5G: a revolution in the making - Part I // EIT Digital

5G: a revolution in the making - Part I

The penetration of cell phones has been exponential over the last 20 years. However, exponential curves cannot go on forever and we have now (almost) reached the end of the line. Credit: ITU

Everybody is talking about 5G, although my impression is that very few understand what they are talking about. Of course one of the reason is that 5G is not here, yet, nor has it been really defined what it is going to be.

The general assumption is that as we move from version nG to version (n+1)G we get more bandwidth, lower latency and so one. In a word we get a better wireless communications network. And it goes without saying that better communications would lead to better services, increased economic wealth for the whole environment with Mobile Operators/phone manufacturers making more money and user paying less for individual services. 

The hope behind this apparent nonsense is that since a single communication service is cheaper people will be using more of them, in many more fields, thus leading to a total increased expense that would make Operators/Manufacturers richer.  Since money cannot be (legally) printed in a basement, the idea is to get this additional revenue 

 

  • from business diverting to Operators’/Manufacturers’ coffers the savings generated by a more efficient production/distribution/supply;
  • -       from mass market diverting expenses in a variety of sectors to the mobile one because of its appeal.

Well, that turned out to be (almost) true in the previous steps 1>2, 2>3, and –but less so- 3>4.  Indeed, looking at the evolution of the tuple technology-usage-economics in the wireless world we can see that the first transitions indeed led to increased service availability, lower cost to the end users and richer mobile Operators/Manufacturers. However, the main factor sustaining this virtuous growth, was the exponential growth of the market, the fast penetration of cell phones.

As we are moving from 3G to 4G, and this is, volume-wise, already significant in mature markets, we are seeing that the virtuous circle of  "more services"> "lower end user bill" > "richer Operators/Manufacturers" is breaking down. The first two parts of the circle are still holding but the third one –richer Operators/Manufacturers is no longer valid. The reason is that the exponential increase in users has come to a screeching halt. This is also having an impact on cell phones manufacturers.  Operators’ revenues have been on the decline in the last years and just last week we saw Apple reporting a lower sale of iPhone for the first time since iPhone 1. 

The fact is that the real engine of the win-win-win loop was not technology evolution per sé, rather a growing market that, indeed, was made possible by better (it means both more performing and cheaper) technology. However, this growing market can occur only as far as there is an “empty space” to fill and we have basically filled most of it. True, one might say, we moved from 0 cellphones to 7 billions and that filled most people’s hands, but now we have the opportunity of expanding the market to Things, and in that area there is plenty of “empty” space. However, the problem is that a market is defined in terms of “paying customers” and Things are not “paying customers”. The “paying customers” are basically the same we have already reached. The increase in market revenues seems to have reached an asymptote in terms of available €.

The growing base of smartphones is clearly enabling the delivery and use of more services and potentially the generation of revenues from those services. The problem is, as the last Apple reporting shows, that the money generated by soft services is not making up for the money lost by the diminished sale of atoms (cell phones). Similarly, the increased number of connected Things is not going to make up for the loss of the increased marketplace that we have experienced in the last 20 years. However, it is better to take a closer look at this Interconnected Things both from a technology and market standpoint.

Author - Roberto Saracco

© 2010-2018 EIT Digital IVZW. All rights reserved. Legal notice. Privacy Policy.