements
AT&T
“Puck”
IMT-2020 candidate
submission
2018 2019 2020 2021 2022
RADIO LAYER
FEATURES
SERVICE LAYER
FEATURES
EQUIPMENT
Downlink/Uplink
split
Ultra Low latency,
Ultra reliable services
Enhanced Network Slicing
Cellular IoT enhancements
Trusted non-3GPP access
Enhanced dual connectivity Positioning 5G evolution
Cloud-native RAN Unmanned aerial systems
eMBB Network Slicing
MEC
5G voice service continuity
NR LTE
EPC
LTE
EPC
NR
5GC
User Plane Control Plane FIGURE 2.1.4
TIMELINE OF 5G FEATURES
5G Readiness & Enabling Conditions
56
Operators will need to densify their networks for 5G,
especially by deploying many more small cells to boost
capacity. However, the scale of the densification may
not be as big as it has been occasionally suggested.
By utilising advanced antenna techniques such as
massive MIMO and beamforming, simulations (e.g. by
Qualcomm11) have shown the feasibility of matching
the downlink coverage provided by LTE 1800MHz with
5G radio base stations operating at 3.5GHz: this implies
a potential for the same cell grid to be reused for the
initial rollout, albeit with challenges on managing the
power output for urban massive MIMO deployments
as well as the feasibility of installing complex antenna
systems required for MIMO in micro base stations.
In the uplink direction massive MIMO and beamforming
are impractical due to the limited power and real
estate in the device, therefore the cell coverage at
3.5GHz becomes uplink limited and smaller than a
cell operating LTE in the 1800MHz band. To overcome
this limitation two strategies have been proposed:
utilise lower band spectrum for the uplink, such as the
1800MHz spectrum (downlink/uplink decoupling); or
aggregate carriers at 3.5GHz with carriers at lower
frequencies.
It should be noted that the limited availability of
spectrum in lower bands would result in a limitation
of the uplink throughput. Therefore, although the
strategies discussed in this section address the
potential coverage impairment resulting from reusing
the LTE grid for NR, it is unlikely to address the capacity
demand of symmetric or uplink skewed services (such
as many wideband IoT services).
2.1.8 Millimetre wave deployments
Millimetre wave technologies will be used for localised and specialised deployments
2.1.7 5G coverage using 4G Infrastructure
5G deployments at 3.5GHz can reuse the existing infrastructure for 4G at 1800MHz
The large amount of spectrum available in the
millimetre wave range combined with the opportunity
for creating extremely dense networks will enable
operators to launch ultra-high throughput services
such as 8K video or high definition AR. Commercial
applications of 5G in millimetre wave spectrum will
initially appear in the form of fixed wireless access for
both consumers and enterprises. The use of millimetre
wave technologies for self-backhauling of cell sites is
being studied by the 3GPP as a candidate feature of
Release 16.
However, the deployment of a large-scale millimetre
wave network is not without challenges. As the size
of a millimetre wave cell, depending on propagation
characteristics, is expected to be in order of 200metres
to 1000metres outdoors and few tens of metres
indoors, the cost to achieve nationwide coverage will be
prohibitively expensive. Accordingly, use of millimetre
wave technologies will initially be restricted to localised
and specialised deployments. Operators may also want
to consider models of infrastructure sharing including
with each other, through public-private partnerships
and neutral hosting for millimetre wave deployments.
10. https://www.qualcomm.com/news/releases/2018/02/25/qualcomm-network-simulation-shows-significant-5g-user-experience-gains
5G Readiness & Enabling Conditions
57
5G sites will rely on a combination of fibre and
microwave backhaul solutions. This mix of backhaul
options will persist deep into the 5G era: by 2025,
the proportion of base stations connected via fibre
backhaul will grow from 30% in 2017 to just over 40%.12
Fibre is the ideal option for 5G, as capacity demands
are significantly higher compared to current typical
microwave installations. A site hosting a 5G radio
base station operating on 100MHz of spectrum using
beamforming and MIMO is expected to require up to
10Gbps (depending on site size and access spectrum)
for backhauling. For comparison, LTE backhaul demand
is in the region of 1Gbps to 2 Gbps per site. In addition,
latency and availability need to be also considered in
backhaul technology selection and design processes.
Existing microwave links will likely need to be upgraded
in order to provide the up to 10Gbps throughput that
5G will require because currently, a typical microwave
link can carry 1Gbps. This type of upgrade is possible by
adopting new technical solutions that operate in the E
band and that can achieve speeds of up to 10Gbps. NTT
has also demonstrated a 100Gbps link using Orbital
Angular Momentum.13
Readers should also be mindful of the fact that network
deployment does not only take into account the peak
traffic, but also average traffic rate within a certain
percentile to meet economic feasibility.
Ericsson Microwave Outlook 201714 forecasts that for some
operators in Western Europe, backhaul for 80% of 5G sites
will be provided by microwave links with the remaining
20% of the sites connected by fibre.
2.1.9 Backhaul upgrade for 5G
Non-fibre 5G sites need upgrade to provide up to 10Gbps backhaul
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
WW 2017 WW 2025
Total Cell-site Backhaul Usage
Copper Fiber Microwave:
7GHz~40GHz
Microwave:
41GHz~100GHz
Satellite Sub-6GHz
Unlicensed
Sub-6GHz
Licensed
2G 3G 4G 4G Evolution 5G Non-3GPP Access
CS Voice
VoLTE
ViLTE
RCS
SMS
MMS
Cell Broadcast & Public Warning System (PWS)
WebRTC
Enriched
Communications
Services run on IMS
VoWiFi
WebRTC
VoWiFi
RCS
VoLTE/ViLTE
VoNR
NR LTE
CS
LTE and NR connected to 5GC
No SRVCC No SRVCC
PS
Handover
NR LTE
CS
LTE and NR connected to EPC
SRVCC SRVCC
PS
Handover
No
CSFB CSFB
FIGURE 2.1.5
TOTAL MOBILE BACKHAUL BY METHOD (SOURCE: ABI RESEARCH)
12. https://www.gsma.com/spectrum/wp-content/uploads/2018/11/Mobile-backhaul-options.pdf
13. https://www.thestar.com.my/tech/tech-news/2018/05/23/record-breaking-100gbps-wireless-transmission-is-a-world-first/
14. https://www.ericsson.com/assets/local/microwave-outlook/documents/ericsson-microwave-outlook-report-2017.pdfd
5G Readiness & Enabling Conditions
58
The ‘regulated’ nature of voice services in most markets
means that operators would be expected to support
voice services in the 5G era. For example, operators
may be mandated, as part of the licence condition,
to provide voice services, especially emergency voice
services, to their subscribers at substantial coverage.
IMS-based communications services are the future of
operator communications and VoNR (IMS voice service
over 5G New Radio) will become the standard operator
voice service for the 5G era (as shown in Figure 2.1.6).
The GSMA recommends that VoNR is planned to be
deployed as soon as possible to avoid a repeat of the
challenges with the retrospective introduction of VoLTE
on 4G networks; provide guidance to operators on
rationalising their legacy 2G/3G networks; and provide
enhanced communications functionality for users. As
IP communications services are set to replace their
legacy counterparts (e.g. RCS will replace SMS) in the
5G era, operators should begin to leverage their 4G
investments to provide full IP communications services.
Profiling of VoNR based on 3GPP specifications is
ongoing in GSMA Networks Group and operators are
encouraged to contribute in order to provide clarity to
device manufacturers and infrastructure vendors as to
what the minimum set of functionality to be supported
are. Strict adherence to the profile will accelerate the
introduction of the service, and unlock economies of
scale and interoperability around the globe.
FIGURE 2.1.6
EVOLUTION OF IMS-BASED IP COMMUNICATIONS SERVICES
2.1.10 5G voice & messaging
IMS-based IP Communications should be supported in 5G from Day 1
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
WW 2017 WW 2025
Total Cell-site Backhaul Usage
Copper Fiber Microwave:
7GHz~40GHz
Microwave:
41GHz~100GHz
Satellite Sub-6GHz
Unlicensed
Sub-6GHz
Licensed
2G 3G 4G 4G Evolution 5G Non-3GPP Access
CS Voice
VoLTE
ViLTE
RCS
SMS
MMS
Cell Broadcast & Public Warning System (PWS)
WebRTC
Enriched
Communications
Services run on IMS
VoWiFi
WebRTC
VoWiFi
RCS
VoLTE/ViLTE
VoNR
NR LTE
CS
LTE and NR connected to 5GC
No SRVCC No SRVCC
PS
Handover
NR LTE
CS
LTE and NR connected to EPC
SRVCC SRVCC
PS
Handover
No
CSFB CSFB
5G Readiness & Enabling Conditions
59
5G coverage will likely be limited initially, so operators
should have mechanisms in place to secure the
continuity of communication services when the device
roams across different access technologies. Unlike 4G,
there will be no provision in the standards to force the
device to select a legacy circuit switched (CS) network
(2G or 3G) to make or receive a call in the case where
voice service over IMS is not supported (CS Fallback).
When the operator supports voice over IMS (that is
VoLTE and VoNR) voice continuity can be attained
when the device moves between these two radio
access technologies by means of regular handover. The
capability of transferring a voice call to a legacy CS access
(Single Radio Voice Call Continuity – SRVCC) that was
standardised for 4G, is currently not specified in the first
release of the 3GPP specifications for 5G (Release 15). It
is a Study Item for Release 16 and will be standardized by
earliest in 2021.
Figure 2.1.7 illustrates the various voice continuity
scenarios.
The recommendation is, therefore, to deploy
nationwide IMS-based IP communications services
as soon as possible. This would eliminate the need
for having to resort to SRVCC or CSFB and enhance
the user experience by providing consistent HD voice
quality within the network. If the operator does not
have VoLTE, deploying nationwide VoLTE would be
the first step to achieving future-proof voice service
continuity in the 5G era. Furthermore, operators
should take into consideration that interconnection
and roaming of IMS networks will allow higher
quality services to be provided to its subscribers with
expanded user base that enjoys the quality service.
Operators are therefore recommended to interconnect
and adopt roaming of IMS networks to leverage full
network effect of global communications service.
2.1.11 Voice service continuity
Operators need to take special consideration in adopting IP Communications for 5G
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
WW 2017 WW 2025
Total Cell-site Backhaul Usage
Copper Fiber Microwave:
7GHz~40GHz
Microwave:
41GHz~100GHz
Satellite Sub-6GHz
Unlicensed
Sub-6GHz
Licensed
2G 3G 4G 4G Evolution 5G Non-3GPP Access
CS Voice
VoLTE
ViLTE
RCS
SMS
MMS
Cell Broadcast & Public Warning System (PWS)
WebRTC
Enriched
Communications
Services run on IMS
VoWiFi
WebRTC
VoWiFi
RCS
VoLTE/ViLTE
VoNR
NR LTE
CS
LTE and NR connected to 5GC
No SRVCC No SRVCC
PS
Handover
NR LTE
CS
LTE and NR connected to EPC
SRVCC SRVCC
PS
Handover
No
CSFB CSFB
FIGURE 2.1.7
INTERWORKING AMONG RADIO ACCESSES
5G Readiness & Enabling Conditions
60
3GPP has indicated that both NB-IoT and LTE-M will
be proposed to ITU-R as meeting the 5G Massive IoT
requirements for IMT-2020. The results from initial
studies are available in the Evaluation of LTE-M towards
5G IoT requirements16; 3GPP Tdoc R1-180252917; and
3GPP Tdoc R1-180179618, and a number of other studies
are currently being conducted as part of the 3GPP
assessment of the IMT-2020 requirements.
To further support the view that NB-IoT and LTE-M
support the 5G LPWA requirements, 3GPP has agreed
that the LPWA use cases will continue to be addressed
by evolving LTE-M and NB-IoT as part of the 5G
specifications19.
3GPP Release 13 provided the initial set of capabilities
for both LTE-M and NB-IoT. Both technologies have
been designed to be power efficient and to achieve
better coverage and penetration. In addition, each
technology offers a variety of capabilities that allow
mobile operators to address a wider range of IoT
use cases. Please refer to Appendix 7.2 for further
descriptions of the NB-IoT and LTE-M requirements.
2.1.13 Cellular Vehicle-to-Everything (C-V2X) in 5G
5G will enable new capabilities for vehicular communications
2.1.12 NB-IoT and LTE-M as part of 5G
NB-IoT and LTE-M as deployed today are already part of 5G15
With the advancements of technologies, vehicular
communications are set to greatly evolve and 3GPP
has already defined a wide variety of features in LTE
with further enhancements slated for 5G to address this
sector. 3GPP refers to features that are fulfilling vehicle
use cases as C-V2X (Cellular Vehicle to Everything),
encompassing all cellular based communications
between a vehicle and other entities such as other
vehicle (V2V), road side units’ infrastructure (V2I),
pedestrians (V2P). Some of these communications can
take place in “direct mode” without the intermediation
of a network infrastructure.
It is noteworthy that 3GPP scope is wider than just
cars and covers instead a wide variety of vehicles
classified in three main categories: terrestrial, aerial
and submarine. Most of the specifications are aimed
at cars and trains belonging to the terrestrial category,
however a lot of work is already ongoing to address
unmanned aircrafts. Unmanned aircrafts are evolving
rapidly and they are more often employed in critical
situations for disaster response and they are becoming
part of public safety use cases.
15. https://www.gsma.com/iot/mobile-iot-5g-future/
16. “Evaluation of LTE-M towards 5G IoT requirements”, Sierra Wireless, Ericsson, Altair, Sony, Virtuosys, AT&T, Verizon, Orange, Nokia, China Unicom, NTT DOCOMO, KDDI, KPN, KT,
Sequans, SK Telecom, SingTel, Softbank, Sprint, Telenor
https://www.sierrawireless.com/-/media/iot/pdf/LTE-M_White_Paper_171114B
17. “IMT-2020 self-evaluation: mMTC connection density for LTE-MTC and NB-IoT”, Ericsson http://www.3gpp.org/ftp/TSG_RAN/WG1_RL1/TSGR1_92/Docs/R1-1802529.zip
18. “Consideration on self-evaluation of IMT-2020 for mMTC connection density”, Huawei, HiSilicon http://www.3gpp.org/ftp/TSG_RAN/WG1_RL1/TSGR1_92/Docs/R1-1801796.zip
19. “Interim conclusions for IoT in REL-16”, 3GPP http://www.3gpp.org/ftp/tsg_ran/TSG_RAN/TSGR_79/Docs/RP-180581.zip
5G Readiness & Enabling Conditions
61
The 5G era will experience a number of challenges
around identifying users, devices and the various
associations formed between the two. For example, a
device may need to be associated with a manufacturer
(for lifetime maintenance), an owner (who may be
paying for the core 5G services consumed by the
device) and a user (who consumes third-party services
via the device).
These challenges already exist to some extent
in previous generation systems and were solved
in a proprietary manner by third-party service
providers, resulting in closed environments and
a lack of interoperability. A standard identity and
access management framework (and management
of privileges) will therefore become increasingly
important in order to simplify interworking between
different solutions.
5G will herald a move from legacy subscriber-centric
services, where operators have focused on providing
voice and data services to the subscriber, towards the
need to support personalised user-centric services
where the focus shifts to the user. In this model, users
will take their services with them, regardless of the
subscription and the access network used.
For this, operators can step-up as trusted Identity
Providers and, in doing so, will be able to better
understand and serve their customers, while also
unlocking new revenue opportunities by offering such
capabilities to third parties delivering services over 5G
networks. For example, operators could play a key role
in enabling a “car as a service” solution by providing the
capability to identify and authenticate users to the car
sharing service provider.
2.1.14 Identity & Access Management in 5G
Identity and access management will be more important and complex in 5G
5G Readiness & Enabling Conditions
62
In recent years, developments in embedded SIM
(eSIM) technologies that permit remote management
of the SIM on mobile devices have matured to the
point that major manufacturers have started to deploy
eSIM technology on an increasing range of connected
devices, including smartwatches and smartphones.
The traditional removable SIM card will continue to
be the most used form factor in the early 5G era for
mass-market devices such as smartphones. However,
eSIM does provide benefits that may be very valuable
for OEMs for 5G devices, two significant benefits
being a 98% reduction in space over the removable
SIM (allowing more room for batteries and modems in
5G devices) and the ability to provision devices postsale to the consumer allowing much more freedom in
device distribution models. This will lead to an increase
in eSIM deployment as OEMs launch new devices with
eSIM capability and operators increasingly support
eSIM functionality (currently 100 operators worldwide
support eSIM). Furthermore, the diversity of IoT
applications for which 5G will be used will undoubtedly
further increase the range of connected devices
available to consumers and enterprises, requiring
smaller form factors and remote provisioning. Secure,
scalable and minimal friction processes that enable
operators to securely authenticate devices on 5G
networks will become increasingly important.
Achieving these secure, scalable and minimal friction
eSIM processes is likely to see further evolution
in the way eSIMs are manufactured. One possible
evolution is an emphasis on enabling manufacturers to
incorporate eSIM capability in their devices that bring
with them pre-certified compliance to personalisation
and certification schemes. Such techniques are being
developed by manufacturers supporting so-called
integrated or ‘system-on-chip’ eSIM solutions and can
enable manufacturers to support eSIM without actually
having the skills and capabilities in their own companies
to manage eSIM production and personalisation and at
reduced overall cost to the mobile industry. Ultimately,
this would see eSIM as an enabler to connecting many
more devices and device types to many different types
of networks, potentially to even non-cellular networks.
FIGURE 2.1.8
TRADITIONAL SIM CARDS VS. REMOTE SIM PROVISIONING OF ESIM
2.1.15 eSIM in the 5G era
eSIM take up will continue to be measured, although ultimately the benefits to OEMs will
cause mass-market adoption
Operator
Device
Deliver Identitfy and
authenticate
SIM
CARD
Operator
Device
Download Identitfy and
authenticate
eSIM
This profile data is used to
securely identify and
authenticate the subscriber
The profile data on the eSIM
is used to identify and
authenticate the subscriber,
just as for the SIM card
Operators use
SIM cards to
securely share
identity and
authentication
details with
subscribers
eSIM removes
the need for the
SIM card –
instead the
profile data is
securely
downloaded
directly to the
device
The red dot represents the
data stored on the SIM,
called a ‘Profile’
The eSIM can store
several profiles
The profile, once
downloaded, is securely
stored on an eSIM, which is
soldered into the device
SUBSCRIBER PROTECTION
STREAMLINE REGULATORY CONDITIONS
TO FACILITATE 5G DEPLOYMENT
PROVIDE REGULATORY FLEXIBILITY
FOR INNOVATIVE 5G PROPOSITIONS
RADIO PROTECTION CORE PROTECTION
• Subscriber Permanent Identifier (SUPI); a
unique identifier for the subscriber
• Dual authentication and key agreement
(AKA)
• Anchor key is used to identify and
authenticate UE. This key is used to create
a secured access throughout the 5G
infrastructure.
• X509 certificates and PKI are used to
protect various non UE devices
• Encryption keys are used to demonstrate
the integrity of signalling data
• Authentication when moving from 3GPP
network to non 3GPP network
• Security Anchor Function (SEAF) allows
re-authentication of the UE when it
moves between dierent access or
serving networks
• The home network carries out the original
authentication based on the home profile
(home control)
• Encryption keys will be based on IP
network protocols and IPSec
• Security Edge Protection Proxy (SEPP)
protects the home network edge
• 5G separates control and data plane
trac
RELEASE SUFFICIENT SPECTRUM FOR 5G
THAT IS HARMONISED AND AFFORDABLE
EASE FINANCIAL DEMANDS OF 5G
BY BRINGING DOWN COSTS
5G Readiness & Enabling Conditions
63
With the introduction of NFV, telecommunication
networks are preparing to undergo the same
transformation that took place in the Information
Technology sector (IT) from where the virtualisation
software paradigm originates. Network Virtualisation
promises an acceleration in time-to-market for existing
and new services, as well as more flexible networks that
can scale and evolve as needed. Many of the solutions
for virtualisation are devised in groups adopting Open
Source, thus operators will work in the future with new
suppliers and a new layer of configurability.
While the goal is to be able to use common hardware
and standardised platforms to run Virtual Network
Functions (VNFs), the reality is that virtualised services
(whether it’s VoLTE, 4G Enhanced Packet Core [EPC]
or enterprise services like Software Defined-Wide
Area Network [SD-WAN]) come with their own set
of infrastructure requirements and custom design
parameters. This results in the creation of various
vendor/function based silos which are incompatible
with each other and have different operating models,
and crucially drives up cost beyond what is anticipated.
This topic is covered in more detail in Section 4.4:
Network Flexibility and in Section 4.9: Network
Equipment Sourcing
2.1.16 Delivering on virtualisation
Common infrastructure abstraction is needed to realise the full benefits of virtualisation
and Open Networks
2.1.17 Vendor ecosystem for 5G
Operators should expect equipment from many more vendors in the 5G era
The cloud native design of the 5G core and adoption
of a service-based architecture has the potential for
disrupting the equipment vendor landscape, with
suppliers that are currently associated with the IT
sector being in a position to provide their products
to telecommunication companies. In the 4G era,
operators already started to introduce virtualised
network elements and functions (e.g. virtual IMS) and
horizontal IT/technology vendors specialised in cloud,
virtualisation, SDN and so on are starting to make
inroads in mobile operator networks.
5G operators will, therefore, need to forge new
business relationships with these new partners and
possibly adapt to a business model that could be very
different from that of traditional vendors. This will be of
particular relevance when working with vendors who
sell products based on open source.
System integrators are also likely to play a much bigger
role as the decomposition of the network will result in
a multitude of suppliers of components that need to
work harmoniously.
This topic is covered in more detail in Section 4.9:
Network Equipment Sourcing.
5G Readiness & Enabling Conditions
64
5G allows operators to leverage the latest technologies
and as such benefit from a more secure network. This
is due to the fact that 5G has been designed with
security at each level of the network. It offers the
mobile industry an unprecedented opportunity to uplift
network and service security levels.
5G services scale up and offer flexibility to the operator,
with this comes the additional opportunity to remove
costly unilateral security controls. 5G security controls
should be appropriate to the specific service needs. For
example, a content delivery service may not warrant
the same security investment as an autonomous
vehicle. This flexibility allows the operator to invest in
the most appropriate security controls for the service.
2.1.18.1 5G era threat landscape
Introducing a new technology to any network alters the
threat landscape. Vulnerabilities and threats against
technology are likely to be unknown at the time of
launch. New threats will be developed as attackers
are provided live service environment to develop their
techniques.
5G is the first generation that recognises this threat
and has security at its foundation. The threat landscape
will diversify due to the unprecedented combination
of new technology and differing service models being
introduced. For example, new players to the market
may not have the same maturity to personal data
management as an operator, therefore increasing the
chances of poor security practices impacting the end to
end service.
2.1.18.2 Operational security in the 5G era
5G has designed in new authentication capabilities,
enhanced subscriber identity protection and additional
security mechanisms. Preventative controls are outlined
within the standards but applications to protect and
monitor the ecosystem as a whole will need to be
implemented. The ability to identify and respond to
these threats will require data analysis.
Traditional security operations will struggle to contend
with the volumes of data a 5G network will produce;
it is not envisaged that collecting all network and user
data will be effective or even feasible. Threat modelling
of the 5G services offered by an operator should be
part of the service design phase and the purpose of this
process is to identify key threats the service is likely to
be impacted by.
Operators should leverage technologies such as
Machine Learning (ML) and Deep Learning (DL) to
automate the identification of the threats within the
data, given the rapid increase in data volumes (see
Section 4.7: Network Automation, for more details).
If processed in near real time, potentially at the edge,
this automated detection could be paired with real
time blocking capabilities to mitigate the effects of an
attack. 5G’s Network Data Analytics Function (NDAF)
could support real-time threat detection.
2.1.18.3 3GPP security standards
5G standards enable security. SA3, the security
subgroup of 3GPP, has outlined a standard security
architecture in Release 15. This architecture introduces
controls to prevent several known threats, including
numerous fraud types. The standards outline the use
of more industry defined and supported, IP-based
protocols. Enabling the move away from historical
insecure protocols, such as SS7, is the right strategic
evolution for operators.
The correct implementation of these standards
should fulfil an operator’s security requirements when
deploying 5G. Failure to deploy standard architectural
controls may result in a less secure network and
necessitate additional security requirements being
added post launch. Experience has shown this costs
operators more in the long term, in capex and impact
on service.
2.1.18 Security considerations for 5G
Security is a critical enabler for 5G
5G Readiness & Enabling Conditions
65
2.1.19 Energy efficiency in the 5G era
Energy efficiency is a major consideration for 5G era networks
3GPP specifications point to an aspirational goal for 5G
networks to be much more efficient than 4G. This will
be driven by more efficient constituent components.
Yet, in several ways, the overall 5G era networks
will be challenged to deliver a greener operational
outcome. Network densification will add more sites and
‘softwarisation’ of the core will add more control points.
This disaggregation of the network will likely result in
multiple sites consuming relatively small amounts of
energy, and imposing a complex challenge to optimise
overall energy consumption.
While the debate and discussions continue, in the
short-term, operators are likely to see an energy
increase in maintaining legacy networks in 2G, 3G
and 4G networks in addition to new requirements
in deploying 5G, at least until legacy networks are
decommissioned.
FIGURE 2.1.9
SECURITY CONTROLS OUTLINED IN 3GPP RELEASE 15
Operator
Device
Deliver Identitfy and
authenticate
SIM
CARD
Operator
Device
Download Identitfy and
authenticate
eSIM
This profile data is used to
securely identify and
authenticate the subscriber
The profile data on the eSIM
is used to identify and
authenticate the subscriber,
just as for the SIM card
Operators use
SIM cards to
securely share
identity and
authentication
details with
subscribers
eSIM removes
the need for the
SIM card –
instead the
profile data is
securely
downloaded
directly to the
device
The red dot represents the
data stored on the SIM,
called a ‘Profile’
The eSIM can store
several profiles
The profile, once
downloaded, is securely
stored on an eSIM, which is
soldered into the device
SUBSCRIBER PROTECTION
STREAMLINE REGULATORY CONDITIONS
TO FACILITATE 5G DEPLOYMENT
PROVIDE REGULATORY FLEXIBILITY
FOR INNOVATIVE 5G PROPOSITIONS
RADIO PROTECTION CORE PROTECTION
• Subscriber Permanent Identifier (SUPI); a
unique identifier for the subscriber
• Dual authentication and key agreement
(AKA)
• Anchor key is used to identify and
authenticate UE. This key is used to create
a secured access throughout the 5G
infrastructure.
• X509 certificates and PKI are used to
protect various non UE devices
• Encryption keys are used to demonstrate
the integrity of signalling data
• Authentication when moving from 3GPP
network to non 3GPP network
• Security Anchor Function (SEAF) allows
re-authentication of the UE when it
moves between dierent access or
serving networks
• The home network carries out the original
authentication based on the home profile
(home control)
• Encryption keys will be based on IP
network protocols and IPSec
• Security Edge Protection Proxy (SEPP)
protects the home network edge
• 5G separates control and data plane
trac
RELEASE SUFFICIENT SPECTRUM FOR 5G
THAT IS HARMONISED AND AFFORDABLE
EASE FINANCIAL DEMANDS OF 5G
BY BRINGING DOWN COSTS
5G Readiness & Enabling Conditions
66
2.2 Policy Readiness (including Spectrum)
KEY TAKEAWAYS
• An enabling policy environment is a prerequisite for 5G success. Accordingly, policymakers
need to foster a pro-investment and pro-innovation environment for the mobile ecosystem.
• To accelerate 5G into commercial use, policymakers should focus on network deployment,
network flexibility, spectrum access and regulatory costs, including reducing sector specific
taxes on customers and operators.
• Specifically, regulators need to promote streamlined network deployment regulations to
address the emerging challenges of network densification.
• Likewise, regulators should promote flexibility to support emerging 5G services (e.g.
through a pragmatic interpretation of the Open Internet principle) and modernising
regulatory frameworks.
• Sufficient, affordable, exclusively licensed, contiguous spectrum should be made available
in harmonised 5G bands. Set-asides in these bands jeopardize the success of public 5G
services and could waste spectrum.
• Spectrum policy measures should be adopted which support long-term 5G investment.
These should include long-term technology neutral licences, clear renewal processes, a
spectrum roadmap and due care taken to avoid artificially inflated spectrum prices.
5G Readiness & Enabling Conditions
67
To accelerate 5G into commercial use, governments
and regulators need to consider market structures
that will foster a pro-investment and pro-innovation
environment for the mobile ecosystem. Many mobile
operators face significant headwinds from the
prevailing policy and regulatory environment, in terms
of investment; spectrum access; network management
flexibility; and infrastructure deployment.
It is important to note that across a broad range of
policy and regulatory issues, the industry position is no
different in a 5G world to earlier generations of mobile
network technology. Positions published in the GSMA
Mobile Policy Handbook20, spanning infrastructure
sharing, taxation and spectrum, to name but a few, are
as relevant and applicable as ever.
Policymakers, as vocal proponents of mobile network
evolution and technology-led economic growth, should
play a driving role in the realisation of 5G, creating
the conditions for efficient and timely mobile network
deployment while bringing down the regulatory costs
for operators. Their attention should focus on the
following key areas to bring 5G to fruition: network
deployment; network flexibility; spectrum access; and
regulatory costs.
Figure 2.2.1 is a summary of the four key policy
considerations for the 5G era.
2.2.1 5G era policy framework
Supportive policy framework is a key enabler for 5G readiness
FIGURE 2.2.1
KEY POLICY CONSIDERATIONS FOR THE 5G ERA
Operator
Device
Deliver Identitfy and
authenticate
SIM
CARD
Operator
Device
Download Identitfy and
authenticate
eSIM
This profile data is used to
securely identify and
authenticate the subscriber
The profile data on the eSIM
is used to identify and
authenticate the subscriber,
just as for the SIM card
Operators use
SIM cards to
securely share
identity and
authentication
details with
subscribers
eSIM removes
the need for the
SIM card –
instead the
profile data is
securely
downloaded
directly to the
device
The red dot represents the
data stored on the SIM,
called a ‘Profile’
The eSIM can store
several profiles
The profile, once
downloaded, is securely
stored on an eSIM, which is
soldered into the device
SUBSCRIBER PROTECTION
STREAMLINE REGULATORY CONDITIONS
TO FACILITATE 5G DEPLOYMENT
PROVIDE REGULATORY FLEXIBILITY
FOR INNOVATIVE 5G PROPOSITIONS
RADIO PROTECTION CORE PROTECTION
• Subscriber Permanent Identifier (SUPI); a
unique identifier for the subscriber
• Dual authentication and key agreement
(AKA)
• Anchor key is used to identify and
authenticate UE. This key is used to create
a secured access throughout the 5G
infrastructure.
• X509 certificates and PKI are used to
protect various non UE devices
• Encryption keys are used to demonstrate
the integrity of signalling data
• Authentication when moving from 3GPP
network to non 3GPP network
• Security Anchor Function (SEAF) allows
re-authentication of the UE when it
moves between dierent access or
serving networks
• The home network carries out the original
authentication based on the home profile
(home control)
• Encryption keys will be based on IP
network protocols and IPSec
• Security Edge Protection Proxy (SEPP)
protects the home network edge
• 5G separates control and data plane
trac
RELEASE SUFFICIENT SPECTRUM FOR 5G
THAT IS HARMONISED AND AFFORDABLE
EASE FINANCIAL DEMANDS OF 5G
BY BRINGING DOWN COSTS
25. https://www.gsma.com/publicpolicy/handbook
5G Readiness & Enabling Conditions
68
Operators are still rolling out 4G infrastructure in
most markets, with 5G as the evolutionary step with
newer equipment added to earlier-generation sites.
Operators will rely, in some geographical areas, on
the deployment of small cells, including more densely
distributed antennas and the provision of backhaul, to
connect a far greater number of mobile base stations.
As a frame of reference, in a hypothetical scenario
where 5G small cells are installed on all street lamp
posts, the GSMA calculates that London in the UK could
see up to 500,000 small cells installed across the city.
The densification of networks to cope with urban
capacity demands requires significant new investments
in additional sites and supporting infrastructure,
potentially four- to six-times higher than for 4G based
on some market estimates. Furthermore, complex
planning procedures involving multiple layers of
approval in some countries create additional burden,
significantly delaying 5G deployment. Policymakers
must strive to ensure that the deployment regulations
at the local level are aligned with the national
digital ambitions and market realities. For example,
governments should adopt a national code for
new mobile sites and modification of existing sites,
implemented by local authorities (e.g. FCC orders).
Policymakers are urged to:
• Simplify planning procedures and regulations for
site acquisition, colocation and upgrades of base
stations;
• Provide operators access and right-of-ways to
public/government facilities for antenna siting on
reasonable terms and conditions;
• Establish uniform electromagnetic field (EMF) rules
that are no more restrictive than internationally
agreed levels.
• Encourage and incentivize fibre investments, and
enact appropriate policies to ease and expedite
fibre rollouts.
• Strive to ensure that the deployment regulations at
the local level are aligned with the national digital
ambitions and market realities. This includes setting
reasonable fees and other conditions for network
deployment at local level.
• Offer a reasonable expectation of approval for
voluntary network sharing deals while avoiding
mandated sharing agreements that may amount to
an access obligation.
2.2.3 Regulatory flexibility
Regulators should enable operators to leverage 5G network features for innovative
propositions
2.2.2 Network deployment regulations
Streamlined network deployment regulations are a necessity
To realise the full economic potential of 5G, regulators
should protect operators’ flexibility to meet the
connectivity requirements of emerging services made
possible with 5G. With 5G operators can use network
virtualisation techniques to dynamically configure
network resources to deliver bespoke, managed
connectivity services. Network slicing is a core
capability that enables operators to create such service
offerings and it is also critical to support public-safety
services as they migrate to 5G infrastructure.
While the GSMA and its members are committed to
the open internet principle and advocate for technical
and commercial flexibility, some operators have raised
concerns that potential regulation related to the open
internet and net neutrality could prevent them from
fully utilising capabilities such as network slicing to
offer tailored services to vertical sectors (e.g. urgent
software updates for driverless cars vs. streaming a cat
video on a smartphone).
Regulators should interpret the open internet principle
in a manner that encourages flexible and efficient
networks instead of taking an overly-restrictive view
of the logical architecture of the network. Where rules
on open internet conduct are in place, services other
than mass-market consumer internet access services
should remain outside of those rules. Additionally,
regulators should review old-fashioned regimes and
update regulatory frameworks to adapt them to the
new industry reality.
5G Readiness & Enabling Conditions
69
2.2.4.1 5G spectrum bands
Approved 5G bands pave the way for refarming
2G/3G/4G spectrum for 5G
3GPP has approved 36 spectrum bands for 5G in the
sub-1GHz; 1GHz to 6GHz; and above 24GHz bands. The
approval creates a group of spectrum bands that are
globally and colloquially recognised as 5G spectrum
(e.g. 3500MHz). Crucially, it also paves the way for
operators to refarm their existing 2G/3G/4G spectrum,
where permitted, for 5G services. Some of these bands
are applicable globally while many are only applicable
on a regional basis. Please refer to Appendix 7.1 for a
table of all the 3GPP approved 5G NR spectrum.
2.2.4.2 Spectrum Access
Availability of the identified 5G spectrum bands in each
market is crucial
5G will be best delivered using dedicated, licensed
spectrum and the industry has identified the need
for spectrum in three frequency ranges to deliver
widespread coverage and support all use cases. These
are: sub-1GHz; 1GHz to 6GHz (e.g. 3.5GHz); and above
6GHz (e.g. 26GHz, 28GHz and 40GHz). Governments
should strive to make sufficient spectrum in these
bands available for 5G to drive global interoperability
and achieve economies of scale for both the industry
and customers.
Sub-1GHz bands provide good 5G coverage and
support specific use cases such as wide-area IoT.
Spectrum in this range will include both refarmed
bands (800/850/900MHz) and new bands
(600/700MHz).
The 1GHz to 6GHz mid-range spectrum bands provide
a good mixture of coverage and capacity. It is expected
that most of the operators will deploy in the wider
3.5GHz range (3.3GHz to 4.2GHz). This spectrum
shows great promise for international harmonisation
and initial deployments of 5G are likely to be in this
range. In areas intended for 5G, it is recommended
that administrations consider clearing the band, e.g.
relocating incumbent users, with the goal of making
large contiguous blocks available for 5G in the most
appropriate portion of the wider 3.5GHz range.
With regard to spectrum above 6GHz, spectrum in the
mmWave range, 26/28/40GHz, is emerging as key for
realising the ultra-high speed 5G vision. This spectrum
is especially useful for short range, high capacity
communication. Identifying harmonised international
mobile spectrum allocations in the mmWave bands
is on the agenda at WRC-19, where the 26GHz and
40GHz bands are currently the focus of the mobile
industry. Outside of WRC-19, 28GHz will also be a vital
band for 5G.
In practice, while mmWave spectrum will eventually
play a key role for 5G, many initial deployments are
likely to be in the 3.5GHz band, which would be the
primary 5G band globally for a number of years.
Hence, it is important to clarify that in the short-term,
5G deployments in spectrum above 6GHz are unlikely
to be as widespread due to the need for significant
densification and small cell deployments.
2.2.4 Spectrum in the 5G era
5G Readiness & Enabling Conditions
70
2.2.4.3 Spectrum Allocations
5G will reach its full potential if sufficient harmonised
spectrum is made available
Governments should make available sufficient amounts
of spectrum for 5G in the, sub-1 GHz, 1 - 6GHz, and the
above 6GHz ranges. In the sub-1 GHz range, a portion
of UHF television spectrum should be made available
for this purpose through the second digital dividend.21
The European Commission supports the use of the 700
MHz band for 5G services22 and in the United States
the 600 MHz band has been assigned and T-Mobile has
announced plans to use it for 5G.23
In the 1GHz to 6GHz range, 5G services will benefit
significantly from assignments of at least 80MHz to
100MHz of contiguous spectrum blocks per operator in
the 3.5GHz range24 in order to deliver better experience
than 4G and address all 5G use cases.
There is a growing risk that, in practice, governments
assign an insufficient amount of spectrum to mobile
operators due to legacy users in the band, spectrum
being set aside from MNO access, or fragmented
assignments. Requisite network synchronization with
legacy users and spectrum assigned to small players
can be challenging and result in an inefficient usage of
spectrum and may rule out some 5G use cases. Recent
auctions in this band (see Figure 2.2.2) show that the
goal of 100MHz of contiguous blocks per operator in
this band is at risk.
In the above 6GHz range, the goal is for contiguous
spectrum of 1GHz per operator to support the full
range of 5G use cases being envisioned. However, there
are concerns that, in practice, this target may not be
reached, especially if regulators apply overly restrictive
usage conditions to protect other services.
Beyond making spectrum available for 5G access,
governments and regulators also need to make suitable
provisions to support 5G backhaul. The significant
capacity demands of 5G means there will be demand
for higher frequency microwave backhaul bands which
are better able to support the wider channels 5G needs.
Currently the V-band (60 GHz) and E-band (70/80
GHz) are expected to be play an important role.
FIGURE 2.2.2
SPECTRUM ALLOCATIONS IN THE 3.5GHZ BAND25 (SOURCE: GSMA INTELLIGENCE)
0
Latvia
2018
Australia
2018
United
Kingdom
2018
Czech
Republic
2018
Italy
2018
Spain
2018
United Arab
Emirates
2018
Korea
South
2018
Ireland
2018
Finland
2018
50
50 50
390
130
350
70
280
93
200
100
200
67
200
50
200
50
150
38
125
31
100
150
200
250
300
350
400
Amount of MHz
assigned
Average amount of MHz
per winner
$ 0
$ 50
$ 100
$ 150
$ 200
$ 250
$ 300
$ 350
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Europe China Japan South Korea United States
of America
China US EU China US EU
577
105
11 2
58 58
Average connections, millions Average mobile revenues, USD billions
21. The second digital dividend is the 700 MHz band in Europe, the Middle East and Africa and the 600 MHz band in the Americas and Asia-Pacific
22. ‘European Commission stakes out 700 MHz band for 5G’ – Telecom TV (2016)
23. Leading towards Next Generation “5G” Mobile Services’ – FCC (2015)
24. The proposed range is based on typical availability of 400MHz spectrum in the 3.5 GHz range, divided by, generally, 4 operators per country.
25. As at 1 January 2019
5G Readiness & Enabling Conditions
Note: the UK amounts exclude the 40 MHz already owned by Three UK through a prior company acquisition.
71
2.2.4.4 Spectrum Pricing
Spectrum should be affordable to encourage network
investment
Spectrum pricing represents a critical concern for
mobile operators as early 5G auctions have already
highlighted failures which risk negatively impacting
deployments. Governments and regulators should
assign 5G spectrum to support their digital connectivity
goals rather than as a means of maximising state
revenues. Effective spectrum pricing policies are vital to
support better quality and more affordable 5G services.
Spectrum prices are increasing with final prices paid
rising 3.5 fold in the 4G era (i.e. 2008-2016) with
some outliers 700% above the global average. While
high spectrum prices occur in all types of market, it is
notable that prices are three times higher in developing
countries compared with developed countries once
GDP is accounted for. High spectrum prices have been
linked to more expensive, slower mobile broadband
services with worse coverage and so present a
profound threat to the success of 5G. They are also
linked to irrecoverable losses in consumer welfare
worth billions of dollars worldwide that comfortably
outweigh additional treasury revenues from the higher
prices.
The causes of very high prices are typically policy
decisions that appear to prioritise maximising short
term state revenues over long-term socio-economic
benefits of mobile services. The GSMA recommends
the following best practice for ensuring policy decisions
do not artificially inflate spectrum prices and thus
jeopardise the success of 5G:
1. Avoid limiting the supply of 5G spectrum, publish
long-term spectrum award plans and hold open
consultations. 5G requires significant amounts of
spectrum so artificial limitations on the amount
offered or inappropriate lot sizes risk inflating prices.
2. Set modest reserve prices and annual fees, and rely
on the market to determine spectrum prices.
3. Avoid creating unnecessary risks in the auction
design that put the success of operators’ 5G
services in jeopardy forcing them to overbid.
4. Consult with industry on licence terms and
conditions and take them into account when setting
prices.
5. Auctions must be well designed and implemented
to be an effective award mechanism. However,
they should also not be regarded as the only award
mechanism. (An auction best practice policy paper
is available on the GSMA website26). Administrative
approaches can be more suitable when regulators
and the national mobile operators can agree a
mutually beneficial split of 5G spectrum.
6. There is no single best approach to estimating the
value of spectrum and international benchmarks
should be used with caution.
7. Spectrum caps and set-asides distort the level
playing field, may jeopardise the success of
commercial 5G services and can be costly for the
entire ecosystem27.
8. Spectrum pricing decisions should be made by an
independent regulator in consultation with industry
2.2.4.5 Spectrum Fragmentation Risk
Support for ‘private’ 5G should not jeopardise spectrum
availability for ‘public’ 5G
Regulators must be careful not to undermine the
availability of sufficient spectrum for ‘public’ 5G
networks, in seeking to support vertical players who
may want to deploy their own ‘private’ 5G networks. In
particular, as 5G should optimally be deployed in 80MHz
to 100MHz blocks in the 3.5GHz range, many markets will
not have enough spectrum if governments fragment the
available spectrum to allocate for private 5G networks.
For example, some regulators are keen to encourage
private 5G networks by setting aside spectrum for
verticals or through spectrum sharing mechanisms. Both
approaches risk limiting the spectrum that is available
for public 5G services which will result in slower services,
reduced capacity and risks driving up spectrum prices
through artificial scarcity.
More widely, set-asides for verticals can lead to
inefficient spectrum usage of priority 5G bands.
Verticals are unlikely to use the spectrum very widely
across countries, so national set-asides are likely to
go unused in many areas. Instead, mobile operators
can provide customised 5G services for verticals who
can then benefit from network slicing, small cells,
wider geographical coverage, as well as the larger and
more diverse spectrum assets, as well as deployment
experience, at mobile operators’ disposal.
26. https://www.gsma.com/spectrum/wp-content/uploads/2016/11/spec_best_practice_ENG.pdf
27. https://www.gsma.com/spectrum/wp-content/uploads/2014/11/The-Cost-of-Spectrum-Auction-Distortions.-GSMA-Coleago-report.-Nov14.pdf
5G Readiness & Enabling Conditions
72
Operators are in the difficult position of committing
significant new investments for the rollout of 5G without
any real certainty of how, or when, a return can be
expected. Governments, in support of their own digital
policy goals, should therefore take meaningful action
to ease the cost burden faced by the mobile industry to
deliver 5G services.
In addition to reasonable spectrum costs, further steps
should be taken in many areas, such as reducing or
eliminating mobile-sector taxes on both operators and
customers; easing tax on energy for 5G; and lowering
administrative and siting fees. Policymakers are also
encouraged to allow voluntary spectrum pooling
between operators to help drive faster services and
maximise spectrum efficiency.
Spectrum sharing (with entities other than mobile
network operators) is gaining traction in some countries.
This may have an impact on the amount of spectrum
mobile operators can reliably access to maximize the
full potential of 5G services in terms of very-high
throughputs, low latency (etc). Spectrum sharing
frameworks support multiple users in a given band
and enterprises in some vertical sectors are calling
on regulators to ensure they can access 5G spectrum
without relying on mobile operators. Some regulators,
most notably the FCC in the 3.5GHz band, are looking
to create shared spectrum bands. These approaches
could limit the amount of spectrum available to mobile
operators for high-quality 5G services.
To deliver affordable, widespread and high-quality
mobile broadband services, mobile operators require
affordable and predictable access to sufficient radio
spectrum. High spectrum prices have been linked
to more expensive, lower-quality mobile broadband
services and may limit 5G roll-out an take-up. Spectrum
auctions should allow the market to determine spectrum
prices. Governments should prioritise rapid, high-quality
5G service rollouts over revenue maximisation when
awarding 5G spectrum.
2.2.5 Regulatory costs
Policymakers need to ease the financial demands of 5G by bringing down regulatory costs
and fees
5G Readiness & Enabling Conditions
Voluntary spectrum sharing approaches are preferable
to set asides as they can be used to support all potential
5G users, including verticals. For example, MNOs can be
permitted to lease their spectrum assets so that verticals
can build their own private 5G networks. This approach
also overcomes the issue of synchronising public 5G
networks with private 5G networks in adjacent bands
which may limit which 5G use cases can be supported.
2.2.4.6: National spectrum planning
Put in place spectrum policy measures to support
long-term 5G network investment and address national
operators’ requirements
It is vital that spectrum is made available in a way
that encourages operators to invest heavily in mobile
networks and supports quality of service. This will
require a significant amount of long-term exclusively
licensed spectrum (e.g. over twenty years) with a
predictable renewal process that is planned years (e.g.
over five years) in advance of expiry.
All mobile licences should be technology neutral –
without additional cost – so operators can speed up
wide area 5G rollouts using existing infrastructure while
also improving spectrum efficiency. A 5G spectrum
roadmap should be published outlining exactly what
bands will be made available and in what timeframes so
operators can plan their investment strategy and value
spectrum effectively.
All 5G spectrum plans should be subject to consultation
with 5G stakeholders to ensure spectrum awards and
licensing approaches consider national technical and
commercial deployment plans. For example, decisions
around licence area sizes (e.g. national versus localised)
and coexistence measures including rules surrounding
network synchronisation will have a major bearing on
network investment, deployment plans and the viability
of various 5G use cases.
73
2.3 Market Readiness
KEY TAKEAWAYS
• Market readiness, starting with 4G maturity, is crucial to determine the timing of 5G launch.
This varies by market and will make or mark the success of 5G in each market.
• The 5G competitive landscape will remain fierce. Policymakers must continue to ensure a level
playing field among competitors that supports the industry’s ability to invest.
• Markets with greater scale can better influence the global trajectory of 5G development, and
are also able to achieve low unit costs of network rollout and economies of scale.
• The availability and capability of 5G phones from 2019 will be a pivotal moment that will
drive customer adoption of 5G.
• An interesting lesson from the launch of 4G is that being the first-to-launch does not
guarantee sustainable competitive advantage.
• Another lesson from 4G is that when an operator delays launching for too long (>12 months
after its rivals), it faces a decline in revenues as competitors gain market share.
• Given revenue uncertainty, many operators will maintain their CAPEX envelopes and focus on
a demand driven approach that addresses hotspots in urban areas with a clear capacity need
or to support enterprise customers’ requirements.
• Operators should have a clear roadmap to shut down 2G/3G networks to limit network
operations complexity and support spectrum refarming.
• The idea of leapfrogging to 5G from 2G/3G and without deploying 4G, is tantalising. But it
will be very difficult due to technical, commercial and regulatory challenges.
• With a major shift in architecture away from traditional models and competencies, operators
need collaboration and new skills to unlock 5G era opportunities.
5G Readiness & Enabling Conditions
74
Assuming that the technology for 5G is ready and the
market is ready, operators will need to evaluate what
they need to get right on their 5G journey. Some of the
key questions to consider:
• How mature is my 4G customer base and what will
they be prepared to pay for 5G?
• What is the state of my current network coverage
and capacity?
• Do I have the right skills and expertise, and if not,
what new partner relationships are required?
• What is the right operational model for the 5G era?
• What new opportunities does 5G create?
• When would customers need 5G capabilities?
• Does a market have pro-investment and innovation
policy and regulatory framework?
• Are operators financially healthy to support 5G
investments?
Some of these questions are explored further in this
section.
2.3.2 4G maturity trigger
4G market maturity and affordability will trigger a push to 5G
2.3.1 Market readiness and timing
The timing of 5G deployment is dependent on market readiness
5G is a question of ‘when’ and not ‘if’ for most markets
and operators. The decision on when to launch 5G will
be based on triggers that are localised for each market,
given the different stages of 5G readiness across
markets.
For example, a looming capacity crunch for mobile
broadband or an identified enterprise need in a market
are credible triggers for 5G launch. Ericsson28 reports
that average smartphone data usage by 2023 will range
from 7GB/month in in Sub-Saharan Africa to 48GB/
month in North America.
Even if the 5G launch trigger has not been reached,
users and policymakers in highly developed mobile
markets with a focus on technology leadership will
expect 5G to be available soon. Many markets with at
least 80% 4G coverage and 60% smartphone adoption
will fall in this category.
Customers’ ability and willingness to pay a premium
for 5G services will be an important consideration in
most markets. Any operator expectation on charging
a premium for eMBB will need to be tested, given
that over the last ten years, customers have used ever
growing amounts of data over faster connections,
while ARPU has stagnated and even declined in many
developed markets.
28. https://www.ericsson.com/en/mobility-report/reports/june-2018
5G Readiness & Enabling Conditions
75
The competitive environment going into the 5G era
remains challenging in many markets around the world.
This is unlikely to abate anytime soon and intense intraoperator competition will remain a big market force
for the foreseeable future. Many operators are also
increasingly competing with non-operator companies,
for example in TV and content services where operators
have made acquisitions (e.g. AT&T’s acquisition of Time
Warner) as well as IoT, where some operators aim
to expand beyond connectivity and provide vertical
solutions.
Competition has been instrumental in driving costs
down, developing innovative products and services,
and expanding coverage globally. Operators will
continue to play their part in ensuring that the mobile
industry remains a source of value creation and growth
driver for the global economy.
A supportive policy framework and a level playing
field between competitors is vital in enabling a
market environment that supports the ability of the
industry to invest in 5G. When these conditions are
less ideal, or supportive, industry financial health may
be negatively impacted. For example, a comparison
of selected countries and regions outlined in Figure
2.3.1 below suggests Europe was the only region in the
world where revenues during the 4G era fell. This may
undermine the capacity of the operators in the region
to pursue an aggressive 5G rollout strategy.
2.3.3 5G competitive landscape
Competition will remain fierce in the 5G era
FIGURE 2.3.1
MOBILE REVENUES AND FORECASTS IN $ BILLIONS FOR SELECTED COUNTRIES AND
REGIONS (SOURCE: GSMA INTELLIGENCE)
0
Latvia
2018
Australia
2018
United
Kingdom
2018
Czech
Republic
2018
Italy
2018
Spain
2018
United Arab
Emirates
2018
Korea
South
2018
Ireland
2018
Finland
2018
50
50 50
390
130
350
70
280
93
200
100
200
67
200
50
200
50
150
38
125
31
100
150
200
250
300
350
400
Amount of MHz
assigned
Average amount of MHz
per winner
$ 0
$ 50
$ 100
$ 150
$ 200
$ 250
$ 300
$ 350
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Europe China Japan South Korea United States
of America
China US EU China US EU
577
105
11 2
58 58
Average connections, millions Average mobile revenues, USD billions
5G Readiness & Enabling Conditions
76
Telecoms is a capital intensive industry and having
sufficient scale can provide huge benefits for all
stakeholders in a market. Markets with sufficient
scale can better influence the global trajectory of 5G
development and are also able to achieve low unit costs
of network rollout (i.e. economies of scale). These will
create significant incentives for early 5G rollout.
Figure 2.3.2 illustrates the lack of scale for operators
in the EU. Each of the market-leading operators in
China and the US (accounting for more than 95% of
all connections) has an average of at least 100 million
connections and generates an average of $58 billion in
annual revenues.
In contrast, leading operators in the EU have an
average of 11 million connections and $2 billion annual
revenues. With sufficient scale, operators in China and
the US have considerable financial muscle to support
5G deployment and a large base of customers to drive
down the cost per connection for 5G.
To mitigate this, operators in individual markets that
are subscale can consolidate, collaborate or align their
5G strategies to achieve better economies of scale.
This can be in-country (e.g. through network sharing
or consolidation) or across borders (e.g. harmonising
the use of spectrum and timing of auctions). This is
a task for all stakeholders in the market, including
policymakers and operators. The announcement
of the Nordics 5G corridor is an example of a
collaboration that facilitates technology and spectrum
harmonisation, and improves the incentives for network
launch29.
FIGURE 2.3.2
AVERAGE CONNECTIONS AND MOBILE REVENUES FOR OPERATORS IN CHINA,
EU AND US (FY 2017) (SOURCE: GSMA INTELLIGENCE)
2.3.4 5G and benefits of scale
Size and economies of scale are beneficial to 5G commercialisation
0
Latvia
2018
Australia
2018
United
Kingdom
2018
Czech
Republic
2018
Italy
2018
Spain
2018
United Arab
Emirates
2018
Korea
South
2018
Ireland
2018
Finland
2018
50
50 50
390
130
350
70
280
93
200
100
200
67
200
50
200
50
150
38
125
31
100
150
200
250
300
350
400
Amount of MHz
assigned
Average amount of MHz
per winner
$ 0
$ 50
$ 100
$ 150
$ 200
$ 250
$ 300
$ 350
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Europe China Japan South Korea United States
of America
China US EU China US EU
577
105
11 2
58 58
Average connections, millions Average mobile revenues, USD billions
29. https://www.government.se/press-releases/2018/05/new-nordic-cooperation-on-5g/
5G Readiness & Enabling Conditions
77
While early 5G devices will be mostly customer
premises equipment (CPE) for Fixed Wireless Access
(FWA) or wireless routers, the availability of 5G phones
from 2019 will be a pivotal moment that will drive
customer adoption of 5G.
The smartphone market has matured, leading to a
lengthening of the smartphone replacement cycle. In
this reality, connection speed alone is unlikely to be a
sufficient driver for mass-market upgrade to 5G devices
as users will wait to see if the new or improved features
warrant replacement of the smartphones every 12 to 18
months. The device ecosystem, including 5G devices,
is hoping for an ‘iPhone moment’, similar to the new
customer experience created by the iPhone in 2007.
There are also disincentives that could deter customers.
Affordability is a major concern, given early indications
that the wholesale cost of 5G handsets, when they are
introduced in 2019, will be more than $750 and that only
9% of Chinese customers buy phones with wholesale
prices of over $50030. The implication is that high device
prices could threaten the economies of scale from China
that ought to accelerate global 5G rollout.
In addition, battery capacity, performance and
safety for early 5G handsets will be a key success
factor. Adoption will be seriously impacted if early
5G handsets cannot last 24 hours on one charge, or
if customers need to switch off 5G in order to make
the battery last longer. Concerns about safety of 5G
handsets will also be notable, whether as a result of
battery safety, fire hazard or avoiding electromagnetic
radiation. In September 2017, the GSMA produced
the paper “5G, the Internet of Things (IoT) and
Wearable Devices - What do the new uses of wireless
technologies mean for radio frequency exposure?” to
provide more clarity on EMF concerns in the 5G era.
2.3.5 Success factors for 5G handsets
New features, affordability, battery life and safety will drive adoption of 5G devices
30. https://news.strategyanalytics.com/press-release/devices/strategy-analytics-5g-hype-cycle-about-run-hard-truth-subsidies-needed
5G Readiness & Enabling Conditions
78
GSMAi analysis of operator KPIs during 3G and 4G
deployment periods suggests that being first to launch
a new cellular technology in a market does not always
result in an increase in financial performance. In terms
of ARPU, revenue or market share of connections, no
correlation was observed either that proves a clear
benefit of launching first. For example, EE launched 4G
in the UK in Q4 2012, ten months ahead of other UK
operators, yet its market share continued to decline
(see Figure 2.3.3 below).
There are at least four likely explanations as to why
being the first mover did not bring any significant
upsides. First, operators that launch first in a market
often do so on a limited scale (e.g. in selected key
cities) with the intention to be the first for marketing/
PR reasons. Second, in most cases the gap between
the first mover’s and competitors’ launches was
less than a year, therefore not enough to bring a
sustainable competitive advantage. Third the first
mover spends time and money debugging the system
for others. Fourth, the first mover pays a premium for
infrastructure and devices.
Long-term market share trends are rather dependent on
other factors such as competitors’ strategy or tariff plans.
FIGURE 2.3.3
4G ERA MARKET SHARE EVOLUTION IN THE UK (SOURCE: GSMA INTELLIGENCE)
2.3.6 Lessons from 3G/4G: first mover advantage
First mover advantage does not guarantee sustainable competitive advantage
0%
5%
10%
15%
20%
25%
30%
35%
40%
Q4 2011 Q4 2012 Q4 2013 Q4 2014
EE (BT) O2 (Telefonica) Vodafone 3 (CK Hutchison)
Verizon
(2010 launch)
AT&T
(2011 launch)
Bell Rogers
Sprint
(2012 launch)
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
2010 2011 2012 2013 2014 2015 2016
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
2010 2011 2012 2013 2014 2015 2016
4G era Capex/revenue (US) 4G era OFCF/revenue (US)
0%
5%
10%
15%
20%
25%
30%
35%
1 2 3 4 5
0%
5%
10%
15%
20%
25%
30%
35%
1 2 3 4 5
Years after 4G launch Years after 4G launch
5G Readiness & Enabling Conditions
79
While being the first to launch a new generation
technology does not necessarily bring sustained
competitive advantage, being late to the market can
have serious implications for an operator. When an
operator delays launching a new technology for too
long (for example, by more than 12 months) after its
rivals, the obvious impact is that the operator faces a
decline in revenue as competitors gain market share
with a superior offer. Moreover, the operator is often
forced to catch up with an aggressive technology
rollout to regain competitiveness. Figure 2.3.4 illustrates
how this dynamic played out in the US for 4G roll out.
2.3.7 Lessons from 3G/4G: late mover risks
Late movers risk capex spikes to catch up with early adopters
0%
5%
10%
15%
20%
25%
30%
35%
40%
Q4 2011 Q4 2012 Q4 2013 Q4 2014
EE (BT) O2 (Telefonica) Vodafone 3 (CK Hutchison)
Verizon
(2010 launch)
AT&T
(2011 launch)
Bell Rogers
Sprint
(2012 launch)
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
2010 2011 2012 2013 2014 2015 2016
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
2010 2011 2012 2013 2014 2015 2016
4G era Capex/revenue (US) 4G era OFCF/revenue (US)
0%
5%
10%
15%
20%
25%
30%
35%
1 2 3 4 5
0%
5%
10%
15%
20%
25%
30%
35%
1 2 3 4 5
Years after 4G launch Years after 4G launch
FIGURE 2.3.4
CAPEX AND CASH FLOW EVOLUTION IN THE US (SOURCE: GSMA INTELLIGENCE)
5G Readiness & Enabling Conditions
80
The lesson from 3G/4G network rollouts is that a
progressive and steady rollout plan, launching around
the same time as rivals, is optimal. Operators which
adopt this approach may, in the short term, experience
a slight increase in capex and a slight decrease in
operational free cash flow (OFCF). This may happen
in a competitive context that necessitates higher
investment levels to meet market-wide network
coverage. In the long run, capex levels will fall to prelaunch levels as investment is focused on continued
densification, maintenance and upgrading of the
network. The examples of Bell Canada and Rogers in
Canada in Figure 2.3.6 (below), illustrate the point.
Much as the lessons from 3G/4G rollouts are useful,
the CAPEX constraints that operators are facing today
will be the important consideration in 5G deployment.
CAPEX dynamics over time are closely linked to
revenue, and revenue growth for leading operators has
been stagnating in recent years.
Looking at the 5G monetisation potential during
the next five years, many operators feel that a clear
revenue increase based on the currently-known 5G
use cases remains to be proven. Therefore, many
operators will maintain the CAPEX envelope, which
means that 5G rollout will most likely be gradual (at the
pace of the regular equipment upgrade/replacement
cycle), starting in 2018 and lasting seven to ten years.
Early deployment will be very much need/demand
driven, addressing hotspots in urban areas with a clear
capacity need or to support enterprise customers’
needs.
FIGURE 2.3.5
CAPEX AND OFCF EVOLUTION IN CANADA (SOURCE: GSMA INTELLIGENCE)
2.3.8 Lessons from 3G/4G: optimal rollout plan
A progressive and consistent rollout plan is optimal for 5G
0%
5%
10%
15%
20%
25%
30%
35%
40%
Q4 2011 Q4 2012 Q4 2013 Q4 2014
EE (BT) O2 (Telefonica) Vodafone 3 (CK Hutchison)
Verizon
(2010 launch)
AT&T
(2011 launch)
Bell Rogers
Sprint
(2012 launch)
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
2010 2011 2012 2013 2014 2015 2016
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
2010 2011 2012 2013 2014 2015 2016
4G era Capex/revenue (US) 4G era OFCF/revenue (US)
0%
5%
10%
15%
20%
25%
30%
35%
1 2 3 4 5
0%
5%
10%
15%
20%
25%
30%
35%
1 2 3 4 5
Years after 4G launch Years after 4G launch
5G Readiness & Enabling Conditions
81
The prospect of running a combined 2G/3G/4G plus
5G network will pose an operational challenge to
operators in many markets. The initial headache with
5G will come from the complexity of managing legacy
networks, the need for integrating legacy networks
with the new 5G network, and the resources and
expertise required to address these challenges.
In the early 5G era, some operators may be able to
count on multi-mode common platforms that are able
to manage all access types (2G, 3G and 4G) plus 5G
scenarios (NSA + SA) from a core perspective.
However, operators need to develop a clear roadmap
for shutting down legacy 2G and/or 3G networks
before commencing mass market 5G rollout, if they
haven’t done it yet. Such a roadmap could have an
implied bonus when spectrum can be refarmed for
5G rollout – although there are sometimes regulatory
barriers to this happening.
A key requirement before rationalising 2G/3G
networks is adopt All-IP communications services
to replace circuit-switched communications. In
addition, interconnection and roaming of these All-IP
communications services is essential because having
inbound roamers and international communications
traffic using CS services forces the operator to retain CS
infrastructure.
The GSMA has developed the Network Economics
Model and worked with the industry to detail several
case studies that illustrate how operators have
executed a 2G or 3G network shutdown or ease down31.
2.3.9 Operational complexity with 2G/3G/4G/5G
Operators should have a clear roadmap to shut down 2G/3G networks
2.3.10 Leapfrogging to 5G
Leapfrogging to 5G from 2G/3G, without deploying 4G, is possible but challenging
The prospect of leapfrogging 4G will be difficult for
most operators because of technical, commercial and
regulatory challenges.
A 4G network is a requirement for operators planning
to launch NSA 5G. While a leapfrog from 3G to SA 5G
is technically feasible, there are many complications.
These include the challenges of managing voice
handover; managing spectrum harmonisation;
maintaining device interoperability; and the need to
wait for the later maturity of SA 5G. It also means
carrying over the complexities of the Circuit Switched
3G network into the 5G era, and the risk of undermining
the simplicity inherent in migrating to 5G’s servicebased architecture (SBA).
Commercially, a leapfrog to 5G from 2G/3G will likely
require a costly outlay on a greenfield, nationwide
deployment of 5G, and with no fallback and no
inbound roaming. It also raises the danger that some
investments (e.g. spectrum), made in anticipation of
4G rollout, could become ‘stranded assets’. Given the
momentum towards a 4G-to-5G migration, devices
and equipment for 3G-to-5G migration will struggle for
economies of scale, potentially making them costlier.
Voice is a regulated service that operators will be
expected to support for the foreseeable future. In
markets where lots of voice traffic is still on 2G, over
devices on 2G mode, it will be difficult to skip 4G and
migrate to 5G without failing to fulfil the regulatory
obligations on voice. Unless an operator wants to
continue supporting 2G or 3G into the future, there is
a need to firstly migrate voice traffic and usage to 4G
(i.e. VoLTE), monetise any 4G spectrum and then plan a
migration path to 5G.
31. https://infocentre2.gsma.com/gp/pr/FNW/NE/Pages/Default.aspx
5G Readiness & Enabling Conditions
82
5G era opportunities will require new domain expertise
including data science, analytics, machine learning
etc., and an architectural rethink of how a network is
deployed and run, including new approaches such as
virtualisation. Operators will either have to develop
these competencies in-house, or they will need to
source them externally, establish partnerships, or
bring in new talent in order to address these new
opportunities.
Some of the new skills will be required to address the
enterprise opportunity in particular. 5G offers huge
opportunities for operators in the enterprise segment,
but they must address the big challenge of building
the C-level relationships to connect and understand
the actual needs of enterprises, and build the solutioning capabilities to address those needs. For instance,
in most enterprise use cases, operators will be
competing with system integrators and other service
providers (e.g. platform providers) on how best to serve
enterprise needs. Often, these rivals will have deep
understanding, borne out of existing relationships with
enterprises.
However, as Sections 3.4 and 3.7 show, operators
can make a difference with 5G and addressing the
enterprise opportunity will also influence how and
where 5G networks will be built. Unlike 2G/3G/4G,
where operators built networks and waited for
customers to come onboard for connectivity solutions,
5G networks may have to be built to address specific
enterprise needs in specific locations.
This will necessitate close collaboration between
operators and enterprises to understand the best
ways of deploying the network. Some operators have
already begun engaging with enterprises and this will
increasingly become a necessity for most operators.
For more details on operator relationships with
enterprises, please go to Section 3.4: What do
enterprises want, and Section 3.7: Enterprise
opportunity.
2.3.11 Collaboration and new skills for 5G
Operators need collaboration and new skills to unlock 5G era opportunities
5G Readiness & Enabling Conditions
83
2.4 The BEMECS Framework
KEY TAKEAWAYS
• The BEMECS (for Basic, Economic, Market, Enterprise, Consumer, Spectrum indicators)
framework is an evaluation tool for 5G market readiness.
• There are 40 indicators in the BEMECS tool which can be used to appraise the 5G market
readiness for 160+ countries.
• The BEMECS tool uses a traffic light system (red, amber, green) to evaluate market readiness
for 40 indicators.
5G Readiness & Enabling Conditions
84
Expectations across society on what 5G will deliver and
how revolutionary it can be, are very high. However,
the readiness of each market for 5G is a multi-factorial
reality and different markets are at different stages of
maturity and readiness.
The GSMA has developed the Basic, Economic, Market,
Enterprise, Consumer, Spectrum indicators (BEMECS)
framework to provide an evaluation tool for the 5G
market readiness of different countries. The BEMECS
framework tool covers more than 160 countries and uses
a traffic light system (Green, Amber, Red) to analyse the
40 indicators included, as summarised in Figure 2.4.1 and
explained in full in Table 7.3.1.
The BEMECS framework aims to encompass the
different perspectives from which 5G readiness can
be analysed. For example, it covers indicators that
are endogenous to the mobile telecoms industry (e.g.
4G and Smartphone penetration), which derive from
the in situ competition in the industry. It also covers
exogenous indicators (e.g. GDP/capita, literacy rates),
which act as external variables that will ultimately
shape 5G readiness. Likewise, BEMECS covers demandside indicators (e.g. ‘Household computer penetration’
and ‘Ratio of ARPU and GDP/Capita’) and supply-side
indicators (e.g. number of operators in a market and
FTTx penetration).
FIGURE 2.4.1
BEMECS FRAMEWORK INDICATORS
2.4.1 Introducing the BEMECS framework
Analytical tool for evaluating 5G market readiness
BASIC
INDICATORS
ECONOMIC
INDICATORS
MARKET
INDICATORS
ENTERPRISE
INDICATORS
CONSUMER
INDICATORS
SPECTRUM
INDICATORS
Region GDP (real) Total Subscribers IoT Penetration AoGDP rdability:
ARPU/per capita <1GHz availability
GSMA Region GDP Growth Rate (Real) Average Download Speed
(Mbit/s)
Registered Websites per
1000 people
Aordability: Device
ASP/GDP per capita 1-6GHz availability
Population GDP Growth Rate
(Constant) Number of Operators Published Apps per 1000
people Literacy Rates
FWA Opportunity
>6GHz availability
Population Density GDP Growth Rate (PPP) 4G Penetration Population with Tertiary
Education
Mobile Social Media
Accounts
Urbanisation GDP (real) Per Capita Mobile Connections
Penetration Ease of Doing Business Personal Computer
Penetration
Smartphone Penetration Published Apps in National
Language
E-Government Availability Unique Subscribers
Penetration
Fixed Broadband
Penetration
Average ARPU (2017-2018)
FTTx Penetration
Electricity Availability
ARPU Growth (2018-2023)
Internet Backbone
Penetration
Mobile Revenue
Growth/GDP Growth
3 4
2
7
9
5
8
10+
5G VALUE ENABLERS
WHAT DO CONSUMERS & ENTERPRISES REALLY WANT?
CONSUMER MOBILE
BROADBAND
(eMBB)
6
UNKNOWN FUTURE
DEVELOPMENTS
CONSUMER FIXED
WIRELESS BROADBAND
(FWA)
ENTERPRISE SOLUTIONS
THE 5G OPPORTUNITY FRAMEWORK
5G ERA BUSINESS MODELS
Known Knowns /
(Evolutionary)
Known Unknowns
(Transformational)
Unknown Unknowns
(Revolutionary)
1
5G Readiness & Enabling Conditions
5G Readiness & Enabling Conditions 85
86
5G Value Creation 3 and Capture
Chapter 3 looks at the promise and opportunity of 5G, examining what
customers and enterprises are anticipating from the technology and how it will
deliver a variety of new revenue streams.
Readers will get an insight into some of the new opportunities unlocked by 5G,
along with an understanding of the key enablers of 5G value creation.
86 5G Value Creation and Capture
THE 5G GUIDE
87
3.1 The 5G Opportunity
KEY TAKEAWAYS
• The 5G opportunity is clear. It will support a wider set of use cases, with varying requirements
in terms of speed, latency, number of connections and mobility.
• The potential economic contribution of 5G to society is clear. A TMG/GSMA study estimates it
at $2.2 trillion contribution to global GDP and $588 billion in worldwide tax revenue by 2034.
• Operators have a clear opportunity to benefit from 5G and the 5G use cases will enable a
broader set of monetisation opportunities for operators and the wider ecosystem.
• Given the aspiration to support enterprises using 5G, operators’ share of the 5G value will
depend on their ability to support the digital transformation of other industries.
5G Value Creation and Capture
88
5G is inevitable. For users, operators, vendors and
policymakers, 5G is the next step in the industry’s
steady progress towards providing a better mobile
experience. In that sense, 5G is a matter of when and
how, and not if, it will happen.
From an operator’s perspective, 5G promises to
structurally reduce the cost of operating future
networks, while providing new functionalities and
unlocking a new wave of innovative services. 5G
will support a wider set of use cases, with varying
requirements in terms of speed, latency, number of
connections and mobility. These use cases will enable a
broader set of monetisation opportunities
5G opportunities range from the known knowns of
enhanced mobile broadband (eMBB) and fixed wireless
access (FWA) to known unknown opportunities (e.g.
in IoT) in many different enterprise markets. Given the
course of technological development, 5G is also set to
underpin revolutionary market opportunities, such as
those based on artificial intelligence and cloud-based
services.
Figure 3.1.1 introduces the 5G opportunity framework,
highlighting the evolutionary, transformational and
revolutionary opportunities for the 5G era.
FIGURE 3.1.1
THE 5G OPPORTUNITY FRAMEWORK
3.1.1 The 5G opportunity framework
5G is inevitable and with the right conditions, it will flourish and create opportunities
across society
BASIC
INDICATORS
ECONOMIC
INDICATORS
MARKET
INDICATORS
ENTERPRISE
INDICATORS
CONSUMER
INDICATORS
SPECTRUM
INDICATORS
Region GDP (real) Total Subscribers IoT Penetration AoGDP rdability:
ARPU/per capita <1GHz availability
GSMA Region GDP Growth Rate (Real) Average Download Speed
(Mbit/s)
Registered Websites per
1000 people
Aordability: Device
ASP/GDP per capita 1-6GHz availability
Population GDP Growth Rate
(Constant) Number of Operators Published Apps per 1000
people Literacy Rates
FWA Opportunity
>6GHz availability
Population Density GDP Growth Rate (PPP) 4G Penetration Population with Tertiary
Education
Mobile Social Media
Accounts
Urbanisation GDP (real) Per Capita Mobile Connections
Penetration Ease of Doing Business Personal Computer
Penetration
Smartphone Penetration Published Apps in National
Language
E-Government Availability Unique Subscribers
Penetration
Fixed Broadband
Penetration
Average ARPU (2017-2018)
FTTx Penetration
Electricity Availability
ARPU Growth (2018-2023)
Internet Backbone
Penetration
Mobile Revenue
Growth/GDP Growth
3 4
2
7
9
5
8
10+
5G VALUE ENABLERS
WHAT DO CONSUMERS & ENTERPRISES REALLY WANT?
CONSUMER MOBILE
BROADBAND
(eMBB)
6
UNKNOWN FUTURE
DEVELOPMENTS
CONSUMER FIXED
WIRELESS BROADBAND
(FWA)
ENTERPRISE SOLUTIONS
THE 5G OPPORTUNITY FRAMEWORK
5G ERA BUSINESS MODELS
Known Knowns /
(Evolutionary)
Known Unknowns
(Transformational)
Unknown Unknowns
(Revolutionary)
1
5G Value Creation and Capture
89
5G will generate massive value for the global economy.
This is underpinned by earlier studies (e.g. by World
Bank32) that show strong relationships between
broadband availability and economic growth. The
GSMA’s Mobile Economy report also shows strong GDP
contribution by the activities of the mobile telecoms
industry.
The December 2018 GSMA/TMG study33 estimates that
5G will provide important economic benefits of $2.2
trillion in global GDP and $588 billion in worldwide tax
revenue cumulatively over the period from 2020 to
2034, as outlined in Figure 3.1.2, below. Millimetre Wave
5G use cases will make up an increasing proportion of
the overall 5G contribution to global GDP, achieving
around 25% of the cumulative total by 2034, which
amounts to $565 billion in GDP and $152 billion in tax
revenue.
3.1.2 Economic benefits of 5G
5G will yield $2.2 trillion in GDP and $588 billion in tax revenue during 2020 – 2034
mmWave band contribution
to total GDP
mmWave contribution
to 5G total tax revenue
2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
$2.2tr
$565bn
Total 5G tax
revenue:
$588bn
$152bn
Market size
$619 billion
101
96
73
69
57
47
41
35
24
77
Real-time automation
Enhanced video service
Monitoring and tracking
Connected vehicle
Hazard and maintenance sensing
Smart surveillance
Remote operations
Autonomous robotics
Augmented reality
Other
FIGURE 3.1.2
ECONOMIC CONTRIBUTION OF 5G (SOURCE: TMG, GSMA)
32. http://pubdocs.worldbank.org/en/391452529895999/WDR16-BP-Exploring-the-Relationship-between-Broadband-and-Economic-Growth-Minges.pdf
33. https://www.gsma.com/spectrum/wp-content/uploads/2018/12/5G-mmWave-benefits.pdf
5G Value Creation and Capture
90
A major question for operators and industry
stakeholders is how much of the $2.2 trillion 5G
economic contribution to GDP is addressable by
operators. An Ericsson study34 in 2017 suggested that
operators have the ability to address an additional
revenue opportunity of $204 billion to $619 billion by
2026 from ten industries (see Figure 3.1.3). “>$400
billion” is used throughout this study as a reference
for the enterprise opportunity. Another study, from
Huawei35, explored the opportunities from their topten 5G use cases, showing for example, that there is an
operator addressable market opportunity of $93 billion
for Cloud AR/VR.
These studies assess the scale of the opportunity that
operators can unlock to capture their share of the
value in the 5G ecosystem. For 5G to avoid becoming
a technology show, it must deliver on its promise to
accelerate the digital transformation of other industries.
FIGURE 3.1.3
5G BUSINESS POTENTIAL PER CLUSTER36 (SOURCE: ERICSSON)
3.1.3 5G revenue projections
The incremental 5G opportunity is in digital transformation of industries
mmWave band contribution
to total GDP
mmWave contribution
to 5G total tax revenue
2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
$2.2tr
$565bn
Total 5G tax
revenue:
$588bn
$152bn
Market size
$619 billion
101
96
73
69
57
47
41
35
24
77
Real-time automation
Enhanced video service
Monitoring and tracking
Connected vehicle
Hazard and maintenance sensing
Smart surveillance
Remote operations
Autonomous robotics
Augmented reality
Other
5G Value Creation and Capture
34. https://www.ericsson.com/assets/local/networks/documents/report-bnew-17001714.pdf
35. https://www-file.huawei.com/-/media/CORPORATE/PDF/mbb/5g-unlocks-a-world-of-opportunities-v5.pdf?la=en
36. https://www.ericsson.com/en/networks/trending/insights-and-reports/5g-challenges-the-guide-to-capturing-5g-iot-business-potential?aliId=1206580
91
5G Value Capture
5G Value Creation and Capture
3.2
KEY TAKEAWAYS
• There are three opportunities for operators to create and capture value in the 5G era.
• First, 5G will enhance the core business of communications and data services. It will boost its
capabilities, and make it more efficient and profitable.
• Second, 5G will deliver new 5G use cases, which operators can either monetise directly, use to
enrich the core offering or can be spun off.
• Third, operators can capture value by investing in ecosystem innovations or partnerships that
can help to ‘pull through’ 5G adoption or that can benefit from a more connected society.
92
Operators have three sets of recognisable opportunities
to capture value in the 5G era, as outlined in Figure 3.2.1.
The first is in enhancing the traditional core business of
communications and data services to consumers and
enterprises. Operators are already experts in this area,
and will evolve their current commercial models into
the 5G era.
The second set of opportunities for operators is in new
5G use cases. The industry has focused a lot of effort
on activities, pilots, and test beds to conceptualise,
develop and commercialise new 5G use cases. Many
of these are aimed at industry verticals, in keeping
with the expectation that 5G will transform industrial
verticals. Some new use cases will have synergies that
enrich the core business (e.g. Cloud AR/VR) while some
will be independent from the core business and could
be spun off to flourish as independent businesses (e.g.
drone delivery).
The third set of opportunities lie in ecosystem
innovations or partnerships that can help to ‘pull
through’ 5G adoption or that can benefit from a more
connected society. Pull-through innovations (e.g. AR/
VR entertainment) encourage customers to upgrade
to 5G and their growth invariably leads to faster, and
more profitable, 5G adoption. Innovations that grow as
mobile connectivity improves (e.g. music streaming)
are also good candidates for capturing value in
the 5G era. While several operators already make
such investments, the key is to explicitly link these
ecosystem investments and partnerships as part of the
value capture opportunities in the 5G era.
FIGURE 3.2.1
THREE VALUE CAPTURE OPPORTUNITIES FOR OPERATORS IN THE 5G ERA
3.2.1 5G Value capture for operators
Operators need to look beyond the core business to identify where and how to capture
value in the 5G era
CORE
BUSINESS
(VOICE, MESSAGING,
DATA)
NEW USE
CASES
(CONSUMER &
ENTERPRISES)
ECOSYSTEM
INNOVATIONS
(START-UPS,
PARTNERS)
A B C
Operators can fund Option C with profits from Option A
Enrich the core Spin-o to flourish
LOW MONETISATION HIGH MONETISATION
OPERATIONAL EXCELLENCE
• Better network eciency for low cost/GB
• Stimulate data usage & drive network utilisation
DIFFERENTIATION
• Productise 5G capabilities for monetisation
(e.g. Network Slices)
• Mass customisation & industrialised partnership model for
market segments
54%
41%
25% 23% 22% 20%
24%
Improved mobile
data speed
Improved mobile
service coverage
Innovative new
services
Improved fixed
home broadband
Lower service
costs
XConnectivity for
previously unconnected
devices (wearables,
appliances,vehicles, etc.)
Don't know
23%
17%
14%
20%
31%
17%
26%
3%
34%
40%
40%
6%
9%
17%
17%
3%
3%
9%
3%
Enterprises (e.g. B2B, B2B2C)
Consumers (e.g. B2C)
Online (e.g. A2P)
Governments (e.g. B2G, B2G2C)
Most Important 2 3 4 Least Important
69%
5G Value Creation and Capture
93
5G has the potential to both bring growth in new
business areas and improve profitability in operators’
core business. Figure 3.2.2 provides an illustration of
these two options.
Using 5G to improve profitability of lower-growth
business segments is primarily about making the
core business of connectivity more efficient with
better utilisation of the network. This is the minimum
expectation for any operator seeking to launch 5G.
Operators seeking a higher-growth 5G strategy will
need to devise a robust roadmap that is based on
offering differentiated services to different market
While there is less of the euphoria to find a 5G ‘killer
app’ as was for 3G, there are still high expectations that
operators will identify new use cases in the 5G era to
drive revenue growth. In practice, any new use case can
be used in three ways by operators.
First, operators should always seek to find new
products and services that can bring in new revenue
streams within the core business. Premium content is
a typical example, and Cloud AR/VR is a big potential
opportunity in the 5G era.
Second, operators can use new 5G services to enrich
and embellish their core offering. Most customers,
segments. This will require commercialising 5G
capabilities such as low latency and security, and
monetising them, potentially through APIs or a
platform model. Based on the technological, market
and operator 5G readiness, this high growth scenario is
less likely to happen in the first years of 5G deployment.
Operators pursuing the higher growth model need to
act now to prepare the market; understand the needs
of the ecosystem; test and evaluate new use cases; and
strike partnership deals.
whether consumers or enterprises, are buying the
core product of connectivity from operators. However,
operators can offer new 5G services to increase the
bundle price, incentivise upgrades, reward loyalty,
minimise churn or even expand their offering.
Third, with strong cash flows and a professionalised
workforce, operators are large enough to invest in
innovations and efficient enough to execute on these
investments. Some innovations that start off as internal
projects will turn out not to have strong synergies with
the core business. These products and services ought
to be spun off so that they can thrive without being
constrained by the operator’s internal processes.
3.2.2 5G and the ‘Core’ operator business
The 5G era vision is to offer differentiated services: the reality is, firstly, to deliver 5G at
low cost
3.2.3 5G and new use cases
Operators should seek new use cases that can either earn new revenues, enrich the core
offering or can be spun off
CORE
BUSINESS
(VOICE, MESSAGING,
DATA)
NEW USE
CASES
(CONSUMER &
ENTERPRISES)
ECOSYSTEM
INNOVATIONS
(START-UPS,
PARTNERS)
A B C
Operators can fund Option C with profits from Option A
Enrich the core Spin-o to flourish
LOW MONETISATION HIGH MONETISATION
OPERATIONAL EXCELLENCE
• Better network eciency for low cost/GB
• Stimulate data usage & drive network utilisation
DIFFERENTIATION
• Productise 5G capabilities for monetisation
(e.g. Network Slices)
• Mass customisation & industrialised partnership model for
market segments
54%
41%
25% 23% 22% 20%
24%
Improved mobile
data speed
Improved mobile
service coverage
Innovative new
services
Improved fixed
home broadband
Lower service
costs
XConnectivity for
previously unconnected
devices (wearables,
appliances,vehicles, etc.)
Don't know
23%
17%
14%
20%
31%
17%
26%
3%
34%
40%
40%
6%
9%
17%
17%
3%
3%
9%
3%
Enterprises (e.g. B2B, B2B2C)
Consumers (e.g. B2C)
Online (e.g. A2P)
Governments (e.g. B2G, B2G2C)
Most Important 2 3 4 Least Important
69%
FIGURE 3.2.2
OPERATIONAL EXCELLENCE VERSUS DIFFERENTIATION STRATEGIES FOR 5G
5G Value Creation and Capture
94
Most operators already work closely with start-ups to
find and fund promising innovations. Overall, operator
corporate venture capital (CVC) is on the rise in the
wider TMT sector, demonstrated by an increasing
number of deals and associated funding over the last
few years. GSMA analysis37 of many operators’ CVC
shows they invest in start-ups that support extension
of core assets or a move into new business lines
altogether, e.g. media, content and fintech (see Figure
3.2.3). Operator CVC activity is also on the rise in
developing markets, where many local start-ups face
scarce funding options and struggle to reach scale.
Collaboration can take different forms and models,
based on the depth of collaboration and the financial
commitment required from the operator. These include
in-house tech hubs, start-up investments (through
CVC, direct equity investments and joint ventures)
and commercial agreements including OTT reselling
partnerships.
While these CVC activities will continue and grow in
the 5G era, there is an opportunity to reimagine some
of the investments as an extension of the 5G value
capture mechanism. These are investments (e.g. AR/
VR solutions) that, while not directly linked to the core
operator business, help to create demand for 5G. Value
capture from these investments will not come from
the usual direct channels. Rather they will help to drive
adoption of 5G, providing an indirect route to creating
and unlocking value in the 5G era.
3.2.4 The ecosystem investment/innovation opportunity
Operators should use their Corporate Venture Capital (CVC) arms to invest in start-ups that
can ‘pull through’ 5G
5G Value Creation and Capture
37. https://www.gsma.com/mobileeconomy/wp-content/uploads/2018/05/The-Mobile-Economy-2018.pdf
FIGURE 3.2.3
OPERATOR CVC INVESTMENT SECTORS 2016 – 2018
Accounting &
Finance
Advertising, Sales
& Marketing
Application &
Data Integration
Business Intelligence,
Analytics & Performance
Management
Analytics & Performance
Consumer Electronics
Customer Relationship
Management
Education & Training
Facilities
Health & Wellness
Infrastructure
& Hosting
Location Based &
Navigation
Marketplace
Monitoring & Security
Music
Networking &
Connectivity
Payments
Real Estate
Scientific, Engineering
Software
Security Software
Social
Supply Chain & Logistics
Telecom Services
Travel (mobile)
Video
Travel
Diversity
of Operator
Investments
Over the past three years operator CVC funds
have invested in a huge range of sectors and
sub-sectors, demonstrating the wide breadth of
operator innovation interests
Only selected sectors shown in this chart
95
What do consumers want?
5G Value Creation and Capture
3.3
KEY TAKEAWAYS
• Consumers will remain the biggest beneficiaries of 5G and their views and expectations is a
good barometer of how 5G will develop.
• Insights from a GSMA Intelligence’s survey of 36,000 consumers in December 2018 suggests
the following key consumer expectations:
– Faster speed is the top consumer expectation
– Consumers expect wide 5G coverage
– Expectations vary on whether 5G will bring innovative new services. Overall, 25% of
respondents expect it but this rises to nearly 50% in Korea.
– Some customers flagged lower service costs as an expectation for 5G, potentially
capping the opportunity for revenue growth.
• Given consumer apathy (particularly in Europe and Japan), operators need to do a better job
of focussing the 5G message to drive demand.
96
GSMA Intelligence’s December 2018 consumer survey,
which covered 34 markets and 36,000 respondents,
included a sub-set of respondents in developed
markets and what they expect 5G networks to deliver.
The top-level results will not surprise: consumers
expect faster networks and better network coverage.
Digging a little deeper reveals some of the 5G
challenges operators face in terms of customer
awareness, operator relevancy, and strategic focus.
Importantly, the survey reveals significant variations
between countries, highlighting the success of early
5G marketing efforts for some, and the need for others
to refocus the 5G narrative to be clearer on its early
applications and benefits.
3.3.2 Key survey insights
3.3.1 Consumer engagement
5G insights from 36,000 respondents in 34 markets
CORE
BUSINESS
(VOICE, MESSAGING,
DATA)
NEW USE
CASES
(CONSUMER &
ENTERPRISES)
ECOSYSTEM
INNOVATIONS
(START-UPS,
PARTNERS)
A B C
Operators can fund Option C with profits from Option A
Enrich the core Spin-o to flourish
LOW MONETISATION HIGH MONETISATION
OPERATIONAL EXCELLENCE
• Better network eciency for low cost/GB
• Stimulate data usage & drive network utilisation
DIFFERENTIATION
• Productise 5G capabilities for monetisation
(e.g. Network Slices)
• Mass customisation & industrialised partnership model for
market segments
54%
41%
25% 23% 22% 20%
24%
Improved mobile
data speed
Improved mobile
service coverage
Innovative new
services
Improved fixed
home broadband
Lower service
costs
XConnectivity for
previously unconnected
devices (wearables,
appliances,vehicles, etc.)
Don't know
23%
17%
14%
20%
31%
17%
26%
3%
34%
40%
40%
6%
9%
17%
17%
3%
3%
9%
3%
Enterprises (e.g. B2B, B2B2C)
Consumers (e.g. B2C)
Online (e.g. A2P)
Governments (e.g. B2G, B2G2C)
Most Important 2 3 4 Least Important
69%
5G Value Creation and Capture
3.3.2.1 Faster speed is the top consumer expectation
Faster mobile data speeds were the top 5G expectation
by consumers across all surveyed countries, with the
exception of Japan where it was a close second. That
speed came top in itself is not surprising: network
operators have long been promoting speed as a key
tangible value driver in consumers’ eyes.
It’s only natural that early marketing efforts will focus
on it as one of the key differentiators against LTE. The
margin of expectation of faster speed versus other
factors underlines its importance for consumers: it is
13 percentage points higher than improved coverage
and approximately 30 percentage points higher than
any other factors (see Figure 3.3.1). While it’s unclear
whether consumers will pay extra for faster 5G speeds,
driving awareness and delivering on this standout
expectation will be a key factor for operators’ drive to
5G adoption.
FIGURE 3.3.1
CONSUMER EXPECTATIONS OF 5G (SOURCE: GSMA INTELLIGENCE)
Q: As you may or may not be aware, new 5G networks will be introduced over the next year, promising to deliver advanced capabilities over
today’s 4G networks. From what you know of 5G, which, if any, of the following would you expect 5G networks to deliver?
N= 15,000 respondents in 16 countries. Respondents could select multiple answers, chart shows % of respondents. Survey fieldwork was
completed in 2018
97
3.3.2.2 Consumers expect improved 5G coverage
Improved coverage was the second most frequent
consumer 5G expectation, but also had the highest
variation across countries (17% in Japan versus 50% in
the US, for example). 5G coverage expectations may
end up being the trickiest for operators to fulfil given
the different propagation properties of spectrum bands
identified for 5G use and likely early rollout strategies,
which will focus NSA deployments within urban areas
using existing tower infrastructure.
The 600 MHz and 700 MHz bands can be used to
extend 5G services widely, including in rural areas.
However, the limited amount of spectrum available
means the fastest 5G services will not be possible in
those bands alone.
3.3.2.3 Consumers are unaware of new 5G use cases
Only 25% of respondents in the survey expect 5G to
bring innovative new services. This is despite 5G’s
enhanced technological capabilities relative to LTE
and the focus of its development (showcased in the
media and in early trials) on the new services that it
will enable, such as autonomous cars and augmented
reality.
As smartphone innovation plateaued some time ago,
this may reflect operators beginning to drop off the
innovation radar in consumers’ eyes: their expectations
around 5G suggest a decoupling of the link between
service innovation and new network technologies.
3.3.2.4 5G messaging needs to be clearer
Almost a quarter of respondents expect 5G to drive
improvements to fixed home broadband (even in
markets where no 5G fixed-wireless network plans have
been announced). An additional quarter did not know
what it would deliver. A broad section of consumers are
still unaware of what 5G will offer, pointing to a lack of
clear and focussed messages from the mobile industry.
The fact that 5G has so many potential applications
does not help: if the industry is unable to put forward
a clearer proposition to consumers then it further
relegates operators to just providing more and faster
pipes.
3.3.2.5 Customers expect lower service costs in the
5G era
While 5G will deliver lower cost per bit, the capital
cost of deployment to achieve this is significant
and operators should make appropriate plans given
consumer propensity to spend more on 5G, coupled
with the cost-orientated, pro-competitive regulatory
climate leading into the 5G era.
That a sizeable proportion of respondents in some
European markets flagged lower service costs as an
expectation for 5G is worrying (e.g. 32% in Spain and
28% in Germany, versus only 16% in the US and 14%
in South Korea) and symptomatic of the regulatory
approach to date. Japan was the outlier in terms of
non-European markets with similar expectations
(33% of respondents), in fact it was their primary
expectation, however this may well lessen later this
year following NTT DOCOMO’s announcement in
October 2018 that it plans to cut mobile charges by
between 20% and 40%38.
3.3.2.6 Korean consumers’ expectations stand out
South Korean expectations of 5G stand head and
shoulders above most other markets. While consistent
on expectations of faster speeds and improved
coverage, Korean consumers also demonstrated the
highest expectations that 5G would deliver innovative
new services (45%) and connectivity for previously
unconnected devices like wearables, appliances, and
devices (38%).
This reflects the drive with which Korean operators
and regulators have approached 5G: from the first live
trials at the Korean Winter Olympics, to agreements
to launch simultaneously to avoid excessive marketing
costs and to share deployment costs, it has been
a focussed and pragmatic approach that has fed
consumer expectations.
5G Value Creation and Capture
38. https://www.mobileworldlive.com/asia/asia-news/docomo-to-cut-back-on-smartphone-bundling-by-april/
98
3.3.3.1 Consumer expectations play to
operators’ strengths
The top two consumer expectations (faster speeds
and better coverage) are a network operator’s core
capabilities, aligning exactly with the current business
model and the structure of its operations.
Delivering on these two expectations will have direct
positive impact on an operator’s perception in its own
market, and the overall reputation of the industry.
Failing to deliver on these will also have implications
especially as the demographic breakdown of the survey
data shows that millennials have higher expectations,
particularly around improved network speeds (+6
percentage points) and coverage (+4 percentage
points).
3.3.3.2 Optimise capex envelope to boost
network speeds
Given that the top consumer expectation is of faster
speeds, operators should look to blend new 5G
radio upgrades to existing sites with incremental
improvements to remaining LTE sites (LTE Advanced
Pro, Carrier Aggregation, Multi MIMO etc.) to deliver the
most cost-effective impact.
3.3.3.3 More focussed messaging required
Operators should consider strengthening consumer
messaging to drive demand prior to service launch.
South Koreans have the highest expectations for 5G,
followed by other markets targeting early (2019/20)
launches. Beyond Japan, where respondents on the
whole tend to be more reserved, European markets
really stand out in terms of low expectations. Given
the general lack of consumer awareness, operators
should look to build awareness of the broad range of
5G benefits that among speed include latency, capacity
and resilience, showcasing these benefits with tangible
new use cases that consumers can relate to.
3.3.3 Lessons for operators
5G Value Creation and Capture
99
What do enterprises want?
5G Value Creation and Capture
3.4
KEY TAKEAWAYS
• While consumers will be the biggest beneficiaries of 5G, the enterprise segment offers the
biggest incremental opportunity for operators in the 5G era.
• In a Q4 2016 survey of operator CEOs, nearly 70% of respondents indicated that they view
the enterprise segment as the most important 5G era opportunity for the industry.
• In Q4 2018, the GSMA conducted a series of interviews with enterprises to understand the
technical and business requirements of enterprises in the 5G era.
• Key takeaways were as follows:
– Enterprises to use massive IoT and 5G to expand their role in the value chain.
– Private 5G network deployments by enterprises using unlicensed spectrum and, where
available, their own spectrum, will accelerate due to the perceived benefits of improved
security, reliability and strategic control
– Enterprises see 5G as ‘good to have’, but not yet a ‘must have’
– 5G capabilities are seen of interest, but business models are unclear
– Enterprises are focused on business outcomes, and flagged the historic challenges of
working with operators
– SMEs were more willing to allow operators to take a role beyond connectivity.
• There are five key lessons for operators from the enterprise interviews:
– Operators need to focus on providing horizontal enablers to create common capabilities
that can be offered across multiple industrial use cases
– As SMEs are more willing to consume operator plug-and-play services, operators should
create a catalogue of services that SMEs can choose from
– There is an industry need to better articulate the 5G capabilities and value proposition to
enterprise customers (incl. FWA, network slicing, MEC and IoT)
– Operators must address the risk of marginalisation in IoT; operators want to move up the
value chain but enterprises see them as connectivity providers
– Enterprises are increasing the number of partners in the digital ecosystem; Operators
should seek to grow their relevance to avoid being disintermediated.
100
With the growing maturity of the consumer mobile
segment, the enterprise market has an elevated
importance in the 5G era. Two GSMA surveys underline
the importance of the enterprise segment to future
operator opportunities. In the GSMA global survey of
750 operator CEOs in fourth quarter 2016, nearly 70%
of respondents indicated that they view the enterprise
segment as the most important opportunity for the
mobile industry in the 5G era (see Figure 3.4.1).
FIGURE 3.4.1
WHERE WILL NEW OPERATOR REVENUES IN 5G COME FROM?
(SOURCE: CEO 5G SURVEY; GSMA; FEBRUARY 201739)
3.4.1 5G enterprise opportunity
The enterprise segment will be the biggest source of incremental 5G revenues
3.4.2 Enterprise engagement
30 enterprises in 8 vertical sectors shared insights on 5G
CORE
BUSINESS
(VOICE, MESSAGING,
DATA)
NEW USE
CASES
(CONSUMER &
ENTERPRISES)
ECOSYSTEM
INNOVATIONS
(START-UPS,
PARTNERS)
A B C
Operators can fund Option C with profits from Option A
Enrich the core Spin-o to flourish
LOW MONETISATION HIGH MONETISATION
OPERATIONAL EXCELLENCE
• Better network eciency for low cost/GB
• Stimulate data usage & drive network utilisation
DIFFERENTIATION
• Productise 5G capabilities for monetisation
(e.g. Network Slices)
• Mass customisation & industrialised partnership model for
market segments
54%
41%
25% 23% 22% 20%
24%
Improved mobile
data speed
Improved mobile
service coverage
Innovative new
services
Improved fixed
home broadband
Lower service
costs
XConnectivity for
previously unconnected
devices (wearables,
appliances,vehicles, etc.)
Don't know
23%
17%
14%
20%
31%
17%
26%
3%
34%
40%
40%
6%
9%
17%
17%
3%
3%
9%
3%
Enterprises (e.g. B2B, B2B2C)
Consumers (e.g. B2C)
Online (e.g. A2P)
Governments (e.g. B2G, B2G2C)
Most Important 2 3 4 Least Important
69%
5G Value Creation and Capture
The GSMA 5G engagement study with operators
in April 2018 indicated that the industry has an
aspirational target to generate 40% of revenues from
enterprises five years post 5G launch (NB: over 85%
of respondents expect to generate more than 15% of
revenues from enterprises five years post 5G launch).
5G will bring new capabilities and the flexibility to serve
the specific needs of different enterprise customers.
The GSMA conducted 30 interviews with enterprise
companies across different regions and verticals
between October and December 2018, as well as a
select number of operators, to fully understand the
technical and business requirements of enterprises in
the 5G era and beyond.
39. https://www.gsmaintelligence.com/research/?file=0efdd9e7b6eb1c4ad9aa5d4c0c971e62&download
101
• Connectivity and high bandwidth to provide both a seamless service and high QoS for various services
from infotainment, navigation etc
• Low latency and high bandwidth can support platooning which help increases fuel eciency and reduces
number of drivers
• In the future, low latency and high bandwidth can support remote driving and remote support (e.g.
vehicle maintenance) which can open a new generation of services / cost savings
• Network slicing provides road / infrastructure managers the ability to have flexible networks and better
manage their infrastructure (allocate slices for specific functions)
1.
AUTOMOTIVE /
MOBILITY
5.
MANUFACTURING
2.
MEDIA &
CONTENT
3.
PUBLIC /
SMART CITY
4.
HEALTHCARE
6.
ENERGY &
UTILITIES
7.
SOFTWARE &
TECH
8.
MOBILE
OPERATORS
ENTERPRISE
USE CASE ENABLED BY 5G & KEY BENEFITS
• Data-based business models open up to car manufacturers (trac information, data analytics) to
monetise data assets with other stakeholders who may value the information e.g. insurance companies,
fleet managers
NEW BIZ MODELS ENABLED
• Network slices will require clear SLAs – for the road managers, they could choose to look for alternative networks
MOBILE • Closer relationship between telcos and car manufacturers will be required
OPERATORS
KEY REQUIREMENTS NEEDED FROM MNOS
• “Pan-regional networks” – some demand for connectivity to be provided by operators on a regional
rather than national level (instead of using roaming intermediaries)
• Road infrastructure managers request a revisit of existing business models (installing hardware on the
roads and subscribing to services with data limits is not sustainable)
• Potential for PPP with governments / smart cities but highly dependent on market
NEW BIZ MODELS ENABLED / FUTURE POTENTIAL ROLE
5G Value Creation and Capture
FIGURE 3.4.2
INSIGHTS FROM ENTERPRISES ACROSS EIGHT KEY SECTORS (SOURCE: GSMA)
FIGURE 3.4.3
1. AUTOMOTIVE AND MOBILITY
• Connectivity and high bandwidth to provide both a seamless service and high QoS for various services
from infotainment, navigation etc
• Low latency and high bandwidth can support platooning which help increases fuel eciency and reduces
number of drivers
• In the future, low latency and high bandwidth can support remote driving and remote support (e.g.
vehicle maintenance) which can open a new generation of services / cost savings
• Network slicing provides road / infrastructure managers the ability to have flexible networks and better
manage their infrastructure (allocate slices for specific functions)
1.
AUTOMOTIVE /
MOBILITY
5.
MANUFACTURING
2.
MEDIA &
CONTENT
3.
PUBLIC /
SMART CITY
4.
HEALTHCARE
6.
ENERGY &
UTILITIES
7.
SOFTWARE &
TECH
8.
MOBILE
OPERATORS
ENTERPRISE
USE CASE ENABLED BY 5G & KEY BENEFITS
• Data-based business models open up to car manufacturers (trac information, data analytics) to
monetise data assets with other stakeholders who may value the information e.g. insurance companies,
fleet managers
NEW BIZ MODELS ENABLED
• Network slices will require clear SLAs – for the road managers, they could choose to look for alternative networks
MOBILE • Closer relationship between telcos and car manufacturers will be required
OPERATORS
KEY REQUIREMENTS NEEDED FROM MNOS
• “Pan-regional networks” – some demand for connectivity to be provided by operators on a regional
rather than national level (instead of using roaming intermediaries)
• Road infrastructure managers request a revisit of existing business models (installing hardware on the
roads and subscribing to services with data limits is not sustainable)
• Potential for PPP with governments / smart cities but highly dependent on market
NEW BIZ MODELS ENABLED / FUTURE POTENTIAL ROLE
102 5G Value Creation and Capture
FIGURE 3.4.4
2. MEDIA AND CONTENT
• Transmitting high volume, high definition videos / drones for transmission in real time for disaster
response requires high bandwidth and low latency
• VR for live-broadcasting and interactive experiences – using the smart phones to share videos in real
time with the community opens up immersive experiences
• Enhancing commerce for retailers – using VR to enhance the customer experience for shopping /
car-parking / getting into their oces etc
• Cloud gaming – requires low latency and high bandwidth of 5G. The role of edge computing key to be
able to process large volumes of data – this means the VR/AR headset itself does not have to be as high
quality
• 5G can be a lower cost alternative to satellite
• 5G for content production (transporting cables for filming can be cumbersome and expensive – wireless
equipment is of interest to media companies)
ENTERPRISE
USE CASE ENABLED BY 5G & KEY BENEFITS
• Advertising opportunities for the media / content provider (e.g. immersive retail)
• Most likely be a revenue share model with the multiple parties involved for new services
NEW BIZ MODELS ENABLED
• Players in media & content are more willing to experiment around use cases for 5G
• Live content requires low latency, high bandwidth and more reliability
• Media and content players need operators to collaborate better and agree on common APIs for developer
communities
MOBILE
OPERATORS
KEY REQUIREMENTS NEEDED FROM MNOS
• When working with smaller ecosystem players, these companies value the reach and marketing spend
that can be accessed through partnerships with mobile operators
• Most likely be a revenue share model with the multiple parties involved for new services
• Certain operators will have ambitions to take a more proactive role higher in the media value chain e.g.
proprietary platforms
• Cloud computing is key to handle the large volumes of video trac – this could provide an opportunity
for operators to operate cloud / CDN for media players
NEW BIZ MODELS ENABLED / FUTURE POTENTIAL ROLE
103
• Connected vehicles for police – link with trac lights for example
• Mass digitisation of certain public services – e.g. police ocers with smartphones and enable them to
send high quality video and voice
• Smart city management
• Network slicing – provide higher security and reliability for mission critical services
ENTERPRISE
USE CASE ENABLED BY 5G & KEY BENEFITS
• Public sector – less about new business models as such more about cost eciencies, security and
reliability
• Enterprise either have private network or would consider getting private network but very expensive
NEW BIZ MODELS ENABLED
• Need guarantee of service
• Need prioritisation of network for emergency services – at a similar cost to existing services
• Want governments to regulate MNOs providing data for emergency services (e.g. crimes and location
data of phones)
• For 5G want cheaper and more reliable connectivity
MOBILE
OPERATORS
KEY REQUIREMENTS NEEDED FROM MNOS
• Operators have the potential to re-sell services provided to the public sector to other enterprise
segments e.g. prioritisation services at premium to enterprises
NEW BIZ MODELS ENABLED / FUTURE POTENTIAL ROLE
5G Value Creation and Capture
FIGURE 3.4.5
3. PUBLIC / SMART CITY
104 5G Value Creation and Capture
FIGURE 3.4.6
4. HEALTHCARE
• Training junior doctors for surgery using AR/VR – this requires low latency, high bandwidth
• Wires in surgery rooms could be replaced with wireless equipment but requires low latency and security
• Remote diagnostics is currently in use but could be enhanced greatly by 5G for real time diagnostics and
high definition video
• Robotics is another use case – surgery is still nascent but for pharmaceutical dispense or support
diagnostics could help save costs (low latency, eMBB)
• Not 5G specific but AI and running data analytics across medical records such as CT scans can help with
prioritisation
ENTERPRISE
USE CASE ENABLED BY 5G & KEY BENEFITS
• Less about new biz models – more about cost optimisation and oering a best experience for patients
and also for the physicians
NEW BIZ MODELS ENABLED
• 5G has to oer the same latency as wired networks - no interruption and no error in connectivity as
safety is the most paramount importance
• Lower price of cellular connectivity for diagnostic devices and as high performance as fibre
MOBILE
OPERATORS
KEY REQUIREMENTS NEEDED FROM MNOS
• Operators could provide cloud storage / data centres and outsource it to other parties who are not large
enough to have their own – operators are looking into diversifying revenue in healthcare
• Smart governments are looking for innovation partners and PPP models for healthcare use cases
NEW BIZ MODELS ENABLED / FUTURE POTENTIAL ROLE
105
• Wirelessly connecting a large number of devices in a secure and economic fashion (cables very
expensive)
• Enabling virtual control of machines with low latency provided through 5G – lead to cost optimisation as
less CPUs needed on one floor
• Telemetry / exchanging information between large number of interconnected devices in real time –
cloud computing can enable this as well as eMBB and mMTC to transmit the information in real time in
high resolution
• Network slices can be reserved for specific functions and allow for lower cost infrastructure
ENTERPRISE
USE CASE ENABLED BY 5G & KEY BENEFITS
• Providing service capabilities to customers based on data analytics coming through connected devices
(e.g. predictive maintenance) even oering cloud computing
• Innovation of products based on networked equipment and machines
NEW BIZ MODELS ENABLED
• Minimum requirement for 5G is to deliver similar latency to fixed network for mission critical applications
• Backward compatibility with past generation devices
• Communicate clearly that NB-IoT and LTE-M will be supported by 5G and provide clear deployment and
technology support timeframes
MOBILE
OPERATORS
KEY REQUIREMENTS NEEDED FROM MNOS
• Cybersecurity could be a potential area where MNOs could play a role as it is a big concern when it comes
to data analytics from mass number of sensors
• Potential for operators to leverage global reach and help provide “Out of the box connectivity”
• Potential for operators to become data platform providers but will be limited to certain markets (e.g.
data storage, analytics etc)
NEW BIZ MODELS ENABLED / FUTURE POTENTIAL ROLE
5G Value Creation and Capture
FIGURE 3.4.7
5. MANUFACTURING
106 5G Value Creation and Capture
FIGURE 3.4.8
6. ENERGY & UTILITY
• Edge computing will be required when enterprises want to scale the number of devices and require
platforms and analytics which can deal with that amount of data in real time
• 5G could provide a substitute for the last mile
• Microrobotics – perform inspection of sensors and share information real-time to prevent malfunctions
(mMTC, low latency) and save costs
• Management of complex virtual plants of the future
ENTERPRISE
USE CASE ENABLED BY 5G & KEY BENEFITS
• Cybersecurity is a both threat and opportunity – large volumes of information flowing through devices
and cloud – open to collaboration with other stakeholders
• Already running or / looking to run private network for more control and reliability
NEW BIZ MODELS ENABLED
• Communicate transparently how long certain technologies will be supported on the field
• Backward compatibility with past generation devices
• SLAs could help boost adoption of 5G
• Managing cybersecurity becoming important with the volumes of data - “veracity of data coming from
wireless technologies”
• Dicult to see that 5G can compete with fibre for latency and therefore deployment may be dicult for
mission critical missions
• Would like to understand from operators value proposition of network slicing and MEC
MOBILE
OPERATORS
KEY REQUIREMENTS NEEDED FROM MNOS
• Openness to working with operators regarding cybersecurity / trusted data
• Certain markets show deep collaboration where operators provide platforms for energy management
• Potential role to audit the certification of IoT devices
NEW BIZ MODELS ENABLED / FUTURE POTENTIAL ROLE
107
• Next generation work sites will be enabled by 5G – not just the communication but networked work sites
and equipment
• Network slices and personalised networks will provide dierent industries more flexibility but require
SLAs and security
• Low latency will allow an real-time interpretation of actions that were not possible before which will
open up a suite of new services and seamless experiences
• Edge computing and 5G bring robotics in reality
ENTERPRISE
USE CASE ENABLED BY 5G & KEY BENEFITS
• Potential for someone to play a role in aggregation of oerings or hosting platforms as the ecosystem
becomes more complex – software providers see themselves as playing this role
• AI and the cloud would become a big opportunity in the 5G era for software providers
• Big enterprises want to deploy private networks
NEW BIZ MODELS ENABLED
• Collaboration with the rest of the ecosystem – especially in use cases such as smart homes / cities where
there a wide rate of players
• Robotics require high bandwidth connectivity, security and SLAs
• MNOs should focus more on an end-end service delivery which is not well practiced currently
• Industry need for policies around 5G access network sharing
MOBILE
OPERATORS
KEY REQUIREMENTS NEEDED FROM MNOS
• MNOs may need to look at new biz models – not charging by data used but other metrics e.g. CPUs /
number of clicks / per session
• Close collaboration with tech players who oer services dependent on cellular connectivity could boost
revenue – especially with co-development of certain services
NEW BIZ MODELS ENABLED / FUTURE POTENTIAL ROLE
5G Value Creation and Capture
FIGURE 3.4.9
7. SOFTWARE & TECHNOLOGY
108
FIGURE 3.4.10
ENTERPRISE INSIGHTS
3.4.3 Key interview insights
There are six key insights from the enterprise interviews
WHAT ENTERPRISES HAVE TOLD US…
1 Enterprises to use massive IoT to expand role in value chain
2 Private network deployments by enterprises will accelerate
3 5G seen as ‘good to have’, not yet a ‘must have’
4 5G capabilities of interest, business models unclear
5 Enterprises are focused on business outcomes
6 SMEs require more end-end support
DEVELOP
HORIZONTAL
ENABLERS FOR 5G
TARGET SME
FOR 5G END-END
SOLUTIONS
ARTICULATE
A CLEAR 5G
VALUE PROPOSITION
ADDRESS IOT
DISINTERMEDIATION
RISKS
FOCUS ON
RETAINING AND
GROWING
RELEVANCE WITH
ENTERPRISES
1 Internet / OTT Video
2 Premium / exclusive Video Content
3 Video Communications
4 Video Enablers / API (e.g. Cloud AR/VR)
Monetise as part of data bundle
Few opportunities & for mostly ‘cash rich’ operators
Expand ‘Green Button’ to include video calling
Identify & standardise common video APIs
Types of video tra c Key consideration for operators
0
10
20
30
40
50
2017 2023
Data trac per smartphone (GB/month)
0
North
America
Western
Europe
Central and
Eastern
Europe
Latin
America
Middle East
and Africa
China Sub-Saharan
Africa
48 GB
28 GB
19 GB
16 GB
12 GB
10 GB
7 GB
Key findings Potential Opportunity and / or Risk Key risk
5G Value Creation and Capture
3.4.3.1 Enterprises to use massive IoT to expand role
in value chain
Manufacturing, production and energy enterprises
have the greatest awareness of 5G and its potential
capabilities.
For these enterprises digital transformation, Industry
4.0 and addressing operational complexity are key
strategic priorities. Some enterprises had advanced
plans to capture incremental revenues in the future
such as providing services based on data analytics (e.g.
manufacturing companies directly providing predictive
maintenance, cybersecurity as a service) but also
innovating products based on networked equipment
and machinery.
These enterprises expect 5G to further enhance these
opportunities. Wirelessly connecting a large number of
devices in a secure and economic way, remote control
of networked machinery, telemetry of information
and network slices to lower cost of infrastructure are
considered to be the key benefits of using 5G.
3.4.3.2 Private network deployments by enterprises
will accelerate
Several large enterprises in the manufacturing,
production industries and public sectors interviewed
for this study already own their own spectrum, and
have either deployed private networks or are looking
to do so. Security, reliability and strategic control
are considered the key drivers to deploy privately. In
select cases, the enterprises work with operators on
their private deployments, but in others they have
disintermediated the mobile operator completely to run
their own private networks.
The smaller enterprises cite that, although private
networks would be beneficial, the costs involved and
limited expertise in network management were barriers
to deploying private networks. Enterprises not included
in this study, such as Rio Tinto (a mining conglomerate
in Australia), Ocado (UK retailer) and Hamburg Port
Authority have also deployed private LTE networks.
A large vendor has reported that it has deployed over
660 private LTE networks. With greater 5G spectrum
flexibility and growing experience and confidence with
private mobile networks we may see an increasing
number of enterprises deploy privately in the future.
5G Value Creation and Capture 109
3.4.3.3 5G seen as ‘good to have’, not yet a ‘must
have’
Enterprises are aware of the attributes of 5G and
expect it to provide higher reliability and security
at a lower cost. Enterprises are mostly aware of the
attributes 5G offers such as high bandwidth and low
latency which they expect to provide an enhanced
experience and lower cost of existing services.
Several enterprises are exploring use cases for network
slicing and edge computing. Enterprises indicated
that network slicing could be used to provide more
flexible networks, increased reliability and can allow for
infrastructure simplification when slices are reserved
for specific functions. For edge computing, enterprises
anticipate the ability to process larger volumes of data
faster, which can lead to innovation of both devices and
services.
These findings are supported by the results of the
2018 GSMA Intelligence IoT Enterprise Survey, which
measures IoT adoption by enterprises across 14
countries and eight verticals. When asked which 5G
capabilities would make it compelling to deploy 5G for
future IoT deployments, 74% of enterprises stated that
higher data transfer speeds would make 5G compelling;
49% cited network slicing, 41% edge computing; and
31% low-latency services. It is interesting to note that
there is little variance in the responses from enterprises
across different verticals.
5G was highlighted as a potential alternative network
technology for more expensive modes of connectivity
such as fibre and satellites in rural areas. In an industrial
setting, wirelessly connecting a mass number of
devices in a secure and economic way was seen to be
a key advantage, however it was noted that in fact for
most use cases existing technologies for IoT networks,
4G and fibre were seen as good enough. There were
some question marks by enterprises whether 5G could
ever compete with, or replace fibre.
The key technological needs from enterprises
focuses on latency (similar to fibre for mission critical
applications), reliability of service and security
(particularly with the volumes of data coming from the
mass of devices connected). Backward compatibility
with past generation devices was one of the most
frequently mentioned requirements from operators,
even going as far as operators potentially taking a
larger role in auditing the certification of IoT devices.
Several enterprises raised the question of costs related
to 5G, particularly in public and health sectors and
where cost optimisation was a greater priority than
revenue generation.
3.4.3.4 5G capabilities of interest, business models
unclear
A number of new use cases enabled by 5G mentioned
in the interviews focus on the media industry. The
low latency and high bandwidth offered by 5G will
improve the nascent VR/AR/XR experience for end
users, proliferate usage and open up new revenue
opportunities (e.g. immersive reality platforms). The
role of edge computing and the ability to process larger
volumes of data faster is valuable across the media
value chain, from broadcasting (real time broadcasting
of content) all the way to hardware innovation, as AR/
VR headsets do not have to be as high-quality when
content can be processed at the edge.
Media players expressed the most willingness to
engage operators, especially on discussions on revenue
sharing for new service opportunities in the future,
and were least concerned about cannibalisation
of players’ traditional business. Media players, as
technical innovators, are open to collaboration and
experimentation with operators.
Media players saw the value of operators not only
providing eMBB and uRLLC, but also the VR/AR/
XR platforms, and the cloud compute/storage and
analytics required. Although business models were
not clearly articulated, players in the media space are
exploring potential revenue share models based on new
services or advertising models with mobile operators.
110 5G Value Creation and Capture
3.4.3.5 Enterprises are focused on business
outcomes
The most urgent enterprise requirements are business
oriented, such as providing clear SLAs and lowering
the cost of cellular connectivity. Clear communication
around how long technologies would be supported
in the field (e.g. legacy technologies such as 2G),
the value and definition of network slicing (business
benefits rather than technical definitions) and edge
computing were also highlighted across various
verticals.
The challenges of working with operators was also
highlighted by enterprises (e.g. speed of deployment,
complexity of organisations and openness to
collaboration with the ecosystem). Mobile operators
need to focus on end-to-end service delivery and
horizontal enablers such as APIs, analytics platforms
that can be built across verticals while bearing in mind
the specific functionalities and services for specific
verticals.
3.4.3.6 SMEs require more end-to-end services
support
Across all verticals, SMEs were much more willing to
allow operators to take a role beyond connectivity than
the larger enterprises. Already, there are several cases
where operators provide/are looking to provide various
platforms, cloud services and analytics for smaller
enterprises.
In APAC, operators are even taking a large role in
marketing and business development by supporting
national and international expansion for smaller partner
companies. Several enterprises also commented on
their willingness to have operators provide connectivity
bundled with their services and expressed an interest in
collaboration around cybersecurity.
3.4.4 Lessons for operators
There are five key lessons for operators from the enterprise interviews
FIGURE 3.4.11
KEY OPERATOR TAKEAWAYS
WHAT ENTERPRISES HAVE TOLD US…
1 Enterprises to use massive IoT to expand role in value chain
2 Private network deployments by enterprises will accelerate
3 5G seen as ‘good to have’, not yet a ‘must have’
4 5G capabilities of interest, business models unclear
5 Enterprises are focused on business outcomes
6 SMEs require more end-end support
DEVELOP
HORIZONTAL
ENABLERS FOR 5G
TARGET SME
FOR 5G END-END
SOLUTIONS
ARTICULATE
A CLEAR 5G
VALUE PROPOSITION
ADDRESS IOT
DISINTERMEDIATION
RISKS
FOCUS ON
RETAINING AND
GROWING
RELEVANCE WITH
ENTERPRISES
1 Internet / OTT Video
2 Premium / exclusive Video Content
3 Video Communications
4 Video Enablers / API (e.g. Cloud AR/VR)
Monetise as part of data bundle
Few opportunities & for mostly ‘cash rich’ operators
Expand ‘Green Button’ to include video calling
Identify & standardise common video APIs
Types of video tra c Key consideration for operators
0
10
20
30
40
50
2017 2023
Data trac per smartphone (GB/month)
0
North
America
Western
Europe
Central and
Eastern
Europe
Latin
America
Middle East
and Africa
China Sub-Saharan
Africa
48 GB
28 GB
19 GB
16 GB
12 GB
10 GB
7 GB
Key findings Potential Opportunity and / or Risk Key risk
5G Value Creation and Capture 111
3.4.4.1 Develop horizontal enablers for 5G
5G opportunities exist across different industries,
but building vertical-specific competencies requires
substantial investment in acquiring expertise,
relationships and assets. Operators need to focus
on providing horizontal enablers to create common
capabilities and services which can be offered across
multiple industrial use cases. This could allow operators
to offer and sufficiently scale services beyond
connectivity and generate a positive business base.
3.4.4.2 Target SMEs for end-to-end solutions
The SME segment emerges as an area where there is
demand for operators to play an end-to-end role in 5G.
Non-network assets such as marketing and business
development are just as valuable to these players as is
connectivity, which can unlock new interesting business
models for operators. As SMEs are more willing to
consume operator managed services, generating a
catalogue of services that businesses can choose from
could be a potential opportunity for operators.
As one example, SMEs are a prime target for networkas-a-service capabilities. 5G and network slicing will
allow operators the capability to offer SMEs hypertargeted network-as-a-service, allowing them to
consume network slices with differentiated QoS,
latency and throughput according to use case and
customer. Although targeting the SME segment
alone may not generate a positive business case for
5G due to the complexities of SME needs and size
of opportunity, it could be a chance for operators to
experiment with new use cases and business models,
which could be replicated further as can be seen by
several innovative operators in APAC.
3.4.4.3 Articulate a clear 5G value proposition
There is an industry need to better articulate the
5G capabilities and value proposition to enterprise
customers (including FWA, network slicing, edge
computing and IoT technologies). The perceived lack
of clarity on technology migration (timelines but also
how legacy technology works with new technology)
delays enterprise investment in devices and potential
take-up of service. Enterprises typically lean towards
implementation of technology that is available
currently, that will be supported in the future or is more
economical (e.g. enterprises preferring LoRa over NBIoT).
The lack of clarity leads to differences in opinions
on the potential for a particular technology: for
example, operators are very positive about the
potential opportunity of FWA for enterprises in
the 5G era whereas verticals showed relatively low
levels of awareness on the benefits. It should also be
emphasised that there was a high level of confusion
from enterprises regarding NB-IoT and LTE-M: the
mobile industry needs to clearly communicate that NBIoT and LTE-M will be supported by 5G.
The 5G era also presents an opportunity for operators
to innovate on business models. Several operators
in APAC and in the Middle-East have embraced
government-led digitisation initiatives to engage both
public and private sector enterprises in discussions
to explore new business models for the 5G era.
Innovation of business models could include ways
of how to monetise connectivity in different ways
(e.g. automotive industry looking for one-stop
regional roaming services, charging data by CPU/
number of clicks etc.), monetising non-traditional
services (e.g. outsourcing cloud and data centres,
cybersecurity, platforms) and effectively monetising
specific enterprise needs (e.g. using 5G as a back-up
solution for enterprises that have a critical reliance
on connectivity, in the same way that 4G is offered to
enterprises by operators today).
112 5G Value Creation and Capture
3.4.4.4 Address IoT disintermediation risks
Operators must address the risk of marginalisation in
the massive IoT opportunity. Many operators recognise
that expanding their role within the value chain is
imperative to generate a positive business case for 5G
and are looking to play a role in data processing, cloud
operations, data storage, analytics services and other
digital services. Enterprises, however, very much see
the role of the operator restricted to providing faster,
more reliable and secure connectivity in the future
and creating the standards for technology rather than
working on integration and service design.
Operators are not only at risk of missing out on
opportunities further up the IoT value chain: there is a
threat of connectivity disintermediation, particularly
from utility/manufacturing enterprises and the public
sector which have deployed proprietary networks to
have more control over their networks and isolation.
With fully virtualised networks in the future, the large
cloud players become increasingly strong competitors
to mobile operators in providing connectivity. Amazon’s
announcement of a partnership to deliver a cloudbased private LTE network solution based on CBRS is a
perfect example of this trend.
Other enterprises interviewed have revealed that they
are exploring options for private networks, however,
this could potentially be an opportunity for mobile
operators. For example, operators could consider
managing private networks on behalf of these types
of players. By opening up network capabilities via APIs
and leveraging network slicing, this would provide
enterprises the control they are looking for while
avoiding the cost of investment and risks of operations
without having to build up in-house know-how in
network deployment and management.
Several operators and vendors are already adopting a
graded approach to test the viability of slicing by rolling
out private LTE networks and/ or campus networks.
A number of demos at MWC 2019 showcased the
usability of such networks in practice – a welcome
advance from previous discussions at the conceptual
level. Notably Deutsche Telekom and Osram launched
Campus Network, based on a ‘dual slice’ that combines
a public and a private LTE network on a common
platform to enable a smart factory use case and
Telefonica highlighted its LTE-Enterprise (LTE-E)
solution which has been developed for industrial
environments in partnership with Ericsson, ASTI and
Geprom.
3.4.4.5 Focus on retaining and growing relevance
with enterprises
Digitisation and increasing complexity of the ecosystem
will only increase the need for operators to understand
and meet the needs of enterprises. There is a risk
that operators may be facing disintermediation from
managing the direct relationship with enterprises as
other technology players see this as a potential role
they could play in the 5G era.
Technology providers position themselves as better
able than operators to manage the complexities and
relationships with enterprises. They believe that AI,
cloud and big data are large opportunities to grow
revenue and as ecosystems become increasingly
complex, they believe they could also play the
aggregator role to minimise the difficulties in working
with mobile operators. This trend mirrors that of the
approach aggregators have taken in working with
operators in digital services (payments, identity and
messaging) and looks to be replicated in the enterprise
space.
5G Value Creation and Capture 113
3.5 The eMBB Opportunity
KEY TAKEAWAYS
• Enhanced mobile broadband (eMBB) is the default, and earliest, 5G use case. This includes
mobile data, video and IP communications services (i.e. VoLTE, RCS).
• 5G will provide the capacity for at least 100GB per month per customer to cope with growing
video traffic.
• Low latencies approaching 1 millisecond will support new use cases in gaming, critical
communications, remote control of devices and industrial automation.
• Monetising extra network capabilities will help to stabilise 5G era ARPU.
• Additional capacity from 5G will encourage bigger/unlimited bundles, and may trigger a shift
to a different pricing paradigm e.g. speed-based tiering.
114
In the 5G era, many operators will be aggressively
targeting the lucrative vertical market - including using
customised technologies like NB-IoT etc. However,
for most operators the early use case for 5G will be
to provide mobile broadband services directly to
customers. This will be primarily through enhanced
mobile broadband (eMBB) and, in some cases, fixed
wireless access (FWA). The prospect for eMBB is
evolutionary to the current business of operators
and will progressively improve the mobile internet
experience of the more than 5 billion mobile phones
users in the world.
3.5.1.1 Data
eMBB is the de facto productisation of mobile data and
is used for accessing apps; email; viewing web pages;
watching videos; updating software; and any internetbased activity on a mobile device. 5G, as has been the
case for previous generations of mobile technology,
will deliver faster downlink/uplink speeds and lower
latency. This will in turn enable improved experiences
and a wider range of use cases.
3.5.1.2 Video
Video is saturating 4G networks and 5G will bring
much better performance for video services. In the 3G
era, the predominant way of consuming video was via
downloads. Thanks to the boom in streaming services,
4G networks support a lot of streaming (e.g. Netflix).
Early projections with AR/VR, 4k/8k video and 360
degree videos suggest that 5G video content will be
immersive, consuming an even higher proportion of the
overall data traffic.
Figure 3.5.1 outlines four types of video products that
operators should evaluate for 5G.
• Internet Video: while operators are unlikely to
charge customers more for internet video, the
lesson from 4G is that while customers will not pay
for internet video directly, they will pay more for a
5G that offers superior experience for video.
• Premium video: operators, where viable, can
offer premium/exclusive video content to paying
customers. This is a lucrative opportunity. Ampere
analysis forecasts that OTT video revenues
(including pay-TV, subscription video, video-ondemand) will generate revenue of $46 billion in 2019
compared to cinema box office revenues of $40
billion.
• Video Communications: thanks to OTT services such
as WhatsApp and WeChat, video calling is no longer
a novelty. However, carrier-grade ViLTE remains an
interesting proposition for the 5G era and should be
actively considered.
• Video enablers/APIs: Operators should consider
developing video enablers/APIs to promote
development of inter-operator video services. This is
the major driving force for the GSMA’s 5G Cloud XR
Forum40.
Broadcast / Multicast technologies and approaches
can also be used for efficient content distribution of
video and other high capacity content (incl. software
updates).
3.5.1 eMBB products & services
eMBB is the biggest early use case
5G Value Creation and Capture
40. https://www.gsma.com/newsroom/press-release/gsma-launches-new-industry-wide-initiative-to-support-development-of-operator-edge-cloud-ar-vr/
FIGURE 3.5.1
FOUR ‘VIDEO’ TRAFFIC TYPES FOR THE 5G BUSINESS CASE
WHAT ENTERPRISES HAVE TOLD US…
1 Enterprises to use massive IoT to expand role in value chain
2 Private network deployments by enterprises will accelerate
3 5G seen as ‘good to have’, not yet a ‘must have’
4 5G capabilities of interest, business models unclear
5 Enterprises are focused on business outcomes
6 SMEs require more end-end support
DEVELOP
HORIZONTAL
ENABLERS FOR 5G
TARGET SME
FOR 5G END-END
SOLUTIONS
ARTICULATE
A CLEAR 5G
VALUE PROPOSITION
ADDRESS IOT
DISINTERMEDIATION
RISKS
FOCUS ON
RETAINING AND
GROWING
RELEVANCE WITH
ENTERPRISES
1 Internet / OTT Video
2 Premium / exclusive Video Content
3 Video Communications
4 Video Enablers / API (e.g. Cloud AR/VR)
Monetise as part of data bundle
Few opportunities & for mostly ‘cash rich’ operators
Expand ‘Green Button’ to include video calling
Identify & standardise common video APIs
Types of video tra c Key consideration for operators
0
10
20
30
40
50
2017 2023
Data trac per smartphone (GB/month)
0
North
America
Western
Europe
Central and
Eastern
Europe
Latin
America
Middle East
and Africa
China Sub-Saharan
Africa
48 GB
28 GB
19 GB
16 GB
12 GB
10 GB
7 GB
Key findings Potential Opportunity and / or Risk Key risk
115
3.5.1.3 IP Communications
The traditional role of operators in providing
communications services will continue in the 5G era,
even if most customers no longer pay for metered
voice/messaging services, and even if operators are to
share that role with other providers.
Accordingly, the GSMA proposes that 5G era networks
should continue to offer, and build on the full set
of IMS-enabled communication services that are
already available in 4G. The expectation is that Voice
over New Radio (VoNR), packaged as an enriched
communications proposition to customers, will replace
legacy communications services and will become the
base assumption for 5G networks.
5G Value Creation and Capture
WHAT ENTERPRISES HAVE TOLD US…
1 Enterprises to use massive IoT to expand role in value chain
2 Private network deployments by enterprises will accelerate
3 5G seen as ‘good to have’, not yet a ‘must have’
4 5G capabilities of interest, business models unclear
5 Enterprises are focused on business outcomes
6 SMEs require more end-end support
DEVELOP
HORIZONTAL
ENABLERS FOR 5G
TARGET SME
FOR 5G END-END
SOLUTIONS
ARTICULATE
A CLEAR 5G
VALUE PROPOSITION
ADDRESS IOT
DISINTERMEDIATION
RISKS
FOCUS ON
RETAINING AND
GROWING
RELEVANCE WITH
ENTERPRISES
1 Internet / OTT Video
2 Premium / exclusive Video Content
3 Video Communications
4 Video Enablers / API (e.g. Cloud AR/VR)
Monetise as part of data bundle
Few opportunities & for mostly ‘cash rich’ operators
Expand ‘Green Button’ to include video calling
Identify & standardise common video APIs
Types of video tra c Key consideration for operators
0
10
20
30
40
50
2017 2023
Data trac per smartphone (GB/month)
0
North
America
Western
Europe
Central and
Eastern
Europe
Latin
America
Middle East
and Africa
China Sub-Saharan
Africa
48 GB
28 GB
19 GB
16 GB
12 GB
10 GB
7 GB
Key findings Potential Opportunity and / or Risk Key risk
3.5.2 eMBB drivers
3.5.2.1 Bigger Capacity
5G will provide the capacity for at least 100GB per
month per customer
The biggest early value for society from 5G will come
from the ample capacity it will provide for digital
services, owing to better spectral efficiency and
capacity.
Smartphone data usage growth is continuing on
an impressive trajectory both in developed and in
developing countries (see Figure 3.5.2). Some operators
(e.g. in affluent Middle East markets) report usage in
excess of 40GB per customer per month, primarily from
video consumption.
Yet, with limited scope for advancements of 4G beyond
LTE Advanced Pro and limited availability of spectrum
in its operating range (below 6GHz), the supply of
additional capacity is expected to be one of the
strongest drivers for the launch of 5G.
A typical user in the 5G era could be consuming more
than 100GB/month of mobile data. (As a reference, an
AR/VR or 8k video stream at 50Mbps for 1 hour uses
about 175GB). Countries where usage trajectory is
already pointing to the 100GB/month usage level, or
cell sites with such traffic demands, are best positioned
for early 5G upgrades.
FIGURE 3.5.2
AVERAGE DATA TRAFFIC PER SMARTPHONE (SOURCE: ERICSSON)
116
3.5.2.2 Lower cost/bit
Cost versus revenue per GB trends will further drive the
market to unlimited data bundles in 5G
5G will continue the trend in mobile data pricing
that was seen in the 4G era where bigger network
capacities, and the convergence of the revenue/GB
and cost/GB curves (see Figure 3.5.3), have led to
the re-emergence of unlimited data bundles. This is a
major change in the business model of operators and
the underlying assumptions that define the operator
business model.
Given the increased efficiency and capacity in 5G,
higher-priced unlimited data bundles can help to
increase profitability for the industry. However,
depending on market conditions, it could also lead to
deflationary pricing and its concomitant implications.
5G Value Creation and Capture
FIGURE 3.5.3
REVENUE/GB VERSUS COST/GB FOR MOBILE DATA (SOURCE: GSMA INTELLIGENCE)
Quality
(e.g. HD Voice/VoLTE) Metered Unlimited
VOICE & MESSAGING
0
20
40
60
80
100
2010 2011 2012 2013 2014 2015 2016 2017
Revenue per bit,
100 indexed (100 = 2010)
Cost per bit,
ratio of revenue per bit
$ 6.00
$ 7.00
$ 8.00
$ 9.00
$ 10.00
$ 11.00
$ 12.00
$ 13.00
$ 14.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Global ARPU, USD
Rebalance Rebalance
?
Metered Unlimited Speed
MOBILE BROADBAND
Rebalance Rebalance
?
Current ARPU
3.5.2.3 Low latency
5G’s low latency will support new use cases
A design goal for 5G is to support low latencies of
up to 1 millisecond. Potential use cases in gaming,
critical communications, remote control of devices and
industrial automation have been suggested. However,
there are question marks whether these services
will need low latency of 1 millisecond and if such low
latency can be found everywhere. For example, some
of the big content providers insist that they only design
their services to work within the current capabilities of
the widely-provided network.
While the scepticism is understandable, the lesson
of 4G shows that generally lower latencies can have
profound impact on service development. For example,
4G’s low latency and bigger capacity has accelerated
the development of services that rely on real-time
feedback and notification (e.g. online gaming).
If this trend is replicated in the 5G era, new, currently
unknown services could emerge, especially focusing
on factory automation, robotics and haptic/tactile
interactions. Ultra-reliable low latency communication
and time-sensitive networking, enabled via a
combination of 5G and wireless edge, will be required
for time-critical Industrial IoT manufacturing processes.
Such processes include closed-loop robotic control,
machine-human interactions, automated guided
vehicles, as well as AR and VR.
117
3.5.2.4 Digital ID
A mobile linked ID will support operator’s role in the
digital value chain in the 5G era
Digital ID is increasingly becoming a ‘must-have’ asset
across society. As more countries, particularly in the
developing world, continue to implement their digital
transformation strategies, proving one’s identity
digitally will become increasingly fundamental to
participation and inclusion41.
Mobile ID, anchored on the phone number, is an integral
component of the eMBB proposition and can be used
to support government efforts to accelerate the roll
out of digital identification systems. With more than
5.1 billion unique subscribers globally, mobile networks
connect people as no other technology before,
providing access to a vast array of life-enhancing
services. Given this scale, the mobile industry has a
unique opportunity to bring the benefits of digital
technology and digital identification. It will also support
efforts to deliver one of the key targets of Sustainable
Development Goal 16: “by 2030, provide legal identity
for all, including birth registration.
3.5.2.5 Affordability of handsets & smartphones
The cost of 5G handsets is a critical determinant of
eMBB demand and could necessitate subsidies
Two interrelated factors will push device availability
and affordability to a top agenda for 5G. Firstly, in
the early years, and especially where the NSA option
has been used, the experience of eMBB will not be
significantly different from that of 4G MBB. Secondly,
early 5G devices will experience a premium over
traditional 4G devices for device vendors to recoup
the R&D investment. The confluence of these two
factors could slow the uptake of 5G as customers balk
at paying a premium for 5G devices when there is little
differentiation from 4G eMBB.
This is a critical consideration especially for operators
who are expecting the consumer market demand to
singularly bankroll the deployment of 5G. Therefore, it
is critical that 5G support is introduced not only in the
expensive flagship models, but also in the affordable
segment to entice more customers to eMBB. Some
operators may also opt to sustain or even increase the
subsidies for 5G devices in other to drive demand
Overall, as the projections for average selling price of
smartphones in 2019 is substantially less than the value
in 2011 (see Figure 3.5.4), there is little appetite for more
expensive devices. Hence 5G devices for eMBB need to
be affordable to drive the demand.
5G Value Creation and Capture
41. https://www.gsma.com/mobilefordevelopment/programme/digital-identity/access-mobile-services-proof-identity-global-policy-trends-dependencies-risks/?utm_
source=YT&utm_medium=reportreferral
Unmet
demand
Excess
capacity
12 noon
Illustrative only
Time of day
Network Capacity Usage Average selling price in US$
12 noon
Average supply
Average demand
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
336.8 348.6 332.5
305.8 291.1 276.2 261.3 245.1 229.4 214.7
0
30
40
50
60
70
80
90
100
50 45 40 35 30 25 20 15 10 5 0
Household Computer Penetration
Fixed Broadband Penetration
Red Ocean:
Fierce
Competition
Blue Ocean:
Existing
pent-up
demand
Desert:
Isolated or
'Oasis' of
opportunities Micronesia (Federated States
Viet Nam Mongolia
Kyrgyzstan El Salvador
Guatemala Honduras Libya
Sri Lanka Samoa South Africa
Vanuatu
Bhutan
Iraq
Indonesia Marshall Islands Djibout Namibia
Lao People’s Democratc
Nepal
Zimbabwe Cameroon
Cuba Equatorial Guinea
Ghana
India Kenya Myanmar
Pakistan São Tomé and Principe
Senegal
Sudan Swaziland
Tajikistan
Timor - Leste
Turkmenistan
Côte d’Ivoire Bangladesh Republic
Solomon Islands
Nicaragua
Africa Cambodia Angola
Comoros Gambia
Nigeria Hait
Uganda Zambia
10
Central African Republic
Congo Republic Papua New Guinea Guinea Mali Tanzania Afghanistan
Burkina Faso Benin
Chad Burundi Congo DR
Ethiopia
-Guinea Bssau
Kiribat
Liberia
Madagascar Malawi Mauritania
Mozambique
Niger
Rwanda Sierra Leone Somalia
South Sudan
YemenTogo
Botswana
Philippines
Ecuador
Romania
Lithuania
World
Americas
Arab States
Asia & Pacific
CIS
Europe
Albania
Algeria
Antgua and Barbuda
Argentna Armenia
Australia
Austria
Azerbaijan
Bahamas
Bahrain
Barbados
Belarus
Belgium
Belize
Bolivia
Bosnia and HerzegovinaBrazil
Brunei Darussalam
Bulgaria
Canada
Cape Verde
Chile
Colombia
Costa Rica
Croata
Cyprus
Czech Republic
Denmark
Dominica
Dominican Republic
Egypt
Estonia
Fiji
Finland France
Gabon
Georgia
Germany
Greece
Grenada
Guyana
Hungary
Iceland
Iran
Ireland
Israel
Italy
Jamaica
Japan
Jordan
Kazakhstan Korea, South
Kuwait
Latvia
Lebanon
Luxembourg
Malaysia
Maldives
Malta
Mauritus
Mexico
of)
Moldova
Monaco
Montenegro
Morocco
Nauru
Netherlands New Zealand
Norway
Oman
Panama
Paraguay
Peru
Poland
Portugal
Qatar
Russia
Saint Lucia
Saudi Arabia
Serbia
Seychelles
Singapore
Slovakia
Slovenia
Spain
Suriname
Switzerland Sweden
Syria
TFYR Macedonia
Thailand
Tonga
Trinidad and Tobago
Tunisia
Turkey
Tuvalu
Ukraine
United Kingdom United Arab Emirates United States
Uruguay
UzbekistanVenezuela
Hong Kong
Palestne
FIGURE 3.5.4
WORLD SMARTPHONE AVERAGE SELLING PRICE (SOURCE: STATISTA)
118
3.5.3.1 Stabilise ARPU
Monetising extra network capabilities will help to
stabilise 5G era ARPU
While overall operator revenues have been growing, the
per connection revenue has been consistently declining
in all countries in the world for the past ten years. Some
of this downward trend is because of connecting lowerspending customers (e.g. low income customers) or
lower-usage connections (e.g. IoT connections), as well
as fierce competitive pressures.
In line with the trend that has begun as 4G matures
(see Figure 3.5.5), there are two main factors that will
help to stabilise, or even reflate ARPU in the 5G era
globally.
First, the rebalancing of tariffs towards data and away
from traditional voice and messaging has arrested the
voice/messaging revenue cannibalisation from OTT
alternatives. A 2014 Ovum study suggested operators
could lose $386 billion between 2012 and 2018 unless
they rebalanced their tariffs from metered voice to
metered data42. This rebalancing is nearly complete in
post-paid-heavy countries (e.g. Japan/South Korea),
and is picking up in prepaid-heavy countries.
Second, operators are succeeding in selling bigger
data bundles to customers in many markets. This
will continue in the 5G era, and together with other
ancillary revenue sources (e.g. antivirus or roaming or
devices), will help to nurture ARPU back to stability or
growth for some operators.
3.5.3 eMBB economics
5G Value Creation and Capture
42. https://www.telecomasia.net/content/telcos-lose-386b-ott-voip-ovum
FIGURE 3.5.5
MOBILE ARPU WILL STABILISE IN THE 5G ERA (SOURCE: GSMA INTELLIGENCE)
Quality
(e.g. HD Voice/VoLTE) Metered Unlimited
VOICE & MESSAGING
0
20
40
60
80
100
2010 2011 2012 2013 2014 2015 2016 2017
Revenue per bit,
100 indexed (100 = 2010)
Cost per bit,
ratio of revenue per bit
$ 6.00
$ 7.00
$ 8.00
$ 9.00
$ 10.00
$ 11.00
$ 12.00
$ 13.00
$ 14.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Global ARPU, USD
Rebalance Rebalance
?
Metered Unlimited Speed
MOBILE BROADBAND
Rebalance Rebalance
?
Current ARPU
119
3.5.3.2 Capacity glut and big bundles
Capacity glut in the 5G era may encourage big
deflationary data bundles
Operators face a constant, unending competitive
pressure to add more capacity to their networks.
This is driven by the need to accommodate growing
data usage on smartphones, and the need to serve
additional devices. But the biggest driver is to provide
enough peak capacity to cover spikes in data usage.
Operators in every market are competing to assure
customers that their mobile data connections will
perform well during peak hours, such as at a bus/train
station during rush hour or at a stadium during a sports
game.
But this additional capacity has consequences. As
Figure 3.5.6 shows, the continuous addition of extra
capacity to provide for the ‘unmet demand’ increases
the ‘average supply’ of network capacity above what
is needed to cover for ‘average demand’. The resultant
‘excess capacity’ has become a key battleground, as
operators try to monetise this capacity with bigger, and
increasingly unlimited, data bundles.
This trend is already in full swing in many developed
markets for 4G services and would carry on into the 5G
era. In some places, it has provided an upsell opportunity,
but concerns remain that the quest to monetise excess
capacity is stoking deflationary pricing.
5G Value Creation and Capture
43. https://nms.kcl.ac.uk/nishanth.sastry/pubs/obiodu-5GWorld18.pdf
Unmet
demand
Excess
capacity
12 noon
Illustrative only
Time of day
Network Capacity Usage Average selling price in US$
12 noon
Average supply
Average demand
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
336.8 348.6 332.5
305.8 291.1 276.2 261.3 245.1 229.4 214.7
0
30
40
50
60
70
80
90
100
50 45 40 35 30 25 20 15 10 5 0
Household Computer Penetration
Fixed Broadband Penetration
Red Ocean:
Fierce
Competition
Blue Ocean:
Existing
pent-up
demand
Desert:
Isolated or
'Oasis' of
opportunities Micronesia (Federated States
Viet Nam Mongolia
Kyrgyzstan El Salvador
Guatemala Honduras Libya
Sri Lanka Samoa South Africa
Vanuatu
Bhutan
Iraq
Indonesia Marshall Islands Djibout Namibia
Lao People’s Democratc
Nepal
Zimbabwe Cameroon
Cuba Equatorial Guinea
Ghana
India Kenya Myanmar
Pakistan São Tomé and Principe
Senegal
Sudan Swaziland
Tajikistan
Timor - Leste
Turkmenistan
Côte d’Ivoire Bangladesh Republic
Solomon Islands
Nicaragua
Africa Cambodia Angola
Comoros Gambia
Nigeria Hait
Uganda Zambia
10
Central African Republic
Congo Republic Papua New Guinea Guinea Mali Tanzania Afghanistan
Burkina Faso Benin
Chad Burundi Congo DR
Ethiopia
-Guinea Bssau
Kiribat
Liberia
Madagascar Malawi Mauritania
Mozambique
Niger
Rwanda Sierra Leone Somalia
South Sudan
YemenTogo
Botswana
Philippines
Ecuador
Romania
Lithuania
World
Americas
Arab States
Asia & Pacific
CIS
Europe
Albania
Algeria
Antgua and Barbuda
Argentna Armenia
Australia
Austria
Azerbaijan
Bahamas
Bahrain
Barbados
Belarus
Belgium
Belize
Bolivia
Bosnia and HerzegovinaBrazil
Brunei Darussalam
Bulgaria
Canada
Cape Verde
Chile
Colombia
Costa Rica
Croata
Cyprus
Czech Republic
Denmark
Dominica
Dominican Republic
Egypt
Estonia
Fiji
Finland France
Gabon
Georgia
Germany
Greece
Grenada
Guyana
Hungary
Iceland
Iran
Ireland
Israel
Italy
Jamaica
Japan
Jordan
Kazakhstan Korea, South
Kuwait
Latvia
Lebanon
Luxembourg
Malaysia
Maldives
Malta
Mauritus
Mexico
of)
Moldova
Monaco
Montenegro
Morocco
Nauru
Netherlands New Zealand
Norway
Oman
Panama
Paraguay
Peru
Poland
Portugal
Qatar
Russia
Saint Lucia
Saudi Arabia
Serbia
Seychelles
Singapore
Slovakia
Slovenia
Spain
Suriname
Switzerland Sweden
Syria
TFYR Macedonia
Thailand
Tonga
Trinidad and Tobago
Tunisia
Turkey
Tuvalu
Ukraine
United Kingdom United Arab Emirates United States
Uruguay
UzbekistanVenezuela
Hong Kong
Palestne
FIGURE 3.5.6
DEMAND VARIATION FOR MOBILE NETWORK CAPACITY – 24 HOURS (SOURCE: KINGS COLLEGE LONDON43)
120
3.5.3.3 Usage vs. speed-based pricing
Widespread adoption of big bundles may trigger a shift
in pricing
An imminent consequence of the move to abundant
and unlimited mobile data bundles is that operators
lose the ability to price differentiate with data usage.
This switchover from metered to unmetered broadband
has happened for many fixed broadband customers
in developed markets. Internet Service Providers have
shifted from data usage based pricing to speed tiers
pricing as a differentiating factor between basic and
premium services to users.
This trend is likely to occur for mobile broadband in
the 5G era as operators offer ever bigger data bundles
beyond what customers are able to use up in a day or
month.
However, rebalancing to another paradigm pricing is
not without its challenges as is evident from the failure
to rebalance to quality-based pricing for HD Voice and
VoLTE (see Figure 3.5.7). Technical challenges and the
ability to put together a compelling value proposition
are often obstacles. For example, a survey of a
representative sample of 978 households in the US in
2016 suggests that households’ do not value speeds of
over 100Mbps highly44.
5G Value Creation and Capture
44. https://prodnet.www.neca.org/publicationsdocs/wwpdf/91917tpi.pdf
FIGURE 3.5.7
EVOLUTION OF PRICING FOR EMBB SERVICES
Quality
(e.g. HD Voice/VoLTE) Metered Unlimited
VOICE & MESSAGING
0
20
40
60
80
100
2010 2011 2012 2013 2014 2015 2016 2017
Revenue per bit,
100 indexed (100 = 2010)
Cost per bit,
ratio of revenue per bit
$ 6.00
$ 7.00
$ 8.00
$ 9.00
$ 10.00
$ 11.00
$ 12.00
$ 13.00
$ 14.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Global ARPU, USD
Rebalance Rebalance
?
Metered Unlimited Speed
MOBILE BROADBAND
Rebalance Rebalance
?
Current ARPU
121
The FWA opportunity
5G Value Creation and Capture
3.6
KEY TAKEAWAYS
• Fixed Wireless Access (FWA) is a by-product of excess eMBB capacity and enables operators
to address new & existing broadband opportunities.
• There are four clear FWA use cases: broadband for the unconnected; broadband to compete
with fixed alternatives; backup broadband and base station backhaul.
• FWA is important for other strategic reasons too: additional incentive to deepen fibre
capillarity, to boost product portfolio for mobile-only operators; or to avoid new FWA
entrants distorting the market.
• The GSMA has mapped FWA opportunities for 160 countries: Blue Ocean markets, Red Ocean
markets and Desert markets.
• While the FWA opportunity varies considerably across geographies, there are always
potential “oases” of opportunities.
122
Fixed Wireless Access (FWA), a wireless link that
provides connectivity to objects that are stationary or
nomadic, will receive a boost thanks to improved 5G
capabilities. FWA is not a new product idea, but 5G
FWA is positioned as superior to previous attempts to
deploy FWA-like services using proprietary wireless
technologies (e.g. LMDS, iBurst), alternative cellular
technologies (e.g. WiMAX) and default cellular
technologies (e.g. 3G, 4G).
Many operators expect to deploy 5G FWA early in the
5G era to provide for broadband in rural/sub-urban
regions, or to provide a competitively-priced alternative
to fixed broadband. This opportunity exists, but is by
no means universally addressable by operators in all
markets. As such, 5G FWA needs to be viewed as an
opportunity that is highly dependent on local realities,
such as the 2018 launches in the US.
There are four primary FWA products that operators
can offer globally, as shown in Figure 3.6.1. Also, as the
FWA opportunity is not universal, this section frames
the discussion based on the different market scenarios
in terms of attractiveness for FWA.
3.6.1 FWA products & services
Operators can address new & existing broadband opportunities with 5G FWA
5G Value Creation and Capture
FIGURE 3.6.1
FWA PRODUCT OFFERINGS FOR OPERATORS
Mix of fibre and legacy backhaul
Cell site TCO (%)
Rich fibre backhaul
Cell site TCO (%)
FWA solutions as backhaul for
Small Cells
Core
Network
/ Internet
4
Roof-mounted or semi fixed
equipment in residential
premises
1
Roof-mounted or semi fixed
equipment in business
premises
2
FWA units as
backup connectivity
for enterprise
3
5G Base Station
or Small Cell
FWA Links
FWA
Fibre Links
Light Pole Street furniture
(e.g. bus stop)
Light Pole
FWA Links
HOME CENTRAL OFFICE
4G AND PREVIOUS 5G
Macro cells Small cells
Radius: 200 – 1,000m
10–30% of total cost 60–80% of total cost
Radius: 500 – 4,000+m
CABINET
FTTx
Fibre may terminate in the middle
depending on the type of FTTx
Fibre Fibre
123
3.6.1.1 Broadband for the unconnected
Operators can address stationary broadband demands
including premises that were not connected previously
or are connected with only legacy copper/DSL
broadband, time-limited (e.g. seasonal) broadband
demands and IoT demands. This is the strongest
opportunity for 5G FWA.
For mobile-only operators, FWA is an opportunity to
enter into new broadband markets, gaining access to
new value pools.
For many fixed/mobile operators with a commitment
to provide high-speed broadband services to rural and
suburban premises, FWA offers a competitive cost
economics compared to greenfield FTTx deployments,
especially in developing regions where low fibre
penetration and costly civil works for fibre densification
favours wireless connectivity. Huawei estimates the
capex per subscriber range at between $500 and
$1000 for FTTx versus $100to $400 for FWA45. This is
based on calculations for 4G FWA and 5G may work
out to be even cheaper.
5G Value Creation and Capture
Mix of fibre and legacy backhaul
Cell site TCO (%)
Rich fibre backhaul
Cell site TCO (%)
FWA solutions as backhaul for
Small Cells
Core
Network
/ Internet
4
Roof-mounted or semi fixed
equipment in residential
premises
1
Roof-mounted or semi fixed
equipment in business
premises
2
FWA units as
backup connectivity
for enterprise
3
5G Base Station
or Small Cell
FWA Links
FWA
Fibre Links
Light Pole Street furniture
(e.g. bus stop)
Light Pole
FWA Links
HOME CENTRAL OFFICE
4G AND PREVIOUS 5G
Macro cells Small cells
Radius: 200 – 1,000m
10–30% of total cost 60–80% of total cost
Radius: 500 – 4,000+m
CABINET
FTTx
Fibre may terminate in the middle
depending on the type of FTTx
Fibre Fibre
FIGURE 3.6.2
FWA IS A LOWER COST ALTERNATIVE THAN GREENFIELD FTTX
45. https://www-file.huawei.com/-/media/corporate/pdf/news/4g-wireless-broadband-industry-white-paper.pdf?la=en&source=corp_comm
46. https://www.nttdocomo.co.jp/english/info/media_center/pr/2018/0522_00.html
3.6.1.2 Broadband competition
The idea of 5G FWA competing with fixed broadband
is a polarising proposition. The attraction is that 5G NR
provides an experience that enables operators to offer
a high-performing, competitive broadband service for
customers.
The clear opportunities are to address customers still
reliant on legacy copper/DSL broadband products,
and scenarios where the cost of newly deploying FTTx
is prohibitively high. However, the idea that alreadyinstalled FTTx can be replaced with FWA is largely
unproven. Unless the FWA service is priced to woo
customers, there is little evidence from anywhere that
FWA offers a superior customer proposition – based on
speed/performance - to FTTx.
3.6.1.3 Backup broadband
As businesses increase their dependence on the
internet, their need for a reliable backup will grow. This
is a currently underestimated opportunity and may
turn out to be the most profitable FWA product for
operators. The rationale is straightforward. Market or
regulatory forces are pushing businesses to ensure that
there is very little downtime in their operations. Faced
with the costly option of running a leased line into their
premises, a 5G FWA option will prove much more cost
effective. Already some operators have begun offering
such services in the market using 4G FWA (e.g. BT
Assure in the UK).
3.6.1.4 Base station backhaul
The option of using 5G FWA as a backhaul for 5G base
stations is still under development, but could well prove
to be an important use case for FWA. Using Integrated
Access Backhaul (IAB), an advanced beamforming
technique that concentrates radio waves in a specified
direction for long-distance transmission, operators can
use FWA to provide backhaul for 5G macro and small
cells. NTT DOCOMO and Huawei demonstrated IAB in
early 201846 and 3GPP is considering Integrated Access
Backhaul (IAB) as a possible 5G NR standard.
124
3.6.2.1 Monetising excess network capacity
Excess network capacity is the biggest enabler for FWA
FWA is an opportunity for operators to monetise their
excess network capacity by creating new product
lines. These include broadband products for the
unconnected, for competing with fixed broadband
propositions, and for backup, in both developed and
developing markets. In a study of European operators,
Rewheel argues that the excess capacity on mobile
networks will push operators to go after fixed-tomobile broadband substitution47. This is already
happening in markets such as Finland and Austria.
3.6.2.2 ‘Pull through’ driver for fibre
FWA provides an additional incentive to deepen fibre
capillarity in the 5G era
The cost of deploying additional fibre infrastructure
to support 5G rollouts is a concern for operators in
some markets, especially if the deployment is for
small cells on mmWave spectrum. A Solon Consulting
study, based on the US market, suggests that fibre
could make up between 60-80% of total cost of a
5G mmWave base station compared to 10-30% for a
typical 4G macro cell (see Figure 3.6.3).
Accordingly, the opportunity to productise and market
FWA will act as a driver for fibre investments. This
can be as part of a fibre + FWA hybrid bundle. FWA
can provide an additional revenue stream for base
stations that are already connected by fibre. And for
base stations that are still connected by microwave, the
prospect of FWA will provide the incentive to switch
from microwave to fibre backhaul.
3.6.2 FWA drivers
5G Value Creation and Capture
FIGURE 3.6.3
FWA AS AN INCENTIVE TO DEEPEN FIBRE USAGE IN 5G (SOURCE: SOLON CONSULTING)
Mix of fibre and legacy backhaul
Cell site TCO (%)
Rich fibre backhaul
Cell site TCO (%)
FWA solutions as backhaul for
Small Cells
Core
Network
/ Internet
4
Roof-mounted or semi fixed
equipment in residential
premises
1
Roof-mounted or semi fixed
equipment in business
premises
2
FWA units as
backup connectivity
for enterprise
3
5G Base Station
or Small Cell
FWA Links
FWA
Fibre Links
Light Pole Street furniture
(e.g. bus stop)
Light Pole
FWA Links
HOME CENTRAL OFFICE
4G AND PREVIOUS 5G
Macro cells Small cells
Radius: 200 – 1,000m
10–30% of total cost 60–80% of total cost
Radius: 500 – 4,000+m
CABINET
FTTx
Fibre may terminate in the middle
depending on the type of FTTx
Fibre Fibre
47. http://research.rewheel.fi/downloads/Capacity_utilization_fixed_mobile_broadband_substitution_potential_2017_PUBLIC.pdf
125
3.6.2.3 ‘Strategic competition’ with fixed broadband
Cost and strategic leverage will inform many FWA
launches
There is an ongoing industry debate on the merits of
using FWA to compete with existing fixed broadband
propositions. This will likely play out in at least two
ways.
First, in a greenfield context, rolling out FWA is
significantly cheaper than FTTx. The per subscriber
capex estimates are $500-$1000 for FTTx versus $100-
$400 for FWA, so it is attractive to opt for 5G FWA if
it can provide a customer experience that is close to
FTTx. Operators who are driven by this cost analysis will
justify FWA based on its lower total cost of ownership.
Second, operators with small or no fixed broadband
market share could use FWA to boost their product
portfolio and strengthen their competitive position.
This may be more so in markets where fixed-mostly
companies (e.g. cable companies) are seeking to enter
the mobile market in the 5G era. For this, the strategic
benefits of launching FWA may not be immediately
evident and may be indirect.
3.6.2.4 Competing with new FWA entrants
Operators should take the lead to chart the roadmap
for FWA hotspots
Past experience suggests that operators may not be
alone in the race to win valuable 5G spectrum for FWA.
A number of new entrants have competed for, and
won, spectrum for 3G and 4G FWA services in the past.
For example, UK Broadband won around 120MHz of
3.5GHz spectrum in the 2013 UK 4G auctions, while new
entrants, such as Smile, Surfline and Afrimax, have been
assigned significant amounts of sub-1GHz spectrum in
markets across Africa, sometimes ahead of established
service providers.
Most of the new entrants have struggled to scale up:
those in developed regions have been constrained by
well entrenched fixed broadband infrastructure and
weak performance of 3G and 4G FWA, while a lack of
resources and capability for large scale deployment is
the primary limitation for those in developing regions.
Nonetheless, their activities impact operators’ ability
to deploy 4G networks cost-effectively and, in many
cases across Africa, distort value in the 4G market with
deflationary pricing.
Operators must not risk a repeat of the 4G spectrum
fragmentation, and its consequences, in the 5G era. To
capitalise on the 5G FWA opportunity and avoid value
erosion, operators should take the lead in proactively
defining the 5G roadmap for their market, as opposed
to taking a reactionary approach to potentially valueeroding events.
5G Value Creation and Capture
126
99% connections
360 MHz 110 MHz
<1% connections
MTN Glo Airtel 9mobile ntel Bitflux Intercellular Smile
700 800 900 1800 2100 2300 2600
Extending the core product
Extending into non-core products
DIFFERENTIATED CONNECTIVITY
(incl. Network Slicing and QoS Di erentiation)
BASIC CONNECTIVITY
(incl. Faux Consumers and basic IoT)
MANAGED SOLUTIONS
(incl. managed services)
BEYOND CONNECTIVITY
(incl. software and security)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
iPhone ASP GDP/capita
(constant US$)
Unique subscriber
ARPU
3.6%
CAGR (2007–2017)
1.0%
CAGR (2007–2017)
-6.0%
CAGR (2007–2017)
60
20
20
20
30
10
20
30
10
30
30 20 20 10
30
10
20
30
10
20
20
FIGURE 3.6.4
SPECTRUM FOR NEW FWA ENTRANTS IN NIGERIA (2018) - NEARLY A QUARTER OF
ASSIGNED SPECTRUM IS HELD BY OPERATORS WITH A COMBINED MARKET SHARE
BELOW 1% (SOURCE: GSMA INTELLIGENCE)
3.6.2.5 Affordability of FWA devices
Adoption of 3GPP’s 5G specifications for FWA enables
production of FWA devices to scale
The success of mobile communications, especially GSM
(Global System for Mobile communications), stems
from the fact that it is globally interoperable and enjoys
global economies of scale. Unlike other technologies,
GSM enabled devices and network equipment to be
manufactured at global scale, reducing the cost of
adoption for both operators and subscribers.
This also applies for FWA using 5G. If FWA customer
premises equipment (CPEs) is based on 3GPP’s 5G
specification, the operators will be able to enjoy global
economies of scale in production of CPEs. Furthermore,
products based on 3GPP specifications have been
developed by a robust ecosystem consisting of
numerous vendors. 3GPP specifications also are peerreviewed by number of experts, ensuring that mistakes
and errors are minimized. This means that the operator
will not only benefit from the potential cost reduction,
but also have numerous alternatives in procuring its
CPEs. Operators will then be in a position to adopt
more competitive pricing for end users.
Device rental models can also be beneficial for both
customers and operators. For example, FWA customers
can benefit if the CPE is rented as it would be easier for
operators to upgrade the CPE while potential upsell of
services can also be possible with the upgrade.
5G Value Creation and Capture
127
Unmet
demand
Excess
capacity
12 noon
Illustrative only
Time of day
Network Capacity Usage Average selling price in US$
12 noon
Average supply
Average demand
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
336.8 348.6 332.5
305.8 291.1 276.2 261.3 245.1 229.4 214.7
0
30
40
50
60
70
80
90
100
50 45 40 35 30 25 20 15 10 5 0
Household Computer Penetration
Fixed Broadband Penetration
Red Ocean:
Fierce
Competition
Blue Ocean:
Existing
pent-up
demand
Desert:
Isolated or
'Oasis' of
opportunities Micronesia (Federated States
Viet Nam Mongolia
Kyrgyzstan El Salvador
Guatemala Honduras Libya
Sri Lanka Samoa South Africa
Vanuatu
Bhutan
Iraq
Indonesia Marshall Islands Djibout Namibia
Lao People’s Democratc
Nepal
Zimbabwe Cameroon
Cuba Equatorial Guinea
Ghana
India Kenya Myanmar
Pakistan São Tomé and Principe
Senegal
Sudan Swaziland
Tajikistan
Timor - Leste
Turkmenistan
Côte d’Ivoire Bangladesh Republic
Solomon Islands
Nicaragua
Africa Cambodia Angola
Comoros Gambia
Nigeria Hait
Uganda Zambia
10
Central African Republic
Congo Republic Papua New Guinea Guinea Mali Tanzania Afghanistan
Burkina Faso Benin
Chad Burundi Congo DR
Ethiopia
-Guinea Bssau
Kiribat
Liberia
Madagascar Malawi Mauritania
Mozambique
Niger
Rwanda Sierra Leone Somalia
South Sudan
YemenTogo
Botswana
Philippines
Ecuador
Romania
Lithuania
World
Americas
Arab States
Asia & Pacific
CIS
Europe
Albania
Algeria
Antgua and Barbuda
Argentna Armenia
Australia
Austria
Azerbaijan
Bahamas
Bahrain
Barbados
Belarus
Belgium
Belize
Bolivia
Bosnia and HerzegovinaBrazil
Brunei Darussalam
Bulgaria
Canada
Cape Verde
Chile
Colombia
Costa Rica
Croata
Cyprus
Czech Republic
Denmark
Dominica
Dominican Republic
Egypt
Estonia
Fiji
Finland France
Gabon
Georgia
Germany
Greece
Grenada
Guyana
Hungary
Iceland
Iran
Ireland
Israel
Italy
Jamaica
Japan
Jordan
Kazakhstan Korea, South
Kuwait
Latvia
Lebanon
Luxembourg
Malaysia
Maldives
Malta
Mauritus
Mexico
of)
Moldova
Monaco
Montenegro
Morocco
Nauru
Netherlands New Zealand
Norway
Oman
Panama
Paraguay
Peru
Poland
Portugal
Qatar
Russia
Saint Lucia
Saudi Arabia
Serbia
Seychelles
Singapore
Slovakia
Slovenia
Spain
Suriname
Switzerland Sweden
Syria
TFYR Macedonia
Thailand
Tonga
Trinidad and Tobago
Tunisia
Turkey
Tuvalu
Ukraine
United Kingdom United Arab Emirates United States
Uruguay
UzbekistanVenezuela
Hong Kong
Palestne
Micronesia (Federated States
Viet Nam Mongolia
Kyrgyzstan El Salvador
Guatemala Honduras Libya
Sri Lanka Samoa South Africa
Vanuatu
Bhutan
Iraq
Indonesia Marshall Islands Djibout Namibia
Lao People’s Democratc
Nepal
Zimbabwe Cameroon
Cuba Equatorial Guinea
Ghana
India Kenya Myanmar
Pakistan São Tomé and Principe
Senegal
Sudan Swaziland
Tajikistan
Timor - Leste
Turkmenistan
Côte d’Ivoire Bangladesh Republic
Solomon Islands
Nicaragua
Africa Cambodia Angola
Comoros Gambia
Nigeria Hait
Uganda Zambia
10
Central African Republic
Congo Republic Papua New Guinea Guinea Mali Tanzania Afghanistan
Burkina Faso Benin
Chad Burundi Congo DR
Ethiopia
-Guinea Bssau
Kiribat
Liberia
Madagascar Malawi Mauritania
Mozambique
Niger
Rwanda Sierra Leone Somalia
South Sudan
YemenTogo
Botswana
Philippines
Ecuador
Romania
Lithuania
World
Americas
Arab States
Asia & Pacific
CIS
Europe
Albania
Algeria
Antgua and Barbuda
Argentna Armenia
Australia
Austria
Azerbaijan
Bahamas
Bahrain
Barbados
Belarus
Belgium
Belize
Bolivia
Bosnia and HerzegovinaBrazil
Brunei Darussalam
Bulgaria
Canada
Cape Verde
Chile
Colombia
Costa Rica
Croata
Cyprus
Czech Republic
Denmark
Dominica
Dominican Republic
Egypt
Estonia
Fiji
Finland France
Gabon
Georgia
Germany
Greece
Grenada
Guyana
Hungary
Iceland
Iran
Ireland
Israel
Italy
Jamaica
Japan
Jordan
Kazakhstan Korea, South
Kuwait
Latvia
Lebanon
Luxembourg
Malaysia
Maldives
Malta
Mauritus
Mexico
of)
Moldova
Monaco
Montenegro
Morocco
Nauru
Netherlands New Zealand
Norway
Oman
Panama
Paraguay
Peru
Poland
Portugal
Qatar
Russia
Saint Lucia
Saudi Arabia
Serbia
Seychelles
Singapore
Slovakia
Slovenia
Spain
Suriname
Switzerland Sweden
Syria
TFYR Macedonia
Thailand
Tonga
Trinidad and Tobago
Tunisia
Turkey
Tuvalu
Ukraine
United Kingdom United Arab Emirates United States
Uruguay
UzbekistanVenezuela
Hong Kong
Palestne
There are several metrics that can be used to map the
relative mass market FWA opportunity in different
countries. On the supply side, home density vs.
population density provides a comparison on how
costly it can be to provide mass market FWA coverage.
Spectrum choice (mmWave vs. 3.5GHz) determines
the size of the cells for FWA coverage and the resultant
cost of covering a given area.
But the demand side provides more helpful metrics to
assess the addressable FWA market opportunity. As a
broadband proposition to stationary and nomadic uses,
FWA will be ‘competing’ with: 1. non-consumption of
home broadband; and 2. alternative home broadband
services.
For (1), the proportion of households with a computer
is a good indicator of an appetite for home broadband.
Customers who can neither afford computers nor
decide against having a computer are unlikely to be
willing FWA customers. For (2), in households with
computers, the level of fixed broadband penetration
in each country will show the level of pent-up,
addressable demand for FWA.
Figure 3.6.5 charts 160 countries on household
computer penetration and fixed broadband
penetration, and shows that for FWA, most markets
can be categorised as either Red Ocean, Blue
Ocean or Desert. However, regardless of which
category a country is in, there will always be ‘oasis’ of
opportunities for FWA.
3.6.3 FWA economics: opportunity mapping
GSMA mapping of ‘oasis’ of FWA opportunities and limitations
FIGURE 3.6.5
FWA MASS MARKET OPPORTUNITY FOR 160 COUNTRIES (SOURCE: GSMA)
5G Value Creation and Capture
The GSMA has used the ITU’s data for 2017 to develop this analysis to cover 160 countries. Readers are invited to use more current data for
their respective markets for more accurate predictions
128
3.6.3.1 Mostly ‘Blue Ocean’ markets
Operators should explore playing in these markets
Blue Ocean markets present a sizeable, and relatively
uncontested, mass market opportunity for home
broadband (i.e. analogous to a peaceful-looking blue
ocean). These are markets with at least 40% household
computer penetration but less than 20% fixed
broadband penetration.
These markets are attractive for 5G FWA because
affordability and usability for residential customers is
high. Likewise, the enterprise opportunities for FWA,
especially for SMEs, will broadly mirror the consumer
market opportunity.
Good examples are found in Middle East countries such
as Saudi Arabia (69% household computer penetration;
11% fixed broadband penetration) and Kuwait (84%
household computer penetration; 3% fixed broadband
penetration).
3.6.3.2 Mostly ‘Red Ocean’ markets
Operators should only play in these markets for
broader strategic reasons
Red Ocean markets present a fiercely competitive
opportunity for home broadband (i.e. analogous to a
bloody, shark-infested ocean). These are markets with
household computer penetration of over 40% and over
20% fixed broadband penetration.
Although these markets are sizeable to be addressed
by FWA, they are highly competitive because either
the fixed broadband ARPU is already at a price that
makes FWA pricing uncompetitive or the existing fixed
broadband providers will fight to defend their market
share. However, FWA, as a backup broadband for
enterprises could provide attractive.
Examples of Red Ocean FWA markets are in most
developed markets in Europe, North America and North
East Asia.
3.6.3.3 Mostly ‘Desert’ markets
Operators should seek out and play in ‘oasis’
opportunities in these markets
Desert markets offer only a small, mass market FWA
opportunity because of low affordability and usability
(i.e. analogous to a dry, barren desert with isolated
‘oases’ of greenery). These are markets with household
computer penetration of less than 40% and less than
20% fixed broadband penetration. Customers in these
markets will likely stick to using their smartphones for
internet access, and as a hotspot for computer internet
access.
However, there will be selected residential and
enterprise opportunities, especially in affluent
neighbourhoods and business districts which can prove
particularly lucrative. Operators in these markets should
focus on making a compelling FWA proposition to
customers in these locations early, else these customers
will seek alternative broadband solutions for their
needs.
Examples of Desert FWA markets are in many
developing markets in Africa and South East Asia.
5G Value Creation and Capture
129
The Enterprise Opportunity
5G Value Creation and Capture
3.7
KEY TAKEAWAYS
• 5G will bring new capabilities and the flexibility to serve the specific needs of different
enterprise customers. This could be worth $400 billion per annum to operators by 2025.
• There are broadly four enterprise offerings by operators: basic connectivity; differentiated
connectivity; beyond connectivity and managed solutions.
• Operators should seek ways to capture incremental value from commoditised basic
connectivity; hence the need for differentiated connectivity (e.g. network slicing).
• Operators can sell more third-party products as part of beyond connectivity; they can also
work as co-innovators with their customers to build customer-relevant solutions.
• 5G will be a key enabler of the 4th Industrial Revolution, as technology is seamlessly
embedded within society and especially in commercial and industrial processes.
130
5G will bring new capabilities and the flexibility
to better serve the specific needs of different
enterprise customers. Operators can leverage these
new capabilities to unlock a sizeable new revenue
opportunity that GSMA estimates could be worth up
to $400 billion per annum by 2025 (including the IoT
segment).
To fully capture this opportunity, operators will need
to tailor their value propositions to large organisations
(including municipalities and government agencies) as
well as small and medium enterprises (SMEs). While
operators are primarily purveyors of connectivity
products, they can offer enterprises four different
offerings positioned around the core connectivity
offering as shown in Figure 3.7.1.
3.7.1 Enterprise products & services
Enterprises will be the biggest source of incremental revenue in the 5G era
5G Value Creation and Capture
FIGURE 3.7.1
OPERATOR ENTERPRISE OFFERINGS IN THE 5G ERA
99% connections
360 MHz 110 MHz
<1% connections
MTN Glo Airtel 9mobile ntel Bitflux Intercellular Smile
700 800 900 1800 2100 2300 2600
Extending the core product
Extending into non-core products
DIFFERENTIATED CONNECTIVITY
(incl. Network Slicing and QoS Di erentiation)
BASIC CONNECTIVITY
(incl. Faux Consumers and basic IoT)
MANAGED SOLUTIONS
(incl. managed services)
BEYOND CONNECTIVITY
(incl. software and security)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
iPhone ASP GDP/capita
(constant US$)
Unique subscriber
ARPU
3.6%
CAGR (2007–2017)
1.0%
CAGR (2007–2017)
-6.0%
CAGR (2007–2017)
60
20
20
20
30
10
20
30
10
30
30 20 20 10
30
10
20
30
10
20
20
3.7.1.1 Basic Connectivity
Operators should seeks ways to capture incremental
value from basic connectivity
Operators will continue to offer basic connectivity
to enterprises in the 5G era using the core eMBB
proposition or, for fixed/mobile operators, fixed
broadband offerings. This is generally a strong business
for operators and can be quite profitable in areas with
unique infrastructure. With the growth in IoT services,
operators have the opportunity to cultivate the market
for billions more IoT connections.
However, whether as the default option or as a
backup, connectivity is largely commoditised and the
basic connectivity offering for enterprises is largely
undistinguishable from the consumer proposition. This
lack of distinction muddles efforts to segment the
market appropriately, resulting in many SMEs being
served as if they are residential customers (i.e. faux
consumers).
In the 5G era, operators should step up efforts to
capture incremental value from basic connectivity.
This could come through special SLAs (differentiated
connectivity) or by bundling additional services
(beyond connectivity).
3.7.1.2 Differentiated Connectivity
Operators can better monetise connectivity using a
bespoke or customised connectivity offering
Both fixed and mobile operators have, since the early
1970s, sought to offer differentiated connectivity to
enterprise customers. With this, operators seek to offer
different quality-of-service (QoS) to different customers
at different price levels.
Table 3.7.1 (below) provides a brief review of 15
differentiated connectivity capabilities that have been
introduced in the telecoms industry since 1974. Several
of these capabilities (e.g. Leased Lines, ATM) have been
productised and marketed to enterprises for several years.
However, there have also been historical challenges in
selling differentiated connectivity.
This context will shape the introduction of network slicing
and other 5G differentiated connectivity offerings. Given
that enterprises already indicate their lack of clarity on the
5G proposition, operators need to be clear that they are
solving a specific business need for a customer instead of
pushing network slicing as a technology.
131
3.7.1.3 Beyond Connectivity
Operators will develop new solutions, sell more
third-party products/services/solutions and develop
platforms for APIs
Operators already offer several non-connectivity
products and services to enterprises and these
will grow in the 5G era. Many of these propositions
are complementary to connectivity (e.g. devices,
cloud/backup storage, security) while some are
supplementary to connectivity (e.g. IT support,
business apps, web hosting).
In the 5G era operators will extend their beyond
connectivity propositions in three additional ways.
Firstly, they will leverage their deep knowledge
about the needs and behavior of the customer, plus
management of the network infrastructure to develop
new products and services.
Secondly, they will deepen their role as resellers of
non-operator products and services (e.g. insurance,
fraud detection, business productivity software [e.g.
Office 360, Salesforce]). Importantly too, and as was
evident in the enterprise engagement, the SME market
will welcome operators providing end-to-end services.
These businesses have limited budgets and will opt
for plug-and-play products from operators that can
simplify their tasks.
Thirdly, in a push to expand their role in the value chain,
operators will develop platforms/market exchanges
to commercialise network APIs and platform enablers.
This is one of the main lessons from the enterprise
engagement, highlighting the need for operators to
develop horizontal enablers that can be used to serve
customers in different industry verticals.
5G Value Creation and Capture
TABLE 3.7.1
SELECTED DIFFERENTIATED CONNECTIVITY MECHANISMS (1974 – 2018)
Name Description Fixed vs Mobile Year introduced Market status
Leased Lines Fixed 1974 (ITU) Moderate usage and revenues
X.25 Fixed 1976 (ITU) Little evidence of current
usage
IP TOS Internet Protocol Type of
Service Fixed 1981 (IETF) Little evidence of current
usage
ATM Asynchronous Transfer Mode Fixed 1988 (ITU) Decreasingly used with
negligible revenues
Frame Relay Fixed 1990 (ITU) Decreasingly used with
negligible revenues
IntServ/RSVP Intergrated Services Fixed 1994 (IETF) Little evidence of current
usage
DiffServ Differentiatiated Services Fixed 1998 (IETF) Little evidence of current
usage
MPLS Multi Protocol Label
Switching Fixed 2001 (IETF)
Widely used (Grandview
Research forecasts $46.3
billion by 2020)
Carrier Ethernet Fixed 2001 (MEF) Widely used (Ovum forecasts
$22.5 billion by 2020)
QCI QoS Class Identifier Mobile 2008 (3GPP) Mostly for VoLTE only
SD-WAN Software Defined Wide Area
Network Fixed/Mobile 2014 (-) Growing usage (Gartner
forecasts $1.3 billion by 2021)
SCM Smart Congestion Mitigation Mobile 2015 (3GPP) Used by emergency services
ACDC Access Control for general
Data Connectivity Mobile 2016 (3GPP) Little evidence of current
usage
5QI 5G QoS Indicator Mobile 2017 (3GPP) Not yet launched
Network Slicing Mobile 2017 (3GPP) Not yet launched
132
3.7.1.4 Managed Solutions
Operators to position as co-innovators with their
customers in the 5G era by offering managed services
Operators are increasingly entering the market to
create and manage a range of connectivity plus
solutions for customers. The benefit of this approach
is that operators can co-innovate with their customers.
For example, by applying data science and AI tools to
IoT customer data (e.g. fleet management company),
an operator can help the customer to identify new
business opportunities or more efficient ways of
running their business.
An important opportunity in the 5G era will be to
manage 5G private networks that several large
enterprises seek to deploy. As history shows that
businesses generally benefit from outsourcing
connectivity solutions as a non-core function,
operators will need to put together a compelling
value proposition that could include leased spectrum,
equipment, and management.
Designing and building technology solutions for large
enterprises is a market traditionally dominated by large
system integrators, especially in developed markets.
Operators will have to compete in this market by
upskilling themselves and building up their brand to
achieve market recognition and reputation. Operators
in developing markets, with less system integrator
competition, have a stronger opportunity in this space.
5G Value Creation and Capture
99% connections
360 MHz 110 MHz
<1% connections
MTN Glo Airtel 9mobile ntel Bitflux Intercellular Smile
700 800 900 1800 2100 2300 2600
Extending the core product
Extending into non-core products
DIFFERENTIATED CONNECTIVITY
(incl. Network Slicing and QoS Di erentiation)
BASIC CONNECTIVITY
(incl. Faux Consumers and basic IoT)
MANAGED SOLUTIONS
(incl. managed services)
BEYOND CONNECTIVITY
(incl. software and security)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
iPhone ASP GDP/capita
(constant US$)
Unique subscriber
ARPU
3.6%
CAGR (2007–2017)
1.0%
CAGR (2007–2017)
-6.0%
CAGR (2007–2017)
60
20
20
20
30
10
20
30
10
30
30 20 20 10
30
10
20
30
10
20
20
3.7.2 Enterprise drivers
3.7.2.1 The declining ARPU trap
Operators need the enterprise market to stabilise
declining consumer ARPU
The mobile industry has faced a declining ARPU for a
long time. This is now an established long-term trend,
highlighting how challenging it has been for operators
to increase their share of the consumer wallet. Using
2007 as a base, in the ten years to 2017 unique
subscriber ARPU declined by an average of 6% per
year, as shown in Figure 3.7.2
By contrast, over the same period global GDP/capita
grew by 1% annually, and the average selling price
of the iPhone grew by 3.6% annually. This means
consumers were getting richer and were willing to pay
more for other products and services in the telecoms
ecosystem, but were paying less for mobile services.
Stabilising, and then reversing this persistently
declining ARPU trend would be a major success for the
5G era, and the enterprise opportunity may be key to
achieving this.
FIGURE 3.7.2
ARPU GROWTH VS GDP/CAPITA AND IPHONE ASP 2007 – 2017
(SOURCE: ASYMCO, WORLD BANK, GSMAI, GSMA ANALYSIS)
133
3.7.2.2 5G and the Fourth Industrial Revolution
The biggest geopolitical driver for 5G is as an enabler
for the Fourth Industrial Revolution
Some operators face an immediate and direct demand
from geopolitical forces to deploy 5G to support the
transformation of society and vertical industries.
This aspiration is captioned as the Fourth Industrial
Revolution or Industry 4.0, a time when technology is
seamlessly embedded within society and especially
in commercial and industrial processes. Political
commentary often puts 5G together with advances
in robotics, AI, quantum computing, IoT, 3D printing,
autonomous navigation etc. as the emerging
technological forces that will power Industry 4.0.
As Figure 3.7.3 shows, operator products and services
were integral to the Third Industrial Revolution from the
1980s as technology evolved from analogue electronic
and mechanical solutions to the digital versions that
are prevalent today. This was the era of the Personal
Computer (PC), internet, smartphones and Machine-toMachine devices.
5G Value Creation and Capture
POST PAID MARKET
PREPAID MARKET
EMERGING MARKET
ENTERPRISE MARKET
1G era 2G era 3G era 5G era
INTERNET MARKET
4G era
3rd INDUSTRIAL REVOLUTION 4th INDUSTRIAL REVOLUTION
1980s
1990s
2000s
2010s
2020s
Proof-of-Concept
for cellular
Interoperability
Interconnection
Roaming
X enterprise opportunities
Swappable
SIM cards
Open market
devices
Always-on data
Smartphones
App stores
Horizontal enablers
(AI, IoT, APIs, Network Slices)
Industrialised
partnership model
Consumers Enterprises Consumers Enterprises
2018 2025 (Aspirational)
20%
80%
60%
40%
33%
REVENUE GROWTH
FOR A HYPOTHETICAL
OPERATOR
MASSIVE IoT / LPWA
Smart cities
Smart logistics
Smart metering
ENHANCED
MOBILE BROADBAND
Immersive video conferencing
Augmented reality
3D video
CRITICAL
COMMUNICATIONS
Autonomous vehicles
Smart grid
Factory automation
FIGURE 3.7.3
5G AND THE 4TH INDUSTRIAL REVOLUTION
3.7.2.3 Private 5G networks: the market opportunity
Operators need to be ready to support private 5G
cellular networks
5G will be the first mobile technology generation to
be designed from the outset to operate in unlicensed,
shared48 and traditional licensed spectrum. This means
that not owning licensed spectrum will not be the
barrier to mobile network operation that it once was.
As a result, the introduction of 5G will create
opportunities for new players to enter the market
to provide private cellular services in a localised
environment. One estimate is that $5 billion will be
spent on private mobile networks per year by the end
of 202149.
This is an opportunity for operators to deploy private
networks for key enterprise customers, or to sublet
licensed spectrum to them. However, enterprises may also
choose to roll out their own 5G networks, either directly
or through partners50. These enterprises include private
venues, municipalities, utility companies, port authorities
and manufacturers who want to deploy cellular-based IoT
solutions and other broadband communications.
48. Unlicensed spectrum includes the 2.4 GHz and 5 GHz “Wi-Fi” bands. Shared spectrum is typically a band that is occupied by an incumbent but that is made available to others in areas
and at times when it is not being used (e.g. a prominent example is the US’ CBRS sharing plan in the 3.5 GHz band.)
49. According to an SNS Telecom & IT study (2017)
50. E.g. German Industry wants to setup their own 5G networks & several US companies/groups are campaigning to the FCC for terms which will suit private mobile networks in the 3.5
GHz band.
134
FIGURE 3.7.4
THE OPERATOR REVENUE MIX IN THE 5G ERA
5G Value Creation and Capture
POST PAID MARKET
PREPAID MARKET
EMERGING MARKET
ENTERPRISE MARKET
1G era 2G era 3G era 5G era
INTERNET MARKET
4G era
3rd INDUSTRIAL REVOLUTION 4th INDUSTRIAL REVOLUTION
1980s
1990s
2000s
2010s
2020s
Proof-of-Concept
for cellular
Interoperability
Interconnection
Roaming
X enterprise opportunities
Swappable
SIM cards
Open market
devices
Always-on data
Smartphones
App stores
Horizontal enablers
(AI, IoT, APIs, Network Slices)
Industrialised
partnership model
Consumers Enterprises Consumers Enterprises
2018 2025 (Aspirational)
20%
80%
60%
40%
33%
REVENUE GROWTH
FOR A HYPOTHETICAL
OPERATOR
MASSIVE IoT / LPWA
Smart cities
Smart logistics
Smart metering
ENHANCED
MOBILE BROADBAND
Immersive video conferencing
Augmented reality
3D video
CRITICAL
COMMUNICATIONS
Autonomous vehicles
Smart grid
Factory automation
3.7.3 Enterprise economics: operator revenue mix
Overall 5G era revenues can grow by 33% if a hypothetical operator can grow its enterprise
revenues to 40% while maintaining its consumer revenues
Faced with a maturing consumer market, the enterprise
segment offers an opportunity for operators to
continue growing revenues in the 5G era, which can
lead to a changing mix of revenues.
An industry rule of thumb suggests that operators
currently seek to generate 80% of revenues from
consumers and 20% from enterprises. To make
progress in the 5G era, operators will need to aim to
grow their absolute revenues by maintaining their
current consumer revenues (in absolute terms) while
growing their enterprise revenues to an aspirational
target of 40% of the total. A hypothetical operator
going from 80/20 to a 60/40 revenue split, could see
revenues in the 5G era grow by 33%.
Unlike the consumer market where operators rely on a
single proposition based on mostly basic connectivity
products (voice, messaging and data), there is unlikely
to be a single enterprise opportunity that will deliver
40% of revenues. Instead, operators will rely on serving
multiple enterprise opportunities using a common set
of horizontal enablers (see Figure 3.7.4).
135
Enterprise Opportunity - IoT deep dive
5G Value Creation and Capture
3.8
KEY TAKEAWAYS
• Many IoT applications are well supported on the existing 4G networks, and NB-IoT and LTE-M
are already part of the 5G family.
• 5G will enhance the IoT opportunity by providing more capacity for scale, for critical IoT, and
by supporting enhanced quality of service and lower latency.
• To compete effectively in IoT, operators should plan to provide IoT connectivity solutions
enhanced with additional capabilities, such as MEC, AI and security.
136
Internet of Things (IoT) is set to become a major
contributing factor to the increase of productivity
by enhancing and automating business and
manufacturing processes via secure connectivity. Many
IoT applications are well supported on the existing 4G
networks, but some can also benefit from enhanced 5G
capabilities for massive IoT by providing more capacity
for scale; for critical IoT; and by supporting enhanced
quality of service and lower latency.
A boost of capacity supported by 5G will be particularly
important, as the large-scale IoT deployments will drive
a massive growth of IoT connections. Two thirds of the
3.6 billion IoT connections in 2025 (up from 1.1 billion
at the end of 2018 as per GSMA Intelligence forecasts)
will be used by smart industry and automotive verticals:
5G is already incorporated into the roadmaps for
connected vehicles, transport, manufacturing and
robotics.
These new IoT connections are set to make use of
numerous new 5G functionality: ultra-reliable low
latency communication and time sensitive networking,
enabled via a combination of 5G and wireless
edge, will be required for time-critical industrial IoT
manufacturing processes, including closed-loop robotic
control; machine-human interactions; automated
guided vehicles; as well as AR and VR, for example, for
machine maintenance.
Public and private businesses will use input from secure
IoT connectivity overlaid with artificial intelligence,
cloud computing and advanced analytics to monitor
and interpret data from diverse assets, production lines
and complex machinery in real-time to anticipate faults,
manage infrastructure and mitigate risks.
3.8.1 IoT products & services
5G will support a wide variety of machine-related, IoT use cases
5G Value Creation and Capture
FIGURE 3.8.1
MOBILE IoT IN THE 5G FUTURE
POST PAID MARKET
PREPAID MARKET
EMERGING MARKET
ENTERPRISE MARKET
1G era 2G era 3G era 5G era
INTERNET MARKET
4G era
3rd INDUSTRIAL REVOLUTION 4th INDUSTRIAL REVOLUTION
1980s
1990s
2000s
2010s
2020s
Proof-of-Concept
for cellular
Interoperability
Interconnection
Roaming
X enterprise opportunities
Swappable
SIM cards
Open market
devices
Always-on data
Smartphones
App stores
Horizontal enablers
(AI, IoT, APIs, Network Slices)
Industrialised
partnership model
Consumers Enterprises Consumers Enterprises
2018 2025 (Aspirational)
20%
80%
60%
40%
33%
REVENUE GROWTH
FOR A HYPOTHETICAL
OPERATOR
MASSIVE IoT / LPWA
Smart cities
Smart logistics
Smart metering
ENHANCED
MOBILE BROADBAND
Immersive video conferencing
Augmented reality
3D video
CRITICAL
COMMUNICATIONS
Autonomous vehicles
Smart grid
Factory automation
137
3.8.2 IoT drivers
5G Value Creation and Capture
3.8.3 IoT economics
3.8.2.1 NB-IoT and LTE-M as futureproof IoT
Investment into NB-IoT and LTE-M today is already an
investment into 5G massive IoT
Massive IoT connectivity based on low power wide
area (LPWA) networks will become a less expensive,
less complex and an energy-efficient foundation for
building future intelligent 5G managed services.
One of the most important enterprise considerations
for any technology investment is its durability and the
openness of its ecosystem. The majority of IoT business
cases require a long-term deployment of connected
sensors and devices that can be managed remotely and
can last for many years without replacement. With the
first 5G networks now being planned, some potential
customers for NB-IoT and LTE-M have been hesitant
to deploy the technology, believing 5G could make it
obsolete.
In reality, the opposite is true: 3GPP has agreed that
the LPWA use cases will continue to be addressed
by incorporating LTE-M and NB-IoT as part of the 5G
specifications, so confirming the long term status of
both LTE-M and NB-IoT as 5G standards. Massive IoT
is expected to be backward compatible, with software
upgrades that would support transition to massive IoT
without disrupting the IoT business case.
3.8.2.2 IoT ‘long tail’ as a driving force
“IoT out of the box” will drive the long tail of industrial
and consumer applications
The early adoption of IoT has been driven by large
enterprises, but the large-scale deployment will
accelerate when IoT becomes ingrained in the long tail
of industrial and consumer applications and services,
many of which are developed by small- and mediumsize enterprises. Adoption of cellular IoT solutions in
this segment will be driven by the mobile industry’s
ability to support open innovation, and open source
prototyping and development.
The foundation for diverse IoT applications is laid on
the existing 4G networks, where LPWA NB-IoT and
LTE-M technologies already support the functionality
of massive IoT and private LTE networks are used by
enterprise customers. The launch of SA 5G networks
will enhance the LTE functionality and give extra boost
to the growth of IoT applications.
3.8.3.1 Competition in the IoT ecosystem
Operators will differentiate with a secure, neutral
service IoT proposition
Operators will not be alone in competing for the
industrial IoT market. Firstly, mobile IoT will coexist
and compete with other access technologies such
as Wi-Fi, LPWA networks and satellite. Secondly,
the management of private 5G networks is equally
attractive to systems integrators, enterprise-focussed
vendors, and enterprise customers themselves.
To compete effectively, operators should plan to
provide IoT connectivity solutions enhanced with
additional capabilities, such as MEC, AI and securityas-a-service that can cater to both the short-range
and long-range Industrial IoT network requirements.
Operators’ unique proposition is in secure management
of diverse 5G connectivity options, combined with
a variety of services such as cellular grade security
and analytics, moving from providing data services to
control services.
Importantly, operators do not need to wait until 2020.
Their portfolios of managed enterprise IoT services can
be built using 4G IoT, and later enhanced and expanded
with 5G building on the established enterprise
relationships and opening new value-added revenue
opportunities.
138
3.8.3.2 IoT value chain
Operators will increase their role in the IoT value chain
in the 5G era
New network capabilities will create more IoT
opportunities for operators, in addition to the many
IoT use cases that can and are being addressed using
today’s existing technologies. A typical example of the
value chain for an IoT service is illustrated in Figure
3.8.2
For operators, the IoT opportunity is about adding
many more connections, as well as capturing value
from parts of the IoT value chain beyond connectivity.
Connectivity revenues represent the main opportunity
for operators in IoT today and this opportunity will
continue to grow as billions of additional connections
are brought on stream. By 2025, however, GSMAi
forecasts the share of connectivity revenue in the
total IoT revenue will decline to 17%, while Service
Enablement, including Applications and Platforms, is
forecast to generate 57% of the total, and Professional
Services and Business Solutions 26%.
This “Forward Integration” opportunity should see
operators take on more roles in enabling IoT services,
and where feasible, offering IoT business solutions.
Among these are analytics/Big Data, real time control/
telematics, and autonomous driving capabilities. The
new roles are outlined in Figure 3.8.3, and analysed in
detail in the GSMA report titled “Opportunities in the
IoT: Evolving roles for mobile operators.”
Likewise, operators could backward integrate and take
advantage of opportunities in new areas.
5G Value Creation and Capture
FIGURE 3.8.2
OPERATOR ROLE IN THE IOT VALUE CHAIN
TRANSPORT LOGISTICS HEALTH MANUFACTURING
TRANSFORM
EMPOWER
CONNECT
CHIP / MODULE
>$400bn
TARGETABLE REVENUE OPPORTUNITY BY 2025
INDUSTRY VERTICALS / SECTORS
HORIZONTAL APIs & ENABLERS
5G ACCESS & CORE NETWORK
DEVICE / MACHINE CONNECTIVITY SERVICE ENABLEMENT BUSINESS SOLUTIONS
Default operator role
‘Backward Integration’ opportunity
‘Forward Integration’ opportunity
IoT Prime Contrator
Big Data, Analytics & AI
Vertical Specialisation
Ecosystem Orchestration
IoT Infrastructure
Network Slicing MEC AI IoT Other 5G era tools/enablers
IoT Security IoT Service Management
IoT Connectivity
Breadth of Portfolio
IoT Foundation IoT Service Enablement IoT Solutions
Operator
Roles
Transformation
Vision
TRANSPORT LOGISTICS HEALTH MANUFACTURING
TRANSFORM
EMPOWER
CONNECT
CHIP / MODULE
>$400bn
TARGETABLE REVENUE OPPORTUNITY BY 2025
INDUSTRY VERTICALS / SECTORS
HORIZONTAL APIs & ENABLERS
5G ACCESS & CORE NETWORK
DEVICE / MACHINE CONNECTIVITY SERVICE ENABLEMENT BUSINESS SOLUTIONS
Default operator role
‘Backward Integration’ opportunity
‘Forward Integration’ opportunity
IoT Prime Contrator
Big Data, Analytics & AI
Vertical Specialisation
Ecosystem Orchestration
IoT Infrastructure
Network Slicing MEC AI IoT Other 5G era tools/enablers
IoT Security IoT Service Management
IoT Connectivity
Breadth of Portfolio
IoT Foundation IoT Service Enablement IoT Solutions
Operator
Roles
Transformation
Vision
FIGURE 3.8.3
OPERATOR ROLE TRANSFORMATION
5G Value Creation and Capture 139
5G Value Enablers – Resilient Networks
& Services
3.9
KEY TAKEAWAYS
• Resilience will be a major strategic and business enabler in the 5G era and will play out in
different ways for different services.
• Operators will need to create value propositions to customers based on clear understanding
of service availability and reliability.
• 5G networks should recognise that different use cases may require different service levels,
especially during atypical operating scenarios.
• Operators need tools and processes to reassure customers that 5G will deliver on its value
proposition and SLA.
• Operators need a secure way to authorise devices and to block devices en masse.
140
Studies show that the cost, to society, of poor internet
connection can be high and many 5G era use cases
could fail to materialise if operators cannot assure
network and service resilience. A 2015 UK study by
Daisy Group suggests that the cost to the economy
can be as high as £11billion, equating to about 31% of
the total annual revenues of the UK’s fixed and mobile
operators. This is the context to the importance of
resilience to creating and capturing value in the 5G era.
A resilient system provides and maintains an adequate
level of service in normal and abnormal operating
scenarios, including in the event of a fault. In this
context, resilience is an all-encompassing concept and
covers other attributes such as reliability; availability;
survivability; consistency; quality management; Six
Sigma, etc. It also covers the traditional approaches
from systems, safety and reliability engineering.
Many operators have already embraced the Total Quality
Management (TQM) methodologies that came from the
manufacturing industries (e.g. operators now routinely use
Six Sigma to improve their service delivery and business
processes ). While much of the focus on resilience has
been at the service level, the 5G era will need a similar
push at the network level to fully enable value creation
and capture for operators.
Resilience will be a major strategic and business enabler
in the 5G era and operators will need to create value
propositions for customers based on clear understanding
of service availability and reliability. For example, Table
3.9.1 illustrates the different levels of network availability
and the type of use cases that can be supported.
It is important to stress that operator-run 5G networks
using licensed spectrum will already be more resilient
than alternative networks run on unlicensed spectrum
or managed by organisations without the scale or
competence to run critical infrastructure.
This section groups the considerations for network and
service resilience into predictive resilience, preventive
resilience and corrective resilience.
3.9.1 Importance of resilience
The economic cost of poor Internet connections can be as high as 30% of annual telecoms
revenues
5G Value Creation and Capture
FIGURE 3.9.1
DESIGNING NETWORKS TO MINIMISE DOWNTIME
"Two Nines" "Three Nines" "Four Nines" "Five Nines"
Availability 99 99.9 99.99 99.999
Downtime
Per Year 3.65 days 8.77 hours 52.60 minutes 5.26 minutes
Per Month 7.31 hours 43.83 minutes 4.38 minutes 26.30 seconds
Per Week 1.68 hours 10.08 minutes 1.01 minutes 6.05 seconds
Per Day 14.40 minutes 1.44 minutes 8.64 seconds 864.00 milliseconds
Use cases (Ideal for…) Email, Web browsing IoT Pay TV Voice, autonomous
navigation
5G Value Creation and Capture 141
3.9.2 Predictive resilience: designing for resilience
Network and service design should be ‘fit for purpose’ for each use case
3.9.1.1 Network resilience and the philosophy of
communications networks
Resilience is integral to the technical designs of mobile
networks, but it is at ‘best effort’ level only
There is an ongoing paradigm shift in the underlying
philosophy of telecoms networks. Since the internet
went mainstream in the early 1980s, and prior to the 5G
era, it has typically been assumed that networks can
deliver ‘best effort’ connectivity over variable quality
networks.
Resilience will be key in the 5G era as the mobile
network is being explicitly asked to support ultrareliable and critical systems. This is a key selling point
for 5G and is reflected in the identification of Ultra
Reliable and Low Latency Communications (URLLC)
as one of the key pillars of the 5G opportunity. 3GPP
has also specified that the reliability of the 5G network
should be such that there is a 1-10^(-5) success
probability of transmitting a layer 2 PDU (protocol data
unit) of 32 bytes within 1ms.
Operators consider a lot of factors in designing and
provisioning mobile networks and services. These
have been explored in detail in the 5G Readiness
chapter. The outcome of these considerations is that
the network is dimensioned to cope with peak usage,
and most customers can expect to receive the same
experience. These considerations will not change,
in general, in the 5G era. However, operators should
consider at least two adaptations to ensure that 5G
era networks and services system are designed for
resilience.
First, as is clear from the enterprise interviews, some
users are not sure of the 5G value proposition and may
not rely on it for their product roadmap (e.g. driverless
cars). This suggests a need for clearer messaging on
what 5G will deliver and what it will definitely offer for
selected use cases.
Second, the operation of 5G era networks should
recognise that different use cases may require different
service levels, especially in atypical operating scenarios.
This is the promise of network slicing, to offer a
differentiated experience to different use cases such
that each use case is optimally addressed. Operators
have begun adapting their propositions in the 4G era
using static categories (e.g. IoT devices that upload
data during off-peak only). In the 5G era, network
automation should make it possible to dynamically
provision different levels of services.
142
Regardless of the robustness of its design and
provisioning, 5G era networks will at times be
challenged to deliver on their designed promise.
These challenges could be accidental (e.g. equipment
failures, bugs in software, natural disasters, human
errors etc.) or malicious (e.g. hacking, software viruses,
unauthorised access, vandalism, theft etc.). In many
ways, the overall resilience of 5G systems will be
determined by the resilience of its weakest component.
For some emerging 5G use cases (e.g. for the
healthcare industry), operators will be tasked
with providing assurances and stringent Service
Level Agreements (SLAs) for customers. Likewise,
policymakers and insurers will be keen to know what
policies and processes operators have in place to assure
security of 5G era systems.
Other stakeholders in the 5G ecosystem will benefit
from a clearly articulated industry view on how to
deliver preventive resilience to support the 5G value
proposition. Accordingly, this calls for concerted efforts
to develop common QoS and SLA frameworks for
different industry verticals and use cases.
3.9.3.1 Access control for resilient networks
Operators need a secure way to authorise devices and
to block devices en masse
A robust identity, authentication and authorisation
framework is integral to providing preventive resilience
for 5G era systems. Assets need to be correctly
identified and authenticated to the right services, while
ensuring that devices are restricted from using services
they are not entitled to. Services should also have an
ability to recognise a subscriber and to compare the
security capabilities required, and then respond in near
real time. The subscriber may move between networks
and services within these networks meaning the
security parameters may alter.
In addition to restricting services, it may be necessary
for an operator to block devices when the 5G era
system is compromised or attacked. This is the case
when numerous devices send data traffic to a specific
target, resulting in a distributed denial of service
(DDoS) attack.
3.9.3 Preventive resilience: frameworks to assure resilience
Operators need tools and processes to reassure customers that 5G will deliver on its value
proposition and SLA
5G Value Creation and Capture
5G Value Creation and Capture 143
3.9.3.2 Supply chain risks in the 5G era
Supply chain resilience and control will be required in
5G due the complexity of the ecosystem
While there may not be as many players in the market
during early 5G deployment, new opportunities in
the 5G era could extend existing relationships and
create new supplier relationships for operators. This is
emerging to be a major consideration for preventive
resilience in the 5G era, and can assume strategic and
geopolitical dimensions.
Accordingly, operators need to understand their place
within the end-to-end supply chain for each service
and where ultimate accountability, responsibility and
liability fall. The supply chain applies to suppliers
providing any aspect of a specified service; this may
be 5G components, service management, software
utilisation, device ownership and numerous other
aspects of service delivery.
A notable example of supply chain risk is that the
failure to risk-assess supply interlinks may result in data
leakage through insecure Network Exposure Functions
(NEF) and Application Programmable Interfaces (API).
Industry standards such as ISO 2800, 2700 and 3100
address supply chain and risk management controls.
3.9.5 Corrective resilience: business continuity and disaster recovery
In the event of a fault, 5G systems will need to quickly return to normalcy
When a fault or failure does occur, customers will need
assurances that operators will quickly identify, isolate
and rectify the fault so that service can continue. This
expectation will only grow in the 5G era as critical
systems and services become increasingly dependent
on the mobile network.
Proper business continuity planning recognises the
potential risks that can hamper 5G service delivery to
customers, support customers in assessing the impact
to their day-to-day operations and mitigate the risks,
and provide assurances on minimising the downtime.
A starting point towards corrective resilience is to
build in redundancies to provide fallback options for
selected use cases. This multi-connectivity approach
could evolve to become a major part of the 5G value
proposition for enterprise use cases.
For example, connections for emergency and critical
services could rely on a fall-back connection in the
event of a fault. This is the explicit requirement from a
team of surgeons exploring the opportunity for remote
surgery in the US54. While low latency is being touted as
the enabler for remote surgery, the surgeons note that
they could perform surgeries with worst case latencies
of up to 250 milliseconds. However, they dread the
unreliability of the connectivity and would require
dedicated networks with multiple connectivity options
to assure resilience.
54. https://www.theguardian.com/technology/2018/jul/29/the-robot-will-see-you-now-could-computers-take-over-medicine-entirely#comment-118850420
144
3.10 5G Value Enablers: Horizontal APIs
KEY TAKEAWAYS
• Horizontal APIs provide the interface between the 5G network and the needs of enterprises
in different industry verticals.
• 3GPP has taken a big step towards harmonising horizontal APIs for the 5G era, providing a
common global structure for exposing network and service capabilities to third parties.
• Capability exposure, platformisation and developer ecosystems are the ingredients for a
successful API ecosystem.
5G Value Creation and Capture
145
The telecoms industry, like other sectors since the
Industrial Revolution of the 19th century, has ridden
on the back of a mass-produced service to deliver
transformational success to society. This worked also
because the service produced was similar to every
customer, allowing operators to drive scale and market
penetration fast. In the 5G era, such mass produced
services will continue to be the main proposition for
consumers and many enterprises.
However, if 5G is to become embedded deeper into
industrial processes in other sectors and unlock the
more than $400 billion revenue opportunity, then
offering only the default service proposition will no
longer be enough. Enterprises, especially those across
different industries, often require bespoke solutions and
operators have traditionally sought to work with large
enterprises to customise their mobile proposition.
Horizontal APIs provide the interface between the
5G network and the needs of enterprises in different
industry verticals. In practice, APIs will provide a more
efficient tool to customise, on a larger scale, the 5G
proposition to the needs of both large and the vastly
greater pool of smaller enterprises. This is the 5G mass
customisation opportunity.
3.10.1 Importance of APIs
As the interface with industry verticals, APIs are the vehicle for mass customisation in the
5G era
FIGURE 3.10.1
HORIZONTAL API AS THE VEHICLE FOR MASS CUSTOMISATION IN THE 5G ERA
5G Value Creation and Capture
TRANSPORT LOGISTICS HEALTH MANUFACTURING
TRANSFORM
EMPOWER
CONNECT
CHIP / MODULE
>$400bn
TARGETABLE REVENUE OPPORTUNITY BY 2025
INDUSTRY VERTICALS / SECTORS
HORIZONTAL APIs & ENABLERS
5G ACCESS & CORE NETWORK
DEVICE / MACHINE CONNECTIVITY SERVICE ENABLEMENT BUSINESS SOLUTIONS
Default operator role
‘Backward Integration’ opportunity
‘Forward Integration’ opportunity
IoT Prime Contrator
Big Data, Analytics & AI
Vertical Specialisation
Ecosystem Orchestration
IoT Infrastructure
Network Slicing MEC AI IoT Other 5G era tools/enablers
IoT Security IoT Service Management
IoT Connectivity
Breadth of Portfolio
IoT Foundation IoT Service Enablement IoT Solutions
Operator
Roles
Transformation
Vision
146
The technical landscape for APIs in the 5G era is a lot
more promising than in previous mobile generations. In
its recent releases 3GPP provided a means to securely
expose and discover the services and capabilities
provided by 3GPP network interfaces, via horizontal
APIs. These are the Network Exposure Function (NEF)
and the Service Capability Exposure Function (SCEF).
When successfully implemented, these will provide a
common global structure for exposing network and
service capabilities to third parties. This will allow
operators to enable new services, provide better SLAs
and ensure better quality of service (QoS) that feature
as key enterprise requirements for operators.
Another technical evolution of the API landscape in
the 5G era is that the APIs will be using established
IT principles to deliver on the 5G Service Based
Architecture. These will simplify the retrieval of data,
management of devices by the customer of the
network and allows operators to design better services.
Some of these principles include:
• Use of HTTP/2 (Hyper Text Transfer Protocol 2)
adopted as the application layer protocol for the
service based interfaces
• TCP (Transmission Control Protocol) adopted as
the transport layer protocol, and TLS (Transport
Layer Security) for security. UDP (User Datagram
Protocol) yet to be defined but will be added in
future 3GPP releases.
• JSON (JavaScript Object Notation) adopted as the
serialisation protocol.
• REST-style (Representational State Transfer) service
design whenever possible.
3.10.2 Technical landscape for APIs
3GPP has taken a big step towards harmonising horizontal APIs for the 5G era
5G Value Creation and Capture
5G Value Creation and Capture 147
3.10.3 APIs, platforms & commercialisation
Capability exposure, platformisation and developer ecosystems are the ingredients for a
successful API ecosystem
APIs are not new in the telecoms industry, and are
already widely used across the internet economy
where billions of API-based transactions are made with
minimal commercial agreements. However, the history
of APIs in the telecoms industry and beyond offers
three insights on what is needed to ensure that APIs in
the 5G era are successful.
First, the foundation for every successful API is that
it provides a standard interface to expose network or
service capabilities to third parties. While it is possible
to design and develop bespoke APIs for every use
case for each customer, it is much more efficient to
agree standard industry-level common APIs which
can be used globally. Crucially too, history shows
that these APIs start off for internal use before being
commercialised for external use.
Second, potential users of APIs may not want to set
up contractual relationships with the 800+ operators
in the world for each individual API. Instead, they
prefer a market exchange which provides a hub for API
exchanges and interconnections. Owners/managers of
the platform become the interface between operators
and the API users.
Third, APIs can only thrive in the market if there is an
active ecosystem of developers who are building new
products and services based on the APIs.
SMS is an example of a very successful API, with good
capability exposure, established platforms and market
exchanges, and a healthy developer ecosystem. This is
now being evolved into RCS.
Figure 3.10.2 is an example of the interlinks between
APIs, platforms and platform providers for the 5G era.
FIGURE 3.10.2
APIS – STANDARDISATION, PLATFORMISATION, COMMERCIALISATION
Pay by
subscription
Payment
SUBSCRIPTION BASED USAGE BASED DIFFERENTIATED PRICING AD-FUNDED
User pays VR platform, VR platform shares
the payment with the content producer
User pays VR store: PPV/Pay per
download; Platform shares payment with
content producer
User pays VR platform for superior
network experience (incl. QoS on uplink,
downlink & latency based on 5G
capabilities)
User pays to enjoy VR content
Adv. Company pays VR platform by CPM
Subscriber
VR Platform/App
VR Content Producer
Pay by usage:
Pay per view/
download
Payment
Subscriber
VR Platform/App
VR Content Producer
Pay by
QoS
Payment
Subscriber
Content owners / apps developers /
vertical industries
Platform exposes network capabilities
to third parties and abstracts them
Network Operator N
oering capabilities (incl. edge)
VR Platform/App
VR Content Producer
CPM based
Payment
Watch VR
Payment
Adv.
Company
VR
Platform
VR
Platform
Subscriber
APIs
ETSI
MEC
e.g.
MobileEdge
Capability
exposure
3GPP NEF,
SCEF, …
148
3.11 5G Value Enablers: Operator Cloud
KEY TAKEAWAYS
• The Operator Cloud will combine the best of both cloud and edge to enable the 5G ‘Service
Delivery Model’.
• Edge computing in 5G networks will be delivered as Multi-access Edge Computing to
reduce latency.
• An Operator Cloud can help operators to save up to 2% of capex by improving operational
efficiency and customer experience.
• If operators can create competitive global platforms for edge/cloud services, this could
unlock a new revenue opportunity of up to $100bn.
5G Value Creation and Capture
149
The Operator Cloud (see Figure 3.11.1), a distributed
cloud/edge infrastructure, is central to the new ‘Service
Delivery Model’ of the 5G era and how operators can
create value for their customers. 5G is a cloud-native
platform that will support a plethora of network
microservices.
Operators are much smaller than existing cloud
providers and need to manage a cloud infrastructure
that will deliver the flexibility and scalability of today’s
internet services. Likewise, the existing cloud providers
will need to move services closer to the edge to deliver
low latency capabilities. Co-locating their equipment
or hosting their application in the Operator Cloud is an
option.
To realise this, the Operator Cloud needs to incorporate
the best properties of cloud-based service delivery
while also leveraging edge-computing technologies.
The ultimate goal is to cost-effectively provide a
resilient network to deliver the consistency, reliability,
latency and compliance expectations of customers in
the 5G era.
In practice the Operator Cloud will support and
optimally distribute computing and intelligence
capabilities, between the core network and the access
network. This will enable high bandwidth and ultralow latency access to cloud computing/IT services at
the cloud and edge to be accessed by applications
developers and content providers.
3.11.1 Importance of the Operator Cloud
The Operator Cloud will combine the best of both cloud and edge to enable the 5G ‘Service
Delivery Model’
FIGURE 3.11.1
THE OPERATOR CLOUD IS A DISTRIBUTED EDGE/CLOUD INFRASTRUCTURE
5G Value Creation and Capture
Cell site
Customers
Aggregation site
Computing and intelligence to edge
Core Network Internet
Cloud
LATENCY Low Not critical
ANALYTICS Real-time Intelligence and insight
DATA TYPE High volume High quality
RAN Edge RAN Central Mobile Core
OPERATOR
CLOUD
INFRASTRUCTURE STRATEGY
INNOVATION STRATEGY
Cost
Saving
Revenue
Generation
Telco as
solution
provider
Telco as
Enabler
Telco
Internal
Synergies with
NFV/SDN rollout
Backhaul and Core Trac
Reduction
Customised System
Integration
Turnkey B2B
Solutions
End Customer
Applications
Edge Hosting /
Co-location
Edge laaS /
PaaS o
ering
Build a combined “5G + Operator Cloud”
investment case and deployment strategy
Recognise these as opportunities to
sweat an asset that is already used in
(A)
Like with 2G/3G/4G or CDN business
cases, there is a
‘build-it-and-they-will-come’
expectation
Explore di
erent business models
(based on their risk-reward profile &
complexity)
Consider partnerships, whether
Operator-led (e.g. MobileEdgeX) or
with other ecosystem players
A
B
4G AND PREVIOUS
OPERATOR CLOUD
150
Edge Computing, architected as Multi-access edge
computing (MEC) for mobile networks, is most suitable
for use cases that require at least one of the following:
low latency; real-time analytics; and high volume
data transfers (see Figure 3.11.2). As edge computing
reduces the physical distance of communications
nodes, latency can be reduced significantly while
allowing real-time analytics to take place. Having
the core functionality at the edge also allows a more
efficient transfer of massive volumes of data.
On the other hand, use cases that are not very delay
sensitive, where intelligence and insight are more
important than real-time analytics, and where high
quality data is preferred over high volume of data
would be more cost effectively addressed using
traditional core/cloud approach. Therefore, while MEC
provides operators with new capability to address new
use cases, it is important for the operator to consider
all of its infrastructure and capabilities to be ready to
address all 5G use cases.
Section 4.5, in the 5G Cost Considerations chapter,
explores the cost aspects of deploying MEC in a
global operator’s 5G network and recommends that
MEC should be integrated into the 5G business case
and investment plan. MEC APIs standards are being
developed by ETSI.
3.11.2 The case for MEC
Edge computing in 5G networks will be delivered as MEC
5G Value Creation and Capture
Cell site
Customers
Aggregation site
Computing and intelligence to edge
Core Network Internet
Cloud
LATENCY Low Not critical
ANALYTICS Real-time Intelligence and insight
DATA TYPE High volume High quality
RAN Edge RAN Central Mobile Core
OPERATOR
CLOUD
INFRASTRUCTURE STRATEGY
INNOVATION STRATEGY
Cost
Saving
Revenue
Generation
Telco as
solution
provider
Telco as
Enabler
Telco
Internal
Synergies with
NFV/SDN rollout
Backhaul and Core Trac
Reduction
Customised System
Integration
Turnkey B2B
Solutions
End Customer
Applications
Edge Hosting /
Co-location
Edge laaS /
PaaS o
ering
Build a combined “5G + Operator Cloud”
investment case and deployment strategy
Recognise these as opportunities to
sweat an asset that is already used in
(A)
Like with 2G/3G/4G or CDN business
cases, there is a
‘build-it-and-they-will-come’
expectation
Explore di
erent business models
(based on their risk-reward profile &
complexity)
Consider partnerships, whether
Operator-led (e.g. MobileEdgeX) or
with other ecosystem players
A
B
4G AND PREVIOUS
OPERATOR CLOUD
FIGURE 3.11.2
MEC VS CLOUD – A REQUIREMENTS PERSPECTIVE
5G Value Creation and Capture 151
3.11.3 Drivers for the Operator Cloud
Operators are one of many possible providers of a distributed cloud/edge infrastructure
The distributed edge/cloud infrastructure space is
attractive to operators and other players because of
the possibilities it enables. Other potential providers
include existing CDN players; select enterprises (e.g.
airports, malls etc.); businesses with distributed real
estate (e.g. supermarket chains); government/local
authorities (e.g. libraries); and tower companies. Each
of these alternative providers may opt to play in the
distributed cloud/edge market, especially if enabled by
either technology or regulation.
Operators have two distinct capabilities that give them
an advantage. Firstly, compared to others, operators
can breakout traffic locally, with minimal effort, before
it reaches the internet. Secondly operators are already
active in managing a mass-market edge infrastructure
for communications services.
Given these, there are four clear drivers for operators
to play in this market: drive for operational efficiency;
demand for improved customer experience;
expectations on monetising 5G era network
capabilities; and political forces.
3.11.3.1 Operational efficiency
An Operator Cloud can help operators to save up to 2%
of capex
Incorporating an Operator Cloud provides operational
efficiency opportunities for operators, potentially
saving up to 1.8% of the capex that would have been
used for backhaul and core network upgrades. This is
based on locally breaking out more than 30% of the
video content to a local storage location55. If applied
globally, this could be worth up to $3.2 billion for the
industry according to GSMA’s analysis.
Given the growing prevalence of video traffic on the
network and the rising dominance of a few large
content providers, the opportunity to locally breakout
and cache popular video traffic is growing.
3.11.3.2 Customer Quality-of-Experience
Poor customer experience creates an annual ‘revenueat-risk’ of more than $60billion for the industry
Customers often cite poor quality of experience
(QoE) as one of their key complaints about operators’
services. Therefore, the mechanism for using the
Operator Cloud to improve customer QoE is clear.
About 20% of customer sessions can be predicted to
suffer considerable QoE degradation at the access
network, according to network measurement specialists
Teragence. This is partly because congestion at the RAN
affects cloud-hosted videos more than edge-hosted
videos. The result is that edge-hosted videos start to
play faster and stall less than cloud-hosted videos.
Poor customer experience promotes churn, putting
operator revenues at risk. If this was to put 5% of
revenues into competitive play, this could put more
than $60 billion of global industry revenue at risk
(based on GSMAi’s forecast for mobile services
revenues in 2020).
3.11.3.3 Monetising new capabilities
Over $100 billion of new revenue opportunities can be
enabled by the Operator Cloud
With the Operator Cloud, operators have a great
chance to monetise the new network capabilities that
will be enabled by the 5G system. Some of these will
be basic storage and compute functionalities and many
others will be based on building a platform to support
apps. If the storage and compute opportunity matches
revenue projections for content delivery networks
(CDNs), this could amount to over $30 billion by 202256.
Likewise, a 30% share of app revenues by 2022 could
be worth over $70 billion to operators57.
These opportunities require operators to create global
platforms for edge/cloud services and applications.
But operators face huge challenges to achieve global
scale for their platforms, especially given previous
experience (e.g. with WAC and OneAPI). Therefore, new
approaches will be key to unlocking the opportunity.
One example is MobiledgeX’s approach to creating a
global operator platform.
55. https://mavenir.com/sites/default/files/2018-12/Mavenir-MEC-at-the-edge-vMBC-WP.pdf
56. https://www.marketsandmarkets.com/Market-Reports/content-delivery-networks-cdn-market-657.html
57. http://www.businessofapps.com/data/app-revenues/
152
3.11.3.4 Political forces
Someone will have to provide the infrastructure for
existing and emerging socio-political uses
Political headwinds in several countries will push the
need for a localised cloud/edge infrastructure. This
may be to satisfy data sovereignty laws, provide
cyber security, prepare for a future where broadcast
TV is replaced by Internet TV etc. For example, the
General Data Protection Regulation (GDPR) in Europe
already homogenises data protection policy across
the European Union, promoting the need to store EU’
citizen’s data with geographic restrictions.
Operators are often key providers of digital
infrastructure in most countries and would be expected
to provide the infrastructure for such politicallymotivated platforms.
5G Value Creation and Capture
3.11.4 Operator Cloud: infrastructure vs. innovation strategy
Value creation and capture with the Operator Cloud is firstly about an ‘infrastructure
strategy’
A common refrain in the industry about the Operator
Cloud, edge computing and MEC is that they present
a chicken and egg dilemma. Operators seek a robust
business case with clearly identified revenue sources
and sizes before embarking on the journey to deploy
the distributed edge/cloud infrastructure. While this
may look like the prudent thing to do, it creates inertia
for action and can lead to operators foregoing the
opportunity completely.
An alternative approach is to consider the Operator
Cloud, firstly as part of the infrastructure strategy of an
operator. Under this approach, the Operator Cloud is
progressively rolled out together with 5G network build
out. Operators also begin to use it for backhaul relief
and to improve the QoE for customers.
Under this approach, operators can satisfy their own
operational and customer experience needs, and then
address new opportunities without needing to impose
an unachievable ROI hurdle. Figure 3.11.3 shows the
contrast between the infrastructure strategy vs. the
innovation strategy.
5G Value Creation and Capture 153
FIGURE 3.11.3
OPERATOR CLOUD AS, FIRSTLY, AN INFRASTRUCTURE PLAY
(SOURCE: GSMA ANALYSIS, ADAPTED FROM DEUTSCHE TELEKOM)
Cell site
Customers
Aggregation site
Computing and intelligence to edge
Core Network Internet
Cloud
LATENCY Low Not critical
ANALYTICS Real-time Intelligence and insight
DATA TYPE High volume High quality
RAN Edge RAN Central Mobile Core
OPERATOR
CLOUD
INFRASTRUCTURE STRATEGY
INNOVATION STRATEGY
Cost
Saving
Revenue
Generation
Telco as
solution
provider
Telco as
Enabler
Telco
Internal
Synergies with
NFV/SDN rollout
Backhaul and Core Trac
Reduction
Customised System
Integration
Turnkey B2B
Solutions
End Customer
Applications
Edge Hosting /
Co-location
Edge laaS /
PaaS o
ering
Build a combined “5G + Operator Cloud”
investment case and deployment strategy
Recognise these as opportunities to
sweat an asset that is already used in
(A)
Like with 2G/3G/4G or CDN business
cases, there is a
‘build-it-and-they-will-come’
expectation
Explore di
erent business models
(based on their risk-reward profile &
complexity)
Consider partnerships, whether
Operator-led (e.g. MobileEdgeX) or
with other ecosystem players
A
B
4G AND PREVIOUS
OPERATOR CLOUD
154
3.12 5G Value Enablers: Network Slicing
KEY TAKEAWAYS
• Network Slicing offers the biggest commercial innovation opportunity in the 5G era.
• It enables operators to create pre-defined, differing levels of services to both their own
customer segments and different enterprise verticals.
• For Network Slicing to succeed as a commercial solution for enterprises, the industry needs
to deliver on four key ingredients:
– Aligned technical standards
– Clear guidelines on how to engage the ecosystem and potential customers from
enterprises
– The implementation roadmap for Network Slicing should be well documented early
enough to ensure broader industry consensus on how to implement slicing
– The business model for Network Slicing should be anchored in the reality of what is
achievable rather than hype
• Upselling Network Slicing capabilities to existing customers ought to be an easier
opportunity than targeting new customers.
5G Value Creation and Capture
155
Network Slicing offers the biggest commercial
innovation opportunity in the 5G era. It will enable
operators to create predefined, differing levels of
services for different enterprise verticals, enabling
them to customise their own operations. As noted by
Ericsson58, Network Slicing will give operators more
value levers to achieve simpler resource management,
deliver better customer experience, provision new
services with a shorter time-to-market, and unlock the
wider enterprise market.
Figure 3.12.1 highlights three focus areas, in two
categories, for Network Slicing.
For the in-house opportunity, an operator can dedicate
separate slices to existing customer segments. This
will provide an end-to-end segmentation beyond what
can be achieved by segmenting based on SIM cards,
or within the billing or customer care systems. A home
operator can also offer ‘roaming slices’ to foreign
operators, enabling them to tailor services for their
roaming customers.
But the big, new opportunity for operators is to
use Network Slicing to tap into new horizons in the
enterprise space. Network Slicing is one of the 5G era
enablers for operators to tap into the over $400 billion
enterprise revenue opportunity. Operators, with the
right device capabilities, operators can create slices for
different enterprise segments and tailor these slices to
their needs.
3.12.1 Importance of Network Slicing
Operators can use Network Slicing to address in-house opportunities or to explore the
enterprise opportunity
FIGURE 3.12.1
NETWORK SLICING USE CASES
5G Value Creation and Capture
OPERATOR A
Low Latency
OPERATOR A
Utilities Finance
Health Transport
OPERATOR A
PRODUCT X
Country D Country C
IoT Country A Country B Prepaid /
Postpaid
High Net
Worth
IN-HOUSE OPPORTUNITY ENTERPRISE OPPORTUNITY
Use slicing to optimise service oerings
Stages of the
“Business Buying Behaviour”
Needs Recognition
& Specification
Supplier Search
& Selection
Order Placement &
Performance Review
New horizons
1
C B A
2 3
1. Prove value of Network
Slicing
2. New customers
3. New sales channels
4. No existing performance
validation
1. Existing customers
2. Existing sales channels
3. Existing performance
validation
4. Prove value of Network
Slicing
1. Finalise technical details
2. Identify internal uses
3. Deploy Network Slicing for
internal use
4. Refine and validate the
Network Slicing proposition
Is it more dicult
to start here?
Is it easier
to start here?
3
2
1
1
2
3
USE CASES SERVICE REQUIREMENTS OPERATOR CAPABILITIES GO-TO-MARKET STRATEGIES
& BUSINESS MODELS
5G ERA USE CASES
Identify & quantify opportunities
that can be addressed by
operators in the 5G era
SERVICE REQUIREMENTS
FOR THE USE CASES
Identify specific requirements for
use cases that can be fulfilled by
cellular
OPERATOR ENABLERS &
CAPABILITIES TO MEET USE
CASE REQUIREMENTS
Match use case requirements to
specific & monetisable 5G era
solutions
IDENTIFICATION &
EVALUATION OF
GO-TO-MARKET
STRATEGIES AND
BUSINESS MODELS
58. https://www.ericsson.com/en/networks/insights/economic-study-5g-network-slicing
156
For Network Slicing to succeed as a commercial
solution for enterprises, the industry needs to deliver
on four key ingredients.
First, the technical standards need to be ready to avoid
the proliferation of proprietary solutions. This will help
to minimise complexity in the implementation, create
common interfaces, assure global interoperability and
deliver service continuity and roaming.
Second, the industry needs clear guidelines on how
to engage the ecosystem and potential customers
from enterprises. A starting point is to be sure that the
industry’s Network Slicing value proposition is clear and
that potential customers understand them.
Third, the implementation roadmap for Network Slicing
should be well documented early enough to ensure
broader industry consensus on how to implement
slicing. The GSMA has published “Network Slicing: Use
Case Requirements59” to support in providing clarity
on slicing templates, APIs etc. that will be needed to
achieve global commercial scale.
Fourth, the business model for Network Slicing should
be anchored in the reality of what is achievable.
Accordingly, operators and their customers need
commercial templates and proof-of-concepts to
showcase the reality and marketability of Network
Slicing.
3.12.2 Network Slicing: prerequisites for success
Technical standards, ecosystem engagement, a clear implementation roadmap and a clear
business model are the ingredients for success
5G Value Creation and Capture
59. https://www.gsma.com/futurenetworks/wp-content/uploads/2018/07/Network-Slicing-Use-Case-Requirements-fixed.pdf
5G Value Creation and Capture 157
3.12.3 Network Slicing: Go-to-Market Strategy
Upselling Network Slicing to existing enterprise customers may prove easier than selling to
new enterprises
Selling Network Slicing may be a new experience for
mobile operators and sales teams will have to come
up to speed quickly on how to sell the proposition. A
helpful place to start is to learn from how enterprise
sales teams in fixed telecoms have sold similar products
such as leased lines, ISDN, Managed WAN, Ethernet
VPN, etc. Based on this, a three-stage go-to-market
strategy would help operators to unlock the Network
Slicing opportunity.
In the first stage, operators should productise and
deploy Network Slicing for internal use to prove its
validity. This option offers a low risk opportunity to
experiment to validate the proposition and refine it
ahead of rollout to commercial customers.
For the second stage, operators should seek to upsell
Network Slicing capabilities to existing enterprise
customers. Operators already have existing enterprise
customers and based on the typical buying behaviour
of business customers, upselling Network Slicing
capabilities to these customers ought to be an
easier opportunity than targeting new customers.
These customers can then become proof points and
advocates for the new capabilities.
In the third stage, operators can now target to sell
Network Slicing to new enterprise customers. This is
the last group of customers to target as they often
require a proven solution and seek market validation
before they buy. Figure 3.12.2 illustrates that the go-tomarket strategy for Network Slicing will be easier if it
follows the reverse order on the stages of the “Business
Buying Behaviour”.
FIGURE 3.12.2
STAGES OF THE NETWORK SLICING GO-TO-MARKET STRATEGY
OPERATOR A
Low Latency
OPERATOR A
Utilities Finance
Health Transport
OPERATOR A
PRODUCT X
Country D Country C
IoT Country A Country B Prepaid /
Postpaid
High Net
Worth
IN-HOUSE OPPORTUNITY ENTERPRISE OPPORTUNITY
Use slicing to optimise service oerings
Stages of the
“Business Buying Behaviour”
Needs Recognition
& Specification
Supplier Search
& Selection
Order Placement &
Performance Review
New horizons
1
C B A
2 3
1. Prove value of Network
Slicing
2. New customers
3. New sales channels
4. No existing performance
validation
1. Existing customers
2. Existing sales channels
3. Existing performance
validation
4. Prove value of Network
Slicing
1. Finalise technical details
2. Identify internal uses
3. Deploy Network Slicing for
internal use
4. Refine and validate the
Network Slicing proposition
Is it more dicult
to start here?
Is it easier
to start here?
3
2
1
1
2
3
USE CASES SERVICE REQUIREMENTS OPERATOR CAPABILITIES GO-TO-MARKET STRATEGIES
& BUSINESS MODELS
5G ERA USE CASES
Identify & quantify opportunities
that can be addressed by
operators in the 5G era
SERVICE REQUIREMENTS
FOR THE USE CASES
Identify specific requirements for
use cases that can be fulfilled by
cellular
OPERATOR ENABLERS &
CAPABILITIES TO MEET USE
CASE REQUIREMENTS
Match use case requirements to
specific & monetisable 5G era
solutions
IDENTIFICATION &
EVALUATION OF
GO-TO-MARKET
STRATEGIES AND
BUSINESS MODELS
158
3.13
KEY TAKEAWAYS
• 5G era business models need to focus on what the customer wants and values. This is the
only way for operators to create and capture value in the 5G era.
• Operators will evolve their existing business models into the 5G era and then develop new
ones to capture value from 5G assets, capabilities and attributes.
• There is a lot of talk about new business models for 5G. While that is true for some use
cases and scenarios, existing business models will still dominate in the 5G era.
• Operators have a wide choice of business models to choose from. But it is likely that a
combination of these 6 business models will dominate. These include subscription, usagebased, bundling, differentiated pricing, platforms, and outcome-based models.
• Other models that could also play a role include ad-funded, sponsored, rental and managed
services models.
5G Value Creation and Capture
5G Era Business Models
Please refer to the Legal Notice for context before reading this section
159
Operators receive lots of advice on how to create
new business models for 5G. Much of it promotes the
view that without new business models, operators
may struggle to create and capture value in the 5G
era. This is the ‘disrupt or be disrupted’ paradigm and
“Re-inventing your business model60” offers insights
that operators can use to explore how disruptive new
entrants might be for the industry.
But the reality is more nuanced, and new business
models are more likely to coexist with existing practises
well into the 5G era. Drawing on lessons from the
management theorist Peter Drucker, a starting point
for evaluating 5G era business models ought to be an
understanding of who the customers are, and what the
customers value.
Figure 3.13.1 illustrates this customer-centric view.
It considers operator business models for the 5G
era by first evaluating potential 5G use cases, then
understanding the service requirements for them,
moving to identifying operator capabilities to address
the requirements, and then finally the go-to-market
strategies for market success.
3.13.1 Evolving the cellular business model
5G era business models need to focus on what the customer wants and values
FIGURE 3.13.1
CUSTOMER-CENTRIC ROADMAP FOR 5G ERA BUSINESS MODELS
5G Value Creation and Capture
OPERATOR A
Low Latency
OPERATOR A
Utilities Finance
Health Transport
OPERATOR A
PRODUCT X
Country D Country C
IoT Country A Country B Prepaid /
Postpaid
High Net
Worth
IN-HOUSE OPPORTUNITY ENTERPRISE OPPORTUNITY
Use slicing to optimise service oerings
Stages of the
“Business Buying Behaviour”
Needs Recognition
& Specification
Supplier Search
& Selection
Order Placement &
Performance Review
New horizons
1
C B A
2 3
1. Prove value of Network
Slicing
2. New customers
3. New sales channels
4. No existing performance
validation
1. Existing customers
2. Existing sales channels
3. Existing performance
validation
4. Prove value of Network
Slicing
1. Finalise technical details
2. Identify internal uses
3. Deploy Network Slicing for
internal use
4. Refine and validate the
Network Slicing proposition
Is it more dicult
to start here?
Is it easier
to start here?
3
2
1
1
2
3
USE CASES SERVICE REQUIREMENTS OPERATOR CAPABILITIES GO-TO-MARKET STRATEGIES
& BUSINESS MODELS
5G ERA USE CASES
Identify & quantify opportunities
that can be addressed by
operators in the 5G era
SERVICE REQUIREMENTS
FOR THE USE CASES
Identify specific requirements for
use cases that can be fulfilled by
cellular
OPERATOR ENABLERS &
CAPABILITIES TO MEET USE
CASE REQUIREMENTS
Match use case requirements to
specific & monetisable 5G era
solutions
IDENTIFICATION &
EVALUATION OF
GO-TO-MARKET
STRATEGIES AND
BUSINESS MODELS
60. https://hbr.org/2008/12/reinventing-your-business-model
160
5G business models will be anchored on the
monetisable assets and capabilities of operators. 5G
will create several new ones, improve several existing
ones, and potentially undermine some too. This is the
context that will shape the evolution of 5G era business
models.
New 5G era monetisable attributes include network
slicing and Edge computing, two attributes at the
centre of creating new value in the 5G era. Also, for the
first time in the history of the cellular industry, 5G could
make ‘uplink characteristics’ a distinct monetisable
attribute. This is feasible because the abundant 5G
capacity could make it possible for operators to
productise ‘uplink’ in the same way that ‘downlink’
has been productised for over 20 years. This will be
valuable for the Cloud AR/VR opportunity.
Existing attributes that will be improved include speed,
latency, and security. Operators will have a chance to
offer enhanced versions of these to consumer and
enterprise customers.
While each of these assets, attributes, capabilities
could be offered to customers individually, Figure 3.13.2
shows that operators can offer a more compelling
proposition if these are integrated into, and sold as a
platform proposition.
3.13.2 5G assets and capabilities
5G will create new and enhance existing operator monetisable attributes
5G Value Creation and Capture
MOBILE BROADBAND
COMMUNICATION SERVICES
PUBLIC SAFETY
RAN 2 (MACRO)
MEC
API’s
AR/VR HEALTH
MONITORING
PUBLIC
SAFETY
SMART
GRID TELEMATICS MANUFACTURING
API’s
API’s
RAN (SMALL CELLS)
RAN 1 (MACRO)
INTERNET OF THINGS
Access
Node
Storage
Node
Computing
Node
MANO Connectivity
MEC
MEC
MEC
PLATFORM BIG DATA ANALYTICS
FIGURE 3.13.2
OPERATOR ASSETS AND CAPABILITIES CAN BE INTEGRATED INTO
A PLATFORM PROPOSITION
5G Value Creation & Capture 161
3.13.3 Six key business models
Six business model choices will dominate for operators in the 5G era
Whether it is for Business to Consumer (B2C), Business
to Business (B2B) or Business to Business/Government
to Consumer (B2X2C) opportunities, operators have
a broader set of business model options in the 5G era.
In practice, operators will combine elements of the six
business models outlined in Figure 3.13.3 to meet most
customer expectations. This section focuses only on
six 5G era models. Readers should refer to “Seizing the
White Space: Business Model Innovation for Growth and
Renewal61” for more information on the rest of example
models.
FIGURE 3.13.3
5G ERA BUSINESS MODELS FOR OPERATORS
Services Services Services
Devices Devices Devices
Spectrum Spectrum Spectrum
Radio Network Radio Network Radio Network
Network Services* Network Services* Network Services*
Backhaul Backhaul Backhaul
Core Network Core Network Core Network
Transition to IP networks
Open Market devices
& non-handsets
Unlicensed spectrum &
non-operator owners?
Infra sharing &
Non-cellular last mile?
Abstracted into device
OS & service layer?
Infra sharing &
aerial technologies?
*Network Services includes authentication, mobility, security, billing, analytics
Operator
control
Shared
control
<3G >3G 5G ERA
GENERIC MODELS EXAMPLE MODELS 5G ERA MODELS
Anity Club
Brokerage
Bundling
Cell phone
Crowdsourcing
Disintermediation
Fractionalisation
Freemium
Leasing
Low touch
Negative operating cycle
Pay as you go
Razor
Reverse razor blades
Reverse auction
Product to service
Standardisation
Subscription
User communities
Subscription
Pay-as-you-use
Bundling
Dierentiated Pricing
Platform
B2C
B2B
B2X2C
Outcome based
Others
61. https://books.google.com/books/about/Seizing_the_White_Space.html?id=3AzNGapxmXMC
162
3.13.3.1 Subscription models
Established business model for predictable revenues in
the 5G era
Subscription is an established business model
in the telecoms industry and will continue in the
5G era for both consumers and enterprises. Most
operators in developed markets have already moved
to subscriptions including unmetered voice and
messaging, and some have begun a shift from metered
data to subscriptions for big data bundles.
Subscriptions can be post-paid or prepaid depending
on the credit worthiness of customers in a market. The
former is for customers who settle their bills at the
end of the month while the latter is for customers who
pay for the subscription before using it. In this context,
‘prepaid’ is different from ‘pay-as-you-go’ which is
explored in sub section 3.13.3.2.
The main benefit of a subscription model for operators
in the 5G era is that it creates a strong, predictable
revenue stream. Accordingly, many operators will seek
to move customers onto 5G subscriptions as soon as
possible.
3.13.3.2 Usage-based or pay-as-you-use models
Directly monetise incremental usage
The usage-based model has traditionally been used to
serve low income customers who prefer tighter control
of their spend. As customers settle into regular habits,
many cost conscious customers also prefer to move
to pay-as-you use models to manage costs. While
such customers may not be the early adopters for 5G,
operators should nonetheless evolve their pay-as-youuse proposition to ensure they are addressing all of the
market, and to prepare for new opportunities.
One such new opportunity is in upselling new 5G
era products, services or solutions to customers.
For example, if operators develop a cloud AR/VR
proposition and can offer, say, 300 minutes of AR
communication, the question will arise on how to
monetise this. Should operators offer a package of
300 AR/VR minutes for customers taking up a new
subscription, or should they allow customers to pay-asthey-use any incremental AR/VR minutes?
The main benefit of a pay-as-you-use model in the 5G
era is that it enables a direct link between incremental
usage and revenues. Conversely, its main disadvantage,
especially in markets where 5G services will be sold as
such, is that it leads to less predictability and greater
variability of revenue streams, and makes planning
difficult for operators.
3.13.3.3 Bundling models
Can be used to enrich, embellish, encircle or upsell the
core data proposition
Bundling is a catch-all term and has traditionally being
used for products and services that enrich, embellish,
encircle or upsell a core proposition. Bundling does not
exist as a standalone business model but it combines
subscription and pay-as-you-use models for multiple
products.
As emphasis shifts from voice to data, data has now
become the core proposition and most of the operator
bundles in the 5G era will focus on what can be added
to improve the appeal of the data bundle. Basic voice
and messaging are now included in many data-led
bundles and the cost of 5G devices could affirm the
need for handset subsidies to encourage adoption.
Operators will also be adding roaming services, security
solutions, fixed broadband and increasingly exclusive or
premium content (e.g. Netflix, Spotify) into the bundle.
The main benefit of a bundling model in the 5G era will
be to encourage customers to subscribe or increase
their usage in a pay-as-you-use model. For this,
operators will need to understand customer habits
and preferences so as to decide what to include in the
bundles. Immersive media content is an early candidate
for the 5G era service to be added to the bundle.
5G Value Creation and Capture
5G Value Creation and Capture 163
3.13.3.4 Differentiated pricing models
Economically optimal to match demand, supply and
ability to pay
Operators have always sought to differentiate the
capability (e.g. QoS) of the core proposition and market
it to different customers for different prices. This has
often been offered as a superior product (e.g. leased
lines for businesses) or inferior product (e.g. low-cost
sub-brands).
This will continue into the 5G era and could
become central to unlocking incremental value
in 5G. For example, network slicing in the 5G era
would give mobile operators the opportunity to
market differentiated value propositions for mobile
connectivity in a similar way that fixed operators have
sold leased lines, ATM, Carrier Ethernet and MPLS for
decades.
The main benefit of differentiated pricing is that it is the
most economically optimal way for operators to match
demand and supply, allowing customers to pay for the
product and the capability they need, when they need it.
3.13.3.5 Platform business models
Ideal to create two-sided and asymmetric revenue
streams; need APIs to see the platform and an
industrialised partnership strategy to woo developers
and users
The platform model is the most publicised option
for operators in the 5G era. Its advocates promote it
as the only approach for operators to develop new
ecosystems by bringing together buyers and sellers
of 5G era products, services and attributes. Platform
owners are able to charge a fee per transaction to one
or several parties (two-sided models), use a freemium
model to attract users and can use APIs to standardise
a previously personalised service to lower cost.
Given their central role as the managers of the market
exchange, platform owners can enter new markets by
offering subsidies to customers, and then capture value
in the core business. This asymmetric business model is
the basis of how many internet companies have grown
(e.g. Amazon with books, Facebook with news, Google
with directory services, Apple with apps).
The main benefit of the platform model is that it
creates new value or revenue streams from two-sided
and asymmetric sources. And if operators want to
become platform owners in the 5G era, at least at the
national rather than international level, there are two
key success factors.
First, they must ‘seed’ the platform with new products
and services. Operators can do this by exposing the
capabilities they already have and make sure they
are well known to the community. Horizontal APIs is
the major interface for operators to harmonise the
technical, commercial and policy positions on the most
frequently used features.
Secondly, operators must design the platforms to
support many customers. This means that the platform
cannot just be reserved for a few deep-pocketed
enterprises. Instead, operators need an ‘industrialised’
model that encourages thousands or even millions of
customers to engage the platform seamlessly. This is
the major lesson from the Apple App Store and Google
Play.
164
3.13.3.6 Outcome-based models
Ideal for embedded connectivity and for product-toservice propositions
Outcome-based business models may become
more prominent in the 5G era as managed mobile
connectivity becomes a critical enabler of select
enterprise products and services. Outcome-based
models are also the focus of a broader shift from
technology to business outcomes in enterprise
technology sourcing, where technology and service
providers begin to contract with a focus on business
level outcomes instead of seeking pure technology
centric SLAs. GSMA Intelligence has explored how such
outcome-based thinking can be used for IoT62.
The rapidly growing involvement of business buyers
in technology purchases such as IoT is one of the key
drivers for the future growth of outcome-based pricing.
Stakeholders such as CMOs and CFOs often want to see
a closer link between the technology services they buy
and the business outcomes they seek. Linking a portion
of the contract revenues to business centric SLAs such
as product shipments, customer net adds, churn and
even revenues; in addition to the technology SLAs such
as speed, latency and reliability, focuses the minds of
operators and other technology providers on clients’
broader business issues, rather than looking narrowly
on the delivery of a pure technology service.
The key challenge with pure outcome-based pricing
is that it ties a provider’s contract revenues to the
business operations and results of the client, not all of
which are under the control of the provider. This makes
pure outcome-based pricing a challenge to execute
well even for the largest IT services players such as
IBM and Accenture, which have been engaged in such
deals for IT outsourcing services for over a decade.
Hence operators need to proceed with outcome-based
pricing with care, and start with tying only a very
small proportion of contract revenues (e.g. in an IoT
engagement) to business specific outcomes, or SLAs.
The main benefit of the outcome-based model is that it
is an opportunity for operators to become embedded
deeper into the enterprise market and tap into a bigger
share of the revenue pool.
3.13.3.7 Other business models
• Ad-funded model: a model often talked about, but it
is difficult to see how operators can rely on the adfunded model for their business in the 5G era.
• Sponsored model: a model where a business
subsidises a service in order to provide other
services (e.g. Facebook’s Internet.org). It has
received a lot of attention given its implications for
net neutrality and has so far not delivered on its
earlier promise63. It is a model to watch for in the 5G
era.
• Rental model: an unsophisticated model for
operators to rent out their assets in return for
a recurring fee. For consumers, this could be
applicable to expensive 5G devices whereas
for enterprises, this could be providing physical
space at the operator central office or cell site for
businesses to install their own equipment.
• Managed services model: a model where the
operator acts as an integrator or consultant to
businesses and is paid for project delivery.
5G Value Creation and Capture
62. Outcome based business models for IoT: https://www.gsmaintelligence.com/research/2018/11/outcome-based-pricing-in-iot-high-risk-high-return-bet/706/
63. Internet Regulation, Two-Sided Pricing, and Sponsored Data: http://chairgovreg.fondation-dauphine.fr/sites/chairgovreg.fondation-dauphine.fr/files/attachments/
Sponsored_data_FinalIJIO403.pdf
5G Value Creation and Capture 165
3.13.4 Cloud AR/VR: an example of a 5G era business model
There are four possible business model combinations for Cloud AR/VR
Cloud AR/VR is emerging as one of the early 5G era
opportunity for operators. Huawei notes that this
market will be worth $292 billion by 2025 and the
operator addressable market value will $93 billion
(about 30% of the total).
Customers can use Cloud AR/VR via a thick client
with sufficient computational resources on the device,
or a thin client with most of the computational task
offloaded to the cloud/edge. Figure 3.13.4 illustrates the
different types of business models that could be used
for cloud AR/VR.
FIGURE 3.13.4
BUSINESS MODEL OPTIONS FOR CLOUD AR/VR IN THE 5G ERA
(SOURCE: GSMA ANALYSIS, ADAPTED FROM HUAWEI)
Pay by
subscription
Payment
SUBSCRIPTION BASED USAGE BASED DIFFERENTIATED PRICING AD-FUNDED
User pays VR platform, VR platform shares
the payment with the content producer
User pays VR store: PPV/Pay per
download; Platform shares payment with
content producer
User pays VR platform for superior
network experience (incl. QoS on uplink,
downlink & latency based on 5G
capabilities)
User pays to enjoy VR content
Adv. Company pays VR platform by CPM
Subscriber
VR Platform/App
VR Content Producer
Pay by usage:
Pay per view/
download
Payment
Subscriber
VR Platform/App
VR Content Producer
Pay by
QoS
Payment
Subscriber
Content owners / apps developers /
vertical industries
Platform exposes network capabilities
to third parties and abstracts them
Network Operator N
oering capabilities (incl. edge)
VR Platform/App
VR Content Producer
CPM based
Payment
Watch VR
Payment
Adv.
Company
VR
Platform
VR
Platform
Subscriber
APIs
ETSI
MEC
e.g.
MobileEdge
Capability
exposure
3GPP NEF,
SCEF, …
166
5G Cost 4 Considerations
Chapter 4 examines cost evolution in the 5G era, outlining how innovations in
5G network architecture, capability and ownership will introduce more drivers
of cost into the operator business model.
Readers will gain a better understanding of the costs of building and operating
5G networks, including granular insights into the major economic opportunities
and challenges.
166 5G Cost Considerations
THE 5G GUIDE
167
4.1 Cost Considerations
KEY TAKEAWAYS
• Cost dynamics in 5G will not only be influenced by traditional network factors (e.g. capacity
and coverage), but also new factors such as network flexibility and ownership.
• The impact of some of these new cost factors can be foreseen or are already being put into
practice in 4G networks e.g. network virtualisation.
• However, the impact of some cost factors cannot be foreseen. Examples include network
ownership (e.g. Private 5G networks) and new network management approaches (e.g. AIbased automation).
5G Cost Considerations
168
5G networks are distinct from previous generations
because of the level of heterogeneity, flexibility and
automation that is inherent in their design. Therefore,
cost dynamics of 5G networks will not only be influenced
by traditional factors (e.g. capacity and coverage), but
also new factors such as network flexibility and network
ownership.
Some of these new themes can be foreseen or are already
topical in 4G networks. NFV/SDN are already being
adopted to provide flexibility for 4G networks. Likewise,
there are active industry discussions on how to introduce
edge computing into the network architecture to provide
low latency capabilities. However, while there is a lot
of enthusiasm for these transformational factors, their
impact on the cost of 5G network rollout and operations in
practice is less clear.
An even bigger set of unknown unknown impact factors
exist for 5G rollout and operation. Much of the industry
consensus has been shaped by infrastructure competition
among operators, with networks built by established
equipment vendors and managed by an army of network
engineers. But a revolution is looming which will see
the introduction of new models of network ownership
(e.g. Private 5G networks), new ways of building
networks (e.g. using Open Source concepts) and new
network management approaches (e.g. using AI-based
automation).
This chapter uses a novel theme-based (could also be
intent-based or outcome-based) approach to explore the
main cost drivers for 5G, instead of the typical technologyfocused approach. Figure 4.1.1 contextualises the impact
of these different themes into a known known, known
unknown and unknown unknown framework. The benefit
of this approach is that it focuses on the business goals
that need to be addressed rather than fixating on the
technicalities of the underlying technology.
The GSMA seeks to bring better understanding of the
impact of these drivers and the Future Network’s Network
Economics programme has developed several case
studies in this area64.
4.1.1 Cost considerations framework
Cost drivers with known and unknown impacts will coexist and shape the 5G business case
5G Cost Considerations
9 8
CAPEX & OPEX EVOLUTION
NETWORK CAPACITY
NETWORK COVERAGE
THE 5G COST IMPACT FRAMEWORK
Known Knowns
(Evolutionary)
Known Unknowns
(Transformational)
Unknown Unknowns
(Revolutionary)
ENERGY EFFICIENCY
NETWORK FLEXIBILITY
NETWORK LATENCY
NETWORK AUTOMATION
NETWORK OWNERSHIP
NETWORK EQUIPMENT SOURCING
SPECTRAL EFFICIENCY
(New radio technologies: e.g. Massive
MIMO, Coding Schemes)
SPECTRAL CAPACITY
(More spectrum, incl. unlicensed, shared)
SPECTRAL REUSE
(Densification, incl. Small Cells)
2x + 10x + 50x =
0 0.5 1.0 1.5 2.0 2.5
5G – 30 MHz
bandwidth
5G – 100 MHz
bandwidth
Cell site throughput (Gbps)
1,000
FIGURE 4.1.1
COST IMPACT & CONSIDERATIONS FRAMEWORK FOR 5G BUSINESS CASE
64. Network Economics programme https://www.gsma.com/futurenetworks/network-economics/
5G Cost Considerations 169
4.2 Network Capacity
KEY TAKEAWAYS
• There are four main considerations for network capacity: spectral efficiency, spectral capacity,
spectral reuse and backhaul.
• With 4G spectral efficiency close to the theoretical maximum, the spectral efficiency gains
from 4G to 5G will be smaller than the gains from 3G to 4G.
• As spectral efficiency gains reach a peak with 5G, increasing the bandwidth of the
communications channel (spectral capacity) increases data throughput.
• 5G will require network densification (spectral reuse) to meet both coverage and capacity
objectives. Both macro cells and small cells will grow in the 5G era.
• Demand for higher capacity backhaul will grow in 5G. While fibre remains the ideal, higher
capacity microwave options could deliver a lower cost alternative.
170
The importance of spectral efficiency and spectral
capacity stems from the Shannon-Hartley Theorem
which determines the theoretical maximum capacity
of a cellular system. Spectral efficiency dictates how
much data can be carried per unit of bandwidth of
a communications channel at a time given the ratio
of signal to unwanted noise. Spectral capacity is
determined by the number of spectrum channels in use.
Spectral reuse (e.g. with network densification) makes
it possible to use the available spectrum channels many
more times. A good analogy is lighting multiple candles
alongside an existing lit candle. As more candles are lit,
the overall luminosity is increased without changes to
the luminosity of the original candle.
Densification is the most important determinant of
access network capacity. As noted in 5G Network
Capacity: Key Elements and Technologies65 and Mobile
Broadband Transformation: LTE to 5G66, if 5G is to
deliver a 1000x improvement over 4G, then spectral
reuse will account for 40-50x. But densification cannot
continue ad infinitum and interference eventually puts
a limit to how many times a cell can be split. Continuing
with the candle analogy, at some point, diminishing
returns sets in and adding more candles will ‘burn’
rather than illuminate. Figure 4.2.1 summarises the
spectral factors that will drive capacity for 5G networks.
The transport network determines the rate of
transferring traffic from the cell site to the core
network. It can be backhaul or fronthaul depending on
which nodes of the radio access network are connected
through the transport.
4.2.1 Network capacity drivers
Spectral efficiency, spectral capacity, spectral reuse and transport are the four key drivers
5G Cost Considerations
4.2.2 Spectral efficiency
5G spectral efficiency gains will be smaller than the improvements from 3G to 4G
The industry is getting closer to peak theoretical
performance, for a single communications channel,
thanks to constant improvement in spectral efficiency.
4G-delivered capacity is close to reaching this Shannon
bound (for one communications channel), hence 5G
will use new approaches to increase spectral efficiency
further.
So while 5G will improve spectral efficiency with
further incremental radio innovations, it pushes the
limits further by leveraging more than one channel
of communications, with techniques such as massive
MIMO and beamforming. In addition, efficient
coordination of adjacent cells to minimise interference
will also enhance the spectral efficiency.
However, given that 4G spectral efficiency is close to
the theoretical maximum, the spectral efficiency gains
from 4G to 5G will be smaller than the gains made in
the transition from 3G to 4G.
9 8
CAPEX & OPEX EVOLUTION
NETWORK CAPACITY
NETWORK COVERAGE
THE 5G COST IMPACT FRAMEWORK
Known Knowns
(Evolutionary)
Known Unknowns
(Transformational)
Unknown Unknowns
(Revolutionary)
ENERGY EFFICIENCY
NETWORK FLEXIBILITY
NETWORK LATENCY
NETWORK AUTOMATION
NETWORK OWNERSHIP
NETWORK EQUIPMENT SOURCING
SPECTRAL EFFICIENCY
(New radio technologies: e.g. Massive
MIMO, Coding Schemes)
SPECTRAL CAPACITY
(More spectrum, incl. unlicensed, shared)
SPECTRAL REUSE
(Densification, incl. Small Cells)
2x + 10x + 50x =
0 0.5 1.0 1.5 2.0 2.5
5G – 30 MHz
bandwidth
5G – 100 MHz
bandwidth
Cell site throughput (Gbps)
1,000
FIGURE 4.2.1
THREE ‘SPECTRAL’ OUTCOMES THAT DEFINE NETWORK CAPACITY-HYPOTHETICAL VALUES
TO REALISE A 1000X CAPACITY INCREASE
65. https://ieeexplore.ieee.org/abstract/document/6730679
66. http://www.5gamericas.org/files/2214/7257/3276/Final_Mobile_Broadband_Transformation_Rsavy_whitepaper.pdf
5G Cost Considerations 171
4.2.3 Spectral capacity
More spectrum bandwidth equals greater network capacity
FIGURE 4.2.2
THEORETICAL MAXIMUM CELL THROUGHPUT FOR 30MHZ BANDWIDTH AND 100MHZ
BANDWIDTH CASES
9 8
CAPEX & OPEX EVOLUTION
NETWORK CAPACITY
NETWORK COVERAGE
THE 5G COST IMPACT FRAMEWORK
Known Knowns
(Evolutionary)
Known Unknowns
(Transformational)
Unknown Unknowns
(Revolutionary)
ENERGY EFFICIENCY
NETWORK FLEXIBILITY
NETWORK LATENCY
NETWORK AUTOMATION
NETWORK OWNERSHIP
NETWORK EQUIPMENT SOURCING
SPECTRAL EFFICIENCY
(New radio technologies: e.g. Massive
MIMO, Coding Schemes)
SPECTRAL CAPACITY
(More spectrum, incl. unlicensed, shared)
SPECTRAL REUSE
(Densification, incl. Small Cells)
2x + 10x + 50x =
0 0.5 1.0 1.5 2.0 2.5
5G – 30 MHz
bandwidth
5G – 100 MHz
bandwidth
Cell site throughput (Gbps)
1,000
As spectral efficiency gains reach a peak with 5G,
increasing the bandwidth of the communications
channel increases traffic capacity. This is the crux of the
industry’s focus on securing wider spectrum bands for
5G. In this context, higher spectrum bands (e.g., 3.5GHz
bands and mmWave bands) are great 5G options
as they offer from 80MHz to 1,000MHz contiguous
bandwidth for 5G use per operator depending on
spectrum band considered.
Furthermore, higher order MIMO and massive MIMO
provides even more data throughput than conventional
radio systems, and would be more efficient when used
in large contiguous bandwidth. This highlights the
importance of contiguous bandwidth and hence the
role of higher spectrum bands in meeting 5G network
capacity.
Even where regulators do not allocate full contiguous
bandwidth, mid-to-high spectrum bands offer much
more bandwidth than the 20MHz bandwidth typically
allocated in 4G. For example, for C-Band, awards to
date have shown that the available bandwidth varied
significantly, from the 80-100MHz awarded to Korean
operators, to the 20-50MHz awarded to UK operators.
These mean that average cell site throughput would
vary from 0.6Gbps to 2.0Gbps, as outlined in Figure
4.2.2 below. In the 5G era, many operators will be
aggressively targeting the lucrative vertical market -
including using customised technologies like NB-IoT
etc.
Of course, disjointed spectrum bands can also be
aggregated using carrier aggregation technology,
whereby up to five disparate 20MHz spectrum bands
can be aggregated as a single data pipe of up to
100MHz bandwidth – a single 100MHz block offers
a more uniform capacity or user experience though.
Carrier aggregation is also used in 4G today, so it is not
unique to 5G.
NB: Actual throughput will be significantly less
172
5G will require network densification to meet both
coverage and capacity objectives. However, one of
the biggest cost uncertainties is the level of network
densification needed.
ABI Research estimates that the number of wireless
cells will grow by at an average annual rate of 5.7%,
from 11.8 million in 2017 to reach 18.4 million by 2025.
This will be driven by the need for more capacity, the
use of higher band spectrum, continued growth in 4G
networks, and new 5G cells to deliver new capabilities.
The cost of adding new sites varies from country to
country and from operator to operator. The modelling
in Chapter 5 explores the incremental cost of 5G based
on the hypothetical cost of new macro and small cells in
different regions and for different operator archetypes.
4.2.4 Spectral reuse: network densification
Number of cells will grow to 18.4 million by 2025 to meet 5G requirements
5G Cost Considerations
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Installed Bases Stations (000s)
Installed Small
Cell BTS
Installed
Macro BTS
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
EU
2017
EU
2025
NE Asia
2017
NE Asia
2025
S&SE
2017
S&SE
2025
NA
2017
NA
2025
LAC
2017
LAC
2025
MENA
2017
MENA
2025
SSA
2017
SSA
2025
Macro Cell-site Backhaul Usage
Copper Fiber Microwave:
7 GHz~40 GHz
Microwave:
41 GHz~100 GHz
Satellite Sub-6 GHz
Unlicensed
Sub-6 GHz
Licensed
FIGURE 4.2.3
INSTALLED CELL SITES BY CELL TYPE SOURCE: ABI RESEARCH
5G Cost Considerations 173
4.2.4.1 Macro cells will grow steadily
The number of macro cells will grow by 3% on average
annually from 11.1 million in 2017 to reach 14.1 million in
2025 (Source: ABI Research, see Figure 4.2.3). Macro
cells are the primary means for operators to reach
their customers and will still be important in the 5G era
despite the growth of small cells. They provide large
coverage ranges (1 ~ 20km), delivered via high power
cell sites combined with tall towers/masts.
Macro cells coordinate the small cells and connectivity
to the core network, and are critical for effective
small cell deployment and operation. In addition,
macro cells are appropriate for use cases that require
significant coverage, but not necessarily high capacity
requirements (e.g., high data rate or low latency).
4.2.4.2 Small cells will grow rapidly
Small cells will grow by 25% on average annually from
0.7 million in 2017 to reach 4.3 million in 2025 (Source:
ABI Research). Small cells are low-powered radio
access nodes or base stations operating in licensed/
unlicensed spectrum that have a coverage range from a
few metres up to a few hundred metres.
Small Cells will be essential for mobile usage inside
buildings, where over 80% of mobile usage occurs in
developed markets, as shown in Figure 4.2.3. Therefore,
dense urban areas will see significant increase of small
cells in the 5G era, while sparsely populated areas can
be covered by densifying macro cells.
4.2.5 Transport (Backhaul/Fronthaul)
Backhaul is a key 5G cost driver
Network densification raises the need for high capacity
and reliable transport solutions, in addition to the
cost of extra sites. While transport for ‘fronthaul’
(connections from the antenna to their controllers) will
grow in importance in the 5G era67, by far the biggest
transport requirement will be for backhaul and this is a
key consideration in the 5G business case modelling in
Chapter 5.
Operators will face a challenge of backhauling the
rapidly growing 5G mobile data traffic from varied
environments, such as urban; suburban; rural; offices;
residential homes; skyscrapers; public buildings; tunnels
etc., regardless of whether it is from macro or small
cells. In fact, there is a potential risk of a ‘network
bottleneck’ if higher 5G access network capacity is not
matched with a commensurate increase in transport
(especially backhaul) capacity.
67. Mobile Backhaul Options report (GSMA/ABI Research) https://www.gsma.com/spectrum/wp-content/uploads/2018/11/Mobile-backhaul-options.pdf
174
4.2.5.1 Backhaul requirements per site
5G networks will require more capacity for backhaul
than 4G networks. Ericsson estimates the vastly
different bandwidth and latency requirements of
5G NR versus 4G in Table 4.2.1. While the actual 5G
requirements will differ depending on the size of the
site, access spectrum and network types, it is clear that
the demand for higher-capacity backhaul will grow in
5G.
5G Cost Considerations
TABLE 4.2.1
4G AND 5G BANDWIDTH AND LATENCY REQUIREMENTS (SOURCE: ERICSSON)
Interface Bandwidth Latency
LTE
CPRI 1-10Gbps/sector 75μs
S1/NG 1-2Gbps/site 30/5ms
NR
eCPRI 10-25Gbps 75μs
F1 1-10Gbps 5ms
S1/NG 1-10Gbps 30/5ms
5G Cost Considerations 175
4.2.5.2 5G backhaul options analysis
Fibre and microwave will be the dominant 5G backhaul
technologies
5G operators have diverse set of backhaul technologies
at their disposal: fibre, satellite, wireless links and even
copper. As shown in Table 4.2.2, while fibre is the ideal
backhaul option for 5G, several microwave options can
and will be used to support 5G cell sites at a lower cost.
Copper and satellite will be niche solutions suitable for
indoor/rural scenarios where fibre and wireless links may
not be feasible.
• Fibre provides stable connection with high bandwidth
capable of addressing future 5G demands with its cost
steadily decreasing with rollout innovations, increasing
competition and growing economies of scale. These
advantages made fibre one of the primary backhaul
solutions in 4G, but its relatively high cost means that
it has so far been used sparingly.
• Copper-line may be suitable for small cells in indoor
settings using Ethernet over existing copper, which
tend to be insufficient to meet requirements of 5G
cells. Copper-line was the primary backhaul solution in
2G/3G, but has not been mainstream in 4G with high
traffic demand. Copper-line also do not scale easily as
DSL throughput is inversely proportional to distance,
thus limiting the reach of copper-line to be used.
Another drawback is the price of copper that makes
the line expensive and vulnerable to theft in some
nations.
• Geosynchronous (GEO) satellites, at about 36,000km
from earth, traditionally serve as the niche backhaul
solution for mobile operators in remote areas or
as the emergency communications link. Whilst
satellite can have extensive coverage, limitations in
bandwidth and latency limit its backhaul application.
Some start-ups plan to launch thousands of satellites
at LEO (Low Earth Orbit), where satellites are only
1,500km away from Earth instead of 36,000km for
traditional satellites. The technology, however, has
not yet matured and therefore may not be suitable
for major backhaul solution in the early 5G era. In
terms of costs, satellite comes at greater variability
in pricing, which is more closely linked to usage than
capacity, unlike other technologies.
• Wireless links using microwave (7-40GHz), V-band
(60GHz), E-band (70/80GHz), W-Band (75-110GHz)
or D-band (110-170GHz) are attractive backhaul
options as their cost can be a quarter of leased fibre,
and the cost can be reduced further by using PMP
(point-to-multipoint) configuration. Higher spectrum
band links can be complementary to microwave
for 5G backhaul, as they provide higher capacity,
but at shorter range. Microwave backhauling would
also grow in the 5G era as a result of daisy-chaining
several small cells to a fibre-connected small cell.
Segment Microwave
(6-40 GHz)
V-Band
(60 GHz)
E-Band
(70/80 GHz) Fiber-optic Copper
(Bonded) Satellite
Future-proof Available
Bandwidth Medium High High High Very Low Low
Deployment Cost Low Low Low Medium Medium/High High
Suitability for Heterogeneous
Networks
Outdoor Cell-site /
Access Network
Outdoor Cell-site /
Access Network
Outdoor Cell-site /
Access Network
Outdoor Cell-site
/ Access Network
/ Core
Indoor Access
Network Rural only
Support for Mesh/Ring
Topology Yes Yes Yes Yes where
avaialble Indoors Yes
Interference Immunity Medium High High Very High Very High Medium
Range (Km) 5~30,++ 1~ ~3 <80 <15 Unlimited
Time to Deploy Weeks Days Days Months Months Months
License Required Yes Light License/
Unlicensed
Licensed/Light
License No No Yes
TABLE 4.2.2
COMPARISON OF 5G MOBILE BACKHAUL TECHNOLOGY OPTIONS (SOURCE: ABI RESEARCH)
176
4.2.5.3 Economics of fibre backhaul
Incumbent operators with fibre assets have a backhaul
cost advantage
Operators with incumbent fibre deployment have
superior economics in backhaul deployment, while new
entrants are better off with microwave links or leased
fibre rather than deploying their own fibre infrastructure.
This conclusion is based on an analysis of the ten year
NPV (Net Present Value) backhaul costs per site for
different fibre ownership scenarios and microwave
scenario outlined in Figure 4.2.4 below.
Most of the cost of deploying a fibre backhaul are due
to civil works (trenching, building the ducts, deployment
of physical cables). There is a clear opportunity
for incumbent operators of leveraging FTTH fibre
deployments using vacant fibres when available, or
adding some extra fibres for additional applications
or future purposes (e.g. corporate services or mobile
backhaul) in planned deployments.
The analysis shows that when the operator already owns
fibre and reuses 90% of its ducts, the cost is 57% less
than that of leasing 1Gbps Ethernet circuits for urban
scenarios and 63% less for suburban scenarios. Leasing
a regulated dark fibre can reduce the cost by 12% and
10% respectively for urban and suburban scenarios when
compared to leasing 1Gbps Ethernet circuits.
When new entrants deploy their own fibre, the cost
is five- to six-times more than an incumbent’s fibre
cost and almost double the cost of leasing 1Gbps
Ethernet circuits. Compared with deploying microwave
capacity of 1,240Mbps, leasing Ethernet-circuits or
regulated dark fibre require equivalent cost, while it is
significantly cheaper than a new entrant building their
own fibre.
5G Cost Considerations
FIGURE 4.2.4
BACKHAUL ECONOMICS PER SITE (10-YEAR NPV OF COSTS IN EUR): FIBRE VS. IP
MICROWAVE (SOURCE: OFCOM, BT OPENREACH, BERNSTEIN)
SITES AGGREGATION POINTS
AREAS / LAC / POPs
MEC
CENTRAL
OFFICES
X1,000s/operator X100s/operator X10/operator
$140bn
74% OF CAPEX
$5bn
3% OF CAPEX
$28mn
0.01% OF CAPEX
MACRO SCALE:
NATIONWIDE & COST EFFECTIVE FOR COVERAGE
SMALL SCALE:
LOCALISED & COST EFFECTIVE FOR COVERAGE & CAPACITY
vs.
• Traditional Infrastructure Sharing (incl. TowerCos)
• Neutral host: Single Wholesale Networks (SWF)
• Aerial networks (incl. satellites, drones, balloons)
• Neutral Host: hotspots & 5G corridors
• Private 5G networks
• Wi-Fi 6
• Bring-Your-Own-Small Cells
12 14 18 19
78
96
33
111 39
136
23
27
44
22
35
52
53
74
17
9 10
23 27
19
19
22
39
29
31
41
68
Fibre
Own build
(100% trenching)
Leasing of
regulated dark
fibre
Leasing of
1 Gbps Ethernetcircuits
Own build
(90% duct reuse)
IP Microwave
155
Mbps
620
Mbps
Urban Suburban
Urban Suburban
Urban Suburban
Urban Suburban
1240
Mbps
67
46
-57% -10%
-12%
NPV of reccuring
costs/CAPEX
(10 yrs)
One-o
costs/CAPEX
Note: WACC: 10%; GBP/EUR: 1.2; urban/sub-urban cell site distance from aggregation point: 750m/1250m; average competitor MNO site
distance from nearest fibre entry point: 25% of total circuit length
5G Cost Considerations 177
4.2.5.4 Macro cell backhaul options
The higher capacity requirements of 5G will drive
adoption of fibre and microwave links in higher
spectrum bands (V-band and E-band). As a result, most
macro cell backhaul will be delivered by microwave
links, followed by fibre, with some significant regional
variations. Satellite will provide coverage in remote
areas.
The uptake of macro backhaul will be closely linked to
regional regulatory context and fibre penetration, as
shown in Figure 4.2.5. In regions with relatively higher
fibre penetration (e.g., North East Asia and North
America), fibre will remain the dominant choice for
macro backhaul, as reusing existing fibre infrastructure
is the most economic option compared to deploying
new microwave links. On the other hand, wireless links
will be prevalent in regions with relatively low fibre
penetration, while fibre adoption will grow in these
regions to accommodate capacity demand.
FIGURE 4.2.5
MACRO BACKHAUL BY METHOD - REGIONAL (SOURCE: ABI RESEARCH)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Installed Bases Stations (000s)
Installed Small
Cell BTS
Installed
Macro BTS
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
EU
2017
EU
2025
NE Asia
2017
NE Asia
2025
S&SE
2017
S&SE
2025
NA
2017
NA
2025
LAC
2017
LAC
2025
MENA
2017
MENA
2025
SSA
2017
SSA
2025
Macro Cell-site Backhaul Usage
Copper Fiber Microwave:
7 GHz~40 GHz
Microwave:
41 GHz~100 GHz
Satellite Sub-6 GHz
Unlicensed
Sub-6 GHz
Licensed
178
4.2.5.5 Small Cell backhaul options
While market and regulatory context also play a role,
fibre will be much more prevalent in small cell backhaul,
compared to macro cells. This is because small cells are
mostly targeted to address hotspot scenarios in large
urban centres where there is more likely to be existing
fibre connections and wireless links require control
terminals to be placed at small cells making small cells
heavier and more spacious.
In developed nations, where cities tend to have higher
fibre penetration (e.g., Europe, North East Asia and
North America), fibre will remain the dominant choice
for small cell backhaul while wireless links will be
more prevalent in developing nations (see Figure 4.2.6
below).
5G Cost Considerations
FIGURE 4.2.6
SMALL CELL BACKHAUL BY METHOD - REGIONAL (SOURCE: ABI RESEARCH)
RURAL URBAN URBAN
(Hotspot)
Capacity Coverage Capacity Coverage Capacity Coverage
Small Cell-site Backhaul Usage
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
EU
2017
EU
2025
NE Asia
2017
NE Asia
2025
S&SE
2017
S&SE
2025
NA
2017
NA
2025
LAC
2017
LAC
2025
MENA
2017
MENA
2025
SSA
2017
SSA
2025
Copper Fiber Microwave:
7 GHz~40 GHz
Microwave:
41 GHz~100 GHz
Satellite Sub-6 GHz
Unlicensed
Sub-6 GHz
Licensed
SUB-1 GHz 1-6 GHz ABOVE 6 GHz
URBAN
POWERHOUSE
SPRAWLING
METROPOLIS
DEVELOPING
MEGA-HUB
CROWDED
CITY
DEVELOPED DEVELOPING
DENSE
SPARSE
Due to limited site-to-site distance and high tra c
density, the limitations of the macro network are
reached quicker and more small cells are required
Lower costs of sites
relative to ARPU.
Examples:
New York, Tokyo, Seoul
Examples:
Shenzhen, Shanghai,
Sao Paulo, Mumbai
Examples:
Paris, London, Los Angels
Examples:
Manila, Lagos, Lima
Higher costs of sites relative
to ARPU, less developed
infrastructure and higher
demand growth.
Due to the lower tra c density, the limitations of the
macro network are reached later and fewer or no
small cells are required
5G Cost Considerations 179
4.3 Network Coverage
KEY TAKEAWAYS
• Sub-1GHz bands (e.g. 700 MHz band) is the first of three bands for 5G. Its signal propagation
is excellent, making it suitable for rural and wide area coverage.
• The 1GHz-6GHz bands (e.g. 3.5GHz) come with large bandwidths for capacity to support a
very high number of 5G devices. It is suitable for urban macro cells.
• Spectrum above 6GHz (e.g. mmWave) can provide very high data rates. But as it is more
susceptible to attenuation, it is most suitable for urban hotspots, including FWA.
• Early deployments of 5G will focus on providing capacity relief in congested areas and hightraffic locations, largely in urban and suburban areas.
• As with 2G/3G/4G, the operator business case for 5G rural roll-outs is challenging (e.g. rural
uses up 79% of the hypothetical total capex to deliver 50Mbps across the UK).
180
4.3.1 5G spectrum coverage range
Operators will use different 5G spectrum bands for different coverage needs
The three different spectrum bands for 5G are suitable
for different coverage ranges as shown in Figure 4.3.1.
First, the sub-1GHz bands (e.g. 700MHz band) can
cover large areas. While this spectrum band cannot
provide high data rates because of narrow spectrum
availability/allocations, signal propagation is excellent,
making it suitable for rural coverage.
Second, the mid-range spectrum bands (1GHz-6GHz
bands), such as the 3.4GHz to 3.8GHz band, come with
large bandwidths to provide the necessary capacity to
support a very high number of 5G devices. Although
5G Cost Considerations
at shorter range than lower spectrum bands, this band
provides higher data rates and therefore is well suited
to urban macro cells but could extend more widely.
Third, higher spectrum bands (6GHz or above) such as
the mmWave bands can be used to provide very high
data rates that come with the very large contiguous
bandwidth of spectrum available in those bands. The
downside with this spectrum band is that the mobile
signal reach is very limited and more susceptible to
attenuation than other bands. Therefore, this band is
often associated with urban hotspots and FWA.
RURAL URBAN URBAN
(Hotspot)
Capacity Coverage Capacity Coverage Capacity Coverage
Small Cell-site Backhaul Usage
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
EU
2017
EU
2025
NE Asia
2017
NE Asia
2025
S&SE
2017
S&SE
2025
NA
2017
NA
2025
LAC
2017
LAC
2025
MENA
2017
MENA
2025
SSA
2017
SSA
2025
Copper Fiber Microwave:
7 GHz~40 GHz
Microwave:
41 GHz~100 GHz
Satellite Sub-6 GHz
Unlicensed
Sub-6 GHz
Licensed
SUB-1 GHz 1-6 GHz ABOVE 6 GHz
URBAN
POWERHOUSE
SPRAWLING
METROPOLIS
DEVELOPING
MEGA-HUB
CROWDED
CITY
DEVELOPED DEVELOPING
DENSE
SPARSE
Due to limited site-to-site distance and high tra c
density, the limitations of the macro network are
reached quicker and more small cells are required
Lower costs of sites
relative to ARPU.
Examples:
New York, Tokyo, Seoul
Examples:
Shenzhen, Shanghai,
Sao Paulo, Mumbai
Examples:
Paris, London, Los Angels
Examples:
Manila, Lagos, Lima
Higher costs of sites relative
to ARPU, less developed
infrastructure and higher
demand growth.
Due to the lower tra c density, the limitations of the
macro network are reached later and fewer or no
small cells are required
FIGURE 4.3.1
5G NR SPECTRUM BANDS AND COVERAGE/CAPACITY PROVIDED
5G Cost Considerations 181
4.3.2 Network coverage: hotspots
5G will initially be deployed in hotspots
Early deployments of 5G will focus on NSA (Option 3
of the possible 5G configurations) to provide capacity
relief in congested areas and high-traffic locations.
This is to be expected given that the higher spectrum
bands to be used by 5G NR can provide ample capacity.
The NSA option ensures that this 5G configuration is
integrated with 4G networks.
Even with SA (Option 2), the higher spectrum band
of 5G NR makes it more suitable for places that
experience capacity crunch with 4G rather than places
that are already reasonably addressed by 4G. Therefore,
5G SA rollouts will also begin with addressing the
hotspots in dense locations (e.g., stadiums, airports and
train stations).
While the 3.5GHz band looks set to be the most
common band used, early maturity of mmWave
technologies and available devices will encourage the
use of mmWave in early 5G hotspots.
4.3.3 Network coverage: urban
Cities are central to 5G deployment strategies
Cities are centres of excellence, with a high
concentration of technology-savvy and relatively
affluent users. Given these socio-political realities,
operators need to work together with other
stakeholders to showcase large-scale deployment and
commercialisation of 5G in cities.
In Delivering the Digital Revolution: Will mobile
infrastructure keep up with rising demand?68, the
GSMA and BCG evaluated the mobile broadband
infrastructure needs of the world’s megacities. The
analysis examined four big-city archetypes, each with
its own network infrastructure needs, and was based
on the stage of development of the cities and projected
traffic density (defined by gigabytes per square km).
This is illustrated in Figure 4.3.2
Figure 4.3.3 shows that the four megacity archetypes
often face similar network capacity challenges and
need continuous upgrade of their infrastructure to
support high traffic density (gigabytes per square km)
in dense urban areas.
However, the cost of upgrading urban networks
to 5G will vary across cities based on their unique
circumstances and characteristics. An analysis
conducted for the UK shows that, in a hypothetical plan
to deliver 50Mbps to the entire country, network costs
for urban centres is only 2% of the total and suburban
19% of the overall capex.
68. https://www.gsma.com/publicpolicy/delivering-the-digital-revolution
182
FIGURE 4.3.2
NETWORK DEPLOYMENT VARIES IN FOUR MEGACITY ARCHETYPES (SOURCE: BCG, GSMA)
5G Cost Considerations
RURAL URBAN URBAN
(Hotspot)
Capacity Coverage Capacity Coverage Capacity Coverage
Small Cell-site Backhaul Usage
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
EU
2017
EU
2025
NE Asia
2017
NE Asia
2025
S&SE
2017
S&SE
2025
NA
2017
NA
2025
LAC
2017
LAC
2025
MENA
2017
MENA
2025
SSA
2017
SSA
2025
Copper Fiber Microwave:
7 GHz~40 GHz
Microwave:
41 GHz~100 GHz
Satellite Sub-6 GHz
Unlicensed
Sub-6 GHz
Licensed
SUB-1 GHz 1-6 GHz ABOVE 6 GHz
URBAN
POWERHOUSE
SPRAWLING
METROPOLIS
DEVELOPING
MEGA-HUB
CROWDED
CITY
DEVELOPED DEVELOPING
DENSE
SPARSE
Due to limited site-to-site distance and high tra c
density, the limitations of the macro network are
reached quicker and more small cells are required
Lower costs of sites
relative to ARPU.
Examples:
New York, Tokyo, Seoul
Examples:
Shenzhen, Shanghai,
Sao Paulo, Mumbai
Examples:
Paris, London, Los Angels
Examples:
Manila, Lagos, Lima
Higher costs of sites relative
to ARPU, less developed
infrastructure and higher
demand growth.
Due to the lower tra c density, the limitations of the
macro network are reached later and fewer or no
small cells are required
2017 2019 2021 2023 2025
GB/Month/Sub
Urban
powerhouse 35%CAGR
Developing
mega-hub 51% CAGR
Sprawling
metropolis 42%CAGR
Crowded
city 54% CAGR
40
30
20
10
0
Urban
Sub-urban
Rural
0% 20% 40% 60% 80% 100%
79%
19%
2%
Motorways
Railways
A&B Roads
0% 20% 40% 60% 80% 100%
21.8%
6.0%
99.8%
MINIMIZE COMPLEXITY TO
KEEP COSTS LOW
Standard Defining
Organisations (SDOs)
DRIVE ECONOMIES OF SCALE
TO REDUCE UNIT COSTS
GSMA, others
MAKE INVESTMENT CASE MARGINAL
TO THE 5G INVESTMENT
Operators
MOBILE DATA TRAFFIC IS EXPECTED TO GROW RAPIDLY WITH CAGR BETWEEN 35% AND 54% UNTIL 2025
FIGURE 4.3.3
MOBILE DATA TRAFFIC GROWTH IN MEGACITIES (SOURCE: BCG, GSMA)
5G Cost Considerations 183
2017 2019 2021 2023 2025
GB/Month/Sub
Urban
powerhouse 35%CAGR
Developing
mega-hub 51% CAGR
Sprawling
metropolis 42%CAGR
Crowded
city 54% CAGR
40
30
20
10
0
Urban
Sub-urban
Rural
0% 20% 40% 60% 80% 100%
79%
19%
2%
Motorways
Railways
A&B Roads
0% 20% 40% 60% 80% 100%
21.8%
6.0%
99.8%
MINIMIZE COMPLEXITY TO
KEEP COSTS LOW
Standard Defining
Organisations (SDOs)
DRIVE ECONOMIES OF SCALE
TO REDUCE UNIT COSTS
GSMA, others
MAKE INVESTMENT CASE MARGINAL
TO THE 5G INVESTMENT
Operators
MOBILE DATA TRAFFIC IS EXPECTED TO GROW RAPIDLY WITH CAGR BETWEEN 35% AND 54% UNTIL 2025
4.3.4 Network coverage: rural
Closing the rural - urban broadband gap is a key socio-economic challenge
Building resilient broadband infrastructure is a key
goal for society (UN Sustainable Development Goal 9)
and 5G, coexisting with 4G well into the 2030s, will be
the bedrock for providing high speed, next generation
broadband services to communities. However,
operators will be challenged by economics.
Figure 4.3.4 shows that in a hypothetical plan to deliver
50Mbps 5G services across the UK, the rural regions will
account for 79% of the total capex. Yet rural regions are
often unviable because there are not enough revenuegenerating users. For example, the average cellular
revenue per rural square mile in the US is $262 whereas
the average cellular revenue per urban square mile is
$248,000, as noted in Is anyone out there? 5G, rural
coverage and the next 1 billion69.
To remain central for all society, whether urban or
rural in both developed and emerging markets, it is
suggested that all stakeholders plan for 5G in a way
that avoids widening the digital divide, as outlined in
Will 5G see its blind side? Evolving 5G for Universal
Internet Access70. This should also include use of
universal service funds to solve network coverage in
remote areas.
3GPP has taken a supporting step, recommending the
600MHz and 700MHz bands as 5G NR spectrum. 3GPP
has also introduced mechanisms to support cells of ‘up
to’ 100km in radius71.
FIGURE 4.3.4
SHARE OF CAPEX TO DELIVER 50MBPS IN THE UK (SOURCE: OUGHTON AND FRIAS72)
69. http://www.comsoc.org/ctn/anyone-out-there-5g-rural-coverage-and-next-1-billion
70. https://arxiv.org/pdf/1603.09537.pdf
71. TS 22.261
72. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/577965/Exploring_the_Cost_Coverage_and_Rollout_Implications_
of_5G_in_Britain_-_Oughton_and_Frias_report_for_the_NIC.pdf
184
4.3.5 Network Coverage: transport links
5G network rollout will trace the route of major transport networks
5G along transport routes will provide connectivity
for autonomous/assisted navigation (e.g. driverless
cars), productivity-boosting activities (e.g. commuting
rail workers) and infotainment (e.g. passenger
entertainment in cars). This is similar to how the 2G/3G
networks traced the road networks. While 4G initially
sought to match the 2G/3G footprint, it soon became
clear that it also needed to trace the rail networks to
deal with data usage by rail commuters.
Using estimates of capex for covering the road and
railway networks in the UK with 5G in Exploring the
cost, coverage and rollout implications of 5G in Britain
5G Cost Considerations
by Oughton and Frias (see Figure 4.3.5), GSMA
calculates that it could take the equivalent of 22% of
annual mobile capex to cover the railway network of a
major developed country with 5G. On the roads, GSMA
calculates that it will take 6% of annual capex to cover
the Motorways (multi-lane, inter-city roads) and 99%
to cover A and B roads (A roads are major roads below
the rank of Motorways while B roads are mostly minor
inner-city and rural roads).
2017 2019 2021 2023 2025
GB/Month/Sub
Urban
powerhouse 35%CAGR
Developing
mega-hub 51% CAGR
Sprawling
metropolis 42%CAGR
Crowded
city 54% CAGR
40
30
20
10
0
Urban
Sub-urban
Rural
0% 20% 40% 60% 80% 100%
79%
19%
2%
Motorways
Railways
A&B Roads
0% 20% 40% 60% 80% 100%
21.8%
6.0%
99.8%
MINIMIZE COMPLEXITY TO
KEEP COSTS LOW
Standard Defining
Organisations (SDOs)
DRIVE ECONOMIES OF SCALE
TO REDUCE UNIT COSTS
GSMA, others
MAKE INVESTMENT CASE MARGINAL
TO THE 5G INVESTMENT
Operators
MOBILE DATA TRAFFIC IS EXPECTED TO GROW RAPIDLY WITH CAGR BETWEEN 35% AND 54% UNTIL 2025
FIGURE 4.3.5
HYPOTHETICAL COST OF 5G COVERAGE OF MAJOR UK TRANSPORT LINKS AS A
PERCENTAGE OF TOTAL ANNUAL CAPEX (SOURCE: OUGHTON & FRIAS; GSMA ANALYSIS)
5G Cost Considerations 185
4.4 Network Flexibility
KEY TAKEAWAYS
• 5G era networks will be flexible and modularized by design with technologies such as NFV /
SDN, network slicing, and Cloud RAN.
• Virtualisation can generate significant cost savings, but it comes with a number of
complexities. There is a risk that it may even end up costing same as before.
• On network slicing, common attributes need to be agreed by the industry to minimise the
complexities and ensure interoperability.
• A Kings’ College London study demonstrated the potential for network slicing, whilst
highlighting required key enablers (automation, templates and interoperability).
• Cloud RAN can enable significant savings with some vendors reporting substantial capex and
opex savings over a 5-year period vs. traditional approach.
186
4.4.1 Flexibility in 5G era networks
A flexible mobile architecture in the 5G era will shake up the industry
5G era networks will be flexible and modularised by
design with technologies such as network slicing,
SDN/NFV, cloud RAN and Open RAN. At a basic level,
these changes in mobile network technology and
architecture seek to reduce costs and provide flexibility
for customised services tailored for major customers.
However, they are also likely to have more profound
impact on the mobile industry in two ways.
Firstly, there are concerns that virtualisation and
softwarisation promise a lot, but can be quite
challenging to implement, and may ultimately cost
the same as physical networks in the long term. Some
operators note that virtualisation does not deliver a
cost advantage for them for existing services. However,
5G Cost Considerations
expectations for cost savings is stronger for new services
where a virtualised architecture can offer better scaling
for the traffic demand than the traditional architecture,
hence resulting in lower capex/opex.
Second, whilst the solutions for greater network
flexibility enables a wider ecosystem of players
and hence more competition among suppliers, this
architectural change makes it difficult to isolate
responsibility, role and issue associated with specific
network elements. This is the focus of the Network
Equipment Sourcing section.
Three key enablers of flexibility for 5G networks are
considered: NFV/SDN, network slicing, Cloud RAN.
4.4.2 NFV/SDN
NFV/SDN technologies bring flexibility and cost savings, but at a price
Network virtualisation is not a 5G-specific cost issue as
it has already begun on 4G networks. However, it is a
prerequisite to deploying and operating a 5G network
because 5G networks are virtualised and cloud native
by design.
As Figure 4.4.1 shows, NFV enables network
functions to be isolated as software that can run over
Commercial Off-The-Shelf (COTS) hardware. NFV
enables cost reduction, faster time-to-market and
a broader ecosystem with more specialist market
players. SDN is where network control planes and
user planes are separated, and the control plane is
centralised. Centralising the control plane enables the
network to make globally optimised routing decisions,
makes the network flow programmable to fit specific
requirements and also broadens the ecosystem with
layer decoupling.
Therefore, SDN can enable a programmable transport
network, which is able to create multiple and
isolated transport slices. The transport resources
can be dynamically allocated to different clients,
interconnecting virtualized and physical network
functions distributed geographically, which are likely
to be located across different network domains. SDN
is also able to provide network programmability
through standardized APIs and networks resources
abstraction, in order to obtain the required operational
flexibility and dynamicity required for 5G, at the speed
of signaling network control protocols propagating
to the networks. Additionally, the centralized control
plane capabilities of SDN provide E2E visibility of
network resources for establishing and maintaining an
optimized connectivity.
Experience from operators who have virtualised their
4G EPC networks is that virtualisation can generate
cost savings of 40% of Total Cost of Ownership. This
comes from the use of COTS, reduced time to market,
and reduced need to over-provision network capacity
and redundancy. Nevertheless, the complexities
associated with decoupling the layers and increasing
the vendor combinations must not be overlooked in
virtualising the network and the operator will need to
balance the long-term cost savings and short-term
investment required.
Operators should, therefore, note that virtualising the
network is not just an engineering challenge, but a
people challenge: whatever the eventual cost benefits
that virtualisation may bring, it is going to get more
expensive in the short-term.
5G Cost Considerations 187
FIGURE 4.4.1
TRADITIONAL NETWORKS TO VIRTUALISED NETWORKS
4.4.2.1 Lessons from the IT industry on virtualisation
The mobile telecoms industry can look at the lessons
from the IT industry which has been deploying
virtualisation technologies for over 30 years.
Virtualisation has helped organisations manage and
shift IT resources from mundane tasks to strategic
projects that create value for the business.
In a research study with 30 customers in a variety of
industries, VMware, a key player in the virtualisation
space, found that the operational impact of
virtualisation on IT operations resulted in:
• 94% of respondents realising operational savings
with virtual infrastructure for both one-time and
day-to-day tasks
• one-time tasks of provisioning, decommissioning
and migrating servers from one data centre to
another each took at least 75% less time with
virtualisation.
• performing the specific day-to-day tasks of
hardware maintenance, rolling back from
unsuccessful patches and rolling back from
unsuccessful configuration changes each took at
least 75% less time with virtualisation.
• The simplification and automation of ordinary
IT activities can dramatically reduce routine
management and maintenance tasks and their
associated labour hours, saving organisations
energy that can be reapplied to new business
efforts and enabling companies to improve
productivity and service availability, while reducing
operating costs.
Appendix 7.4, co-authored by VMware, provides a
detailed analysis of the virtualisation journey for the
IT industry and how the mobile telecoms industry can
apply the same lessons for 5G.
UTILITIES
5G NETWORK
AUTOMOTIVE
MANUFACTURING
MOBILE BROADBAND
COMMUNICATION SERVICES
PUBLIC SAFETY
TRADITIONAL NETWORKS NETWORKS WITH NFV
Network functions on dedicated H/W Software components
Virtualization (resource pooling)
Cost-e cient, easy to scale and elastic
General-purpose COTS H/W
Vendor-specific / Special-purpose / hard to scale
Video
Optimizer
EPC CDN IMS Firewall
IoT Slice Broadband
Slice
Low Latency
Slice
NFV
RAN 2 (MACRO)
RAN (SMALL CELLS)
RAN 1 (MACRO)
INTERNET OF THINGS
Access
Node
Storage
Node
Computing
Node
MANO Connectivity
NETWORKS OFFER SAME CAPABILITIES TO ALL NETWORKS SUBDIVIDED VIRTUALLY AND OPTIMISED FOR DIFFERENT NEEDS
UTILITIES
5G NETWORK
AUTOMOTIVE
MANUFACTURING
188
4.4.3 Network slicing
Common attributes need to be agreed by the industry to minimise complexities of
network slicing
Enabled by NFV and SDN, Network Slicing enables the
creation of two or more virtual networks with different
performance parameters over a single physical network
infrastructure, so each of the virtual/logical networks
can serve a specific purpose. Conceptually, it can
be depicted as slicing a physical network into many
networks to serve specific use cases (see Figure 4.4.2).
With network slicing, operators can address a variety
of different client requirements, especially enterprises,
with one physical network.
Network slicing, however, also comes with complexities
in the context of interoperability and roaming. A
customer using one network when switching to another
network will expect a comparable, if not the same,
5G Cost Considerations
experience. In this context, standardising a general set
of attributes that characterise different network slices
would be beneficial (e.g. the Generic Slice Templates
(GST) defined by the GSMA Network Slicing Templates
Taskforce).
The GST is an industry-agreed list of all the necessary
slicing parameters. This does not mean that values
of the parameters need to be agreed, but rather the
attributes would be agreed such that a slice provided
by an operator is easily emulated by another operator
when the template is transferred, providing a baseline
and reference for potential customers.
FIGURE 4.4.2
CONCEPT OF NETWORK SLICING
UTILITIES
5G NETWORK
AUTOMOTIVE
MANUFACTURING
MOBILE BROADBAND
COMMUNICATION SERVICES
PUBLIC SAFETY
TRADITIONAL NETWORKS NETWORKS WITH NFV
Network functions on dedicated H/W Software components
Virtualization (resource pooling)
Cost-e cient, easy to scale and elastic
General-purpose COTS H/W
Vendor-specific / Special-purpose / hard to scale
Video
Optimizer
EPC CDN IMS Firewall
IoT Slice Broadband
Slice
Low Latency
Slice
NFV
RAN 2 (MACRO)
RAN (SMALL CELLS)
RAN 1 (MACRO)
INTERNET OF THINGS
Access
Node
Storage
Node
Computing
Node
MANO Connectivity
NETWORKS OFFER SAME CAPABILITIES TO ALL NETWORKS SUBDIVIDED VIRTUALLY AND OPTIMISED FOR DIFFERENT NEEDS
UTILITIES
5G NETWORK
AUTOMOTIVE
MANUFACTURING
5G Cost Considerations 189
4.4.3.1 The investment case for network slicing
The Investment case will be much easier if it is only
marginal to the broader 5G investment case
For network slicing to deliver on its promise, it needs to
be provisioned in a way that does not create a massive
return-on-investment hurdle for operators. There are
three considerations to make this happen.
First, and as described above, is to minimise the
complexities in its design and conceptualisation.
Second, there is a need to drive economies of scale by
FIGURE 4.4.3
THE ROLE OF COLLABORATION IN THE INVESTMENT CASE FOR NETWORK SLICING
2017 2019 2021 2023 2025
GB/Month/Sub
Urban
powerhouse 35%CAGR
Developing
mega-hub 51% CAGR
Sprawling
metropolis 42%CAGR
Crowded
city 54% CAGR
40
30
20
10
0
Urban
Sub-urban
Rural
0% 20% 40% 60% 80% 100%
79%
19%
2%
Motorways
Railways
A&B Roads
0% 20% 40% 60% 80% 100%
21.8%
6.0%
99.8%
MINIMIZE COMPLEXITY TO
KEEP COSTS LOW
Standard Defining
Organisations (SDOs)
DRIVE ECONOMIES OF SCALE
TO REDUCE UNIT COSTS
GSMA, others
MAKE INVESTMENT CASE MARGINAL
TO THE 5G INVESTMENT
Operators
MOBILE DATA TRAFFIC IS EXPECTED TO GROW RAPIDLY WITH CAGR BETWEEN 35% AND 54% UNTIL 2025
focusing on a few slicing templates that can achieve
wide adoption. Lastly, the investment case needs to be
marginal to the broader 5G investment case.
As Figure 4.4.3 shows, responsibility to achieve these
will depend on several stakeholders across the industry
– Standard Defining Organisations (SDOs) such as
3GPP, industry groups such as GSMA and operators all
have a role to ensure that the investment case does not
impose a high barrier to the deployment and adoption
of network slicing.
190
4.4.3.2 Lessons from a network slicing
implementation
In 2017-18, King’s College London together with the
University of Surrey and the University of Bristol in the
UK ran the world’s first 5G end-to-end network slicing
implementation.
A major goal of the study was to demonstrate the
potential of network slicing in delivering low-latency
applications over multiple operator networks, whilst
relying on the interoperability of the participating
operator’s slices. The implementation involved
intelligent cameras and real-time social media
connections across London, plus innovative 5G music
performances with artists in distributed locations.
One implementation tested was for a low-latency
control of a drone, which is launched both from a local
operator’s core network and a remote operator’s core
network. In the latter case, a low-latency network slice
is stretched from local operator’s core network to the
remote operator’s core network, where the application
server runs. While the proof-of-concept successfully
demonstrated the feasibility of stitching together
network slices across two operators’ domains, it also
demonstrated that manual configuration of a crossoperator slice is a time-consuming process requiring
significant coordination.
5G Cost Considerations
Based on their experience, King’s College London
provide the following recommendations for operators:
• Network slicing should be an enabler for commercial
value propositions and customers should not have
to worry about its technical complexities.
• Granularity of network slices can vary, allowing
for more differentiation and service creation.
But increased granularity will increase cost of
provisioning a slice.
• Network slicing can be used to provide a dedicated
service to some customers, and a means to specify
a set of QoS for some applications.
• Interoperability and inter-operator cooperation is
critical because network slices for global businesses
will require the orchestration of various resources
from different parts of the network.
• Automation is essential and without it, network
slicing will struggle for scalability.
• Network slicing templates, with predefined and
optional fields, will help to bring down the cost
and time to deploy, guarantee interoperability and
enable automation of slice management on global
scale.
• New business models and ways of working will
emerge from network slicing and operators should
get ready to play new roles (e.g. Infrastructure-as-aservice).
• The relationship between operators and end
customers could undergo a fundamental change
if verticals (e.g. automotive companies) leverage
network slicing to reach directly to customers.
Appendix 7.5, commissioned by the GSMA, provides the
full analysis from Kings College London’s experience of
network slicing.
5G Cost Considerations 191
4.4.4 Cloud RAN
Network virtualisation makes it possible to deploy Cloud RAN to unlock capex and
opex savings
Cloud RAN enables significant savings that would
not have been possible with traditional configuration.
For example, according to a Mavenir and Senza Fili
Consulting study73, Cloud RAN can yield 49% capex
savings and 31% opex savings over a five-year period
compared to the DRAN architecture – see Figure 4.4.4.
It should be noted that the CAPEX and OPEX savings
above depends strongly on the availability of fiber and
space for the baseband farms. Having to build or rent
these may change the case significantly, as additional
build/rent costs may offset the savings.
DRAN
Capex
Cloud RAN
Capex
DRAN
Opex
Cloud RAN
Opex
49% capex savings
31% opex savings
$0 $10 $20 $30 $40 $50
$ Million
37% TCO savings
(capex and opex)
Capex
Fields Examples
Opex
Equipment (BBU, RRU, SCGW)
BH and FH equipment
Site aquisitions, network planning
Installation
Site lease
Operations, maintenance, power
Backhaul and fronthaul
Machine Learning
Major breakthroughs
in the last 10 years
Speech Vision NLP (Natural
Language Processing)
Robotics Other
Predictive analytics
Deep learning
Reinforced learnings
Text to speech
Speech to text
Machine vision
Image recognition
Translation
Information extraction
Expert systems
Planning, scheduling and
optimisation
32%
23%
37%
3%
5%
Networking
Infrastructure
Network
Components
Operations Spectrum Finance
Cloud RAN is a radio access technology where some
components of the radio access network are virtualised
and centralised so that one physical location handles
hundreds of cells, reducing the cost and complexity of
operating a cell site.
The Cloud RAN architecture is possible because
virtualisation allows for the baseband processing to be
done in virtual equipment running on generic hardware.
The result is that fewer and lower cost COTS servers
are used when compared to a distributed RAN (DRAN)
architecture, today’s predominant approach. The Cloud
RAN also simplifies network management and enables
resource pooling. The Cloud RAN architecture is
highly suitable for the small cell era, where lower cost,
flexibility and scalability are key operational factors.
FIGURE 4.4.4
5 YEARS CUMULATIVE TCO FOR CLOUD RAN – CAPEX AND OPEX (SOURCE: MAVENIR, SENZA FILI CONSULTING)
73. https://www.mobileworldlive.com/wp-content/uploads/2017/11/20451-Mavenir-Whitepaper1.pdf
192
4.5 Network Latency
KEY TAKEAWAYS
• Low latency is often cited as the key capability that operators will be able to monetise in
the 5G era; but delivering it will inevitably increase the cost of the network.
• MEC (Multi-access edge computing) for mobile networks is the critical component to
achieve low latency in mobile networks.
• GSMA estimates that the cost of adding a MEC server to every cell site in the world would
be $140bn; limiting the roll-out to aggregation points reduces this figure to $5bn.
• Opex may be challenging for operators given on-site space and power constraints.
5G Cost Considerations
193
Low latency is often cited as the key capability that
operators will be able to monetise in the 5G era.
However, achieving low latency inevitably increases the
cost of the network and operators will have to make
trade-offs on where to invest, and when to promise low
latency capabilities to customers.
Latency is primarily governed by the laws of physics
(maximum theoretical speed c of 299,792,458 metres
per second; 300 kilometres in 1 millisecond). Figure
4.5.1 shows the different sources of delay in actual
networks. Latency is also affected by network topology
(no of hops), protocols implemented in the transport
network or network congestion). Industry estimates
suggest that to deliver a content in 1 millisecond on
real networks, the content needs to be less than 1 km
away74. This would require widespread deployment of
edge computing servers across the network, with its
attendant cost implications.
Where the content is not owned by the serving
operator (e.g. AR content from a social network), this
also means that there has to be interconnection points
at those edge computing servers so that third parties
can host or cache their content. This is the rationale for
exposing APIs for edge computing.
4.5.1 Latency in 5G era networks
Given the constraints of physics, delivering low latency will be costly and trade-offs will
be needed
FIGURE 4.5.1
LATENCY PERFORMANCE FOR LTE COMPARED TO LATENCY REQUIREMENT FOR 5G
Legacy costs Core Network
Energy Other
Fibre 5G Access MEC
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Opimisation
Deployment
0% 20%
4ms 4ms 1-2ms 5-10ms
If in the same country
as the customer
Core Network Internet
40% 60% 80% 100%
LTE – MIN 10MS
<0.5ms <0.5ms
5G SERVICE SUB-1MS
Content
4G 5G not optimised 5G target
NETWORK
OPEX
5G Cost Considerations
74. https://www.gsmaintelligence.com/research/?file=141208-5g.pdf&download
194
4.5.2 Enabling low latency: edge computing
The cost of MEC is linked to where the ‘Edge’ is
Edge computing, architected as MEC for mobile
networks, is the critical component to achieve low
latency in mobile networks. Its conceptual development
aims for sub-1 millisecond latency, but its design
architecture deals with the reality that not many
services will need such low latency.
Accordingly, rather than push for MEC sites to be on
every cell site, MEC is being designed to be deployable
at alternative locations. The locations can be regional
DCs (large central offices), local central offices and
aggregation sites, where progressive approach will
flow from the regional DCs all the way to aggregation
sites. GSMA estimates (see Figure 4.5.2) that the cost
of adding a MEC server at every cell site in the world
5G Cost Considerations
will be $140 billion, about 74% of total industry capex in
2017. In contrast, putting MEC at aggregation points will
cost $5 billion.
MEC opex may be even more challenging than capex
for individual operators. Physical space at many cell
sites is limited and energy to power the additional
equipment may not be easily available. There will also
be a higher risk of theft in some countries for MEC
equipment, so security costs may rise. Unsurprisingly,
there are discussions on sharing MEC sites, and there
are also tower companies and start-ups (e.g. Vapor
IO) who seek to build out the hardware for ‘Edge’
infrastructure and partner with operators to use it.
FIGURE 4.5.2
THE COST OF MEC AT DIFFERENT ‘EDGE’ LOCATIONS
SITES AGGREGATION POINTS
AREAS / LAC / POPs
MEC
CENTRAL
OFFICES
X1,000s/operator X100s/operator X10/operator
$140bn
74% OF CAPEX
$5bn
3% OF CAPEX
$28mn
0.01% OF CAPEX
MACRO SCALE:
NATIONWIDE & COST EFFECTIVE FOR COVERAGE
SMALL SCALE:
LOCALISED & COST EFFECTIVE FOR COVERAGE & CAPACITY
vs.
• Traditional Infrastructure Sharing (incl. TowerCos)
• Neutral host: Single Wholesale Networks (SWF)
• Aerial networks (incl. satellites, drones, balloons)
• Neutral Host: hotspots & 5G corridors
• Private 5G networks
• Wi-Fi 6
• Bring-Your-Own-Small Cells
12 14 18 19
78
96
33
111 39
136
23
27
44
22
35
52
53
74
17
9 10
23 27
19
19
22
39
29
31
41
68
Fibre
Own build
(100% trenching)
Leasing of
regulated dark
fibre
Leasing of
1 Gbps Ethernetcircuits
Own build
(90% duct reuse)
IP Microwave
155
Mbps
620
Mbps
Urban Suburban
Urban Suburban
Urban Suburban
Urban Suburban
1240
Mbps
67
46
-57% -10%
-12%
NPV of reccuring
costs/CAPEX
(10 yrs)
One-o
costs/CAPEX
5G Cost Considerations 195
4.5.3 MEC as part of 5G capex
If operators are to build out MEC, then it should be integrated into 5G capex
FIGURE 4.5.3
MEC COULD ACCOUNT FOR 2-4% OF 5G CAPEX IN A HYPOTHETICAL SCENARIO
Legacy costs Core Network
Energy Other
Fibre 5G Access MEC
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Opimisation
Deployment
0% 20%
4ms 4ms 1-2ms 5-10ms
If in the same country
as the customer
Core Network Internet
40% 60% 80% 100%
LTE – MIN 10MS
<0.5ms <0.5ms
5G SERVICE SUB-1MS
Content
4G 5G not optimised 5G target
NETWORK
OPEX
The MEC business case is a chicken and egg quandary.
There are not enough confirmed paying customers
for MEC capabilities to meet the investment criteria
for many operators. Yet, without a rollout of MEC, the
business opportunity will not be developed.
GSMA’s consideration of this is that MEC rollout should
be included in the 5G business case and its cost should
be integrated into 5G capex planning. The advantage of
this approach is that MEC is progressively trialled and
built out, without a big bang investment case. GSMA
modelling suggests that for the three 5G deployment
scenarios explored in Chapter 5, MEC, at the
aggregation sites, will account for 2-4% of hypothetical
5G era capex (see Figure 4.5.3). Please refer to Chapter
5 for methodology and disclaimer.
196
4.6 Network Energy Efficiency
KEY TAKEAWAYS
• Costs and growing global commitments to reduce greenhouse gas emissions require radical
energy efficiency for 5G networks.
• 5G promises to deliver up to 1,000 times as much data as today’s networks, the
infrastructure to deliver this may potentially consume up to 2-3 times more energy.
• Operators can deliver a greener 5G by using renewable energy sources and by adopting
practices that increase energy efficiency.
• Solar energy is the key option for operators wishing to supply their own renewable energy,
though in some markets (e.g. Nordics) wind energy solutions are preferred.
• 5G era networks power management will be optimised as part of an intelligent
infrastructure.
5G Cost Considerations
197
For many operators, energy consumption has
historically being a major consideration as it is one
of the highest operating costs, alongside employee
remuneration (see Figure 4.6.1). But it is becoming
even more important due to climate change and
sustainability considerations. The potential increase
in data traffic (up to 1,000 times more) and the
infrastructure to cope with it in the 5G era could make
5G to, arguably, consume up to 2-3 times as much
energy. This potential increase in energy, coming from
greater number of base stations, commercial stores and
office space; maintaining legacy plus 5G networks and
increasing cost of energy supply – call for action.
The current reality is that overall energy usage by the
telecoms industry needs to come down as the industry
consumes between 2 - 3% of global energy currently75.
Many national governments are mandating businesses
to adhere to energy reforms (e.g. EU’s 2030 climate
and energy framework) with the global goal to reduce
greenhouse gas (GHG) emissions, since 2014, by 30%
in absolute terms by 2020 and 50% by 2030. The
telecoms industry is not exempt from these pressures
and the evolution to 5G is an opportunity to deliver a
cleaner, greener telecoms footprint - indeed, 3GPP’s 5G
specification calls for a 90% reduction in energy use.
A growing number of operators have taken a leading
role in sustainability and the use of renewables to meet
or exceed these decarbonisation goals and these will
expand in the 5G era. The many solutions to enhance
network energy efficiency fall in two major groups:
increasing the use of alternative energy sources to
reduce dependence on the main power grid; and
network load optimisation to reduce the energy
consumption.
4.6.1 Towards ‘Greener’ 5G era networks
Costs and global commitments to reduce greenhouse gas emissions call for radical energy
efficiency for 5G networks
FIGURE 4.6.1
PROJECTED IMPACT OF ENERGY OPTIMISATION IN 5G NETWORKS (SOURCE: ORANGE)
Legacy costs Core Network
Energy Other
Fibre 5G Access MEC
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Opimisation
Deployment
0% 20%
4ms 4ms 1-2ms 5-10ms
If in the same country
as the customer
Core Network Internet
40% 60% 80% 100%
LTE – MIN 10MS
<0.5ms <0.5ms
5G SERVICE SUB-1MS
Content
4G 5G not optimised 5G target
NETWORK
OPEX
5G Cost Considerations
75. http://mdpi.com/2078-1547/6/1/117
198
4.6.2 Network energy costs: industry debate
Energy consumption constitutes between 20 – 40% of network OPEX and there are two
schools of thought on how this will evolve for 5G
There are two opposing schools of thought with
regards to network energy consumption in 5G. Some
stakeholders point to no overall net increase in the
energy consumption of 5G networks by virtue of the
equipment being more efficient. For example, Telia and
Ericsson believe that the increase in energy usage will
be offset by more efficient equipment resulting in no
net increase in energy usage76. This view is also shared
by Nokia77, who in addition, in 2017 found that existing
site equipment renewal delivered efficiencies of 44%
which are expected to offset any increase78.
On the other hand, other stakeholders believe that the
energy consumption of wireless networks will initially
fall before picking up again. Huawei estimates that
energy consumption will fall initially until “around 2021”
(MDPI report). However, in the same way 5G data traffic
(and network deployments) increase, so does energy
usage. They calculate this increase to be at a rate of 5%
p.a. from 2022 until 2025. Even this value is contingent
5G Cost Considerations
on a breakthrough in “efficient 5G technologies”,
a delay of which could see global energy usage
increasing by an additional incremental 30%.
In addition to the data load question, i.e., equipment
will be able to handle more bandwidth with the same
or lower energy consumption, this does not address the
increase in cell sites with Huawei pointing to a doubling
of network energy consumption. It is worth highlighting
that issues of power capacity at existing sites, may also
affect CAPEX and deployment times79.
Figure 4.6.2 highlights the cost contributions and total
cost of ownership (TCO) for a hypothetical operator in
a developed market. It is based on the GSMA’s Network
Economics Model and has been developed to support
operators in understanding the key value levers to
deliver lower TCO.
FIGURE 4.6.2
TOTAL COST OF OWNERSHIP, BASED ON THE GSMA’S NETWORK ECONOMICS MODEL
ESTIMATE FOR A HYPOTHETICAL OPERATOR IN A MOSTLY DEVELOPED MARKET
DRAN
Capex
Cloud RAN
Capex
DRAN
Opex
Cloud RAN
Opex
49% capex savings
31% opex savings
$0 $10 $20 $30 $40 $50
$ Million
37% TCO savings
(capex and opex)
Capex
Fields Examples
Opex
Equipment (BBU, RRU, SCGW)
BH and FH equipment
Site aquisitions, network planning
Installation
Site lease
Operations, maintenance, power
Backhaul and fronthaul
Machine Learning
Major breakthroughs
in the last 10 years
Speech Vision NLP (Natural
Language Processing)
Robotics Other
Predictive analytics
Deep learning
Reinforced learnings
Text to speech
Speech to text
Machine vision
Image recognition
Translation
Information extraction
Expert systems
Planning, scheduling and
optimisation
32%
23%
37%
3%
5%
Networking
Infrastructure
Network
Components
Operations Spectrum Finance
76. http://kth.diva-portal.org/smash/record.jsf?pid=diva2%3A1177210&dswid=5306
77. https://gsacom.com/paper/5g-network-energy-efficiency-nokia-white-paper/
78. https://www.nokia.com/sites/default/files/nokia_people_and_planet_report_2017.pdf
79. https://www.huawei.com/en/press-events/news/2018/10/huawei-first-5g-power-solution - more than 70% of the sites will face the challenge of insufficiency capacity of
power, battery, distribution, and more than 30% of the sites need grid modernization, with inevitable CAPEX increases
5G Cost Considerations 199
4.6.3 Benefits of renewable energy
Renewable energy sources can be both good for the environment and cost effective
4.6.4 Leveraging alternative energy sources
Energy sourcing and energy efficiency provide the path to a greener 5G
Operators are increasingly shifting their energy
sourcing away from carbon sources towards green
renewable technologies and alternative energy sources,
such as photovoltaic modules and fuel cell generators
as their cost continues to fall. Such non-carbon energy
sources can exempt an operator from the burdens of
carbon emissions regulation and enables the networks
to be more resilient to natural disasters or power
outages.
The optimal choice of renewable energy will differ
depending on the context of the operator (e.g.,
fossil fuel costs in the nation, power outages, carbon
emissions regulation), but alternative energy source
solutions can be cost effective. This is important
because energy costs from the central grid or by
energy generators with fossil fuels is a major concern
for operators: the former because the electricity
needs depend on the utilities and the latter because
carbon emissions are being regulated/taxed by some
regulators.
80. https://www.weforum.org/agenda/2018/05/one-simple-chart-shows-why-an-energy-revolution-is-coming-and-who-is-likely-to-come-out-on-top
Operators have three options for alternative energy
sourcing. First, operators may purchase green energy
directly from their utility provider (often at a premium).
Second, they can use a third-party power purchase
agreement (PPA) as a means to shift supply to
renewables without the initial capex investment,
agreeing to purchase energy from the solar or wind
farm at a specific rate for a specific period of time e.g.
5-20 years.
Thirdly, operators can self-generate energy either
at the base station with standalone or hybrid solarbased solutions, (which can be extended to off-grid
scenarios); or with larger scale solar and wind farms,
requiring capex investment.
4.6.4.1 Renewable energy: Self-supply options
Solar energy is the key option for operators wishing to
supply their own renewable energy for their network,
though in some markets (e.g. Nordics) wind energy
solutions are preferred. Solar energy is a very attractive
option in some regions, such as the Middle East or
Africa – with average solar radiation ranging between
5 KWh/m2 and 7KWh/m2 – where output can be up to
1000GWh per country, per year.
Solar energy is becoming cheaper than traditional
fossil fuels and is now either the same price or cheaper
than new fossil fuel capacity in more than 30 countries
according to a World Economic Forum report80.
The GSMA expects that solar will play a key role in
the 5G era. The construction of more solar parks, with
a useful life of 20-30 years, will result in a gradual
reduction of emissions for operators by incorporating
more base stations and charging points in a growing
network.
200
4.6.4.2 Renewable energy: power purchase
agreement (PPA)
To avoid the capex for self-supplied renewable
energy solutions, operators can enter into a financial
agreement where a developer designs, funds and
installs a solar energy system on operators’ property.
Under PPA, mostly considered for solar and wind
energy solutions, the developer sells the power
generated to the host operator at a rate that is typically
lower than the local utility’s retail rate.
PPAs typically range from 10 to 25 years and the
developer remains responsible for the operation and
maintenance of the system for the duration of the
agreement. As an example, a North American operator
5G Cost Considerations
purchased over 800 megawatts (MW) of wind energy
in the first six months of 2018, in one of the largest
PPA in US corporate history. The carbon savings from
this project is equivalent to taking more than 530,000
vehicles off the road each year or providing electricity
for more than 372,000 homes per year.
The cost of production of renewable energy continues
to fall, so operators should structure their PPAs to
ensure they continue to benefit from future cost
efficiencies over the duration of these contracts. PPAs
should also factor in energy storage within the solution
(e.g. concentrated solar power thermal energy storage)
to ensure reliability and security of supply.
4.6.5 Optimising the network load
5G era networks will be optimised as part of an intelligent infrastructure
Network load optimisation is essential to ensure that
total energy consumption is reduced. This is a prescient
requirement for 5G era networks. Improving energy
efficiency to consume less energy can be achieved
through a multitude of solutions, including smart
building, virtualising the core, and improving RAN
efficiency through modernisation of legacy equipment
and implementation of low-powered solutions.
While existing core networks enjoy the benefits of
having well-established energy management systems
(including remote management systems), the critical
elements for access network infrastructure such as
power systems, batteries, air conditioners, free cooling
and generators (gen-sets) often do not come with
holistic, well-developed energy management systems.
Remote monitoring and automation of management
functions for the main site infrastructure elements
allow operators to identify capex and opex reduction
opportunities and develop energy efficiency strategies.
Further energy efficiency gains will also come from
network automation and using a shared network
infrastructure.
5G Cost Considerations 201
4.7 Network Automation
KEY TAKEAWAYS
• Network automation, where technology is applied in network deployment and operation to
reduce human effort, is not new.
• 5G era networks will need more automation because they are more complex; have a higher
management workload to deal with more customers and data traffic; and the increasing
sophistication of customers and types of services.
• Automation in the 5G era will either be based on the traditional approach (using preprogrammed rules to run processes) or based on AI or a combination of both.
• AI will enable cognitive functions that have not been possible before, supporting predictive
maintenance, long-term network optimisation, network planning, security and deployment
automation.
202
4.7.1 The age of network automation
Network automation can either use pre-programmed rules, or be based on AI or a
combination of both
Network automation, where technology is applied in
network deployment and operation to reduce human
effort, is not new. Operators already have a degree of
network automation implemented: e.g. specific network
faults trigger an alarm to the operations staff and
networks treat traffic automatically based on pre-set
policies.
5G era networks will need more automation because
they are more complex and have a higher management
workload to deal with more customers and data traffic,
and the increasing sophistication of customers and
types of services. This trend is set to grow further in
the 5G era, when billions of devices will be connected,
potentially opening up new opportunities for both
revenue growth and cost reduction.
5G Cost Considerations
While the overall impact of network automation is a
big unknown for operators, there are two benefits that
operators should seek to unlock. Firstly, automation
is the logical step to dealing with growing network
complexity, given the limitation of cost and finding
personnel with the right expertise. Secondly,
automation is the optimal means to deliver networks
and services in a more agile way and with reduced
provisioning times.
Network automation in the 5G era will either be based
on the traditional approach (using pre-programmed
rules to run processes) or based on AI or a combination
of both.
4.7.2 AI-based network automation
AI will enable cognitive functions that have not been possible before
The growing maturity of machine learning and other
AI technologies will dramatically expand the scope for
network automation. AI enables learning algorithms
that can take cognitive decisions on network operation
that were previously taken by humans. This will be
beneficial for predictive maintenance, long-term
network optimisation, network planning, and network
deployment automation.
The possibility of using AI for network automation is
largely thanks to the drop in the cost of computing, the
accumulation of large datasets, and the development
of learning algorithms to process the datasets. AI is a
broad term and covers different fields and techniques
(see Figure 4.7.1). Examples include machine learning,
speech, vision, natural language processing, robotics
and finally to other fields such as optimisation. The
most relevant fields for network automation are
machine learning and optimisation.
In addition, AI can be used for network planning, to
enhance the efficiency of the network and reduce
cost of deployment. Speech, vision, natural language
processing and robotics are also important but are
not as related to network automation as the two fields
mentioned above. However, operators should always be
attentive to AI-driven innovations that can be utilised
for network automation (e.g. image recognition of heat
patterns within data centres).
5G Cost Considerations 203
FIGURE 4.7.1
THE DIFFERENT FIELDS OF AI
4.7.3 Network automation in action
Automation can either use pre-programmed rules, or use data to generate rules
Broadly speaking, most forms of network automation
implement pre-programmed rules or implement new
rules that have been informed by an analysis of large
operational datasets. Accordingly, there are three
network automation mechanisms for operators to
consider.
Firstly, operators can, and should continue automating
routine processes to streamline network element
provisioning and management. These do not involve
AI, and are based on delegating a computer or
intelligent system to take action based on preconfigured parameters. This is the traditional approach
to automation and, for example, would be needed to
accelerate service provisioning for network slices in 5G.
Secondly, operators can apply AI in specific areas of the
network. For example, some operators already apply
machine learning to predict degradation of 3G/4G
data traffic and optimise VoLTE, or to enhance carrier
aggregation and balance the load in the RAN. Others
use machine learning models, to predict failures in
virtualised core network or software defined networks
deployed in enterprise customers’ premise.
Thirdly, operators can take a holistic approach and
create a network operations platform that is AIpowered. This is achieved by developing in-house
or adopting open source framework (or even the
combination of the two). For example, an operator
integrates open source in different layers (network
cloud, edge computing system and AI marketplace) to
form a full-stack AI platform.
DRAN
Capex
Cloud RAN
Capex
DRAN
Opex
Cloud RAN
Opex
49% capex savings
31% opex savings
$0 $10 $20 $30 $40 $50
$ Million
37% TCO savings
(capex and opex)
Capex
Fields Examples
Opex
Equipment (BBU, RRU, SCGW)
BH and FH equipment
Site aquisitions, network planning
Installation
Site lease
Operations, maintenance, power
Backhaul and fronthaul
Machine Learning
Major breakthroughs
in the last 10 years
Speech Vision NLP (Natural
Language Processing)
Robotics Other
Predictive analytics
Deep learning
Reinforced learnings
Text to speech
Speech to text
Machine vision
Image recognition
Translation
Information extraction
Expert systems
Planning, scheduling and
optimisation
32%
23%
37%
3%
5%
Networking
Infrastructure
Network
Components
Operations Spectrum Finance
204
4.7.4 Mechanism of AI-based network automation
Operators can use AI to automate network operations, improve network planning and
strengthen security
5G Cost Considerations
AI can contribute to making the network more
efficient and “intelligent” in three main areas: network
operations; network planning; and network security.
Machine learning is most often applied to network
operations. Examples include network monitoring,
fault prediction, optimising self-organising networks
(SON) and monitoring/predicting degeneration of
quality of the network, but it can also be used for fraud
prevention and troubleshooting.
Machine learning and other AI techniques can also
have an important role in network planning as it did
for network operations. Some operators already apply
AI in planning and designing the radio access network,
4.7.5 Limitations of network automation
Automation, especially when AI-driven, has limitations
Operators should consider three types of limits
in defining their automation strategy. Firstly, the
usefulness of automation needs to be proven for each
use scenario and operators should limit their use of
automation to where there are clear business benefits.
As was argued for in Automation and AI in Telco Ops
— A Reality Check81, while computer-driven automation
promises a lot of efficiency gains, it will not always
follow that automation is more effective than human
action for some initiatives.
Secondly, the nature of AI could bring additional
unpredictability to network operations if its closed
loop system becomes a black box with little human
understanding. This technology limitation may not be
helpful for network and service provisioning, especially
considering that operators need to provide assurances
to customers to incentivise some 5G era use cases
that require a highly reliable and resilient network
performance.
Thirdly, for AI use cases, the data and the algorithms
to extract insights from it, present challenges that
operators need to prepare and plan for. These scenarios
require huge datasets, and the data requires structuring
to make it suitable for training an AI model. Also, the
outcomes can, potentially, be biased based on the
prejudices of its human handlers, and it can be difficult
to explain and generalise its learnings.
deciding where base stations can be installed to
optimise cost and interference. Some operators also
use AI to predict the best rollout route for network
deployment. For example, machine learning models
and computer vision can be used to determine best
rollout routes in fibre deployments.
Mobile networks remain susceptible to security
threats that can cost operators immensely (e.g., data
breaches). AI can enhance the security of mobile
networks by detecting anomalies of how devices
behave in the network, providing prediction and
recommendations to security experts.
81. https://www.sdxcentral.com/articles/analysis/automation-and-ai-in-telco-ops-a-reality-check/2018/08/
5G Cost Considerations 205
4.8 Network Ownership
KEY TAKEAWAYS
• To manage costs in the 5G world, new network ownership models will apply at both the
macro and small scale.
• The traditional infrastructure sharing model will continue into the 5G era, with passive
infrastructure sharing and the use of tower companies becoming more widespread.
• The benefits of single wholesale networks are appealing but dangerous given the lack of
wholesale competition and related pricing constraints.
• Aerial networks (e.g. LEO satellites) may provide backhaul for operators in remote/rural areas
where economically justified.
• Given that it may be both physically difficult and aesthetically challenging to install multiple
small cells on public infrastructure, neutral host small cells may be needed.
• Private networks are likely to proliferate in the 5G era; operators need to consider the most
economically viable method to support them.
• Improvements to Wi-Fi (e.g. with Wi-Fi 6) could create a complement to 5G small cells and
private networks.
206
4.8.1 Evolution of network ownership and management
New network ownership models will apply at both the macro and small scale
The need to meet the throughput and coverage
requirements for 5G era networks would, on paper,
lead to higher costs. This is fuelling active discussions
in industry, academia, financial and policy circles on
how different forms of ownership and management of
5G-era networks, among other things, can reduce costs.
These discussions challenge the historical network
ownership and management paradigm - where an
operator owns and manages the network infrastructure
it deploys/operates - that has prevailed across the
industry for the past few decades. Crucially, they
are also happening at the same time as the operator
community is seeking to make the case for, and raise
the funds, to invest in 5G.
5G Cost Considerations
Figure 4.8.1 outlines two aspects to these discussions:
at macro scale, to provide coverage across populations
and geography; and small scale, to provide capacity in
hotspots and 5G corridors, network deployments.
Each of the seven approaches under consideration
can reduce the cost burden for operators in deploying
5G era networks, but some of them inadvertently
undermine the historical role of operators as the
owners and managers of the public broadband
infrastructure. The discussions, and how they will
eventually play out, are major unknown considerations
for operators.
FIGURE 4.8.1
LARGE SCALE VS SMALL SCALE NETWORK OWNERSHIP CONSIDERATIONS
SITES AGGREGATION POINTS
AREAS / LAC / POPs
MEC
CENTRAL
OFFICES
X1,000s/operator X100s/operator X10/operator
$140bn
74% OF CAPEX
$5bn
3% OF CAPEX
$28mn
0.01% OF CAPEX
MACRO SCALE:
NATIONWIDE & COST EFFECTIVE FOR COVERAGE
SMALL SCALE:
LOCALISED & COST EFFECTIVE FOR COVERAGE & CAPACITY
vs.
• Traditional Infrastructure Sharing (incl. TowerCos)
• Neutral host: Single Wholesale Networks (SWF)
• Aerial networks (incl. satellites, drones, balloons)
• Neutral Host: hotspots & 5G corridors
• Private 5G networks
• Wi-Fi 6
• Bring-Your-Own-Small Cells
12 14 18 19
78
96
33
111 39
136
23
27
44
22
35
52
53
74
17
9 10
23 27
19
19
22
39
29
31
41
68
Fibre
Own build
(100% trenching)
Leasing of
regulated dark
fibre
Leasing of
1 Gbps Ethernetcircuits
Own build
(90% duct reuse)
IP Microwave
155
Mbps
620
Mbps
Urban Suburban
Urban Suburban
Urban Suburban
Urban Suburban
1240
Mbps
67
46
-57% -10%
-12%
NPV of reccuring
costs/CAPEX
(10 yrs)
One-o
costs/CAPEX
5G Cost Considerations 207
4.8.2 Infrastructure sharing (incl. Towercos)
The traditional infrastructure sharing model will continue into the 5G era
At the macro scale, many operators across the world
will, most certainly, embark on more infrastructure
sharing for 5G. This is expected given that many
operators have achieved capex and opex savings from
infrastructure sharing in 2G, 3G and 4G networks. The
GSMA has detailed operator case studies showing
capex and opex savings of up to 50% on shared
infrastructure. The format of 5G era infrastructure
sharing will follow the same pattern since in earlier
versions of infrastructure sharing as shown in Figure
4.8.2.
The benefits of infrastructure sharing must be
contrasted against the risks of hindering infrastructure
competition that has served the industry so well. Two
Passive
Key Assets
Radio Controller
Backhaul
Base Station
Site
Spectrum
Active
Site Sharing Shared Backhaul MORAN MOCN CN Sharing
A B
A B
A B
A B
A B
A B A B
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
INCREASING COMPLEXITY OF SHARING
INCREASING COST SAVINGS
Core Network A B
Shared
A B
A B Shared
A B
Shared
Shared
A B
Shared
0
20
40
60
80
100
120
140
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
TowerCo Passive Active
(MORAN)
Active
(MOCN)
Open
Access
clear risks must be addressed. First, infrastructure
sharing should not create a disincentive for operators
to invest in providing adequate coverage to customers
across all environments. Secondly, the need for
resilience in 5G era networks means that network
redundancy will remain a key consideration to assure
overall system resilience.
As such, while some governments (e.g. South Korea82)
are being proactive to encourage infrastructure
sharing for 5G, it is important that governments have a
regulatory framework that allows voluntary sharing of
infrastructure among operators.
82. https://www.mobileworldlive.com/asia/asia-news/korea-operators-to-build-shared-5g-infrastructure/
FIGURE 4.8.2
TECHNICAL CLASSIFICATION OF INFRASTRUCTURE SHARING
208
4.8.2.1 Trends in infrastructure sharing
With densification of networks from 2G to 4G, more
operators have adopted infrastructure sharing.
Accordingly, infrastructure sharing has rapidly
accelerated in recent years, growing from 12/15 publicly
announced deals in 2008 to 120/125 deals in 2014,
according to data from Coleago (see Figure 4.8.3).
The scope of deals has changed to passive
infrastructure sharing and sharing of spectrum along
with RAN (MOCN) is slowly but steadily increasing. The
most prominent trend since 2010 is emergence of tower
5G Cost Considerations
companies, where tower companies own, deploy and
operate the infrastructure that tenant operators lease.
An obvious observation is that passive infrastructure
sharing is gaining traction and that sharing of spectrum
along with RAN (MOCN) is slowly but steadily
increasing.
FIGURE 4.8.3
CUMULATIVE INFRASTRUCTURE SHARING DEALS (SOURCE: COLEAGO)
Passive
Key Assets
Radio Controller
Backhaul
Base Station
Site
Spectrum
Active
Site Sharing Shared Backhaul MORAN MOCN CN Sharing
A B
A B
A B
A B
A B
A B A B
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
Shared
INCREASING COMPLEXITY OF SHARING
INCREASING COST SAVINGS
Core Network A B
Shared
A B
A B Shared
A B
Shared
Shared
A B
Shared
0
20
40
60
80
100
120
140
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
TowerCo Passive Active
(MORAN)
Active
(MOCN)
Open
Access
5G Cost Considerations 209
4.8.3 Neutral Host: Single Wholesale Networks (SWN)
Macro scale SWNs are tantalising but dangerous
A recurring question, given the merits of infrastructure
sharing, is whether to combine all the networks into a
Single Wholesale Network (SWN) or to build a single
greenfield 5G network. This approach would reject
the infrastructure competition model at a time when
most countries have three operators and there is little
enthusiasm to return to a single operator market.
For 5G, some governments have either publicly (e.g.
US) or privately called for an SWN to ensure fast rollout
of 5G. These would be built using some form of publicprivate partnership. Some other ecosystem players,
e.g. tower companies, are also exploring moving up
the chain to deploy their own, and operate 5G neutral
hosts.
The GSMA has evaluated SWNs or Wholesale Open
Access Networks (WOAN) extensively and noted that
while the stated vision and goals are often ambitious,
turning the vision into reality is difficult83. Experience
from Rwanda (deployed an WOAN), Kenya, Russia,
Mexico, South Africa and USA (SWN or WOAN
considered), indicated a number of challenges and
unmet targets. These include affordable price targets,
lack of competition and challenges with hitting
coverage targets.
83. https://www.gsma.com/spectrum/woan-report/
84. https://www.economist.com/briefing/2018/12/08/satellites-may-connect-the-entire-world-to-the-internet
85. https://www.gsmaintelligence.com/research/?file=b30810aee2588382d0b0d3b1302da031&download
4.8.4 Aerial networks (incl. LEO satellites)
Technology feasibility is clearer but economic viability is as yet unproven
There is a clear rationale for aerial networks. Given
their elevated altitude, they can provide coverage
for a much larger footprint, above and beyond what
can be covered using terrestrial networks (see Figure
4.8.4). There is now improved technology (e.g. better
launch rockets) and more funding for LEO satellites and
drones (e.g. OneWeb and SpaceX plan to more than
double to number of LEO satellites to over 20,000 by
2027, according to CelesTrak SATCAT84).
However, it is less clear how these systems can be
commercially viable (cf. the commercial challenges
of previous LEO constellations such as Iridium and
Globalstar). For example, internal documents from
SpaceX suggest a target ARPU of $62.5085. But
GSMA Intelligence data indicates only Bahamas
had an ARPU higher than $50 globally in 2018. IoT
might be an option, focusing on verticals that need
geographic coverage (e.g. driverless cars); require unit
tracking across large distances (e.g. military vehicles,
commercial trucking, shipping); or that operate in
remote areas out of reach of land-based networks (e.g.
offshore oil rigs, mining pits).
Aerial networks already act as partners or competitors
to operators. As partners, they support operators to
reach remote/rural areas at a lower cost, or fill in the
gaps to address gaps in coverage for some verticals
(e.g. connected cars).
210
FIGURE 4.8.4
AERIAL NETWORKS – WIDER AREA COVERAGE, WEAKER SIGNAL, LOWER CAPACITY
(SOURCE: GSMA INTELLIGENCE)
5G Cost Considerations
4.8.5 Neutral Host: hotspots & 5G corridors
Aesthetics, environmental and financial drivers for neutral hosts for 5G hotspots
Altitude (km)
40,000
1,000
20
10
0
Civilian airspace
Increasing area coverage
Weakening signal strength
Mobile base
station
Balloon Drone/unmanned
aircraft
Satellite
(Low Earth orbit,
LEO)
Satellite
(Geosynchronous
Earth orbit, GEO)
Ground coverage
Sea
level
Core/Transport Layer Access Layer
Own
Core
Shared
Core
Leased
Core
Operator’s
5G
Small
Cells
Shared
5G
Operator’s
4G
Neutral host
small cells
Unlicenced
(cellular and WiFi)
SDOs Open Source
5GAA ZVEI IIC ...
NGMN
SA1
RAN2 SA1
SA1
RAN3
SA6 ETSI ZSM MEF
ETSI NFV
ETSI MEC
BBF
ONAP
OSM
OPNFV
IETF
SA
GSMA TMF
Business /
Requirement
Network
Management
Slicing template (business aspect)
3GPP Non-3GPP
Network
Service
The need to provide ample capacity in hotspots or 5G
corridors, with the option to use mmWave spectrum,
means that small cells will be much more prevalent in
the 5G era. Such small cells will often be deployed on
public infrastructure such as lamp posts, bus shelters,
or in the premises of large enterprises such as stadia
and railway stations.
Given that many countries have at least three
operators, it may be both physically difficult and
aesthetically challenging to install multiple small cells
on such infrastructure. As such, there is a need for
broad industry discussions to determine the best way
forward. For example the public sector or a private
organisation can install a single neutral infrastructure
on the lamp post and lease the access to it to all
operators. They may also take form in public-private
partnership, where the public sector may fund the
deployment/operation of the network to assist
the operators and enhance the quality of network
infrastructure regionally.
Neutral host systems or Distributed Antenna Systems
(DAS) are likely to become more popular for 5G
hotspots (e.g. stadia, airports) and corridors (e.g.
railway lines, motorways). Figure 4.8.5 shows the
different combinations of own and shared infrastructure
in a 5G system.
5G Cost Considerations 211
FIGURE 4.8.5
A NEUTRAL HOST SMALL CELL SYSTEM
Altitude (km)
40,000
1,000
20
10
0
Civilian airspace
Increasing area coverage
Weakening signal strength
Mobile base
station
Balloon Drone/unmanned
aircraft
Satellite
(Low Earth orbit,
LEO)
Satellite
(Geosynchronous
Earth orbit, GEO)
Ground coverage
Sea
level
Core/Transport Layer Access Layer
Own
Core
Shared
Core
Leased
Core
Operator’s
5G
Small
Cells
Shared
5G
Operator’s
4G
Neutral host
small cells
Unlicenced
(cellular and WiFi)
SDOs Open Source
5GAA ZVEI IIC ...
NGMN
SA1
RAN2 SA1
SA1
RAN3
SA6 ETSI ZSM MEF
ETSI NFV
ETSI MEC
BBF
ONAP
OSM
OPNFV
IETF
SA
GSMA TMF
Business /
Requirement
Network
Management
Slicing template (business aspect)
3GPP Non-3GPP
Network
Service
86. Unlicensed spectrum includes the 2.4 GHz and 5 GHz “Wi-Fi” bands. Shared spectrum is typically a band that is occupied by an incumbent but that is made available to
others in areas and at times when it is not being used (e.g. a prominent example is the US’ CBRS sharing plan in the 3.5 GHz band.)
87. According to an SNS Telecom & IT study (2017)
88. E.g. German Industry wants to setup their own 5G networks & several US companies/groups are campaigning to the FCC for terms which will suit private mobile networks
in the 3.5 GHz band.
4.8.6 Private 5G networks
Private networks will proliferate in the 5G era; operators need to consider how to
support them
An enterprise providing a neutral host for a hotspot
could decide to own the network and where possible,
own or share the spectrum as well, creating a private
5G network. This is possible because 5G will be the first
mobile technology generation to be designed from the
outset to support unlicensed, shared86 and traditional
licensed spectrum. This means that owning licensed
spectrum will no longer be a barrier to mobile network
operation.
As a result, the introduction of 5G could create
opportunities for new players to enter the market to
provide private cellular services on a local scale. One
estimate is that $5 billion will be spent on private
mobile networks per year by the end of 202187.
There is an opportunity for operators to run private
networks targeted for key enterprise customers, or to
sublet licensed spectrum to them. This can be used
to turn a cost (network densification to serve indoor
customers) into an opportunity. However, enterprises
may also seek to rollout their own private 5G networks,
either directly or through partners88. These include
private venues, utility companies, port authorities and
manufacturers who may want to deploy cellular-based
IoT solutions and other broadband communications.
212
4.8.7 Wi-Fi: the road to Wi-Fi 6
An improved Wi-Fi may be regarded as a complement to 5G small cells and private networks
For enterprises requiring a private 5G network
on their premises, an improved Wi-Fi could be a
complementary solution. Owing to the use of licensed
spectrum, cellular systems can efficiently manage
interference and provide mechanisms to deliver
quality of service with high reliability and predictability
especially in controlled environments such as a campus
network. Conversely, currently adopted Wi-Fi solutions
rely on unlicensed spectrum and have a much less
developed quality of service framework, making these
systems inherently unable to offer guaranteed services.
But these considerations will change as Wi-Fi 6
(previously known as 802.11ax) debuts in the market
from around 2020. Wi-Fi 6 becomes the first Wi-Fi
5G Cost Considerations
standard to adopt OFDMA (Orthogonal Frequency
Division Multiple Access), a technology also adopted in
LTE that will vastly increase the efficiency and quality
of the data link, especially in dense deployments.
Given that the vast proportion of traffic in most
developed markets flows through Wi-Fi, and the
expectation that these will migrate to cellular in the
search for higher quality, an improved Wi-Fi 6 could
impact the cost dynamics for 5G small cells and private
networks.
4.8.8 Bring-Your-Own-Small Cells (BYO-Small Cells)
Customers already bring their own Wi-Fi. Should they bring their own Small Cell?
As private networks proliferate in the 5G era for use in
enterprise settings, it raises the prospect of a future
for Bring-Your-Own-Small Cells (BYO-Small Cells) for
residential premises.
The potential for BYO-Small Cells is that it begins
to transfer responsibility for indoor coverage from
operators to customers. Some variant of this model
has already been unsuccessfully tried with earlier
generations of femtocells. However, neutral host small
cells and advances in self-organising networks could
provide the breakthrough.
For cellular networks this could be the radio engineer’s
nightmare, but it is the model for Wi-Fi for many
residential users. It is also the model for most other
utility services (e.g. electricity, gas, fixed telephone/
broadband) where the responsibility for the service
provider ends at the boundary of the premises and the
customer is responsible for internal wiring/piping.
5G Cost Considerations 213
4.9 Network Equipment Sourcing
KEY TAKEAWAYS
• The disaggregation of software from hardware and the decoupling of layers of the network
should enable more players to become network equipment suppliers to operators.
• In practice, operators require carrier-grade performance for hardware and software and this
could limit the number of OEMs that are able to provide the requisite accountability and
performance assurances.
• Open source supply could offer new opportunities for innovation and cost reduction, but
operators will need to adapt their approach to the very different philosophy of open source
organisations.
• It will be important to establish well defined liability boundaries for service assurance in the
disaggregated model and adapt operational procedures accordingly.
214
4.9.1 Open Source for flexibility: a dose of realism
In running carrier-grade networks, reliability and accountability are more important
than flexibility
In theory, the disaggregation of software from
hardware and the decoupling of layers of the network
should enable more players to become network
equipment suppliers to operators. This will bring more
competition and lower prices into the ecosystem. For
example, Mavenir notes that an operator with 10,000
cell sites would be paying less than 10% for COTS
hardware and software licences for Baseband Unit
(BBU) when compared to purchasing dedicated BBU
appliances.
Adopting open architecture solutions can also
provide operators with significant cost reduction
through the use of open source and white-boxes
as a supply alternative, or by using standardised
interfaces (e.g. from Open RAN). This is especially true
if the operators invest in or possess the engineering
capabilities/resources to understand the knowledge of
virtualization.
5G Cost Considerations
In reality, it is a big unknown if the decoupling of layers
would bring as many new players to the ecosystem
as expected and if this will lead to realisable cost
savings over the long term. Operators require carriergrade performance for hardware and software. But
not many OEMs will be able to meet the performance
requirements and not many are well capitalised
(financially) to provide the requisite accountability and
performance assurances.
Likewise, initial cost savings from outsourcing could
be undone by complexities from hard-to-troubleshoot
hardware and software, plus the need to maintain
the engineering capability to deal with continuously
changing configurations.
5G Cost Considerations 215
4.9.2 New lock-in phenomenon
The risk of vendor lock-in remains and operators must remain vigilant
Traditional OEM business model is based on a tightly
integrated product where dedicated hardware
appliances, licences for the software running on it
and maintenance/support are sold, integrated and
maintained as a package by the vendor.
However, the decoupling of layers does not mean that
operators would no longer experience lock-in to a
few vendors. Whilst it is true that operators would be
able to extricate themselves from the lock-in of siloed
products provided by traditional equipment vendors,
operators are likely to experience lock-in to specific
vendors in each layer.
For example, an operator would get most of its
hardware from IT hardware firm A while software
for control plane functionality would mostly rely
on a software firm B. In each of these domains, the
expectation of carrier-grade requirement limits
the number of vendors that can participate in the
ecosystem and only few vendors would be able
to deliver the quality and support in the scale that
operators require.
It is also important to highlight that there could be a
lock-in to specific open source solutions when adopting
open source de-facto-standards. The risk of lock-in
grows if implementations rely on any specific solutions
that prevents its interoperability with other elements
not included in the open source project (e.g. CORD).
4.9.3 Mobile operators as system integrators
Operators will either outsource to a single vendor or need an ‘army of engineers’ to
integrate the different open source hardware and software
With disaggregation of hardware and software,
however, vendors will be focused on developing either
software or hardware, and the integration of hardware
and software will be, in most part, the responsibility
of the operator. This is important to assure service
recovery in the event of a network failure. For example,
in the case of network fault, it would be difficult to
identify the root cause and, crucially, where liability lies,
as the number of possible combinations of hardware
and software increases drastically. Even if the vendors
have the responsibility for troubleshooting, it will take
significant time to identify which vendor would be
responsible for the cause.
Operators will, therefore, have to make a choice
between becoming the integrator of the system or
delegating the integrator role completely to one single
capable vendor. For the former, operators will need to
maintain “an army of IT and telecoms engineers” to
perform and manage the integration in-house. For the
latter, the operator will be establishing a “managed
services” contract with the single vendor to operate
and troubleshoot the network.
216
4.9.4 Proliferation of open source organisations
The standardisation landscape is becoming too fragmented
An important consequence of softwarising the
network is that more organisations are involved in
the standardisation landscape. Whereas traditional
networks required standards from 3GPP, ETSI, IETF,
BBF and sometimes IEEE to be implemented, the new
network technologies required for disaggregation
of software from hardware are standardised and
developed in many other organisations.
5G Cost Considerations
Figure 4.9.1, for network slicing, is an example of the
proliferation of new standardisation groups in ETSI
(e.g., ETSI MEC and ETSI NFV) and various open source
organisations. Consequently, tracking the progress of
relevant organisations, studying the specifications/
code and representing the operator’s opinion in the
organisations will become more complex and costly.
FIGURE 4.9.1
NETWORK SLICING STANDARDIZATION LANDSCAPE
Altitude (km)
40,000
1,000
20
10
0
Civilian airspace
Increasing area coverage
Weakening signal strength
Mobile base
station
Balloon Drone/unmanned
aircraft
Satellite
(Low Earth orbit,
LEO)
Satellite
(Geosynchronous
Earth orbit, GEO)
Ground coverage
Sea
level
Core/Transport Layer Access Layer
Own
Core
Shared
Core
Leased
Core
Operator’s
5G
Small
Cells
Shared
5G
Operator’s
4G
Neutral host
small cells
Unlicenced
(cellular and WiFi)
SDOs Open Source
5GAA ZVEI IIC ...
NGMN
SA1
RAN2 SA1
SA1
RAN3
SA6 ETSI ZSM MEF
ETSI NFV
ETSI MEC
BBF
ONAP
OSM
OPNFV
IETF
SA
GSMA TMF
Business /
Requirement
Network
Management
Slicing template (business aspect)
3GPP Non-3GPP
Network
Service
5G Cost Considerations 217
4.9.5 Engaging and leveraging open source organisations
Operators need to adapt fast to the very different philosophy of open source organisations
There are four clear philosophical differences between
the traditional standardisation approach and the open
source approach.
4.9.5.1 Focus on implementation
Open source organisations focus on implementations.
Whilst documents and specifications can be drafted
to guide users of the technology, the ultimate form of
contribution in open source organisations is lines of
code and merely submitting requirements/requests
does not drive the organisation forward. Also, while in
the more traditional Standards Defining Organisations
(SDOs), meaningful changes can only be realised
through technical contributions (e.g., change request
to technical specifications). Therefore, to drive open
source organisations, operators need to possess the
engineering capability to be able to interpret open
source codes and to contribute code to the open
source organisations.
4.9.5.2 Product liability
Open source organisations are not liable for the
technology developed. Although purchase of licences
may be required depending on the policy of the
organisations, the open source organisations usually
do not take responsibility for fault and issues that
arise from the implementation of its technology in
commercial networks. This means that mobile networks
need to maintain engineering capability to verify the
implementation and understand the open source codes
to the extent that troubleshooting is feasible.
4.9.5.3 Changeability of code
The power of open source lays in the possibility for the
user (i.e. the mobile operator) to make any changes to
the code that is deemed necessary. It is probably only a
handful of operators in the world that possess the skills
and resources necessary to be able to leverage this
asset: for most operators, the nature of the source code
in their equipment (open or closed) will be immaterial.
4.9.5.4 Proliferation of organisations
As can be seen in the network slicing standardisation
landscape, there are many organisations that develop
the technology overall and coordination is necessary
to maintain coherent and consistent development of
technology. Therefore, the coordination of various
SDOs and open source organisations is necessary. This
would also minimise the potential issues that open
source implementations may generate that would
be problematic to resolve. Operators would have to
coordinate these various standardisation organisations
along with open source organisations by sending
delegates and making relevant contributions.
218 5G Cost Considerations
4.10 Capex and Opex evolution
KEY TAKEAWAYS
• There is no industry consensus for a major bump in capex for the 5G era and the funding
envelope is expected to remain similar to 4G.
• Exponential growth in data traffic is the biggest 5G opex driver.
Having explored the cost considerations in this chapter,
it is clear that, 5G is, and should be, targeted to be cost
effective. Therefore, there is no industry consensus for
a major bump in capex for the 5G era and the funding
envelop is expected to remain similar to 4G.
This conclusion derives from several industry research
studies, sentiment analysis from major global network
vendors and mobile network operators, which largely
conclude the use cases of 5G will revolve around eMBB
in the early 5G era. Consequently, the expectation is
that 5G era capex will grow incrementally, given that
5G capacity would be deployed incrementally, when
and where needed, through this forecast period (2018-
2025).
In most markets, capex will grow progressively, in line
with operator revenue growth, rather than requiring
a ‘big bang’ and will vary by operator/region due to
varying levels of business maturity.
These considerations form the basis of the assumption
used for the GSMA’s hypothetical 5G business case
model that is described in Chapter 5.
4.10.1 5G Capex evolution
5G era capex will be incremental, with no significant bump for 5G
5G Cost Considerations
5G Cost Considerations 219
89. http://www.analysysmason.com/Research/Content/Reports/5g-opex-strategy-rma16/
4.10.2 5G Opex evolution
Exponential growth in data traffic is the biggest opex driver
20
40
80
100
60
120
2013 2018 2023
0
5G
data traffic
4G/3G/2G
data traffic
5G Cost Considerations
Mobile network opex has been stubbornly high in
recent years, whilst it is essential to the 5G business
case that it falls. An Analysys Mason survey suggests
that operators are seeking a 30% reduction in opex by
202589. Yet, there is no single solution that will achieve
this and operators will need to rely on a combination of
tactics to deliver savings on this scale in the 5G era.
The most significant opex driver is the exponential
growth in mobile data traffic. In Ericsson’s latest
Mobility Report, total mobile data traffic is expected
to increase almost eight-fold by the end of 2023 (see
Figure 4.10.1), with a CAGR of 39%. At that time, it
is expected that 20% of global mobile data traffic
worldwide will be carried by 5G networks, and the
figure will be much higher in regions with early 5G
deployments. This is 1.5-times more than the total of
4G/3G/2G traffic today.
FIGURE 4.10.1
GLOBAL MOBILE DATA TRAFFIC GROWTH (SOURCE: ERICSSON)
With the increased demand putting strain on network
components and infrastructure, operators must
realise a pragmatic and efficient approach to running
networks. Network transformation strategies, with
energy being a core focus, will be key to ensuring
efficiencies. This assumption applies to the GSMA opex
forecast for operators in developed or high/middle
income countries but also Asia Pacific, where data
consumption is expected to reach over a quarter of the
global total.
Similar to the capex, these opex considerations form
the basis of the assumption used for the GSMA’s
hypothetical 5G business case model that is described
in Chapter 5.
220
Business Case Considerations – 5 Hypothetical Model
Chapter 5 examines the overall business case for 5G using GSMA scenario analysis
across a number of different geographies and operator archetypes.
Readers will gain insight into how different rollout strategies will impact the
overall economics of 5G.
Chapter 5 - including the model, scenarios and archetypes that inform it - is a general guide
developed exclusively by the GSMA and does not make reference to any specific geographic
market or operator.
Its cost and revenue assumptions have been developed using publicly available sources only.
Neither the model, nor its constituent parts, have been validated by any operator or vendor.
The model is basic and does not include several major cost considerations such as spectrum,
licensing conditions, impact of planning laws etc.
Accordingly, the model does not represent nor make reference to concrete plans or views
of specific operators. In the same vein, the model cannot nor should be used to establish a
benchmark regarding any particular operator.
Use of the model is at the user’s discretion and, save for the changeable levers included in it,
any modification of the model is forbidden without an explicit written permission from the
GSMA.
220 Business Case Considerations
THE 5G GUIDE
221
5G Business Case Model: Setting
the context
5.1
KEY TAKEAWAYS
• The GSMA 5G business case model supports operators in identifying the relevant elements
to be taken into consideration in their decision making process about the type of investment
they want to make in 5G networks.
• The model examines the business case to deliver at least a 5% increase in revenue and a 40%
share of the revenues from enterprises.
• It is built for 8 operator archetypes in developing and developed regions, plus three
deployment scenarios to reflect the speed of 5G rollout.
Business Case Considerations
222
5.1.1 The objective for the model
The model will support operators on the question of: “How fast should I rollout 5G?”
Given the extensive analysis in the previous chapters
of the book, the GSMA believes that 5G is inevitable: it
is only a question of when, rather than if, operators will
deploy 5G. Accordingly, the two pertinent question for
operators to consider in their 5G rollout are:
1. When should I start 5G rollout?
2. How should I roll out 5G?
For the ‘when’ question, the economic, social and
political drivers that will influence when an operator
commences 5G rollout were explored in Chapter 2.
Business Case Considerations
In particular, the BEMECS 5G Readiness framework
provides a framework for identifying and evaluating the
economic and market conditions that are favourable for
commencing a 5G rollout.
For the ‘how’, the GSMA has developed this model to
assist operators in evaluating if their unique operational
realities can support a rapid 5G deployment or if
5G should be rolled out gradually in an evolutionary
approach.
5.1.2 The objectives behind the model
The model sets the business case to deliver at least a 5% increase in revenue and a 40%
share of the revenues from enterprises
Operators will have their own set of objectives to
justify their 5G rollout plan. However, throughout the
engagements with operators and other stakeholders,
three particular objectives emerged.
First, given the challenges of low revenue growth for
operators, a meaningful increase in revenue attributable
to 5G will be expected. A 5% revenue increase mark
is used in the model as the pragmatic and realistic
minimum expectation for the 5G era.
Second, given the maturity of the consumer market,
it is expected that the enterprise segment will drive
the incremental 5G opportunity for many operators.
Most operators do not currently get up to 20% of their
revenues from the enterprise segment. However, if the
enterprise 5G use cases (e.g. based on the Ericsson
market sizing) are realised, an average operator could
earn 40% of its revenues from the enterprise segment.
The 40% share of revenues from enterprises is therefore
used in the model as an optimistic expectation for the
5G era.
Third, the model has been designed with the
assumption that the cost intensity (ratio of cost to
revenue) will be unchanged into the 5G era. This means
that there will be no extra capex for 5G, unless it is
matched by a corresponding increase in revenues.
Business Case Considerations 223
5.1.3 Methodology for the model
There are eight operator archetypes and three deployment scenarios in the model
The model provides a stylised study of potential costs
and projected revenues for select deployment options,
or types. It sets eight operator archetypes in developing
and developed regions, in three deployment scenarios
that reflect variances in target segments and speed of
5G rollouts. The model combines existing and historical
operator/market data (GSMAi, other) with additional
5G cost and revenue assumptions.
The model takes a stylised high-level scenario based
approach in considering potential cost and revenue
implications. The GSMA objective for this model is
to provide an indicative support to operators in their
own 5G business case modelling, rather than outline a
specific, local and granular economic study.
Figure 5.1.1 provides a high level overview of the
business case model developed by the GSMA.
FIGURE 5.1.1
HIGH-LEVEL STRUCTURE OF THE 5G BUSINESS CASE MODEL
Existing
Cost Assumptions
Revenue Assumptions
Rapid, Full
Standalone Developed
Developed
Developing Enterprise
Standalone
OPERATOR ARCHETYPES SCENARIOS RESULTS
NonStandalone
Cost Intensity Major Player,
Integrated Products
Major Player, Integrated Products
Major Player, Mobile Only
Minor Player, Integrated Products
Minor Player, Mobile Only
Developing
Major Player, Integrated Products
Major Player, Mobile Only
Minor Player, Integrated Products
Minor Player, Mobile Only
5G ‘Time to Build’ Major Player,
Mobile Only
Revenue Minor Player,
Integrated Products
Minor Player,
Mobile Only
CAPEX
COMMS CLOUD AR/VR ENTERPRISE/IoT FWA
FIBRE SITES
OPEX
OTHER NE SAVINGS VIRTUALISATION
RAPID FULL-SCALE DEPLOYMENT ENTERPRISE FOCUSED DEPLOYMENT CAPACITY OPTIMISATION DEPLOYMENT
• 60% of 5G Subscribers impacted
• 3GHz to 60% Urban sites; 40% Rural
• No fall back to 4G
• 100% Fibre
• No site sharing, full virtualisation, no Network
Economic savings
• ARPU – Access only scenario and Full Service
scenario
• 40% of 5G Subscribers impacted
• 3GHz to 40% Urban sites
• Fall back to 4G
• 60% Fibre
• Private partnerships site sharing; full virtualisation, limited Network Economic savings
• ARPU – 30 - 40% Enterprise Revenue split (i.e.
growth by 40%) by year 5
• 20% of 5G Subscribers impacted
• 3GHz to 20% Urban sites; 20% Rural
• Fall back to 4G
• 40% Fibre
• Part virtualisation; Network Economic savings
(Infrastructure share, backhaul, energy)
• ARPU – Access only scenario and Full Service
scenario
A B C
224
Archetypes & Deployment Scenarios
Business Case Considerations
5.2
KEY TAKEAWAYS
• The operator archetypes modelled are:
– Major Player, Integrated Products
– Major Player Mobile Only
– Minor Player, Integrated Products
– Minor Player, Mobile Only
• The deployment scenarios are based on the speed and purpose of the rollout:
– Deployment Option A: Rapid, full scale deployment
– Deployment Option B: Enterprise focused deployment
– Deployment Option C: Capacity optimisation deployment
Business Case Considerations 225
5.2.1 Operator archetypes
There are four different operator archetypes in the model and these are explored for both
developed and developing regions
The model simulates the cost and revenue implications
of three particular rollout scenarios for four operator
archetypes, in both developed and developing
regional contexts (see Figure 5.2.1). The purpose of
including these is to evaluate the core considerations
for operators regionally and locally, whilst attempting
to represent as many GSMA operator members as
possible.
FIGURE 5.2.1
OPERATOR ARCHETYPES FOR THE 5G BUSINESS CASE MODEL
Existing
Cost Assumptions
Revenue Assumptions
Rapid, Full
Standalone Developed
Developed
Developing Enterprise
Standalone
OPERATOR ARCHETYPES SCENARIOS RESULTS
NonStandalone
Cost Intensity Major Player,
Integrated Products
Major Player, Integrated Products
Major Player, Mobile Only
Minor Player, Integrated Products
Minor Player, Mobile Only
Developing
Major Player, Integrated Products
Major Player, Mobile Only
Minor Player, Integrated Products
Minor Player, Mobile Only
5G ‘Time to Build’ Major Player,
Mobile Only
Revenue Minor Player,
Integrated Products
Minor Player,
Mobile Only
CAPEX
COMMS CLOUD AR/VR ENTERPRISE/IoT FWA
FIBRE SITES
OPEX
OTHER NE SAVINGS VIRTUALISATION
RAPID FULL-SCALE DEPLOYMENT ENTERPRISE FOCUSED DEPLOYMENT CAPACITY OPTIMISATION DEPLOYMENT
• 60% of 5G Subscribers impacted
• 3GHz to 60% Urban sites; 40% Rural
• No fall back to 4G
• 100% Fibre
• No site sharing, full virtualisation, no Network
Economic savings
• ARPU – Access only scenario and Full Service
scenario
• 40% of 5G Subscribers impacted
• 3GHz to 40% Urban sites
• Fall back to 4G
• 60% Fibre
• Private partnerships site sharing; full virtualisation, limited Network Economic savings
• ARPU – 30 - 40% Enterprise Revenue split (i.e.
growth by 40%) by year 5
• 20% of 5G Subscribers impacted
• 3GHz to 20% Urban sites; 20% Rural
• Fall back to 4G
• 40% Fibre
• Part virtualisation; Network Economic savings
(Infrastructure share, backhaul, energy)
• ARPU – Access only scenario and Full Service
scenario
A B C 5.2.1.1 Major Player, Integrated Products
An incumbent operator with market share (of
subscribers) of more than 25% in its operating country;
product portfolio consists of integrated products such
as strong fibre products and bundled services.
5.2.1.2 Major Player Mobile Only
An incumbent operator with market share of over 25%
in its operating country; products and services consist
of core mobile only
5.2.1.3 Minor Player, Integrated Products
An operator with market share less than 25% in its
operating country; product portfolio consists of
integrated products such as strong fibre products and
bundled services.
5.2.1.4 Minor Player, Mobile Only
An operator with market share under 25% in its
operating country, products and services consist of
core mobile only.
226
5.2.2 Deployment scenarios
The deployment scenarios are based on the speed and purpose of the rollout
The model sets three deployment scenarios to outline
the approaches an operator could take based on its
expectations for speed and purpose of 5G rollout.
These scenarios are identified using industry expertise,
operator survey data and historical studies related to
previous generation rollouts.
The three deployment scenarios evaluate the
investments/costs and revenue projections for the first
Business Case Considerations
five years of commercial launch of 5G. For these, the
main top-level levers are the degree of investment in
new sites and fibre backhaul; the urban vs. rural split;
and the incremental ARPU from 5G era use cases.
Figure 5.2.2 summarises the key assumptions for the
three deployment scenarios.
FIGURE 5.2.2
THREE 5G DEPLOYMENT SCENARIOS
5.2.4.1 Deployment Option A: Rapid, full scale
deployment
For Option A, the model applies the estimates
associated with the rapid build out of a 5G network
which is independent of 4G systems and includes a
new 5G core. This scenario will be the most investmentheavy for operators to consider, with assumed
higher number of new sites, site upgrades and fibre
investment.
5.2.4.2 Deployment Option B: Enterprise focused
deployment
For Option B, the model explores the hypothesis that
an enterprise targeted (SA) 5G deployment, supportive
of enterprise specific use cases, can generate return
on investment and/or does not deviate vastly from a
sustainable cost intensity. This option still assumes a 5G
core, but uses a lower level of infrastructure investment
relative to Option A, but greater than Option C.
5.2.4.3 Deployment Option C: Capacity optimisation
deployment
For Option C, the model starts with the assumption
that initial 5G launches will focus on capacity and
coverage enhancements for eMBB. Many elements
of this 5G rollout build on 4G networks, rather than
representing a complete departure, and that means
operators can take an evolutionary approach to
infrastructure investment.
Operators taking this approach may begin by
upgrading the capacity of their existing 4G macro
network by refarming a portion of their 2G and 3G
spectrum, or by acquiring additional 5G spectrum when
available. This way, they can align investments in 5G by
also evolving to LTE and LTE-Pro features, such as 4x4
or massive MIMO.
Existing
Cost Assumptions
Revenue Assumptions
Rapid, Full
Standalone Developed
Developed
Developing Enterprise
Standalone
OPERATOR ARCHETYPES SCENARIOS RESULTS
NonStandalone
Cost Intensity Major Player,
Integrated Products
Major Player, Integrated Products
Major Player, Mobile Only
Minor Player, Integrated Products
Minor Player, Mobile Only
Developing
Major Player, Integrated Products
Major Player, Mobile Only
Minor Player, Integrated Products
Minor Player, Mobile Only
5G ‘Time to Build’ Major Player,
Mobile Only
Revenue Minor Player,
Integrated Products
Minor Player,
Mobile Only
CAPEX
COMMS CLOUD AR/VR ENTERPRISE/IoT FWA
FIBRE SITES
OPEX
OTHER NE SAVINGS VIRTUALISATION
RAPID FULL-SCALE DEPLOYMENT ENTERPRISE FOCUSED DEPLOYMENT CAPACITY OPTIMISATION DEPLOYMENT
• 60% of 5G Subscribers impacted
• 3GHz to 60% Urban sites; 40% Rural
• No fall back to 4G
• 100% Fibre
• No site sharing, full virtualisation, no Network
Economic savings
• ARPU – Access only scenario and Full Service
scenario
• 40% of 5G Subscribers impacted
• 3GHz to 40% Urban sites
• Fall back to 4G
• 60% Fibre
• Private partnerships site sharing; full virtualisation, limited Network Economic savings
• ARPU – 30 - 40% Enterprise Revenue split (i.e.
growth by 40%) by year 5
• 20% of 5G Subscribers impacted
• 3GHz to 20% Urban sites; 20% Rural
• Fall back to 4G
• 40% Fibre
• Part virtualisation; Network Economic savings
(Infrastructure share, backhaul, energy)
• ARPU – Access only scenario and Full Service
scenario
A B C
Business Case Considerations 227
5.3 Cost Model – Assumptions
KEY TAKEAWAYS
• Key capex assumptions:
– 5G networks will require a much higher capillarity of fibre to meet capacity and latency
requirements
– 5G will require a much denser network
– Spectrum is a major capex consideration for operators when deploying 5G
• Key opex assumptions:
– Savings from virtualisation in the IT industry suggest that operators could achieve similar
benefits
– Energy efficiency and backhaul relief will provide additional Opex savings
228
5.3.1 Cost mechanics
Cost considerations for the 5G era will apply to both capex and opex
The model evaluates the major levers that drive the
capex and opex dynamics in a 5G buildout. It provides
a high-level calculation across the core scenarios
of 5G commercial rollout based on an itemised list
of cost levers. The purpose is to highlight potential
Business Case Considerations
cost differences between three rollout scenarios, for
varying archetypal operators in the ‘5G era’. Figure 5.3.1
provides a summary of the major cost levers for the
model, which are assessed in detail below.
FIGURE 5.3.1
SUMMARY OF THE CAPEX AND OPEX ASSUMPTIONS FOR THE MODEL
CAPEX OPEX (Cost Savings)
Fibre Sites Site Sharing Virtualisation Other NE Savings
Rapid Full Scale
Deployment
Fibre to 100% of sites 5G (3GHz) site upgrade costs;
60% of Urban sites; 40% Rural None Full – 100% of network –
Assumed Cost per site 3GHz new sites – 200% growth
in Urban sites; 100% in rural –
Densification (Small Cells) –
Enterprise Focused
Deployment
Fibre to 60% of sites 5G (3GHz) site upgrade costs;
40% of Urban sites; 5% Rural Private Partnerships Full – 100% of network Backhaul – 10%, per
site
Assumed Cost per site 3GHz new sites – 100% growth in
Urban sites; 50% in rural
30% site sharing
reduction Energy – 10%, per site
Densification (Small Cells)
Capacity
Optimisation
Deployment
Fibre to 40% of sites 5G (3GHz) site upgrade costs;
20% of Urban sites; 20% Rural
60% site sharing
reduction Part – 50% of network Energy – 20%, per site
Assumed Cost per site 3GHz new sites – 20% growth in
Urban sites; 10% rural
Backhaul – 20%, per
site
Densification (Small Cells) Cumulative Opex saving of 30-40%*, per year
A
B
C
5.3.2 CAPEX
5.3.2.1 Fibre
5G networks will require a much higher capillarity of
fibre to meet capacity and latency requirements
To improve overall network capacity, operators must
undertake large-scale fibre efforts to meet the capacity
and latency requirements of existing and new cell sites.
In particular, fibre is essential to support small cell
deployment in urban areas. This invariably requires the
use of fibre optics to minimise the time-to-market of
massive small cell deployments, a major milestone for
the roadmap to 5G.
The model assumes that for deployment Option A,
100% of sites will require fibre, i.e. assuming 20% of
existing sites have fibre, another 80% is required; for
Option B a total of 60%; and for Option C 40%. These
will vary for developed and developing markets and the
model accounts for that.
Business Case Considerations 229
5.3.2.2 Sites
5G will require a much denser network
Network density growth is inevitable and a requirement
in 5G, and the level of growth is dependent on data
growth demands and anticipated scale of deployment.
The model assumes variances in each scenario for:
• 5G 3.5GHz site upgrade costs – assuming 3.5GHz as
the ‘global’ 5G spectrum band, the model includes
the anticipated proportion of existing site footprint
to be upgraded.
• 5G new sites – the number of newly built 5G cell
sites/base stations required to maintain expected
coverage and capacity for each given scenario.
5.3.2.3 Spectrum cost considerations
Spectrum is a major capex consideration for operators
when deploying 5G
While acknowledging the implication of spectrum
prices, this model does not incorporate spectrum
costs in the modelling. Spectrum prices vary widely
as there are many potential factors affecting them,
such as spectrum allocation approaches; reserve
prices; spectrum available at the market; 4G coverage;
potential newcomers; and much more.
The race for spectrum will continue across high and
low bands. Prices for 3.5 GHz used to be very low, but
they have been increasing since last year, with the UK
auction reaching very high levels. The 3.5GHz band is
seen by many as the pioneer band for 5G, hence the
increase in interest. As presented in Figure 5.3.2, its
auction price varies significantly mainly due to national
policy decisions such as the auction design selection.
FIGURE 5.3.2
SUMMARY OF THE COST OF SPECTRUM FOR 3.5GHZ (SOURCE: GSMA INTELLIGENCE)
-
0.005
0.010
0.015
0.020
0.025
0.030
- 0.005 0.010 0.015 0.020 0.025 0.030
Italy
2018
Korea, South
2018
Australia
2018
United Kingdom
2018
Ireland
2018
Finland
2018
Latvia
2018
Spain
2018
Czech Republic
2018
Italy
2018
Korea, South
2018
Australia
2018
United Kingdom
2018
Ireland
2018
Finland
2018
Latvia
2018
Spain
2018
Czech Republic
2018
$/Mhz/Pop/Yr (PPP)
$/Mhz/Pop/Yr (PPP)
0.027
0.027
0.023
0.023
0.018
0.018
0.008
0.008
0.003 0.003
0.003
0.003
0.015
0.015
0.004
0.004
0.002
0.002
230
Prices for mmWave have been very low, but there
is a risk of them getting higher with the recently
completed mmWave auctions in South Korea, Italy or
the US. For now, considering prices paid by operators
through acquisition is a related indicator in considering
spectrum prices for other countries. In the US, Verizon
Business Case Considerations
acquired XO Communications for $1.8 billion and
Straight Path Communications for $3.1 billion; AT&T
paid $207 million for Fiber Tower and spectrum in
39 GHz. Figure 5.3.3 highlights the range of prices
paid so far for mmWave spectrum (values for US are
provisional as at 1 January 2019).
FIGURE 5.3.3
SUMMARY OF THE COST OF SPECTRUM FOR MMWAVE (SOURCE: GSMA INTELLIGENCE)
- 0.00020 0.00040 0.00060 0.00080 0.00100 0.00120 0.00140
South Korea
2018 (28 GHz)
Italy
2018 (26 GHz)
USA
2019 (28 GHz)
$/Mhz/Pop/Yr (PPP)
0.00113
0.00112
0.00025
NAS
Dierent parameterisation of PDCP, RLC,
MAC, and PHY per slice.
RLC’’: non-real-time functions of RLC
RLC’: real_time functions of RLC
NAS NAS
RRC
Cell Related Functions
NS-SF
Common Channel MAC - Scheduler
PHY
PDCP
RLC’’
RLC’
UE1
eMBB
UE2
cMTC
UE3
IoT
Shared Functions
RAN Slice 1 RAN Slice 2 RAN Slice 3
RLC’ RLC’
PDCP
RLC’’
PDCP
RLC’’
APPLICATION
SCHEDULER
RRC RRC
5.3.3 OPEX
The model assumes a higher proportion of the network
to be virtualised for operators adopting Options A
and B. As the demands for the core and RAN stretch
its capabilities, operators need to find ways to ensure
efficiencies through advancements in technologies
required to keep up. The model applies an estimated
percentage reduction of average opex per site. This is
taken from the GSMA’s Network Economics work where
the economic impact of various network transformation
strategies is modelled.
5.3.3.1 Virtualisation
Savings from virtualisation in the IT industry suggest
that operators could achieve similar benefits
According to EMA IT management research, over 70%
of organisations report that virtualisation has delivered
“real, measurable cost savings.90” Virtualisation,
especially with sophisticated management, allows
significant operational expense savings. 5G networks
will present an opportunity for operators to reproduce
such benefits.
90. https://www.vmware.com/files/pdf/vmware-solution-opex-reducing-opex-wp-en.pdf
Business Case Considerations 231
5.3.3.2 Additional OPEX savings
Energy efficiency and backhaul relief will provide
additional Opex savings
Recent work within the GSMA’s Future Networks
Programme has explored and identified significant
potential cost savings from energy efficiency and
backhaul relief that were incorporated in the model.
Energy efficiency savings can come from either
alternative energy sources to take the network off
the main power grid and network load optimisation
to reduce the energy consumption. The GSMA has
identified and estimated average saving of 10-30%
per annum in total network opex. This is reused in the
model.
Backhaul relief provides operators a means of reducing
their opex and capex by minimising the need for
incremental spending to expand capacity. This can be
achieved by using innovative transport architecture
with RAN to cope with the challenges and optimisation
of the transport demand. As networks evolve through
4.5G to 5G with more complexity, network densification
and intelligence at the edge, the need will be even
greater to optimise transport network architecture
within mobile RAN to resolve the challenges of
backhaul/fronthaul demand and the corresponding
increase in cost (Capex and Opex).
The GSMA has identified and estimated an average
saving of 20-30% per annum in total network opex for
archetypal operators from backhaul relief: this has been
applied to the model.
232
Revenue Model – Assumptions
Business Case Considerations
TABLE 5.4.1
SUMMARY OF THE ASSUMPTIONS FOR THE BEST-CASE INCREMENTAL ARPU INPUTS FOR
THE MODEL (5 YEARS POST 5G LAUNCH)
5.4
KEY TAKEAWAY
• Incremental revenue growth in the core business will come from new consumer use cases
(e.g. AR/VR), enterprise/IoT use cases (e.g. real time automation), and new broadband
opportunities (e.g. FWA).
5.4.1 Revenue mechanics
Incremental revenue growth in the core business will come from new consumer use cases,
enterprise/IoT use cases, and new broadband opportunities
The model estimates the upside from new 5G use
cases and prioritised (based on extensive research)
value creation to capture revenue streams. The model
assumes different revenue impacts (or incremental
ARPU uplift) dependant on region and archetype, and
also by scenario deployment. The focus of the model
is on three revenue streams: new consumer use cases,
enterprise/IoT use cases and new broadband markets
(primarily FWA).
The model relies on these revenue assumptions to
estimate:
a) the amount of incremental ARPU uplift for each of
the three revenue streams.
b) the amount of revenue required to maintain a
sustainable cost intensity.
For example, the model assumes a higher level of
incremental ARPU for Enterprise and IoT in the
enterprise-focused Option B compared to the capacityfocused Option C. Table 5.4.1 summarises the impact of
the main 5G era value opportunities for a Major player,
integrated products operator in a developed market.
Base case scenario Option A
(Rapid, full 5G deployment)
Option B
(Enterprise focused 5G
deployment)
Option C
(Capacity optimisation 5G
deployment)
Growth assumptions used in model
Total ‘incremental’ ARPU 100% 3.0x 1.9x 1.3x
New Consumer Use cases
(esp. Cloud AR/VR) 7.7% 4.2x 2.8x 1.9x
Enterprise Use Cases 87.7% 2.9x 1.8x 1.2x
New Broadband Markets
(esp. FWA) 4.6% 3.3x 2.3x 1.8x
Business Case Considerations 233
Operators will continue to seek new consumer use
cases, in the 5G era to add to their current portfolio of
value added services. This is the direct Business-toConsumer (B2C) opportunity for 5G and will shape how
operators are able to complement and enrich their core
mobile broadband proposition.
Amongst all the possible new consumer use cases,
Cloud AR/VR is the clearest and, potentially,
most lucrative opportunity for operators. Its
conceptualisation, architecture and requirement make it
reliant on a super-fast, low latency, mobile connectivity.
As such, the model uses Cloud AR/VR as the
exemplified consumer use case to drive incremental
ARPU in the fifth year post 5G launch. Huawei’s “5G
Unlocks a world of opportunities: top ten 5G use cases”
report estimates the market size for Cloud AR/VR
by 2025 to be $292 billion. The operator addressable
market opportunity will reach more than $93 billion
(30% of the total). This is about 8% of overall operator
revenue in 2025, giving a potential ARPU increment of
$1.60 for a major, integrated operator in a developed
market.
5.4.2 New consumer use cases
Cloud AR/VR is the clearest, incremental 5G era consumer opportunity
5.4.3 Enterprise/IoT use cases
Real time automation is the clearest, incremental 5G era enterprise opportunity
As much of the incremental 5G opportunity will come
from the enterprise segment, a clear understanding of
the requirements and market opportunity is needed.
This opportunity will be best addressed with rollout
Options A or B – rapid or enterprise focused 5G
deployments.
In The guide to capturing the 5G industry digitalisation
business potential91, Ericsson quantified the
opportunities from nine application-based clusters,
identifying a $204 billion to $619 billion addressable
opportunity for operators by 2026. The upper threshold
of $619 billion is equivalent to 53% of overall operator
revenue in 2026, giving a potential ARPU increment of
$10.70 for a major, integrated operator in a developed
market.
91. https://www.ericsson.com/assets/local/networks/documents/report-bnew-18001324.pdf
92. http://www.snstelecom.com/5gfwa
5.4.4 New Broadband Markets
5G will open up the FWA opportunity
5G promises to unlock the FWA opportunity for
operators, thanks to its ample capacity. This is a major
development for operators, because 5G will provide
competing broadband technology that can match or
better some fixed broadband options.
SNS Telecom reports in 5G for FWA: 2017 – 2030 –
Opportunities, Challenges, Strategies & Forecasts92 that
FWA subscriptions will grow from about $1 billion in
2019 to $40 billion by 2025. This is about 3% of overall
operator revenues in 2025, giving a potential ARPU
increment of $0.70 for a major, integrated operator in a
developed market.
With operators now working towards 5G FWA to
provide high speed broadband to residential users,
fixed wireless broadband will be a revenue growth
opportunity.
234
Model Outputs & Results
Business Case Considerations
5.5.1 High level results
The model suggests that Option C is the optimal deployment model and delivers a 5%
revenue uplift with minimal change in the cost intensity
The results presented in this section detail initial
simulation from the deployment cost options and
value creation models. They attempt to cover all eight
operator archetypes, with assumed variations and
sensitivities applied for each scenario.
Figure 5.5.1 displays the results for all eight operator
archetypes based on the default assumptions. The
models supplement this document and are able to be
manipulated to suit the users profiling.
Based on the analysis, it is clear that the evolutionary
approach will be the natural path for most operators,
allowing them to minimise investments while the
incremental revenue potential of 5G remains uncertain.
5.5
KEY TAKEAWAYS
• The model suggests that the Option C deployment model delivers a 5% revenue uplift with
minimal change in the cost intensity.
• Unsurprisingly, there are significant increases in capex and opex for the more intensive
deployment scenarios (A&B) across both developed and developing markets.
• Revenue modelling suggests that incremental revenues across both developed and
developing markets will be insufficient in the more intensive deployment scenarios to
outweigh the increase in costs.
• Option C will deliver the most efficient return on investment of the 5G scenarios assessed
across both developed and developing markets.
Business Case Considerations 235
FIGURE 5.5.1
SUMMARY OF OUTPUTS FROM THE 5G BUSINESS CASE MODEL
Country Profile Operator Archetypes Measure Rapid, Full-Scale
Deployment
Enterprise
Focused
Deployment
Capacity
Opimisation
Deployment
Developed
1 Major Player, Integrated Products
Cost Intensity Change 29% 10% -4%
Revenue Uplift 147% 10% 5%
2 Major Player, Mobile Only
Cost Intensity Change 28% 10% -2%
Revenue Uplift 145% 10% 5%
3 Minor Player, Integrated Products
Cost Intensity Change 47% 19% -1%
Revenue Uplift 149% 11% 5%
4 Minor Player, Mobile Only
Cost Intensity Change 42% 18% 1%
Revenue Uplift 152% 10% 5%
Developing
5 Major Player, Integrated Products
Cost Intensity Change 35% 14% -2%
Revenue Uplift 135% 11% 5%
6 Major Player, Mobile Only
Cost Intensity Change 29% 11% -2%
Revenue Uplift 131% 11% 5%
7 Minor Player, Integrated Products
Cost Intensity Change 51% 19% -7%
Revenue Uplift 111% 11% 5%
8 Minor Player, Mobile Only
Cost Intensity Change 43% 19% 0%
Revenue Uplift 130% 11% 5%
In this column, the
percentage used is the
increase in Revenue
required in Year 5 (from
Year 0) for the operator
to maintain a sustainable
cost intensity level.
In the model, cost intensity change is defined as:
(Capex + Opex) / (Revenue in year 5) – (Capex + Opex) / (Revenue in year 0)
For Options B and C, revenue uplift is simply defined
as the delta between year five revenue and year zero
revenue for each operator archetype. For Option A,
instead the model calculates the increased amount of
revenue the operator is required to generate in order to
maintain a sustainable cost intensity (in this simulation
the default assumption is that the ‘sustainable’ cost
intensity level is within a threshold of 0-2% of base
[year zero] cost intensity).
236
5.5.2 Cost results
The deployment cost model outputs show the indexed costs estimates for all archetypes
and scenarios
Cost results in the model sum total network capex and
total network opex.
Where applicable, the cost lines have adjustable
parameters which can be toggled to reflect the
expectations of the user. The cost line assumptions in
the simulations in these results can be found within the
deployment cost model.
5.5.2.1 Cost results – Developed market
In the initial simulations for developed markets, the
model estimates the total cost (CAPEX + OPEX)
deltas for four operator archetypes in a hypothetical
Business Case Considerations
developed country, between baseline and end of year
five of 5G rollout. The results are shown in Figure 5.5.2.
Across the board there are expected increases in costs
for operators in developed markets, for both scenario
Options A and B. Relatively, the largest increase is
expected for mobile only players, largely due to the
estimated increase required on fibre spend. Though still
estimated to see cost lowered/flat in scenario Option C,
‘Minor players’ are expected to reap the benefits from
network economics strategies at a slower rate than
major players, which see a more significant cost saving
at the end of year five.
100%
100% 100% 100%
100% 100%
246%
150%
90%
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
MAJOR PLAYER, INTEGRATED PRODUCTS MAJOR PLAYER, MOBILE ONLY
MINOR PLAYER, INTEGRATED PRODUCTS MINOR PLAYER, MOBILE ONLY
Total Cost
(Base)
Total Cost
(Year 5)
Total Cost
(Base)
Total Cost
(Year 5)
100% 100% 100%
245%
155%
98%
249%
159%
103% 100% 100% 100%
252%
164%
106%
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
MAJOR PLAYER, INTEGRATED PRODUCTS MAJOR PLAYER, MOBILE ONLY
MINOR PLAYER, INTEGRATED PRODUCTS MINOR PLAYER, MOBILE ONLY
100% 100% 100%
234%
152%
97% 100% 100% 100%
230%
148%
94%
100% 100% 100%
211%
142%
92% 100% 100% 100%
230%
156%
103%
FIGURE 5.5.2
COST PROJECTIONS FOR OPERATOR ARCHETYPES IN A DEVELOPED MARKET
Business Case Considerations 237
5.5.2.2 Cost results – Developing market
For first model simulations with ‘developing’ markets,
the model estimates the total cost (CAPEX + OPEX)
deltas for four operator archetypes in a hypothetical
developing country, between baseline and end of year
five of each 5G deployment scenario. The results are
shown in Figure 5.5.3.
Similar to operators in developed markets, there are
estimated to be significant jumps in capital expenditure
for operators in developing markets, especially for
Options A and B. The largest increase is expected for a
‘Major Player, Integrated Products’ which is estimated
to have a 234% (indexed) increase in total cost at end
of year five compared to base year. This is owing to an
estimated annual capex increase (relative to existing
annual capex levels) of 114% from rapid large-scale
infrastructure investment. Though still estimated to see
cost lowered/flat in Option C, operators in developing
regions are expected to reap the benefits from network
economics strategies at a slower rate than those in
developed markets, which see a more significant OPEX
cost saving at the end of year 5.
FIGURE 5.5.3
COST PROJECTIONS FOR OPERATOR ARCHETYPES IN A DEVELOPING MARKET
100%
100% 100% 100%
100% 100%
246%
150%
90%
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
MAJOR PLAYER, INTEGRATED PRODUCTS MAJOR PLAYER, MOBILE ONLY
MINOR PLAYER, INTEGRATED PRODUCTS MINOR PLAYER, MOBILE ONLY
Total Cost
(Base)
Total Cost
(Year 5)
Total Cost
(Base)
Total Cost
(Year 5)
100% 100% 100%
245%
155%
98%
249%
159%
103% 100% 100% 100%
252%
164%
106%
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
MAJOR PLAYER, INTEGRATED PRODUCTS MAJOR PLAYER, MOBILE ONLY
MINOR PLAYER, INTEGRATED PRODUCTS MINOR PLAYER, MOBILE ONLY
100% 100% 100%
234%
152%
97% 100% 100% 100%
230%
148%
94%
100% 100% 100%
211%
142%
92% 100% 100% 100%
230%
156%
103%
238
5.5.3 Revenue results
The deployment cost model outputs show the indexed revenue estimates for all archetypes
and scenarios.
The changes are calculated using estimations of
increases in service ARPU from specific 5G use cases as
described in section 4 of this chapter
Within the model, the incremental service revenue
ARPU estimations have changeable inputs which can
be adjusted to reflect the expectations of the user.
These initial simulations are based on default revenue
assumptions which are also described in Section 5.4.
Business Case Considerations
5.5.3.1 Revenue results – Developed market
For first model simulations with ‘developed’ markets,
the model estimates the (average) indexed revenue
deltas of four operator archetypes in a hypothetical
developed country, between baseline and end of year
five of each 5G deployment scenario. The results in
figure 5.5.4 show the average revenue changes of four
operator archetypes in the developed country profile,
per scenario.
Total Cost
(Base)
Total Cost
(Year 5)
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
MAJOR PLAYER, INTEGRATED PRODUCTS MAJOR PLAYER, MOBILE ONLY
MINOR PLAYER, INTEGRATED PRODUCTS MINOR PLAYER, MOBILE ONLY
Revenue
(Base)
Revenue
(Year 5)
Revenue
(Base)
Revenue
(Year 5)
Rapid, Full-Scale Deployment Enterprise Focused Deployment Capacity Optimisation Deployment
100% 100% 100%
117.6% 109.9% 104.4%
Rapid, Full-Scale Deployment Enterprise Focused Deployment Capacity Optimisation Deployment
100% 100% 100%
115.9% 109.7% 104.6%
100% 100% 100%
209%
137%
86%
209%
141%
93%
100% 100% 100%
211%
144%
98% 100% 100% 100%
215%
149%
102%
FIGURE 5.5.4
AVERAGE REVENUE PROJECTIONS OF OPERATOR ARCHETYPES IN A DEVELOPED MARKET
Business Case Considerations 239
A key revenue assumption behind each scenario is
the percentage of subscribers ‘impacted’ by 5G, i.e.
the proportion of total subscribers/connections that
operators will realise 5G revenues from. The default
parameters used in these assumptions are as follows: A:
60%, B: 40% and C: 20%.
That strongest revenue uplift is estimated to be
in a rapid full-scale 5G deployment, with a higher
proportion of subscribers impacted but also due to a
higher estimated contribution of revenues from both
enterprise/IoT and consumer use cases.
FIGURE 5.5.5
AVERAGE REVENUE PROJECTIONS OF OPERATOR ARCHETYPES IN A DEVELOPED MARKET
Total Cost
(Base)
Total Cost
(Year 5)
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
MAJOR PLAYER, INTEGRATED PRODUCTS MAJOR PLAYER, MOBILE ONLY
MINOR PLAYER, INTEGRATED PRODUCTS MINOR PLAYER, MOBILE ONLY
Revenue
(Base)
Revenue
(Year 5)
Revenue
(Base)
Revenue
(Year 5)
Rapid, Full-Scale Deployment Enterprise Focused Deployment Capacity Optimisation Deployment
100% 100% 100%
117.6% 109.9% 104.4%
Rapid, Full-Scale Deployment Enterprise Focused Deployment Capacity Optimisation Deployment
100% 100% 100%
115.9% 109.7% 104.6%
100% 100% 100%
209%
137%
86%
209%
141%
93%
100% 100% 100%
211%
144%
98% 100% 100% 100%
215%
149%
102%
5.5.3.2 Revenue results – Developing market
Considering the default assumptions, the outcome for
operators in developing markets portray a similar result
for those developed markets.
Out of the three major use cases expected to enhance
revenues for 5G in developing regions, FWA sees a
relatively stronger expected growth, with improved
infrastructure investment (incl. fibre) and considering a
stronger uptake of the service in more rural regions.
240
5.5.4 Cost intensity results
Following the modelling of both total costs and revenues it is important to provide context
to the results in the form of a ‘cost intensity’ consideration.
Cost intensity = (CAPEX + OPEX) / Revenue
This is an important measure for operators as it
gauges the economic sustainability of the network. For
example, from the revenue results we understand there
to be a strong uplift in Option B which may paint it as
the desirable deployment scenario, but once costs are
taken into account we see cost intensity percentages
increase by over 2x. Thus to ensure a desired cost
intensity percentage, the operator must in fact generate
massive revenues. It is assumed that operators have
Business Case Considerations
an objective to maintain their cost intensity of minimal
deviation from the percentage at year zero, throughout
the 5G era.
5.5.4.1 Cost intensity results – Developed market
Cost intensity levels for developed market operators
is estimated to increase significantly through Option
A, owing to higher CAPEX and OPEX through the
deployment period.
Total Cost
(Base)
Total Cost
(Year 5)
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
MAJOR PLAYER, INTEGRATED PRODUCTS MAJOR PLAYER, MOBILE ONLY
MINOR PLAYER, INTEGRATED PRODUCTS MINOR PLAYER, MOBILE ONLY
Revenue
(Base)
Revenue
(Year 5)
Revenue
(Base)
Revenue
(Year 5)
Rapid, Full-Scale Deployment Enterprise Focused Deployment Capacity Optimisation Deployment
100% 100% 100%
117.6% 109.9% 104.4%
Rapid, Full-Scale Deployment Enterprise Focused Deployment Capacity Optimisation Deployment
100% 100% 100%
115.9% 109.7% 104.6%
100% 100% 100%
209%
137%
86%
209%
141%
93%
100% 100% 100%
211%
144%
98% 100% 100% 100%
215%
149%
102%
FIGURE 5.5.6
COST INTENSITY (INDEXED) PROJECTIONS OF OPERATOR ARCHETYPES IN A DEVELOPED
MARKET
Business Case Considerations 241
In scenario Option C, however, there is potential
for operators to see a reduction in this measure,
owing largely to the assumption that operators
benefit well from network economic strategies such
as infrastructure sharing and energy efficiencies.
Operators in the region can realise strong savings in
OPEX from these, for example the archetypical major
player with integrated products, with cost intensity
reduced to 86% of its baseline measure.
5.5.4.2 Cost intensity results – Developing market
Thought still high, the estimated growth of total cost
intensities for operators in developing regions are not
as pronounced, with the average level of change in
Option A, for example, around 200%.
FIGURE 5.5.7
COST INTENSITY (INDEXED) PROJECTIONS OF OPERATOR ARCHETYPES IN A DEVELOPING
MARKET
Total Cost
(Base)
Total Cost
(Year 5)
Revenue
(Base)
Revenue
(Year 5)
Rapid, Full-Scale Deployment Enterprise Focused Deployment Capacity Optimisation Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
MAJOR PLAYER, INTEGRATED PRODUCTS MAJOR PLAYER, MOBILE ONLY
MINOR PLAYER, INTEGRATED PRODUCTS MINOR PLAYER, MOBILE ONLY
100% 100% 100%
203%
139%
93% 100% 100% 100%
200%
135%
90%
100% 100% 100%
183%
129%
88% 100% 100% 100%
199%
142%
99%
100% 100% 100%
246%
150%
90%
For scenario Option B, indexed cost intensities increase
by an average of 135% across the four archetypes.
Most operators correctly would consider this too
large a spike in this measure, but considering the level
of investment and the anticipated capex increase
involved, this may not be a feasible deployment option
for some.
Similar to developed markets, operators in developing
countries are also able to realise cost intensity
reduction following the deployment of 5G in a capacity
optimisation-driven approach. The assumption here
highlights a stronger saving from infrastructure sharing,
particular for major players.
242
5.5.5 Deployment cost model simulation – example
The results for a major player with integrated products, in a developed country illustrates
the business case for most 5G pioneer markets
An initial simulation from the cost model is conducted
for operator archetype: Major player, integrated
products, in a developed country. The outputs range
from Total Costs (OPEX+CAPEX); Cost Intensity (total
cost/revenue); Revenue; and ‘Time to Build’, which
estimates the amount of time it would take to deploy
5G given the operators annual capex envelope.
Business Case Considerations
5.5.5.1 Total Cost (indexed)
The initial simulation for this archetype shows that the
total cost (CAPEX+OPEX) relative to baseline (indexed)
for deployment Option A increases nearly 2.5-times
(see Figure 5.5.8). The main drivers of this are the
anticipated increase in spend for cell site densification,
upgrades to existing sites, and the amount of fibre
required for this type of deployment.
Total Cost
(Base)
Total Cost
(Year 5)
Revenue
(Base)
Revenue
(Year 5)
Rapid, Full-Scale Deployment Enterprise Focused Deployment Capacity Optimisation Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
MAJOR PLAYER, INTEGRATED PRODUCTS MAJOR PLAYER, MOBILE ONLY
MINOR PLAYER, INTEGRATED PRODUCTS MINOR PLAYER, MOBILE ONLY
100% 100% 100%
203%
139%
93% 100% 100% 100%
200%
135%
90%
100% 100% 100%
183%
129%
88% 100% 100% 100%
199%
142%
99%
100% 100% 100%
246%
150%
90%
FIGURE 5.5.8
COST RESULTS FOR A MAJOR, INTEGRATED OPERATOR IN A DEVELOPED MARKET
Business Case Considerations 243
5.5.5.2 Cost Intensity (indexed)
The initial simulation for this archetype shows that
cost intensity (capex + opex / revenue) relative to
baseline (indexed) for deployment Option A almost
doubles. Owing to huge costs associated with a new
infrastructure, as well as increased operational costs
from network complexity with a standalone core.
An alternative, and potentially viable, deployment
option for operators with matching profiling is Option B
rollout where cost intensity is estimated to be 1.3-times
higher than that in the baseline year (see Figure 5.5.9).
Owing to a more refined, targeted deployment, CAPEX
is not predicted to be as substantial as full standalone.
However, it is clear that if cost efficiency and
pragmatism is at the forefront of operator’s minds
when considering various deployment options,
choosing Option C is very likely to be most sensible.
After extrapolating estimated network economic
efficiencies, especially savings in OPEX, there is actually
a potential to lower cost intensities. This is, however,
also dependant on the additional revenue that can be
generated from 5G.
Revenue
(Base)
Revenue
(Year 5)
Cost Intensity
(Base)
Cost Intensity
(Year 5)
Rapid, Full-Scale Deployment Enterprise Focused Deployment Capacity Optimisation Deployment
100% 100% 100%
209%
137%
86%
100% 100% 100%
118% 110% 104%
Rapid, Full-Scale Deployment Enterprise Focused Deployment Capacity Optimisation Deployment
5.5.5.3 Revenue
As described in section 5.4, estimates on incremental
ARPU growth will come from three particular cases:
New consumer use cases (Cloud AR/VR); Enterprise/
IoT; New broadband markets (FWA), for each operator
archetype and deployment scenario. Within the model,
as with the cost lines, these inputs are flexible and can
be altered to suit user expectations.
Though results for this archetype suggests Option A
deployment generates the biggest increase in revenue
from base year, what must be considered is that cost
intensity increases vastly from substantial capex
investments and increased opex. For this operator to
keep its cost intensity at a sustainable level (minimal
deviation from baseline cost intensity), it must realise
revenues nearly 2-2.5 times higher than existing annual
revenue (see Figure 5.5.10).
Option C suggests that revenue grows marginally,
indicating a suitable return on investment for this
deployment scenario. However, this is dependent on
cost efficiencies being incorporated which result in
lower opex spend and less economic strain.
FIGURE 5.5.9
COST INTENSITY RESULTS FOR A MAJOR, INTEGRATED OPERATOR IN A DEVELOPED MARKET
244
FIGURE 5.5.10
REVENUE RESULTS FOR A MAJOR, INTEGRATED OPERATOR IN A DEVELOPED MARKET
5.5.5.4 Capex ‘Burn Rate’
The definition of this result is effectively how many
years it would take an operator to deploy 5G. It is
calculated by:
Business Case Considerations
FIGURE 5.5.11
NO OF YEARS OF CAPEX REQUIRED FOR A MAJOR, INTEGRATED OPERATOR IN A
DEVELOPED MARKET
The table of results (see Figure 5.5.11), for this particular
archetype, deploying based on Option A, would take up
to six years longer than deploying based on Option C;
with an annual capex increase of 125% compared to 14%
for scenario Option C, which is a more expected level of
investment and/or spend for operators categorised in
this segment.
Revenue
(Base)
Revenue
(Year 5)
Cost Intensity
(Base)
Cost Intensity
(Year 5)
Rapid, Full-Scale Deployment Enterprise Focused Deployment Capacity Optimisation Deployment
100% 100% 100%
209%
137%
86%
100% 100% 100%
118% 110% 104%
Rapid, Full-Scale Deployment Enterprise Focused Deployment Capacity Optimisation Deployment
Cumulative capex required to deploy 5G (for each scenario), ($)/estimated annual capex envelope, ($)
Metric Rapid, Full-Scale
Deployment
Enterprise Focused
Deployment
Capacity Optimisation
Deployment
5G Capex ‘Burn Rate’ Years 6.3 2.9 0.7
Annual CAPEX Increase % 125% 58% 14%
Business Case Considerations 245
246
Key Messages and Positions 6for the Industry
Chapter 6 provides suggested industry-level messages and positions relating to
the 5G era, providing operators with a set of considered messaging for different
stakeholders. The goal is that if common messaging and terminology can flow
through all members’ communications, the industry will convey a clearer and
more impactful narrative.
Operators can use this industry-level messaging to complement their own
communication activities with governments, regulators, analysts, media and
customers. This is with a view to facilitating a consistent industry voice.
GSMA members are encouraged to distribute this material to their marketers,
communicators, speechwriters and spokespeople, and encourage them to use this
content in external-facing materials as appropriate.
246 Key Messages and Positions for the Industry
THE 5G GUIDE
247
6.1 GSMA’s Perspective
KEY TAKEAWAY
• The GSMA leadership is clear about the significance of 5G and how it will benefit
citizens, enterprises and society. At the same time, the related challenges are
understood.
Key Messages and Positions for the Industry
“The arrival of 5G is very significant... with the arrival of 5G things which are now in the realm
of science fiction will become reality.”
Sunil Mittal, Chairman, GSMA 2017/18
“Mobile operators and our wider industry have a key role to play in promoting a safer and
more inclusive digital world, while building the infrastructure and services that will carry us
forward as we enter this new era of intelligent connectivity.”
Stéphane Richard, Chairman, GSMA 2019/20
“5G is a giant step forward in the global race to connect and digitise economies and
societies: it is an opportunity to create an agile, purpose-built network tailored to the
different needs of citizens and the economy. But it is vital that all stakeholders work together
to ensure that 5G is successfully brought to market.”
“One of the biggest challenges for the 5G future is to ensure that there is a supportive
regulatory environment – one that fuels investment and fosters innovation. A policy
framework that reflects the changing digital landscape while minimising costs and barriers to
network deployment will deliver the best outcomes for society and the economy is needed.”
“The timely release of spectrum, flexibility to share networks under commercial agreements
and facilitation of small cell deployments will encourage the infrastructure investments
required in order to deliver the global benefits of the 5G Era.”
Mats Granryd, Director General, GSMA
6.1.1 GSMA Leadership’s Views
248
Industry-level Messaging
Key Messages and Positions for the Industry
6.2
KEY TAKEAWAYS
• The GSMA encourages common messaging and terminology in members’ communications
to ensure that the industry conveys a clearer and more impactful narrative on 5G.
• Intelligent Connectivity will enable revolutionary new products and services to be
developed, benefiting governments, businesses, consumers and society in general.
• Examples of new services will include:
– Remote control of robots in real time increasing industrial productivity
– Remote training and telepresence for increased efficiency and effectiveness
– Smart agriculture – enhanced food production and efficient distribution
– Connected care – real time, intelligent health and home monitoring
– Proactive environment management with Predictive Modeling and Monitoring
– Autonomous transportation – convenient, safe, independent travel
– Cloud-based mobile gaming – immersive gaming anywhere, without a console
Key Messages and Positions for the Industry 249
6.2.1 Generic 5G elevator pitch
The global benefits of the 5G Era: an industry-level elevator pitch for operators
The mobile industry’s purpose is to intelligently connect everyone and everything to a
better future: 5G is the next major step in delivering this purpose.
Building on and working together with 4G, 5G provides the ability to connect people and
things better, faster and more efficiently in a 5G Era.
The faster mobile internet speeds, seamless connectivity, increased capacity and greater
flexibility that 5G provides – together with Mobile IoT, big data analytics and artificial
intelligence – will fundamentally improve the way we live and work in an age of Intelligent
Connectivity.
As demand for seamless connectivity grows, especially in cities and industrial areas, 5G will
facilitate the opportunity to create even more agile, purpose-built networks tailored to the
different needs of citizens, enterprises and society.
5G will drive future innovation and economic growth: it will be an evolutionary step with
a revolutionary impact, delivering greater societal benefit than any previous mobile
generation and enabling new digital services and business models to thrive.
Intelligent Connectivity will sit at the heart of new smarter ecosystems that benefit
everyone: society will use technology to tackle the world’s biggest challenges; consumers
will enjoy immersive, contextual experiences and enterprises will be able to embrace the
Fourth Industrial Revolution.
4G will continue to deliver high-speed mobile broadband, supporting the numerous and
increasing connectivity needs of citizens and the economy, and it will help to support 5G.
4G is also key to continuing the drive to connect even more of the world’s unconnected
people to mobile broadband for the first time.
With 4G networks already covering 81% of the global population across 208 countries
– increasing to 86% by 2025 – and 5G networks set to cover nearly 40% of the global
population by 2025 (source: GSMA Intelligence), the 5G Era is truly upon us.
Appropriate spectrum and regulatory conditions are needed in order to continue to
encourage the required investments by the mobile industry and allow 5G Era benefits to be
realised by all.
250
6.2.2 Messaging for enterprise customers
Operators have more to offer enterprises in the 5G era
The following section comprises additional messages
oriented specifically towards the enterprise sector
setting out the significant benefits that the 5G era can
deliver to businesses.
Key Messages and Positions for the Industry
Please also refer to the results of the enterprise
research conducted as part of this work (see
Section 3.4).
In addition to new revenue opportunities, the business benefits of 5G include reduced
operating costs, an increased return on capital employed and, ultimately, greater profitability.
5G is a giant step forward in the global drive to digitise economies and societies, acting as an
innovation platform upon which new transformational digital services and business models
will evolve and thrive.
Smarter platforms facilitated by 5G, AI and machine learning, will use data collected from
the IoT to enable improved decision-making and business efficiencies, resulting in the
cost-effective delivery of new and improved products and services in an age of Intelligent
Connectivity.
This intelligently connected world will enable a new, unprecedented era of automation,
facilitating enhanced services - from personalised healthcare and enhanced welfare, to smart
cities and transport.
Anything that needs to be connected will be connected. The IoT is scaling with more
and more connected products and sensors providing essential data to improve device
performance, with an anticipated 25 billion connections by 2025.
5G will provide the opportunity for individual enterprises’ needs to be met by dynamically
tailoring and configuring mobile networks to their particular requirements (Source: GSMAi
Intelligence).
Operators are trusted, proven and experienced enterprise partners with the capabilities,
experience and licences to operate secure mobile networks based on global, interoperable
standards, that deliver economies of scale and are future-proof.
Key Messages and Positions for the Industry 251
6.2.3 Use case examples from a customer benefits perspective
How operators can add even more value in a world of Intelligent Connectivity
5G mobile broadband will deliver download speeds
of over 1Gbps and enable a consistently high-quality
mobile broadband experience with reliable internet
access at home, in the office and on the move. This
enhanced, reliable and high-speed mobile broadband
will facilitate so-called “hyperconnectivity”, a world of
always-available communication, entertainment and
services.
5G, together with the IoT, facilitated by operators’
LPWA networks, combined with AI and machine
learning, will fundamentally alter the way we live and
work in an age of Intelligent Connectivity, see Figure
6.2.1.
FIGURE 6.2.1
TOWARDS A WORLD OF INTELLIGENT CONNECTIVITY
INTELLIGENT CONNECTIVITY
The Fusion of 5G, AI and IoT
Intelligently connecting everyone and everything to a better future
TOMORROW
TODAY
Flexible, reliable, high-speed, low-latency,
high capacity networks
Smarter platforms for enhanced
decision making & automation
Everything will be securely connected
enabling rich new products & services
4G / 3G /
MOBILE IoT
HUMAN GENIUS IQ:
140+
9 BILLION
CONNECTED DEVICES
5G ERA:
INTEROPERABLE NETWORKS
5G / 4G / 3G / MOBILE IoT / WIFI /
FIXED BROADBAND / SATELLITE
ARTIFICIAL INTELLIGENCE:
COMPUTER IQ: 10,000+
INTERNET OF THINGS
25 BILLION CONNECTED DEVICES
NETWORK DEPLOYMENT NETWORK FLEXIBILITY 5G SPECTRUM CONSIDERATIONS REGULATORY COSTS
Simple planning procedures and
regulations
Access to public sites
EMF rules and compliance
processes aligned with
international guidance
Technical and commercial flexibility
for operators
Regulatory flexibility that allows
dynamic network configuration
Avoid prescriptive rules that limit
innovation and investment
Contiguous spectrum for each
operator
Reasonable terms and prices
Exclusive licensing of spectrum
bands
Recognition of steep investment
with uncertain returns
Reduce mobile specific taxes
and fees
Modernise policy framework to
create a better investment
environment
STREAMLINE
REGULATORY CONDITIONS
to facilitate 5G network
deployment
PROVIDE
REGULATORY FLEXIBILITY
for innovative propositions
that use 5G
RELEASE SUFFICIENT
SPECTRUM FOR 5G
that is harmonised and
a
ordable
EASE FINANCIAL
DEMANDS OF 5G
by bringing down regulatory
costs and fees
252
6.2.3.1 Remote control of robots in real time
increasing industrial productivity
High speed, low latency 5G mobile networks will
enable a tactile internet delivering haptic experiences
for new use cases. With tactile internet, users can
actuate precise control, through instantaneous
communications, to support touch-based interaction
with visual feedback. Automation, robotics and
telepresence are already growing in importance in
industrial applications like smart factories and the
remote operation of industrial machinery. Data from a
multitude of new connected sensors will provide more
valuable data to smart platforms to further enhance the
industrial benefits.
The tactile internet, i.e. low latency combined with
high availability and reliability, will take the possibilities
still further, enabling the efficient manufacturing of
highly customised products, and remote inspection,
maintenance and repair of everything from industrial
plant to aeroplanes, and, for example, remote mining in
high-risk areas.
Key Messages and Positions for the Industry
AI and machine learning-assisted intelligent platforms
enhanced by 5G will enable better robotic coordination
and collaboration processes thereby improving
production performance to cost-effectively deliver
higher quality products and services. Businesses will
also be able to use 5G to control remotely located
machinery used in industrial production based on input
from sensors and cameras located on-site. If necessary,
specialist machines will be able to print 3D objects on
demand, enabling them to repair broken components.
Over time, factories will become increasingly
automated, enabling them to be controlled largely by
staff in another location. This will mean more flexibility
about where to locate production plants.
6.2.3.2 Remote training and telepresence for
increased efficiency and effectiveness
High speed, low latency 5G mobile networks
combined with VR and AR technologies will enable
new opportunities in training and education with
telepresence, for example by experiencing highrisk situations from the safety of a control room or
office. 5G and the combination of new generations of
headsets will enable AR/VR devices to be wireless and
completely mobile.
Machinery and health and safety training will be
conducted in AR, while factories’ smart sensors will
measure and control emissions.. Highly skilled workers
will be able to practice tasks prior to performing them:
for example, surgeons can rehearse heart surgery
and civil engineers can test scenarios before applying
the optimal changes at an oil refinery. Intelligent
ecosystems will be able to apply predictive analysis
with high-probability results.
Key Messages and Positions for the Industry 253
6.2.3.3 Smart Agriculture – enhanced food
production and efficient distribution
Mobile IoT is already enabling increased crop yields,
crop quality and livestock management through
enhanced monitoring of soil conditions, improved use
of pesticides and fertilisers, animal welfare, and tracking
of weather conditions. Facilitated by 5G, AI-assisted
agriculture big data platforms will utilise multiple real
time data feeds to help make more informed food
production decisions.
For example, 5G era technologies can be used to help
monitor and control the conditions inside greenhouses
to optimise the growth of the crop. Mounted inside the
greenhouse, connected sensors can transmit data to
an application that gives the grower a clear and realtime overview of the temperature and humidity levels
throughout the structure. The grower can then adjust
conditions, for example, by applying heated air to the
crop.
Intelligently connected transportation will increase
the efficiency of distribution through optimal routing
and monitoring of temperature control of food in
transit. This more effective management of vehicle
refrigeration will lead to crops and food being delivered
in better condition with longer market and shelf lives.
Connected drones are already being used for crop
spraying, land management and aerial surveillance:
intelligent AI-assisted agricultural platforms with
machine learning will further enable long-term
improvements to farm production through better
understanding of the agricultural process.
6.2.3.4 Connected Care – better and more affordable
healthcare
The digital health solutions enabled by 5G and
Intelligent Connectivity will support healthcare
professionals in delivering higher quality, more
consistent and efficient healthcare. They will assist
governments and healthcare providers in increasing
access or managing epidemics and empower
individuals to manage their own health more
proactively and effectively. Examples, according to
PwC, are that digital health at scale could save €99
billion in healthcare costs in the EU, $14 billion in Brazil
and $3.8 billion in Mexico (GSMA digital healthcare
report 2016). The elderly and the chronically ill will
benefit from mobile-enabled wearable and smart
home devices which will provide everyday activity
monitoring in addition to medication regime assistance
and reassurance. “Always on” connected devices will
enable relatives and carers to stay in touch for dayto-day contact, as well as emergency assistance to be
provided.
Wearable wellness devices will monitor key biometrics
indicators securely networked to remote health
platforms for real-time analytics against personal
medical profiles to assess current and future
health. This will enable enhanced personal wellness
management at scale, better access to health
information and more effective professional treatment.
254
6.2.3.5 Proactive environment management with
predictive modeling and monitoring
Predictive modelling enhanced by 5G will be used to
reduce pollution in smart city scenarios by providing
more data to enable accurate pollution forecasting
models.
Real-time AI-assisted monitoring platforms will enable
even more sophisticated big data models through the
smarter analysis of weather, commuter information and
town planning information.
5G will accelerate and enhance this predictive
modelling ability, enabling it to be applied to more
societal problems such as disease control, weather
and natural disaster management in addition to dayto-day challenges such as city traffic optimisation.
For example, in China, mobile is already being
used to facilitate anti-flood and other waterway
analysis, enabling monitoring and management of
hydroelectricity, water transfer and environmental
situations.
6.2.3.6 Autonomous Transportation – convenient,
safe, independent travel
The rise of smart cars and intelligent transport systems
facilitated by 5G will optimise traffic flows, further
enhance travel safety and reduce journey times.
Connected transportation will be augmented with
“conditional automation” offering self-driving abilities
under specific conditions.
On-board sensors will enable these automated
connected vehicles to be responsive and intelligent
enough to travel safely and efficiently. They will use
data from multiple sources to adapt to changes in
climate, traffic and other road users as necessary.
Key Messages and Positions for the Industry
In the coming years customers will be able to summon
intelligently connected, automated vehicles, controlled
via their mobile device for pick up virtually anywhere,
Uber and Volvo’s partnership being but one example of
development in this space.
Fleets of drones and road-based unmanned,
autonomous, delivery vehicles will enable fast, low-cost,
secure delivery directly to customers, with smart homes
enabling enhanced, flexible delivery access options.
6.2.3.7 Cloud-based Mobile Gaming – immersive
gaming anywhere, without a console
Fast, mobile, low latency access to powerful cloudbased gaming servers will enable gamers to enjoy the
latest titles without the need to purchase expensive
consoles and hardware: as an example, Oculus Quest
is already being positioned as “No PC, No Worries, No
Limits”.
The gaming experience will be enhanced with more
freedom of movement, player orientation and better
interaction with the game and the real world: the
Vive wireless gaming adapter is being promoted as
“Untethered Virtual Reality”.
Gaming will become more immersive thanks to AR and
VR enabled by 5G; it will be more social, more realistic
and more contextual and engaging. Machine learning
remote gaming platforms will intelligently alter games
by improving players’ online experiences based on
historical and real-time data.
Key Messages and Positions for the Industry 255
6.3 GSMA 5G-era Policy Positions
KEY TAKEAWAYS
• The GSMA’s Policy Group has developed policy considerations to support the sustainable
rollout and commercialisation of 5G.
• Policymakers are urged to streamline the conditions for 5G deployment by setting a national
mobile network deployment policy that simplifies planning procedures for small cells, grants
operators access to public sites for antenna siting, and establishes uniform electromagnetic
field (EMF) rules that are based on internationally agreed levels.
• Network flexibility to meet the varied connectivity requirements of 5G services and open
internet principles are not mutually exclusive, and regulators should encourage the efficient
use of network resources through features such as network slicing.
• Regulators that get as close as possible to assigning 100 MHz per operator in 5G mid-bands
(e.g. 3.5 GHz) and 1 GHz per operator in millimetre wave bands (e.g., 26 GHz and 28 GHz) will
best support robust 5G services.
• Licensed spectrum is essential to guarantee the necessary long-term heavy network
investment needed for 5G and to deliver a high quality of service. Licences should be
technology neutral and have a long duration with a predictable renewal process.
• The financial demands of 5G deployment on mobile operators will be significant, requiring
a high level of investment with uncertain returns. To support their digital policy aspirations,
governments should act to ease the cost burden faced by the mobile industry to roll out 5G
networks.
256
6.3.1 Policy Actions to Support 5G Implementation
The GSMA’s Policy Group has developed policy considerations to support the sustainable
rollout and commercialisation of 5G
5G connectivity opens up the possibility of a world of
revolutionary new products and services, with these
new networks central to the realisation of an advanced
digital economy and society. However, the barriers
to network deployment are significant, including
coverage requirements that distort the market.
National governments and regulators must do their
part by supporting operator investment and removing
deployment roadblocks.
Key Messages and Positions for the Industry
Accordingly, policymakers and regulators need to shift
from the current policy focus of minimising prices for
consumers towards a value maximisation vision. They
should take supportive action in the following four
areas to bring 5G to fruition in their market (see Figure
6.3.1): Network Densification; Network Virtualisation;
Spectrum Allocation & Assignment to operators; and
Regulatory Costs and Fees.
INTELLIGENT CONNECTIVITY
The Fusion of 5G, AI and IoT
Intelligently connecting everyone and everything to a better future
TOMORROW
TODAY
Flexible, reliable, high-speed, low-latency,
high capacity networks
Smarter platforms for enhanced
decision making & automation
Everything will be securely connected
enabling rich new products & services
4G / 3G /
MOBILE IoT
HUMAN GENIUS IQ:
140+
9 BILLION
CONNECTED DEVICES
5G ERA:
INTEROPERABLE NETWORKS
5G / 4G / 3G / MOBILE IoT / WIFI /
FIXED BROADBAND / SATELLITE
ARTIFICIAL INTELLIGENCE:
COMPUTER IQ: 10,000+
INTERNET OF THINGS
25 BILLION CONNECTED DEVICES
NETWORK DEPLOYMENT NETWORK FLEXIBILITY 5G SPECTRUM CONSIDERATIONS REGULATORY COSTS
Simple planning procedures and
regulations
Access to public sites
EMF rules and compliance
processes aligned with
international guidance
Technical and commercial flexibility
for operators
Regulatory flexibility that allows
dynamic network configuration
Avoid prescriptive rules that limit
innovation and investment
Contiguous spectrum for each
operator
Reasonable terms and prices
Exclusive licensing of spectrum
bands
Recognition of steep investment
with uncertain returns
Reduce mobile specific taxes
and fees
Modernise policy framework to
create a better investment
environment
STREAMLINE
REGULATORY CONDITIONS
to facilitate 5G network
deployment
PROVIDE
REGULATORY FLEXIBILITY
for innovative propositions
that use 5G
RELEASE SUFFICIENT
SPECTRUM FOR 5G
that is harmonised and
a
ordable
EASE FINANCIAL
DEMANDS OF 5G
by bringing down regulatory
costs and fees
FIGURE 6.3.1
SUMMARY OF GSMA PUBLIC POLICY CONSIDERATIONS RELATING TO 5G
Key Messages and Positions for the Industry 257
6.3.1.1 Network Deployment
Mobile operators’ ability to deliver high-speed,
high-capacity 5G connectivity is dependent on the
deployment of small cells, including more densely
distributed antennas and the provision of backhaul to
connect a far greater number of mobile base stations,
particularly in cities. Policymakers are urged to
streamline the conditions for 5G deployment by setting
a national mobile network deployment policy that
simplifies planning procedures for small cells, grants
operators access to public sites for antenna siting, and
establishes uniform electromagnetic field (EMF) rules
that are based on internationally agreed levels.
6.3.1.2 Network Flexibility
One of the central capabilities of 5G is its ability to
‘virtualise’ the network, dynamically configuring
network resources to increase efficiency and to deliver
bespoke managed connectivity for innovative products
and services. To realise the full economic potential of
5G at the earliest stages of its deployment, regulators
should establish technical and commercial flexibility for
mobile operators and for companies developing new
services that will rely on the capabilities of 5G.
6.3.1.3 Spectrum Allocation & Assignment
5G networks require access to spectrum in low, medium
and high radio frequencies and in larger contiguous
blocks than previous mobile generations require.
Regulators that get as close as possible to assigning
100MHz per operator in 5G mid-bands (e.g. 3.5GHz)
and 1GHz per operator in millimetre wave bands
(e.g., 26GHz and 28GHz) will best support robust 5G
services.
Millimetre wave mobile bands will largely be agreed
at WRC-19 where the GSMA recommends support for
the 26GHz, 40GHz and 66GHz to 71GHz bands. The
28GHz band is not being considered at WRC-19 but
will be used by 5G in several leading countries (e.g.,
Japan, South Korea and the US) and so should also be
supported where possible.
On spectrum assignment, licensed spectrum is essential
to guarantee the necessary long-term heavy network
investment needed for 5G and to deliver a high quality
of service. Licences should be technology neutral
and have a long duration with a predictable renewal
process. Policymakers are also encouraged to support
voluntary spectrum pooling between operators to help
drive faster services and maximise spectrum efficiency.
6.3.1.4 Regulatory Costs and Fees
The financial demands of 5G deployment on mobile
operators will be significant, requiring a high level of
investment with uncertain returns. To support their
digital policy aspirations, governments should take
action to ease the cost burden faced by the mobile
industry to rollout 5G networks.
Steps should be taken in many areas, including
increasing regulatory certainty, reducing or eliminating
mobile-sector taxes and lowering administrative fees.
It is especially vital that regulators avoid inflating
5G spectrum prices (e.g., through excessive reserve
prices or annual fees) as this risks limiting 5G network
investment and driving up the cost of services for users.
258
7 Appendix
Appendix
THE 5G GUIDE
The appendix covers the following five topics:
1. 5G NR spectrum bands
2. NB-IoT and LTE-M requirements
3. The BEMECS 5G Readiness framework
4. Lessons from IT virtualisation (co-authored by VMWare)
5. Network Slicing - Making it happen (by Kings College London)
Appendix 259
7.1 5G NR Spectrum Bands
Frequency
range
Band Name Mode Downlink
(MHz)- Low
Downlink
(MHz)-
Middle
Downlink
(MHz)- High
Bandwidth
(MHz)
Uplink
(MHz)-Low
Uplink
(MHz)-
Middle
Uplink
(MHz)-High
Duplex
spacing
Sub-1GHz n71 600 FD 617 634.5 652 35 663 680.5 698 -46
Sub-1GHz n12 700 a FD 729 737.5 746 17 699 707.5 716 30
Sub-1GHz n28 700 APT FD 758 780.5 803 45 703 725.5 748 55
Sub-1GHz n83 UL 700 SU 45 703 725.5 748
Sub-1GHz n20 800 FD 791 806 821 30 832 847 862 -41
Sub-1GHz n82 UL 800 SU 30 832 847 862
Sub-1GHz n5 850 FD 869 881.5 894 25 824 836.5 849 45
Sub-1GHz n8 900 FD 925 942.5 960 35 880 897.5 915 45
Sub-1GHz n81 UL 900 SU 35 880 897.5 915
1-6GHz n51 TD 1500- TD 1427 1429.5 1432 5
1-6GHz n76 DL 1500- SD 1427 1429.5 1432 5
1-6GHz n50 TD 1500+ TD 1432 1474.5 1517 85
1-6GHz n75 DL 1500+ SD 1432 1474.5 1517 85
1-6GHz n74 L-band FD 1475 1496.5 1518 43 1427 1448.5 1470 48
1-6GHz n3 1800 FD 1805 1842.5 1880 75 1710 1747.5 1785 95
1-6GHz n80 UL 1800 SU 75 1710 1747.5 1785
1-6GHz n86 UL 1800- SU 70 1710 1745 1780
1-6GHz n39 TD 1900+ TD 1880 1900 1920 40
1-6GHz n2 1900 PCS FD 1930 1960 1990 60 1850 1880 1910 80
1-6GHz n25 1900+ FD 1930 1962.5 1995 65 1850 1882.5 1915 80
1-6GHz n70 AWS-4 FD 1995 2007.5 2020 25 / 15 1695 1702.5 1710 300
1-6GHz n34 TD 2000 TD 2010 2017.5 2025 15
1-6GHz n1 2100 FD 2110 2140 2170 60 1920 1950 1980 190
1-6GHz n84 UL 2000 SU 60 1920 1950 1980
1-6GHz n66 AWS-3 FD 2110 2155 2200 90 / 70 1710 1745 1780 400
1-6GHz n40 TD 2300 TD 2300 2350 2400 100
1-6GHz n41 TD 2500 TD 2496 2593 2690 194
1-6GHz n38 TD 2600 TD 2570 2595 2620 50
1-6GHz n7 2600 FD 2620 2655 2690 70 2500 2535 2570 120
1-6GHz n77 TD 3700 TD 3300 3750 4200 900
1-6GHz n78 TD 3500 TD 3300 3550 3800 500
1-6GHz n79 TD 4500 TD 4400 4700 5000 600
above 24GHz n258 26 GHz TD 24250 25875 27500 3250
above 24GHz 257 28 GHz TD 26500 28000 29500 3000
above 24GHz n261 28 GHz TD 27500 27925 28350 850
above 24GHz n260 39 GHz TD 37000 38500 40000 3000
TABLE 7.1.1
5G NEW RADIO SPECTRUM BANDS
260
93. https://www.gsma.com/iot/nb-iot-deployment-guide/
94. https://www.gsma.com/iot/lte-m-deployment-guide/
7.2 NB-IoT and LTE-M requirements
The NB-IoT and LTE-M technologies are in constant
evolution as they are being refined to better support
increasing market demand. Release 13 established
the initial base of LTE-M and NB-IoT functionality
for massive IoT. As indicated in the preliminary
self-assessment in 3GPP, Release 15 will add the
functionality to fulfil all the requirements of IMT-2020
with respect to the Massive IoT.
Release 14 and 15 address the aspects of mobility,
throughput, power consumption and positioning.
Another important addition is a RAT type for LTE-M
(NB-IoT already has a unique RAT type from Release
13). One of the main purposes of such an identifier
is the ability to distinguish LTE-M traffic from the
traditional LTE traffic. This allows mobile operators to
uniquely identify LTE-M and NB-IoT traffic, giving the
opportunity to combine them in a single Network Slice
and also have a variety of advantages, such as applying
a dedicated charging model for Massive IoT. At this
stage there are no expected major modifications or
improvements planned for LTE-M and NB-IoT in 3GPP
Release 16, where most of the effort will be on the ultrareliable low latency communication (URLLC) aspects
for fulfilling IMT-2020.
The table below provides a high level overview of
the set of capabilities that have been defined in the
different 3GPP releases. The GSMA Deployment Guides
for NB-IoT93 and LTE-M94 provide details for all features
and guidelines for their deployment.
TABLE 7.2.1
TECHNOLOGY SPECIFICATIONS FOR LTE-M AND NB-IOT
LTE-M
3GPP Release 13 (Category M1) 3GPP Release 14 (added Category M2) 3GPP Release 15
FDD and TDD support VoLTE support LTE-M traffic identifier (RAT Type)
Power optimisation (PSM & eDRX) Mobility enhancement in Connected Mode BEST (Battery Efficiency Security for low
Throughput)
Coverage Extension (CE Mode A and CE Mode B) Higher data rate available
Two power classes for the UE Positioning by E-CID and OTDOA in addition to
CellID
Connected Mode Mobility Multicast transmission/Group messaging
Ability to support a voice call Release Assistance Indication
SMS support
Service Capabilities Exposure Function (SCEF)
Appendix
261
TABLE 7.2.1
TECHNOLOGY SPECIFICATIONS FOR LTE-M AND NB-IoT (cont.)
NB-IoT
3GPP Release 13 (Category NB1) 3GPP Release 14 3GPP Release 15
FDD support only Non-Anchor PRB Enhancements Local RRM Policy Information storage
Support a range of communication options
(IP over Control Plane, IP over User Plane, Non-IP
over CP, Non-IP over UP)
Connected Mode Mobility added BEST
(Battery Efficiency Security for low Throughput)
Non-IP Data Delivery (NIDD) Higher data rate available TDD Support
Different deployment options
(in-band, guard-band, standalone)
Positioning by E-CID and OTDOA in addition to
CellID
Power optimisation (PSM & eDRX) Multicast transmission/Group messaging
Coverage Extension
(CE Mode 0, CE Mode 1 and CE Mode 2) Release Assistance Indication
Two power classes for the UE Added a new lower power class
Cell reselection only supported
Singletone or Multitone Transmission
Service Capabilities Exposure Function (SCEF)
Appendix
262
The GSMA has developed the BEMECS (Basic,
Economic, Market, Enterprise, Consumer, Spectrum
indicators) framework to provide an evaluation tool to
assess the 5G market readiness of different countries.
7.3 The BEMECS Framework
The BEMECS framework tool covers 160+ countries
and uses a traffic light system (Green, Amber, Red) to
analyse each indicator for each market.
TABLE 7.3.1
THE BEMECS FRAMEWORK – THE FULL DETAILS
BEMECS 5G Readiness Framework
5G Enablers Enabler List Analysis Data Source
B - Basic Indicators
Region
These indicators provide the socio-political context that will shape the 5G era in each
country. They are exogenous and independent of the telecoms industry
GSMA
GSMA Region GSMA
Population World Bank
Population Density World Bank
Urbanisation World Bank
E - Economic
Indicators
GDP (Real)
These exogenous indicators provide the macroeconomic context that will shape the 5G
era in each country
World Bank
GDP Growth Rate -
Real (2018 - 2023) IMF
GDP Growth Rate -
PPP (2018 - 2023) IMF
GDP (real)/Capita World Bank
GDP (Constant)/
Capita (2010 - 2017) World Bank
263
TABLE 7.3.1
THE BEMECS FRAMEWORK – THE FULL DETAILS cont.
BEMECS 5G Readiness Framework
5G Enablers Enabler List Analysis Data Source
M - Market Indicators
(both mobile & fixed)
Total Subscribers These indicators reflect the market status ahead of the 5G era in each country GSMAi
No of operators
(>95% of market)
Given recent trends towards consolidation, 3-player markets are considered optimal for
5G readiness: competition is healthy enough to encourage 5G deployment but not too
much to cause deflationary hyper-competition
GSMAi
Mobile Connections
Penetration
>100% suggests a mature market where customers are keen for the next new thing.
<70% is indicative of a challenged operating environment with a sizeable pent up
demand for basic connection
GSMAi
Unique Subscribers
Penetration
This indicator clarifies whether the general penetration levels is as a result of multi-SIM
ownership. >80% suggests a mature market while <50% is indicative of a suggests that
there is a sizeable unconnected population
GSMAi
Average ARPU (Q2
2017 - Q2 2018)
Operators eventually deployed 2G/3G/4G in all markets regardless of ARPU. Same will
happen for 5G. However, ARPU of <$10 are unlikely to correlate with a market that can
absorb the higher cost of networks and devices in the early 5G era
GSMAi
ARPU Growth (2018
- 2025)
ARPU is projected to fall for most markets. However a <-5% forecasted decline over the
early 5G era suggests that operators need to be doing more to stabilise their business GSMAi
Mobile Services
Revenue Growth /
GDP growth (2018
- 2023)
>100% is indicative of a healthy operating environment and a positive future outlook
that is attractive to operators for 5G commercialisation. <0% is indicative of a
challenged operating environment where operators are struggling to grow
GSMAi
Average Download
Speed (Mbps)
>40Mbps suggests 5G is next logical step. <10Mbps suggests market can still provide a
lot of value with 4G Ookla
4G penetration
>70% suggests a market that has attained 4G maturity and ready for the next leap in
technology. <40% means the market is not optimal for NSA 5G and may have to wait
for 5G SA availability
GSMAi
Smartphone
penetration
>70% suggests widespread consumer readiness for a next generation device. <40%
indicates that there is more work to do to increase adoption of high-end/high-tech
devices
GSMAi
Fixed broadband
penetration
Markets with >20% fixed broadband penetration are already used to high-speed
internet services (and extensive availability of Wi-Fi) for consumer and enterprise
customers. These markets should be readier to welcome 5G
ITU
Fibre (FTTH)
penetration
While high capacity microwave links are emerging, fibre will remain key as backhaul for
5G base stations. >20% FTTH suggests a healthy fibre capillarity that can support low
cost 5G rollout. <5% suggests that there is little fibre backhaul for 5G
ITU
Internet backbone
penetration
>100% (compared to the USA) suggests there is enough international internet
backbone to support a thriving domestic ICT sector. <50% suggests that the market
needs more international connectivity options
ITU
Electricity availability
per population
The 5G era will support the digital transformation of all sectors of the economy. >90%
suggests that energy/electricity availability is not a constraint to this. <60% suggests
an economy where the energy needs of consumers and enterprises are yet to be fully
met
SE4ALL
264
TABLE 7.3.1
THE BEMECS FRAMEWORK – THE FULL DETAILS cont.
BEMECS 5G Readiness Framework
5G Enablers Enabler List Analysis Data Source
E - Enterprise
Indicators
Current Status:
IoT connections /
Population
>15% suggests a market that is already actively exploiting the opportunity presented
by IoT. <5% suggests that the market has yet to tap its IoT potential GSMAi
Innovation Potential:
Population with
Tertiary education
>50% suggests that there is a sufficient pipeline of intellectual creativity to develop
new 5G-enabled solutions that are applicable to the local market. <20% suggests
that a critical mass of young people are not being properly equipped to create new
5G-enabled services.
UN
Innovation
Potential: registered
websites/1000
people
>172 (Median + 1 Standard Deviation for all countries) suggests an ecosystem that is
prolific and diversified in creating an internet-based frontend for local services. <11
(Median for all countries) suggests that more needs to be done to provide an internet
frontend for local services.
ZookNIC
Innovation
Potential: apps
developed/1000
people
>3.7 (Median + 1 Standard Deviation for all countries) suggests an ecosystem that
is prolific and diversified in creating an app-based frontend for local services. <0.4
(Median for all countries) suggests that more needs to be done to provide an app
frontend for local services.
AppFigures
Barriers to
innovation: Ease of
doing business
Operators need an innovation and investment friendly regulatory environment to fully
explore 5G era business opportunities. >70% suggests a market with fewer obstacles to
innovation. <40% suggests that policymakers should be doing a lot more to encourage
investment and innovation
World Bank
Barriers to
innovation: apps in
national language
>70% suggests that Enterprises have a vibrant ecosystem of locally-relevant internet/
app resources. <30% suggests that more needs to be done to localise and use digital
technology in enterprise environments
AppFigures/
Ethnologue
Enterprise Example:
E-Government
availability
Government is often the biggest 'enterprise' vertical and >70% availability of
e-Government services is an indication that the market has gone far to use digital
technology for enterprise applications. <30% suggests that more needs to be done to
use digital technology in enterprise environments
UN
C - Consumer
Indicators
Affordability: ARPU/
GDP per capita
(monthly analysis)
<3% suggests that most customers can, in general, afford to pay for premium 5G
services. >6% is indicative of a market where mobile telecom’s share of the consumer
wallet has little room for growth.
GSMAi
Affordability:
Internet Device ASP
/ GDP per capita
<3% suggests that most customers can afford the cheapest internet device, either by
paying for it out rightly or via some of subsidy or financing scheme. >6% is indicative
of a market where the cheapest internet device is still seen as an unaffordable luxury.
Tarifica
Ability: Literacy rates
>80% suggests most consumers can, with minimal effort, embrace new 5G-enabled
services and enterprises can be assured of adoption of new 5G-enabled services. <50%
is indicative of a market that has yet to reach tipping point on literacy and where many
customers are mostly comfortable with basic voice and video services only.
UN
Usability: Household
computer
penetration
Several 5G era use cases (e.g. Cloud AR/VR) will require new hardware/gadgets.
Markets with >70% household computer penetration are indicative of a readiness to
acquire the next entertainment or productivity-enhancing gadget. <30% suggests
there are affordability challenges to buying new gadgets.
ITU
Consumer example:
mass market Fixed
Wireless Access
(FWA) opportunity
A "mostly Blue Ocean opportunity" for 5G FWA exists where there is high household
computer penetration but low Fixed Broadband (FBB) penetration. In "mostly Red
Ocean" markets, 5G FWA will compete aggressively with existing FBB. Other markets
are "Deserts" for 5G FWA. However, every market will have 'oasis' of FWA opportunities
for affluent residential areas or business districts
GSMA
Consumer example:
mobile social media
accounts (% of pop)
Social media has been a flagship consumer use case in the 4G era. >60% suggests
that this service has reached maturity levels and customers are ready for new 5G era
flagship use cases. <30% suggests that not enough consumers can afford, or are eager
to embrace new use cases
We Are Social
265
TABLE 7.3.1
THE BEMECS FRAMEWORK – THE FULL DETAILS cont.
BEMECS 5G Readiness Framework
5G Enablers Enabler List Analysis Data Source
S - Spectrum
Indicators
<1GHz availability
>161MHz (Median + 1 Standard Deviation for all countries) are markets where operators
have substantial spectrum in the recognised sub 1GHz 5G NR bands. 0 means
operators do not have any spectrum in the recognised sub 1GHz 5G NR bands
GSMAi
1 - 6 GHz for 5G
availability
>300 MHz (assume 3 operators with 100MHz blocks each) are markets where
operators have substantial spectrum in the recognised 1 - 6 GHz 5G NR bands. 0 means
operators do not have any spectrum in the recognised 1 - 6 GHz 5G NR bands
GSMAi
>6GHz for 5G
availability
Markets where operators have substantial spectrum in the recognised >6GHz 5G NR
bands are ready for 5G on mmWave spectrum. GSMAi
266
Lessons from IT virtualisation
Evolving mobile operator networks to network clouds
Co-authored by VMWare
7.4.1 Best Practices for telcos learned from the IT Datacentre virtualisation market
The process of virtualisation for mobile operators
will bring the architecture of the software-defined
data centre into the telecom network domain,
delivering a common infrastructure platform for IT
and network operations. Experts concur that there
are two important benefits to virtualisation: cost and
agility. When combined, there is immense potential to
realise value for mobile operators, particularly with the
imminent arrival of 5G. Operators have a window of
opportunity to transform their networks to distributed
network clouds, and in turn play a keystone role in the
next generation of cloud evolution
The competitive landscape is changing on multiple
fronts for mobile operators, with new services and
new players battling for subscribers with different
‘just-in-time’ or on-demand business models. This
requires operators to embrace non-traditional areas,
such as digital, and to work in faster, more agile ways.
This business imperative is analogous to the digital
transformation that the IT data centre has gone
through over the past two decades, culminating in
“datacentre clouds”, where business agility depended
on IT agility.
Cloudification (including Virtualisation and Software
Definition of Network Assets and Services) helps
organisations shift IT resources from mundane tasks
to more strategic projects that create value for the
business. VMware, a key player in the virtualisation
space, believes that well-executed virtualisation
can reduce capex by up to 60%, with business
infrastructure virtualisation solutions also enabling
organisations to significantly reduce IT opex. For
example, in a research study with 30 customers in a
variety of industries, VMware found that the operational
impact of virtualisation on IT operations resulted in:
• 94% of respondents realised operational savings
with virtual infrastructure for both one-time and
day-to-day tasks.
• one-time tasks of provisioning servers,
decommissioning servers and migrating servers
from one data centre to another each took at least
75% less time with virtualisation.
• performing the specific day-to-day tasks of
hardware maintenance, rolling back from
unsuccessful patches and rolling back from
unsuccessful configuration changes each took at
least 75% less time with virtualisation.
By simplifying and automating ordinary IT activities,
virtualisation solutions can dramatically reduce
routine management and maintenance tasks and
their associated labour hours, saving organisations
energy that can be focused on new business efforts
and enabling companies to improve productivity and
service availability, while reducing operating costs.
Another lesson that can be gleaned from the
transformation of the IT sector is that the performance
and robustness that comes with virtualising IT
workloads and applications is significant. Similar to
the early experiences with some operators as they
deploy network functions virtualisation (NFV), the
early days of the IT data centre market were met with
trepidation about whether or not applications could
run as good or better in a virtualised environment as
they did on dedicated hardware. The industry quickly
realised how robust the technology was and today
the vast majority of all IT applications and workloads
are virtualised. Mobile operators are likely to follow a
similar path where initial deployments start off with
some scepticism, but once cost savings are realised, the
pace of VNF (Virtual Network Functions) onboarding
accelerates, technical barriers (such as performance
and latency) are progressively overcome and
confidence grows with each subsequent deployment.
7.4
Appendix
267
When looking at the business justification for
virtualisation of network functions and transforming
carrier networks into cloud-like infrastructure, operators
need to consider the holistic benefits beyond just the
reduction in hardware and software costs. Across
multiple industries, the TCO of virtualisation has far
reaching benefits including:
• Reducing costs by consolidating idle resources and
redeploying those resources on new projects.
• Increasing efficiencies in IT operations. This benefit
is just as transferrable to network operations.
• Improving time to implementation of new services,
leading to faster ‘time-to-revenue’.
• Reducing cost of launching and operating new
services through remote, software defined delivery
and management. No need for truck rolls and
install/decommissioning of expensive hardware
• Increasing disaster recovery capabilities, including
decreasing recovery time on existing non-high
availability services.
• Building cost-effective and consistent development
and test environments.
• Reducing costs in troubleshooting, technical
support training and maintenance.
• Consistency in management and security through
the ability to apply a common set of configuration
rules across large distributed environments.
• Leveraging hyperscale public cloud environments
where needed.
Over the past two decades, tech innovation has
reshaped our expectations and transformed almost
every industry, from banking to media, healthcare
to retail, manufacturing to transportation that has
depended heavily on the underlying technology
infrastructure. Telecommunications is no different. As
these other industries have witnessed, virtualisation is
the foundational principle leading to cloud like agility
and efficiency.
5G essentially marks the “cloudification” of the telecom
industry, which requires a new mindset and culture. As
mobile operators start to deploy 5G, NFV is an essential
technology to compete and differentiate, creating new
value for their customers: new products, new services,
new revenue streams. As the IT data centre market did
before, mobile operators will need to embrace the first
rule of the cloud, which is to consistently automate
everything and use industry standard platforms where
possible for infrastructure. It also means embracing
core tenets of modern software development like
Agile/continuous delivery, which allows teams to
compress and accelerate their innovation cycles.
Equally important are business model transitions from
existing services to a new service model encompassing
concepts like marketplaces, SaaS services, shared
revenue, shared cost and multi-tenancy. These are the
essential principles that define a cloud-centric culture
and where operators can benefit from learning from
their IT predecessors.
Appendix
268
7.4.2 Technical Advantages: A production-proven NFV platform is essential
for 5G success
With automation, scalability, and an extensible
platform for creating and delivering new services,
mobile operators can begin to match the agility of
cloud service providers and reap the cost benefits that
they have come to realise in their IT operations. Key
advantages are listed below:
7.4.2.1 Accelerated network performance and scale
Facing rapidly increasing data traffic and demand
for enhanced user experiences, Mobile Operators are
renewing their focus on architecting the network for
optimum application throughput, response times, scale,
and service continuity. NFV enables Control and User
Plane Separation (CUPS) – this is quickly becoming
fundamental to the 5G toolbox, enabling extensible
network deployment, operation, and independent
scaling between control plane and user plane functions,
while not affecting the functionality of the existing
nodes.
With the extensibility to deploy user plane (UP) nodes
closer to the RAN, a CUPS- based NFV deployment
facilitates reduced latency and increased throughput
for applications without increasing the number of
control plane (CP) nodes. This also allows for the
independent evolution of the CP and UP functions,
including their placement and scaling.
This approach also aligns well with other evolving
techniques such as MEC, where the UP nodes become
the data plane for MEC servers, and Network Slicing,
where Mobile Operators can dynamically create a
network slice to form a complete, autonomous and fully
operational network customised to cater to diverse
customer needs.
7.4.2.2 Intent based assurance
Deploying new services on-demand, with real-time
scaling, monitoring, and proactive avoidance, has now
become imperative. Mobile operators can leverage NFV
capabilities to achieve assured application performance
based on business and operational intent, increased
capacity utilisation without resource contention,
360-degree visibility with real-time insights, root cause
analysis and remediation, and reduced operational
costs through real-time predictive analytics, contextual
troubleshooting, and closed loop automation.
7.4.2.3 Carrier-grade networking and security is key
Mobile operators are increasingly seeking networking
and security platforms that provide consistent
connectivity, QoS, integrated security, and inherent
automation to deliver applications and services,
when and where needed. Well-executed NFV
implementations can facilitate this fundamental
shift in networking capabilities by offering complete
multi- tenant service separation, consolidated network
functions in NSX including NAT and load balancing,
simplified administration of application QoS profiles,
enhanced network resiliency and distributed stateful rewalling, and cross-cloud and native PaaS support.
7.4.2.4 Unified virtualised environment across IT &
network operations
With Mobile operators looking for increased flexibility
and efficiencies in bringing new services to market, the
ability to programmatically deploy services anywhere
from the data centre to cloud, to branch, and the edge,
and across different technologies, including VMs and
containers, is becoming key. With NFV, operators can
deploy both VM and container workloads on a VIM with
a single network fabric allowing them to seamlessly
deploy hybrid workloads where some components run
in containers and others in VMs.
Appendix
269
7.4.2.5 Extensible platform
Phased delivery of NFV functionality not only returns a
better business case but also ensures mobile operators
can minimise the need for new operational skills and
processes, providing a more manageable on-ramp to
NFV- based service deployment. A virtualised cloud
environment for the carrier network also has the
advantage of being able to leverage the hyperscale
“public” cloud environments (from the likes of Amazon,
Microsoft, Google) where needed. As an example,
seamless movement (through a process that VMware
refers to as “vMotion”) of a network function or
addition of new capacity from a public cloud could be
a valuable asset to improve the resiliency and capacity
management of carrier networks.
7.4.2.6 Simplify network operations
NFV promises to give operators unprecedented
agility and flexibility in deploying and operating their
networks. Software defined architectures that are
the foundation of NFV enable remote deployment,
manageability and ongoing operations. Uniformity
across compute, storage, and network environments
allow for a reduced set of operating principles and
configuration complexity.
Appendix
7.4.3 A Multi-Service Multi-Tenant Platform Returning ROI for NFV
The evolution from static, appliance-based network
elements to an agile, virtualised telco cloud
environment enables mobile operators to drive
down costs while establishing a common platform
for new service innovation and revenue expansion.
This secure NFV environment can be shared across
lines of businesses and multiple tenants, allowing for
convergence of telco network, IT, and B2B services into
a multi-cloud architecture.
Complete tenant resource isolation can be achieved
using policy-based allocation of isolated compute,
storage, and networking resources mapped to
individual tenants of the cloud(s), providing complete
tenant and VNF isolation. Provider and tenant-based
roles and service policies further help establish
delegated access, and availability and performance
boundaries across the cloud(s).
This multi-services platform approach allows mobile
operators, tenants, and customers to share a common
pool of resources, creating a portfolio of network,
managed hosting, and cloud services on demand,
driven by orchestration techniques similar to those
managing workloads in cloud data centres.
Service agility is further enhanced through standard
and pre-defined tenant services that can be deployed
on-demand in response to changing customer and
network requirements. Tenant-specific portals and
northbound APIs enable several operational intelligence
capabilities including monitoring, issue isolation and
remediation, automation workflows, and capacity
planning and forecasting.
270
Network Slicing - Making It Happen
Insights from the first global end-to-end implementation at KCL
Nishanth Sastry & Toktam Mahmoodi
Centre for Telecommunications Research, Department of Informatics,
King’s College London
7.5.1 Executive Summary
• Network slices were introduced as a concept
in order to effectively support the diverse
requirements of 5G applications.
• Network slices provide a functional construct to
achieve two orthogonal objectives: (i) isolation
between traffic which may interfere with each other;
and (ii) a network design which best supports the
mix of applications that are running within the slice.
• Native support for isolation can provide strong
security guarantees, which makes it attractive to
new client groups, such as enterprise customers.
However, cost factors and limited granularity of
slicing at UE or radio network may lead to (partial)
sharing.
• The paradigm of partial sharing creates the
key tensions which must be managed in any
implementation of network slicing. First, in the
shared parts of the infrastructure, there is a tension
between separation by reserving resources and
the gains that can be achieved by statistical
multiplexing. Second, the difficulty of virtualising
and sharing radio resources imposes restrictions on
the number of slices. This leads to questions about
where the network slice “ends” (i.e., whether the
slice reserves resources and provides guarantees all
the way up to the UE, or just in the core network,
or the core and parts of the access network), and
whether slices will be shared amongst customers
who may have similar requirements.
7.5
Appendix
7.5.2 Recommendations
The major takeaways for the telco industry are as
follows:
1. Embrace the heterogeneity of tenants: If network
slices become successful, they will disappear from
public view and act as an enabler for different
applications that will excite more interest. However,
the engineering that will go into making this happen
can be the “make or break” factor for widening
the range of industry verticals as customers of 5G
telecommunications offerings. This requires mobile
operators to play at both ends of the economic
spectrum, catering both to high end consumers
who require high levels of differentiation and to
consumers who require low cost slices, requiring
operators to operate well-tuned and optimised
networks at high levels of efficiency to derive
revenue through volume.
2. Optimise granularity of network slices: While a
higher granularity in network slices allow for more
differentiation and can enable more innovative
business models, it also increases the costs of
provisioning a slice. The level of granularity is, hence,
a critical decision. Current (Release 15) standards
specify that at any given time, a single UE may be
associated with up to eight distinct network slices.
This places a hard constraint on the number of
end-to-end network slices that can be pushed all
the way to a client device. Negotiating this tension
between greater isolation through completely
separate network slices, and lower costs of sharing
slices will be a key component in the economics and
business models of network slicing.
271
3. Understand that network slicing can serve
different ends: Associated with the previous
point, network slicing can serve at least three
different functions, each with different deployment
constraints and different economic driving forces:
(i) as a container to provide a degree of isolation
to customers; (ii) as a way of providing a “tailored”
network, suitable for a particular kind of application
(e.g., a connected cars network slice for automotive
applications); and (iii) as a way of specifying a
desired set of quality of service (QoS) parameters
commonly demanded by common applications.
The degree of sharing increases from (i) to (iii), and
costs decrease correspondingly.
4. Establish interoperability and inter-operator
co-operation: Network slices of global players
(e.g., UPS or FedEx managing a fleet of vehicles)
require the orchestration of different kinds of
resources from different parts of their network.
Such orchestration may span different countries
and different operators. Thus, realising the collective
benefit of network slicing will require operators
to come together and ensure interoperability of
major network slices. Learning from the success
and adoption of the SIM, a common interface for
creating and managing network slices needs to be
simple, and universally supported. slices allow a
much richer interface for tenants to express their
requirements, so is not an easy matter for network
slices to achieve an equivalent level of global
support and common levels of functionality. For this
to happen, all operators will need to work together
and standardise a common set of supported
functionalities, and a common language or protocol
for negotiating requirements between themselves
and the industry verticals.
5. Ensure intra-operability or consistency of
operation: Especially in large operators with
equipment and implementations from multiple
vendors, it is important to ensure the different parts
of the operators’ network infrastructure (potentially
running different network stacks), provide a
consistent definition or behaviour of network slicing,
so that the end customers can be provided with a
guaranteed behaviour.
6. Automate the management of network slices:
Scale will hit, and it will hit hard. Despite progress in
various MANO options, including some outstanding
work by ETSI, we still have a way to go here, in
automating the management of network slices. The
only way to address the scalability will be through
automating the instantiation of the network slices
within a single domain or across multiple domains.
This automated process will bring in a need to
define negotiation protocols for cross-domain slices
and also verification processes to ensure output of
the automated instantiation performs as planned.
For the full benefits of network slicing to be realised,
the creation of network slices should be simplified
as much as possible, and operators should enable
on-the-fly and responsive increasing or decreasing
of a slice’s resource requirements.
7. Slice templates with predefined and optional
fields: Having standardised slice templates could
bring down the cost and time to deploy of network
slices significantly, guarantee interoperability, and
enable automation of slice management on global
scale. While slice templates should have largely
predefined fields with fixed size to achieve the
above, ability to set default values in these fields
and additional optional fields will allow network
operators to draw a clear differentiation in the
service they offer.
Appendix
272
8. Prepare for new business models and new ways
of working: Network slicing creates new roles for
mobile operators as infrastructure providers and
will draw in new industry verticals who will act as
tenants that rent this infrastructure. Multi-tenancy
and sharing of infrastructure in a transparent
manner will create significant new revenue streams
for operators, but will also require fundamental
operational changes to realise these benefits.
We expect that at least in the initial days, major
companies with a worldwide presence will be able
to ensure their bespoke slice requirements by
striking deals with all major operators in the markets
they wish to operate in. In other circumstances,
mobile operators may need to come together
to cooperatively provide a type of network slice
that is seen to have a high demand, but has not
been standardised yet (e.g., through the allocation
of a Slice/Service Type or SST value). We may
also see the creation of specialised aggregators,
who help create a standardised network slice for
a particular industry requirement, and provide
the interoperability at the service level for an
industry, by working with different operators. Such
aggregators would be akin to special-purpose
MVNOs, providing a bespoke kind of network at
a lower price or higher efficiency or quality (for
instance, a network slice that is tuned for massive
IoT).
9. Prepare for a fundamental change the relationship
between mobile operators and end customers: For
the first time, enterprises in industry verticals will
be able to create native and specialised networks
that allow them to reach customers directly on top
of mobile operators’ infrastructure. The implications
of this change are several: exchange of customer
information between verticals and mobile operators
need to comply with privacy laws in different
jurisdictions; operators will need to consider that
users may, in some cases, not be locked in as they
are now, and this will need to be factored into
the economic models of operation and pricing
structures; and business operations will need to
change to accommodate the potential B2B (or
B2B2C) models of operation.
10. New regulation will be required to identify how
and to what extent users’ data can be mined: With
reaching out to the customers, verticals will also
have some degree of access to customers’ data.
While some sectors (e.g., content providers, online
advertising industry) have had significant revenue
by mining their users’ data in the past, regulations
have not allowed other sectors such privilege. New
regulations will be needed in how users’ data can be
used by different verticals.
Appendix
7.5.3 A technical background
The Next Generation Mobile Network Alliance (NGMN)
defines network slicing as a concept for running
multiple logical networks as independent business
operations on a common physical infrastructure [1].
3GPP Release 15 incorporates the notion of network
slicing, and defines it as “A logical network that
provides specific network capabilities and network
characteristics.” As one of the core functional
enhancements introduced in 5G, it is expected that
network slices will be a critical and indispensable
component of cellular networks in the near future.
Network slices were introduced as a concept in order
to cleanly support the diverse requirements of 5G
applications: For example, a massive number of data
flows for machine-type communications that each
require inexpensive transport of a small number of bits
impose a fundamentally different set of requirements
on the mobile network from a single data flow
supporting remote surgery, which requires low latency,
low error rates and support for much higher bandwidth.
It is envisioned that in 5G, such diverse applications
may run in parallel networks that are logically separated
from one another, whilst sharing the same physical
infrastructure, i.e., in two different network slices.
273
Network slices provide a functional construct to achieve
two orthogonal objectives: (i) isolation between traffic
which may interfere with each other; and (ii) a network
design which best supports the mix of applications
that are running within the slice. Native support
for isolation can be used to provide strong security
guarantees, which makes it attractive to new groups,
such as enterprise customers. Because each slice can
be tailored to support a particular application or mix of
applications, network slices can also be used to provide
strong quality of service guarantees (based on isolation
from other network slices). As a corollary, this can also
lead to differentiated services in different network slices
(a matter for policy debate).
Network slicing is achieved by using NFV techniques.
Virtualisation allows multiple logical network
functions to co-exist on the same physical hardware
infrastructure without interfering with each other. The
performance guarantees required by the applications
are supported by reserving appropriate resources
and chaining together virtualised network functions
to create a network slice that delivers end-to-end
functionality between the network endpoints being
connected. Whereas partially shared infrastructure,
which is composed of generic hardware resources
such as Network Function Virtualization Infrastructure
(NFVI) resources, work well in certain parts of the
network, it is harder to virtualise or slice other hardware
resources, and may require dedicated hardware for
network elements in the RAN.
This paradigm of partial sharing creates several
tensions which must be managed in any
implementation of network slicing. First, in the shared
parts of the infrastructure, there is a tension between
separation by reserving resources and the gains that
can be achieved by statistical multiplexing: If traffic
from different slices are using the same network
resources, it can lead to contention and congestion,
resulting in delays, dropped packets, etc. To achieve
true isolation, network resources need to be reserved
in advance. However, reservations greatly decrease
the statistical multiplexing gains that can be derived
from the network. Second, the difficulty of virtualising
and sharing radio resources imposes restrictions on
the number of slices. This leads to questions about
where the network slice ends, and whether slices will
be shared amongst customers who may have similar
requirements (For example, to support connected
cars on 5G, will/should there be a separate slice for
Ford cars and a separate slice for BMW cars, etc., or
will there be a single network slice for cars from all
manufacturers).
Generally, three solution groups are discussed with
varying levels of common functionality in 3GPP
standards [2]: Group A is characterised by a common
Radio Access Network (RAN) and completely
dedicated Core Network (CN) slices, i.e., independent
subscription, session, and mobility management for
each network slice handling the UE. Group B also
assumes a common RAN, where identity, subscription,
and mobility management are common across all
network slices, while other functions such as session
management reside in individual network slices. Group
C assumes a completely shared RAN and a common CN
control plane, while CN user planes belong to dedicated
slices.
Appendix
274
7.5.3.1 Example of shared and slice-specific functionality
FIGURE 7.5.1
EXAMPLE OF THREE SLICES SHARING COMMON SPECTRUM (TAKEN FROM [7])
Appendix
As described in Mannweiler et al. [7], when spectrum
is shared amongst mobile virtual network and service
operators, the RAN is a typical example of a shared
network functionality, part of which is controlled
by a single authority and part is shared. Figure 7.6.1
illustrates the case of a common spectrum shared
by three network slices, each with own RAN and CN
part. The layer 2 Control-plane is split into cell related
functions which are common to all slices, and session or
user specific radio resource control (RRC). Depending
on the underlying service, RRC can configure and tailor
the User-plane protocol stack. For instance, Slice 1 has
an application scheduler, not present in the other two
slices.
- 0.00020 0.00040 0.00060 0.00080 0.00100 0.00120 0.00140
South Korea
2018 (28 GHz)
Italy
2018 (26 GHz)
USA
2019 (28 GHz)
$/Mhz/Pop/Yr (PPP)
0.00113
0.00112
0.00025
NAS
Dierent parameterisation of PDCP, RLC,
MAC, and PHY per slice.
RLC’’: non-real-time functions of RLC
RLC’: real_time functions of RLC
NAS NAS
RRC
Cell Related Functions
NS-SF
Common Channel MAC - Scheduler
PHY
PDCP
RLC’’
RLC’
UE1
eMBB
UE2
cMTC
UE3
IoT
Shared Functions
RAN Slice 1 RAN Slice 2 RAN Slice 3
RLC’ RLC’
PDCP
RLC’’
PDCP
RLC’’
APPLICATION
SCHEDULER
RRC RRC
275
7.5.4 Use cases and benefits of network slicing
Network slices and the softwarisation of the network in
5G enable a clear separation between functionality and
infrastructure. This leads to a new paradigm of Network
Infrastructure as a Service (NIaaS), and a role for
traditional mobile network operators as infrastructure
providers (InP), on top of which different industry
verticals can create and tailor networks that suit their
particular mix of application-level requirements. Each
user of an infrastructure slice is termed as a tenant.
The key attraction of network slices from an InP point
of view, is that it enables multi-tenancy, i.e., multiple
independent clients who are oblivious to each other but
are sharing the same set of physical network resources.
This enables huge cost benefits for InPs, and we expect
this to be the key economic incentive for today’s
mobile network operators to deploy network slicing.
The new guarantees provided by network slices also
make it attractive from the perspective of the tenants.
Furthermore, tenants only pay for the amount of
network resources they use. Thus, network slices create
a win-win situation for both the infrastructure provider
and the verticals that run on top of the network. Below,
we list the key aspects that unlock value.
7.5.4.1 Security (Isolation and privacy)
Network slices enable infrastructure providers to
make two key security guarantees to their tenants: (i)
isolation, i.e., one tenant cannot interfere with another
tenant’s traffic; and (ii) privacy: i.e., one tenant cannot
infer another tenant’s traffic details.
With isolation, the infrastructure provider guarantees
that an action in a network slice belonging to one
tenant will not in any way affect other tenants.
Interference includes malicious attacks as well as
inadvertent errors. Thus, for instance, if there is an
attack on a slice operated by one tenant, for instance
a rapid increase in network traffic due to a denial of
service attack, other tenants are protected from the
effects of that attack. Isolation between slices enables
5G to become a platform for applications such as
finance and health care to use the public 5G networks.
For instance, highly lucrative financial applications
such as dark pool trading and algorithmic trading
rely on extremely low latency connections. While
advances in 5G lead to low latency, such applications
will also require that their flows are not affected by
background traffic which can suddenly increase the
Appendix
experienced latency at inconvenient times. Similarly,
a surgeon operating remotely over a 5G network will
require not only low latency, but also an extremely low
error rate. Interference from other traffic can lead to
tragic consequences and, therefore, isolation through
network slicing will be critical to adoption of 5G by
such applications. Note that these requirements are
distinct from merely expressing a QoS preference.
Typically, QoS guarantees are treated as “soft” whereas
a violation of QoS in the examples cited here could
have severe financial or human effects.
Isolation between network slices leads naturally to the
second security element: privacy of each network slice.
Each tenant is guaranteed that other tenants are not
able to infer characteristics of the network traffic within
its slice. This guarantee that other tenants cannot infer
the network characteristics of a network slice allows
sensitive applications to make use of 5G network
infrastructure. For example, enterprise networks
spanning multiple locations can run over 5G rather
than having to create separate and parallel connectivity
infrastructure. Because network slices are constructed
using softwarised and virtualised network functions,
they are expected to have lower running costs than
leased private lines. This creates lower CAPEX and
OPEX for the InP, which can pass on the savings to
the tenants. Additionally, the softwarisation also leads
to flexible allocation of resources, allowing tenants
to rapidly change their demands on the 5G network
depending on their business needs.
7.5.4.2 Improved QoS and traffic management
As noted above, there is a distinction between network
slicing and QoS. However, the isolation guarantees
offered by slicing also becomes an enabling factor for
improved QoS management: a tenant can more easily
manage its traffic and ensure better QoS for itself
since other tenants cannot interfere with it. Although
5G provides also provides for 5QI [2] as a mechanism
for specifying QoS requirements, 5QI values are
standardised and interpreted in well-known and
well-specified ways. The flexibility of network slicing
creates a parallel and much more flexible mechanism
for tenants to express bespoke QoS requirements. For
common kinds of network slices, such requirements can
be expressed in terms of a template, which will then be
instantiated by the infrastructure provider [3].
276
7.5.4.3 Creating tailored services
Given spectrum is one of the most valuable assets
of any mobile operator, dividing frequency bands
to different use cases and industries does not offer
the best use of spectrum. As not all use cases have
the same pattern of use, network slicing, with slice
isolation, provides an opportunity for services to
physically co-reside on the same frequency bands but
remain logically isolated and secure.
7.5.4.4 Autonomy in network management
Because of isolation, neither the infrastructure provider
nor the other tenants are affected by the actions
of a tenant in a given network slice. Thus, tenants
can be given much more flexibility in managing the
logical networks encapsulated as a network slice.
This allows all sorts of novel applications not possible
before, ranging from implementation of custom ways
of differentiating across services, which may not be
possible in the public 5G network (e.g., due to network
neutrality guidelines) to rigorous and tailored rules for
managing different kinds of traffic that fit a particular
tenant’s needs (e.g., attaching a dedicated bearer for a
particular kind of flow, or having flows without a bearer
at the logical level).
7.5.4.5 Vertical support and revenue
Network slicing as one of the main distinguishing
features of 5G compared to the previous generation
in terms of how mobile operators serve their business
users, makes it also the major defining factor of
revenue models. It is however important to understand,
deployment difficulty both in terms of performance
requirement of a certain use case, as well as the level of
required support from network, varies for different use
cases. At the same time, the challenges of deploying
use cases and the relevance of different use cases
to vertical sectors, also greatly vary. This diversity is
captured in Figure 7.5.2, below. Taking a few examples
from Figure 7.5.2, e.g. real-time manipulation is an
extremely challenging use case since it requires high
reliability and low latency simultaneously. However,
deploying real-time manipulation in a vertical such as
healthcare is even more challenging given the precision
required for the operations, or in manufacturing sector
in which there is a high degree of dynamic. While use
cases such as hazard and maintenance sensors are less
challenging to deploy, there is yet a higher challenge
for deployment in public safety sector given the higher
requirements on security and resilience.
Appendix
FIGURE 7.5.2
DIFFICULTY OF ADDRESSING DIFFERENT VERTICAL SECTORS AND USE CASES WITHIN
THOSE SECTORS
Usecase/Sector Automotive Energy Health Finance Manufacturing Retail Public safety Entertainment
Real-time manipulation
(automation)
Enhanced Video
Monitoring & Tracking
Hazard & Mnt sensors
AR & VR applications
Difficulty Level - +
277
It is also evident that a single vertical sector might
be in-need of multiple use cases with different
connectivity requirements and level of deployment
difficulty. One of the examples of a vertical market is
the automotive industry and the path to connected
autonomous driving. While the use of URLLC for
assisted and autonomous driving functionalities will
be exploited, there are also opportunities for providing
on-the-move entertainment services, with different
connectivity requirements that can potentially be
delivered through different slice(s).
Appendix
7.5.5 The challenges and deployment constraints
The challenges for achieving network slicing have to
do with business pressures and realities on the ground
that may make it difficult to achieve an implementation
that makes the network slice seamless and transparent
to its end users. To see what the challenges are, it may
help to consider some properties that would make for a
successful network slice. In the best case scenario, the
network slice will become an ICT commodity, just like
today’s compute clouds. It will be:
a) As easy to deploy network slices as a virtual
machine on today’s cloud providers: Today’s 4G
networks are complicated and complex beasts,
requiring highly trained network engineers.
5G network slice functionality will be exposed
(potentially via intermediaries; see Section 7.6.2)
to verticals, whose core business practice does not
include telecommunications. If a slice takes more
than a few minutes to deploy, it already becomes
too complex and complicated for non-experts,
especially small and medium players who may
drive much of the operators’ revenue by sheer
numbers. Note that network slices are much more
complicated than today’s cloud virtual machines,
since slices require not only the allocation of
virtualised compute resources, but also radio
resources, as well as co-ordinated orchestration and
management of these resources, chaining them
together appropriately for end-to-end functionality.
b) Easy to change the size and configuration
of a slice on the fly, and at short notice: New
applications and verticals for 5G networks will have
two key incentives for adoption - new functionality
that enables their businesses to use 5G, and cost
reductions. Businesses will see immediate savings in
CAPEX by using a virtualised network infrastructure
that can be shared with other tenants without
compromising security. In the long-run however,
cost reductions through OPEX savings are likely to
dominate as the main driver for continued usage of
network slices. To enable this, it is key that network
slices can be changed on the fly - for instance, the
amount of bandwidth reserved, or the latency, or
number of devices connected may change based on
business needs that are hard to anticipate when the
slice is being setup. To enable wide adoption, it is
imperative that operators should allow applications
to start using network slices at the lowest price
point that makes sense for the tenants, and then
expand or decrease their usage on the fly to suit
business needs.
c) Granularity of radio resources and RAN
slicing: Given providing isolation between radio
resources would also bring issues such as wireless
interference, slicing RAN is clearly constrained.
While in regular operation of the mobile network,
RAN resources are dynamically allocated to users,
when it comes to the end-to-end network slicing,
how dynamic and granular those could be linked
to a slice at core network is a challenge. Various
models for association between radio resource
management and network slicing are studied
including auctioning [5].
d) Revenue associated to verticals: Not all vertical
sectors and all associated use cases come with the
same revenue pattern. While some might ask for
very strict requirements to the targeted network
slice, their revenue potential might be insignificant.
Market research have shown diverse levels of
difficulty in addressing different verticals and use
cases, not directly relevant to the difficulty of
deployment (seen in Figure 7.6.2).
278
7.5.5.1 Example from KCL’s participation in the 5G
testbed and trials
During 2017-18, King’s College London together with
University of Surrey and University of Bristol debuted
the world’s first 5G end-to-end network, which
involved a number of cutting edge applications ranging
from intelligent cameras and real-time social media
collection across the city of London to innovative 5G
performances with artists in distributed locations.
Together with partners, we have developed a feasibility
study to examine what network slicing across multiple
operator domains can achieve. In this study, the lowlatency application is control of a drone, which is
launched both from a local operators’ core network
and a remote operator’s core network. In the latter
case, a low-latency network slice is stretched from
local operator’s core network to the remote operators’
core network, where the application server runs
(further information is available in [6]). The study has
successfully demonstrated the potentials of network
slicing in delivering low-latency applications globally,
and over multiple operators’ networks, relying however
on the interoperability of the participating operators’
slices. While this proof-of-concept has successfully
demonstrated the feasibility of stitching network slices
across two operator domains, it has also indicated
that manual configuration of a cross-operator slice is a
timely process requiring significant coordination.
7.5.5.2 Interoperability (consistent network slices
across operators)
As mentioned above, network slices require the
orchestration of different kinds of resources from
different parts of the network. For instance, as
mentioned above, in the 5G network slice demo at
King’s College London, a drone at KCL was remotely
controlled from the USA, requiring an ultra-reliable low
latency slice which spanned a local operator in the USA
and a local operator in the UK. Although the demo was
intended to stretch and showcase the capabilities of
5G network slicing, such multi-operator network slices
will not be uncommon in the near future. Consider,
for example, a network slice being used by FedEx or
UPS to monitor and manage a fleet of vehicles across
different countries of the EU. This slice would have
to span different operators in different countries,
providing seamless connectivity over a heterogeneous
set of radio devices, potentially operating at different
frequencies. The IoT and machine type communications
in general will rely on a geographically distributed set
of connected devices.
Today, managing such devices and services is
straightforward, requiring only a Subscriber Identity
Module (SIM). Global interconnectivity and roaming is
managed behind the scenes by the mobile operators.
However, this interface is also restrictive, providing only
a small set of well-known service levels. Network slicing
will allow much finer differentiation of services, allowing
different applications to fully utilise the power of 5G.
However, for this expectation to be fulfilled, there needs
to be a common interface that allows the tenants to
express their needs to different infrastructure providers,
and negotiate the service levels needed.
Learning from the success and adoption of the SIM,
such a common interface for creating and managing
network slices needs to be simple, and universally
supported. However, network slices allow a much richer
interface for tenants to express their requirements, so
is not an easy matter for network slices to achieve an
equivalent level of global support and common levels
of functionality. For this to happen, all operators will
need to work together and standardise a common set
of supported functionalities, and a common language
or protocol for negotiating requirements.
Support for standardised network slicing is already
underway. Through the so-called Service/Slice type
or SST values, release 15 of the 3GPP architecture
specification [2] specifies standardised sets of network
functions for common use cases such as enhanced
mobile broadband (eMBB), ultra-reliable and lowlatency communications (URLLC) and massive IoT
(MIoT). Standardised network slices can span multiple
operators, with functions potentially federated
across geographies. However, these few standardised
templates for network slices are unlikely to satisfy the
exact network requirements imposed by many major
industries and verticals (e.g., for a particular kind of
robotic surgery, or a particular kind of functionality
expected by an autonomous car), and support for
such specific requirements will only be satisfied with
bespoke network slices. This poses problems: consider,
for instance, a car manufacturer which relies on a
bespoke kind of network slice for a special-purpose
connected car application, created after extensive
discussions with a major mobile operator in Germany. If
this car were to cross the German borders and a similar
arrangement has not been reached with operators
on one or more countries in mainland Europe, the
connected car application may well not work as
intended, with potentially disastrous consequences for
road safety.
Appendix
279
We expect that at least in the initial days, major
companies with a worldwide presence will be able to
ensure their bespoke slice requirements by striking
deals with all major operators in the markets they wish
to operate in. In other circumstances, mobile operators
may need to come together to cooperatively provide
a type of network slice that is seen to have a high
demand, but has no standardised SST value (yet). We
may also see the creation of specialised aggregators,
who help create a standardised network slice for
a particular industry requirement, and provide the
interoperability at the service level for an industry, by
working with different operators. Such aggregators
would be akin to special-purpose MVNOs, providing
a bespoke kind of network at a lower price or higher
efficiency or quality (for instance, a network slice that is
tuned for massive IoT).
7.5.5.3 Intra-operability (consistent network slices
within an operator)
A different concern from the above, and one that
operators themselves are likely to bear the burden of,
is ensuring uniform behaviour of a network slice within
a single operator’s network. This arises because of
legacy radio hardware and software stacks. Because
of cost issues, most operators will likely evolve their
infrastructure to 5G on top of existing investments,
both in software and hardware. They may even have
equipment and software from multiple vendors, with
different network stacks in a messy but coherent
co-existence. Deploying network slices will require
exposing abstractions on top of this infrastructure
and may lead to bugs or inadvertent behavioural
differences in different parts of the network. This will
be an important challenge in the early days of network
slicing deployment.
A further challenge arises because of the heterogeneity
in 5G radio. Cost concerns may lead to only certain
kinds of radio being deployed in certain locations,
which then may place restrictions on the universal
availability of bespoke network slices.
7.5.5.4 Slice per service or slice per customer?
As indicated above, one major concern for the viability
of network slicing is the limitations in the granularity
of slicing radio resources. A further limitation is that, at
the UE level, current 3GPP specifications (i.e., Release
15), allow a maximum of eight slices that the UE can
associate with.
Given these real limitations, we expect to see two
distinct models for network slicing deployment. The
first model will associate a network slice with a unique
consumer. For instance, a car manufacturer may obtain
a network slice from a major mobile operator to deliver
a “connected car” feature for their entire car fleet. The
second model is driven more by cost efficiency: mobile
operators may define a network slice for a particular
kind of service (e.g., mobile broadband, or fixed
wireless access). All customers requiring that service
will then share a network slice.
The difference between these two models is a tradeoff between security and cost: The first model enables
better isolation, but because of the inherent limitations
of network slicing especially at the radio access
network, will involve a much higher price point than the
second model. We expect that the majority of network
slice consumers will end up sharing a particular kind
of network slice (e.g., for enhanced mobile broadband
(eMBB), or massive IoT (MIoT)). In other words, the
value realised by the customers of a shared slice is
simply in the bespoke kind of network that the slice
represents, which may provide better support for that
application (e.g., an MIoT slice may support much
higher levels of control plane or signalling traffic).
Among the benefits of network slicing mentioned
above, shared slices involve giving up the isolation
advantage and likely will not allow autonomy in
network slice management. However, within each slice,
it is possible to provide differentiated services and
improved QoS. Network slices, whether shared across
customers or not, also provide a distinct advantage to
mobile network operators by separating different traffic
types. This will allow better service, billing and network
management, and the simplification of operator
networks that can result from principled application
of network slicing principles can itself justify the
introduction of network slices.
Appendix
280
7.5.5.5 Cost vs performance - hard vs soft network
slices
Infrastructure providers and tenants alike will have
a choice between so-called “hard” network slices,
wherein resources are reserved a priori, and “soft”
network slices, where the same network resources are
multiplexed among different slices. Certain application
and traffic types such as ultra-reliable and low latency
communications (URLLC) may have no option but
to require hard network slicing. Other applications
may be able to benefit from the cost savings that
can be achieved by soft slicing and overbooking of
network resources among competing customers
who will likely not require those resources all at the
same time. As above, aggregators may come in as
tenants of infrastructure providers (today’s mobile
network operators) and provide a lower cost service by
apportioning the slice to their customers.
Appendix
FIGURE 7.5.3
SLICE TEMPLATE TO BE USED FOR SETUP OF A SLICE AND CAN BE EXCHANGED FOR
NEGOTIATION BETWEEN TWO OPERATORS IN ESTABLISHMENT OF A CROSS-OPERATOR SLICE
Slice type
(k-0 bits)
Slice parameter-1
(k-1 bits)
Slice parameter-2
(k-2 bits) … Slice parameter-n
(k-n bits)
Optional fields
(extra features)
7.5.6 Vision for network slicing: a laundry list of work items
A number of technical, economic and business factors
will influence the final shape of network slicing as it
starts to be embraced around the world. Our vision
of the work required within the telecommunications
industry for network slicing involves three principal
components: enabling automated network slice setup;
resolving issues created by limitations in granularity;
and defining network slicing with a view to the future,
and negotiating visibility to end consumers when
network slices reach all the way to the UE.
7.5.6.1 Automation in setup of network slices
We foresee the automation of establishment and
maintenance of network slices to be a critical factor in
enabling scale and wide adoption. While an essential
part of defining a network slice is identification of
requirements and ensuring network slices can be
tailored to the requirements of the service, it is also
important that the slices can be setup quickly and
with low cost. One of the most prominent solution
to achieve this is the definition of a network slice
template that could be adopted by operators globally.
A template, as seen in Figure 7.5.3, including properties
of the slice, i.e. slice parameter-i, with the fixed size for
different entries, could be filled either by the network
operators, translating their users’ or vertical customers’
requirements. Having fixed and standard size sliceparameter-i will also allow multiple operators to establish
cross-operator slices, when needed, rapidly and through
an automated process. While the standard template will
allow quick and low-cost setup of network slice, leaving
the actual values of slice parameter-i to be selected
by operators will allow differentiation in the design
and value proposition for different operators globally.
Additionally, having an optional field to accommodate
extra features of the network slice could offer greater
degree of differentiation between operators and how
they offer services to their vertical customers.
281
To support the cross-operator instantiation of a
network slice through automated process, the
negotiation procedure should also be designed and
have a standard form. For example, whether a threeway handshake is sufficient for such negotiation or
further cycle of handshake is required. An additional
consideration is whether telco operators will be willing
to negotiate the establishment of a cross-operator slice
using the same slice parameters as they have used to
setup the initial slice. However, in a nutshell, we foresee
the negotiation for cross-operator setup of network
slices through exchanging the slice template as seen in
Figure 7.5.3.
The automated instantiation of the network slices
also requires an additional step in the setup of a
slice, which is verification. Verification will allow the
network operators to ensure what has been planned
and instantiated has in fact been setup and deliver the
expected performance. Such verification might also be
needed during the maintenance of the network slice to
reassure the performance of a given slice remains as
provisioned. There is a strong body of work in the field
of verification that can be used in developing this stage
of the automated slice setup and maintenance process.
7.5.6.2 Defining network slices with a view to the
future
We also foresee the granularity and number of network
slices to be far beyond having three typical slice of
eMBB, mMTC and URLLC, with slice types defined with
three bits, as currently standardised by 3GPP [2]. In
fact, it is extremely important to define the format of
the slicing template in a way that network slicing can
be scalable in the foreseeable future and does not
face limitations in either the number of different slices
that could be defined (this is k-0 in Figure 7.5.3; e.g. in
[2], k-0 is 3), or number of different parameters that
define and differentiate a slice (this is n in Figure 7.5.3).
The community has similar experience with the IPv4
header that has later been addressed through more
scalable definition of the IPv6 header, for example.
As mentioned earlier, since slicing is one of the main
business drivers for 5G, such differentiation should also
be offered to the network users’, i.e. vertical customers.
Hence, the number of slices and the differentiation
between them will be of much higher diversity. For
example, an automotive manufacturer should be able to
request their own slice with the extra features of their
choice. Defining a flexible view of network slicing that
takes into account both the need for standardisation as
well as the need for differentiation will be important.
7.5.6.3 Negotiating visibility of the end consumer
between operators and verticals
While we see a high level of personalised and
customised network slices as an essential part of future
5G networks, it should be noted that from an operator
perspective, creating an “end-to-end” network slice
that reaches all the way to the UE and providing control
of this network slice to an interested third party vertical
can create a more direct connection between verticals
and consumers. This potential removal of the current
direct relationship between mobile operators and end
consumers can have profound effects, which will need
further examination:
• End consumers will potentially be no longer tied to
individual mobile operators, and this loss of lock-in
may need to be factored into prices and operating
models.
• It may, in some cases, be technically more
challenging to implement certain functionalities
(such as roaming and handoff), without a full
knowledge of the end consumer, and their identity
and patterns of behaviour.
• Given privacy laws in certain jurisdictions (e.g.,
GDPR in the EU), legal aspects of handling customer
information of the tenant verticals without a direct
relationship with the consumers themselves needs
to be looked into carefully.
• While the regulation, on how users’ data can
be used, have been very strict in some sectors,
mining users’ data has been a significant source
of revenue in other sectors. This differentiation
between regulatory aspect will remain the same,
but there will also be a possibility of a greater level
of differentiation.
In the converse case, where the network slice
does not reach all the way to the UE, or is shared
between multiple customers, verticals will need some
information about the consumer they are interacting
with, and this information will be held by the operators.
Transferring this information across in a safe and legal
way to the verticals will need looking into.
Appendix
282
7.5.7 Conclusion
Network slicing will be a key factor in realising the
economic benefits promised by 5G. In this document,
we identified several use cases and benefits, ranging
from improved security through better isolation,
improved QoS through virtualised networks tailormade for particular application requirements, better
support for industry verticals and autonomy in
network management. However, we also identified
several challenges to realising these benefits, chief
among which are interoperability of network slices
and clarification of the extent of a network slice
(“Where does the slice end”). We identified a vision
for addressing these challenges, through automation
of network slice setup, creation of a flexible and wellunderstood set of templates for different kinds of
network slices, and negotiating visibility to the end
consumer. It is our view with this, the potential of
network slicing will become a reality without a shadow
of doubt.
[5]M. Jiang, M. Condoluci, T. Mahmoodi, “Network
slicing in 5G: an auction-based model”, IEEE ICC
2017, Paris, May 2017.
[6]Mission critical services globally using 5G, online
video: https://www.btplc.com/Innovation/
Innovationnews/Operatorscollaborate/index.htm
[7] P. Rost, C. Mannweiler, D. S. Michalopoulos, C.
Sartori, V. Sciancalepore, N. Sastry, O. Holland, S.
Tayade, B. Han, D. Bega, D. Aziz, H. Bakker, “Network
Slicing to Enable Scalability and Flexibility in 5G
Mobile Networks”. IEEE Communications Magazine,
55(5), May 2017.
Appendix
7.5.8 References (Network Slicing contribution from KCL)
[1] NGMN Alliance, NGMN Network Slicing “Description
of Network Slicing Concept”,
Available: https://www.ngmn.org/uploads/
media/160113_Network_Slicing_v1_0.pdf(Jan 2017).
[2] 3GPP, “TS23.501, V15.3.0 (2018-09), Technical
Specification Group Services and System Aspects;
Study on Architecture for the 5G System; Stage 2”,
Sep 2018. (A short introduction and commentary
on the network slicing part of the standard can be
found in this article, which is based on a slightly
older version of the standard: https://sdn.ieee.org/
newsletter/december-2017/network-slicing-and3gpp-service-and-systems-aspects-sa-standard)
[3]X. Foukas, G. Patounas, A. Elmokashfi, M. Marina.
“Network Slicing in 5G: Survey and Challenges”,
IEEE Communications Magazine, 55(5), May 2017.
[4]Network Slicing Architecture, IETF draft. Jan 2018.
https://tools.ietf.org/id/draft-geng-netslicesarchitecture-02.html
Appendix 283
5G Task Force Team
Steering Committee
Project Team
Juan Carlos Archila
(América Móvil)
Chair,
GSMA Strategy Group
Emeka Obiodu
Editor and Project Lead,
5G Task Force
Peter Jarich
GSMA Intelligence
Andy Hudson
Policy
Mani Manimohan
Policy
Irina von Wiese
Legal
Colin Bareham
Marketing
Serpil Timuray
(Vodafone)
Chair,
GSMA Policy Group
Yoon Chang
Strategy
Mark Giles
GSMA Intelligence
Alex Sinclair
Chief Technology Officer,
GSMA
Michele Zarri
Technology
David George
GSMA Intelligence
Hatem Dowidar
(Etisalat)
Chair,
GSMA Technology Group
Richard Reeves
Strategy
Jasdeep Badyal
GSMA Intelligence
Laxmi Akkaraju
Chief Strategy Officer,
GSMA
Henry Calvert
Technology
Sylwia Kechiche
GSMA Intelligence
John Guisti
Chief Regulatory Officer,
GSMA
Dongwook Kim
Technology
Radhika Gupta
GSMA Intelligence
Contributors
Javier Albares
Kalvin Bahia
Elisa Balestra
Ed Barker
Laurent Bodusseau
Pau Castells
Oliver Chapman
Maximo Corral San
Martin
Genaro Cruz
Calum Dewar
Molly Earles
Jon France
Karen Gibson
Svetlana Grant
Tim Hatt
David Hutton
Pablo Iacopino
Amy Lemberger
Mark Little
Andrew Milne
Mona Mustapha
Dennisa
Nichiforov-Chuang
Kenechi Okeleke
Ian Pannell
Barbara Pareglio
Andrew Parker
David Pollington
Kelvin Qin
Vikram Raval
Mikael Ricknas
Arran Riddle
Manik Singhal
Jan Stryjak
Brett Tarnutzer
Yiannis Theodorou
External reviewer:
Angel Dobardziev,
WhiteBridge Insight
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285
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