5G dreams: A tech revolution hits roadblocks

India’s Prime Minister, Narendra Modi, launched the country’s 5G networks at the end of 2022. Since then, in less than two years, Bharti Airtel and Reliance Jio have launched their 5G services across most circles in India. While the government has been projecting it as the world’s fastest 5G rollout at a scale, ministers and stakeholders have also created hype around the technology, underlining its potential advantages in security and latency, but to very limited avail.

Unfortunately, 5G network adoption and monetisation in India are currently at a very preliminary stage, leaving telecom operators struggling to profit from their capital expenditures of over USD 15 billion on infrastructure and spectrum alone.

Customer adoption of 5G remains low, with the GSMA predicting that it will account for just 25% of all mobile connections by the end of 2025.

So, why did 5G not take off as it was meant to?

THE CONSUMER CONUNDRUM

Before understanding enterprises’ adoption of 5G, let us break down the consumer conundrum for this technology. In 2022, the cost of a gigabyte of 4G data was just around Rs 10, making India one of the most affordable geographies for Internet services across the world.

While this is good for consumers, telecom operators have found it not to be a great idea for monetising 5G in the country. At the core of the problem is the fact that the current standards of 5G network services do not particularly offer an upgrade in terms of the services that consumers can avail of.

Consumers’ primary use cases on mobile networks include streaming over-the-top (OTT) video content to mobile devices such as smartphones. Since 2016, the advent of Reliance Jio in India has ensured that inexpensive mobile data has boosted content streaming in a big way, turning it into a consumer habit and exponentially increasing Internet consumption in the country.

“To fully realise the potential of 5G, there is a need for continued deployments of 5G SA and additional densification of mid-band sites.”- FREDRIK JEJDLING, Executive Vice President, Ericsson

4G services, however, were already adequate for streaming purposes in most cases, including live sports and entertainment. While network gaps and dark spots—areas where connectivity is inconsistent—continue to persist even today, most users found adequacy in 4G network services for mainstream consumer applications.

This was a significant jump between 3G and 4G, which consumers then leveraged. However, the same was not valid for 5G. When the latter came into mainstream circles, it did not bring any specific applications to compel users into upgrading their telecom services or devices. On the contrary, applications that already used 4G continued to work as before.

5G, therefore, proved difficult to monetise for most telecom operators, not just in India but worldwide. This is a key aspect for any telecom operator, and 5G offered no special fillip for operators to be able to charge a special levy for 5G services over 4G—at least as of now. Even as telecom operators increased tariffs, a pan-India pushback against increasing data tariffs by over 20% has led to a decline in subscriber count.

For the record, the Telecom Regulatory Authority of India data indicates users are migrating away from Reliance Jio and Bharti Airtel (which offer 5G services) to state-run Bharat Sanchar Nigam Limited (which is only now rolling out 4G in India).

While 5G offers lower latencies, the applications and use cases that can be achieved using 4G are not significantly lower in practical use.

Expanding upon this, a media statement by telecom infrastructure provider Ericsson in June this year says, “The 5G mid-band spectrum provides a sweet spot between both coverage and capacity while improving user experience. As 5G matures, the focus for many service providers is expected to shift toward developing differentiated connectivity offerings.”

This is the core issue with capitalising on 5G services in India. As it turns out, enterprises also have similar problems.

THE LACK OF DEMAND

A note to investors and clients from earlier this year by Deepak Ayyagari, Principal at consultancy firm PricewaterhouseCoopers (PwC) US and Florian Grone, global telecoms advisory leader at PwC, said, “With telecom evolutions typically running for five to seven years, we are firmly mid-cycle on 5G, which first rolled out in 2019. Yet, 5G’s promises have mostly to be delivered.”

Elaborating upon the slow movement of 5G services further, Ayyagari and Grone said, “The ‘killer’ apps of data-intense uses like video and 3D-graphics processing, immersive augmented, virtual and extended reality experiences, mobile multiplayer gaming, autonomous robots, and connected vehicles—have had limited adoption, have not yet fully emerged, or have turned out not to require 5G after all. Customer adoption of 5G remains low, with the GSMA predicting that at the end of 2025, 5G will still account for only a small share of 25% of all mobile connections. This is up from 8% in 2021, but far behind 4G, which will still command 55% of connections.”

For the last seven quarters, companies worldwide have focused only on core operations, the cost-take-out uses of technology, and telecom services.

Several key factors could be singled out for this. One, the macroeconomic uncertainty that commenced towards the end of FY23 set into motion a set of delays in decision-making among clients deploying technology and telecom services. Over the past seven quarters, this has further led to companies around the world only focusing on core operations, or as technology service providers call it, ‘cost take-out uses of technology and telecom services.’

5G, on this note, falls under discretionary technology. In India, media reports have highlighted that enterprises continue to use wired and wireless public Internet services delivered through enterprise lease contracts. In contrast, adopting private, captive 5G services has remained on the back burner. As a result, while 5G adoption among enterprises represents a substantial opportunity on paper, in reality, the adoption is a far cry from the lofty demand from service providers.

Alongside the economic concerns came 5G’s own problem—that of being a disposable service. Even among enterprises, 5G has not produced additional fillip over 4G networks regarding its considerable latency upgrade or cyber security standards. While 5G offers lower latencies, the applications and use cases that can be achieved using 4G are not significantly lower in practical use.

Current geopolitical headwinds further exacerbate the issue, leading to uncertainty not conducive to a smooth-flowing cross-border business environment. The absence of geopolitical conflicts ensures smooth business transactions, where no uncertain factors hamper the global economic and commercial supply chain.

However, in the current situation, the Russia-Ukraine and Israel-Palestine conflicts continue to divide the world, and the economic superpowers largely control the flow of businesses across borders and industries. With the US and EU aligned towards certain factions and the factor of China’s global stance mostly assumed to be against that of the US, India plays a crucial centrist role. Yet, this role is only conducive to its geography, which still contributes to less than 5% of West-headquartered Big Tech’s revenue—an essential indicator of the importance of a market’s revenue potential.

In 5G’s case, it is more important to note that while telecom service providers are ready with spectrum, bandwidth, and infrastructure, global business disruptions are putting their plans behind. For instance, manufacturing is a critical sector that was primed to be a key customer of enterprise 5G networks. Yet, the threats of disruption to global manufacturing, coupled with inflationary uncertainties, have pushed the discretionary need to adopt 5G back by years.

THE FUTURE POTENTIAL

Despite the not-so-overwhelming monetisation and use cases, there is no denying that 5G still holds the future. Ericsson’s annual trend-defining Mobility Report, published on 26 June 2024, highlights this: “5G continues to grow in all regions and is expected to account for about 60% of all mobile subscriptions by the end of 2029… Mobile data traffic is forecast to grow with a compound annual growth rate of about 20% through the end of 2029. About a quarter of all mobile network data was handled by 5G by the end of 2023. This is forecast to grow to about 75% by the end of 2029.”

“To fully realise the potential of 5G, there is a need for continued deployments of 5G SA and additional densification of mid-band sites. To date, around 50 service providers have deployed or launched 5G SA in public networks, and the global expansion of 5G mid-band coverage is primarily propelled by extensive deployments in India and North America,” said Fredrik Jejdling, Executive Vice President of Ericsson.

While Ericsson, one of the key infrastructure builders of 5G, remains bullish on the technology, the company was forced to revise its forecast numbers to project a downward trend in 5G adoption.

Nevertheless, it remains clear that the uptick in 5G adoption is inevitable. What remains to be seen is whether it is delivered in time for those who have placed bets on the technology standard to reap profitable returns on their investments.

By Vernika Awal

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