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Operators struggle to make business case for 5G

February 14, 2019

 

Despite all the hype and excitement surrounding 5G, operators are still in the very early stages of deploying next-generation networks and struggling to make a business case for 5G. On a global basis, most 5G rollouts will continue through 2022, according to a new survey from McKinsey.

 

Most of 2019 will be dedicated to preparing and planning for 5G, according to the firm’s survey of 46 chief technology officers directly involved in 5G development plans around the world. While nearly half of the operators included in the survey have already engaged in or completed 5G pilots, only 30% of respondents plan to roll out 5G on a large scale in 2020.

 

North American operators are leading by a wide margin though, with 56% planning to have large-scale deployments of 5G completed before 2020. The remaining North American carriers represented in the survey plan to reach that level by the end of 2022. Globally, 31% expect to reach large-scale deployment before 2020, 61% expect to hit that mark by the end of 2022 and 8% may not get there until the end of 2025, according to McKinsey.

 

The survey also concluded that 60% of operators view business case as the biggest challenge in their 5G strategy and only 25% expect 5G to deliver a strong business case. The increased operating costs and capital expenditures earmarked for 5G could prove difficult if carriers can’t drive substantial interest in the next-generation networks.

 

“Until those cases emerge, most operators will tread cautiously, leveraging 5G for near-term objectives and waiting for a clearer view on the use cases’ economics to accelerate,” a team of McKinsey analysts wrote in the report. “Given the expense required to prove those significant use cases, it could be an uncomfortably long wait. And for operators in countries that don’t see 5G as a matter of strategic and economic importance, there is a greater risk of falling behind.”

 

McKinsey compared the current dynamic to that of 3G rollouts when adoption didn’t fully pick up until devices from BlackBerry, and more notably Apple’s iPhone, were released. The survey also uncovered some insights into millimeter-wave spectrum. Less than 35% of respondents expect to deploy 5G on millimeter-wave spectrum in the near term, and more than 80% cite higher costs as a primary concern with respect to the very high frequency spectrum.

 

“Although commercially in its infancy, 5G technology is ready, and in most markets its presence will be felt from 2020 on,” McKinsey’s analysts wrote in the report. “Yet the fact that commercial models are not ready cannot be minimized; the business case is marginal, and the investments to enable new business models are not currently planned.”

 

Source: https://www.fiercewireless.com/5g/carriers-struggle-to-make-business-case-for-5g

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