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5G:
THE PAST, PRESENT AND FUTURE OF
THE MOBILE INDUSTRY EVOLUTION
CHETAN SHARMA
5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
Table of Contents
Introduction .................................................................................................................................... 3
Historical Evolution of Network Technology ................................................................................. 5
The current state of 5G ................................................................................................................... 8
What will 5G look and feel like? ....................................................................................................10
Shifts in Ecosystem Control Points................................................................................................ 13
Wireline and Wireless are becoming the same network ............................................................... 16
Winners and Losers .......................................................................................................................18
Conclusions .................................................................................................................................... 21
Acknowledgements ....................................................................................................................... 22
About Mobile Future Forward ...................................................................................................... 22
Mobile Future Forward Publishing .............................................................................................. 23
Papers ..................................................................................................................................................... 23
Books ....................................................................................................................................................... 23
About Chetan Sharma Consulting ................................................................................................ 24
About the Author .......................................................................................................................... 24
Disclaimer
Chetan Sharma Consulting is one of the most trusted advisory firms in the global mobile
industry. This research document presents some in-depth analysis about the future of
the mobile industry. However, the author or the company assumes no liability
whatsoever.
This paper is part of the Mobile Future Forward Research Paper Series. For past papers
and books, please see http://www.mobilefutureforward.com
Any use or reprint of the material discussed in the paper without prior permission is
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2
Introduction | www.mobilefutureforward.com
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
Introduction
The deployment of LTE otherwise known as 4G is in full swing. Operators in US, Japan,
Korea, Finland, Australia, and others started deploying the new technology some years
ago and are nearing completion of their network build out. Others in Europe and Asia
are on an aggressive schedule to catch-up. We can expect that a majority of the
operators will have LTE up and running in the next couple of years. Operators have
sunsetted 2G. In some instances they even stopped investing in 3G and are putting all of
their investments in the 4G bucket. As mobile networks transition to all IP, operators
will be able to re-farm their spectrum assets for 4G deployments. Beyond LTE,
operators are looking at LTE-A to provide more efficiency and network bandwidth to
consumers.
In mature LTE markets like the US, Korea, and Japan, the talk has shifted to the next
generation technology evolution 5G. Even Europe, which still has a long way to go
before their 4G is built out have set their sights on 5G to recapture the mantle and the
pride of the GSM days. Korea and Japan led the world in 3G but lost the lead of 4G to
the US. They both are eager to be considered leaders in 5G. Japanese government has
set the ambitious goal of having 5G by the Tokyo Olympics in 2020. US regulators have
started to talk about 5G and the future spectrum needs as well.
Since the launch of 1G networks in late seventies and the eighties, we are now onto the
5th iteration of the network technology evolution. We have gone through a lot of
technology skirmishes1 but with 4G and likely with 5G, we are narrowing the differences
1
GSM vs. TDMA, CDMA vs. GSM, WCDMA vs. EV-DO, LTE vs. WiMax, etc.
Introduction | www.mobilefutureforward.com
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
Introduction | www.mobilefutureforward.com
Copyright 2015, All Rights Reserved. Use without permission is strictly prohibited.
5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
If we look at the North American market over a period of 35 years, we observe that the
new generation brings in roughly three times the cumulative service revenue for the
industry. This happened from 1G to 2G and 2G to 3G. The 4G story is still evolving and
we are nowhere near completing the technology cycle but all indications are that the 4G
service revenue will be three times the 3G cycle revenue.
In fact, by some measures, we are behind the 5G curve but are likely to make up as there
are more companies in more countries focused on the competitive battles of ushering
the age of even faster broadband. The research work on 5G started in 20123 and has
started to kick into high-gear in 2014 as governments, organizations, and companies
started to set targets for launch. Japan is motivated to launch 5G by 2020 for Tokyo
Olympics.4 Huawei and MegaFon are teaming up to launch 5G by 2018 for the soccer
world cup.5 We are likely to see more announcements in 2015. ITU and regulators are
also getting organized to figure out the spectrum demands for 5G.6
http://www.metis2020.com
https://www.telegeography.com/products/commsupdate/articles/2014/08/19/mic-looks-to-commercialise-5gservices-by-2020-olympics/
5
http://www.mobileworldlive.com/huawei-russias-megafon-plan-5g-launch-2018-world-cup
6
http://recode.net/2014/10/27/the-race-to-5g-is-on/
7
Source: Chetan Sharma Consulting, 2014
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
The capital required to deploy a new network has consistently increased over the last
three decades. In the first 10 years, US operators spent roughly $24Billion collectively.
For the last 5 years, they have been exceeding that figure each year.8 As the number of
subscriptions grew, so did the demand on the network especially as smartphone
penetration started to increase at a good pace in 2007-8. The revenue/capex ratio has
also steadily increased until 2009. It has been on the decline ever since. Will 5G reduce
the deployment cost by a significant factor to have a steady revenue/capex ratio for the
operators? Margins on the data business have been under significant pressure as well
and have been declining in most markets for the past few years. Will 5G help stabilize
the margins?
As we have illustrated in our other papers,9 mobile is redefining the global GDP in more
ways than one. All leading companies realize that now. Governments know that in a
connected world, jobs and economic growth is at stake and the smarter and agile
regulators will do whatever they can to wrestle some of the edge that comes being a
leader.
5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
5GPPP, EU15
METIS, EU16
5G Lab Germany17
NGMN18
ETSI19
4GAmericas20
Most of the US activities are confined to research institutes and corporate R&D
initiatives.
Governments and research institutes in Europe, Japan, and Korea are putting a lot of
emphasis on 5G as if the various countries are in the race to put man on the moon
being first and stay dominant in 5G is a critical policy goal for these countries. In the US,
the FCC has started the exploration of the allocation of frequencies for 5G.21
15
http://5g-ppp.eu/
https://www.metis2020.com/
17
http://5glab.de/
18
http://www.ngmn.org/ NGMNs 5G white paper https://www.ngmn.org/uploads/media/NGMN_5G_White_Paper_V1_0.pdf
19
http://www.etsi.org/
20
http://www.4gamericas.org
21
http://www.fcc.gov/article/doc-330009a2
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
22
http://pr.huawei.com/en/news/hw-373886-4.5g.htm#.VIaGWTHF98E
http://www.samsung.com/uk/news/local/samsung-electronics-sets-5g-speed-record-at-7-5gbps-over-30-timesfaster-than-4g-lte
23
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
A number of these requirements will be shaped by the standardization process and how
the industry builds the case for higher performance access networks that take into
account the diversity in applications, business cases, business models, end-points,
bandwidth and latency requirements, geographical differences in requirements. A
number of 5G scenarios will be accomplished by LTE-A and subsequent technology
features so a clear demarcation of where 4G ends and 5G begins will be a tricky
proposition.24
Another point that should be noted is that the Gbps speed in discussion is for GHz
frequency bands and for short distances. That means, we will have to build much denser
networks than we have today involving D2D, P2P, tighter integration of licensed and
unlicensed spectrum bands and as such new architectures and business models to carry
the bits.
It is also not entirely clear how the seamless handoff will take place between the
millimeter dense networks and lower frequency macro networks without any
performance degradation. There is also no consensus on the frequency bands that
should be allocated for 5G around the world. The harmonization process is a long
drawn-out convoluted process. Without narrowing the number of bands, the economies
of scale cant be reached to bolster the case for 5G.
Operators will have to justify the network investment based on the business case for 5G.
Clearly, the infrastructure costs per GB will decline by a significant factor as most of the
complexity management moves to software but it will still cost a fortune to acquire new
spectrum and deploy new technology across the various spectrum assets. The volume of
the traffic will keep growing and the margins per bit will keep declining. How will
operators make the case for more investment in these scenarios? Will 5G enable new
business models that were not possible before due to industry and technology structure?
There are more questions than there are answers but many of these questions will be
sorted out as the industry finds its way to define 5G.
There is also the question of how much bandwidth do we really need? Historically,
anything that is been offered up to the consumers gets gobbled up pretty past. The US
market is doing 2.2GB/sub/month as of 2014 with T-Mobile reporting at least double
the usage.25 Similarly, in Korea and Sweden, we have seen 7-10 GB/sub/month
consumption so it is not out of the realm of possibilities that we are looking at 20-30
GB/sub/month consumption rates in some of the markets by the turn of the decade and
this is just cellular data. Wi-Fi consumption will grow even faster.
But, can human eye discern speed after a certain point? Can we really tell the difference
on a smartphone between 30 Mbps and 70 Mbps when the data downloads pretty
rapidly and we might not notice the difference as the bandwidth availability increases.
24
We are almost certain that some vendors and operators will jump the gun and start calling an interim technology
5G
25
Source: Chetan Sharma Consulting, 2014
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
Will we consumer more HD or newer and higher resolutions of content that needs more
throughput? Hugh Bradlow, Chief Scientist of Telstra observed that the threshold at
which an average consumer is satisfied with the throughput is roughly proportional to
the square of the diagonal of the screen size. As devices and screen sizes changes, the
threshold adjusts upwards or downwards.26
One significant flaw in the standardization process is the lack of Internet and pure
digital players on the table. The standards are being designed the traditional ways by
vendors and by the operators. There is rich history and experience in traditional
ecosystem that we should leverage but we would be remiss if we dont involve the likes
of Facebook and Google in the standardization process for it is the applications that are
driving the networks and devices and not the other way around.
Applications such as autonomous driving, multi-user video conferencing, opera
livestreaming, multi-user gaming, telemedicine, distant learning, augmented reality,
and many other application and service scenarios will inevitably drive the need for
higher performance from the network. As the industry figures out its journey towards
5G, it might be the business models and the shifts in industry tension points that will
shape the next 15-20 years.
26
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
27
For a more in-depth assessment of the revenue curves in the mobile industry and how they are shaping the
future of the industry, please see the 4th wave series papers http://www.chetansharma.com/4thwaveandthenexttrillion.htm
28
While there are unlimited bundles of data available, they are still controlled. Even the unlimited usage is
throttled after a certain level of data usage in some shape or form. Most of the operators have largely abandoned
the unlimited data wagon.
29
Source: Chetan Sharma Consulting, 2014
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
If we look at the economic activity from a smartphone entering the ecosystem, the role
of applications and services is quite visible in both the developed and developing
markets. As shown in figure 4, the percentage of revenue flowing into new areas over the
lifetime of a smartphone is increasing. The areas of apps, commerce, advertising, and
cloud are adding very tangible revenue streams to the ecosystem.
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
merge at a frantic pace in the next 5 years. Many will also become content owners,
banks, and might even operate car companies. On the flip side, we might see the rise of
non-traditional MVNOs wherein vertical industry players will bundle in IP access with
their services.
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
It is well established that video will constitute bulk of data traffic both on wireline and
wireless from here on. From a consumer point of view, the access technology will just
disappear in the background. They will care less what access medium is carrying the bits
of any particular content or traffic. There will be enough intelligence built into the
network framework that economics and performance requirements more than anything
else will dictate how bits are carried from point A to point B. This is the reason that it
will make more sense to merge the wireline and wireless assets in a given country. An
operator with assets in both categories will be better able to bundle services and content.
32
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
33
http://chetansharma.com/mobilecompetition.htm
For more discussion, please refer the Fourth Wave Series papers available at
http://www.chetansharma.com/4thwaveandthenexttrillion.htm
35
http://chetansharma.com/usmarketupdateq32014.htm
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
Computing itself has changed over the life of the wireless industry. From the early days
of the mainframe, 1G-to-early 3G coincided with the sheer dominance of the windows
platform. With iOS and Android capturing much of the computing ecosystem, Windows
is left to fight for relevance.
36
For more discussion on this, please see Connected Intelligence Era paper at
http://www.chetansharma.com/connectedintelligenceera.htm
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
As is true with any technology cycle, there will be new and nimble players ready to take
wallet share away from the incumbents. 5G will see an explosion of applications and
services companies who seek to digitize and automate the task economy to the most
granular level.
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
Conclusions
The noise around 5G will only grow louder in 2015 but it is normal. All mobile network
technology evolutions have gone through the same cycle in the last 35 years and 5G will
be no different. However, the ecosystem and the control points in 2025 are likely to look
markedly different from the first three cycles. The brilliant engineering community will
no doubt respond with performance capabilities that will make 4G look like analog days.
As the industry is embarking on its 5G cycle, mobile itself might disappear from the
lexicon of the industry for it will be so pervasive, so embedded in everything we do that
it will become part of our digital consciousness. The connected intelligence era37 is
clearly upon us and 5G will play an important role in defining it.
Mobile will continue to transform every industry with thousands new startups changing
and contributing in their own ways. Tighten your seat belts and enjoy the ride. It will be
like no other in the history of mankind.
37
http://www.chetansharma.com/connectedintelligenceera.htm
21
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
Acknowledgements
Author would like to acknowledge the assistance of Wim Sweldens, Hugh Bradlow, and
Sarla Sharma for providing their feedback.
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Acknowledgements | www.mobilefutureforward.com
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
Papers
Each year, Chetan Sharma Consulting researches and produces industry-defining papers that look at new
opportunities, industry challenges, and the shifts in consumer behavior.
Books
Mobile Future Forward publishes the book series that consists of essays from speakers and thoughtleaders in the mobile industry. The Mobile Future Forward Summit is all about creating new ideas,
discussion and debate of opportunities and challenges. The essays from CEOs and senior industry
executives are focused on new technologies, trends, and business twists and turns of the industry.
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5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION
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