Starting later this year, early 5G services are going to become available in the United States. It will be rolled out in phases, and some versions will be more ‘marketing 5G’ than actual 5G. Mobile operators have a lot at stake here. Subscriber and revenue growth have stagnated, yet operators are spending big sums on spectrum and gear for the 5G upgrade.
But success in 5G is going to be different than success in 4G (LTE). Whereas 4G sort of sold itself, I think success in 5G is going to require a quite different sales/marketing structure and mindset at the operators.
Let’s look a bit at the history of wireless data. 3G was basically about mobile e-mail, driven largely by the first smartphones – Blackberry, Treo, and so on. There were also some consumer type applications, where operators were, for a brief time, kings of the content hill, cataloguing ringtones and rudimentary games on the home screen of mobile phones.
4G was really about wireless broadband. For the first time, you could do many of the same things with your pocket computer (AKA the smartphone) as you could from your home computer — and then some, given GPS and other capabilities on mobile devices. In this 2010-2018 era, operators essentially became purveyors of broadband service plans. Most of the action was driven by the smartphone suppliers and app stores. The challenge for the operators was providing sufficient network to keep up with the data growth, and developing the right mix of profitable/affordable price plans (initially ‘bucket’, then some flavor of ‘unlimited’).
And yes, there will be some aspect of 5G that is akin to your broadband provider selling you faster speeds for $10-20 per month so you can watch Netflix in 4K. But much of the 5G opportunity is in new areas of business for the operators. They have to think about how they will structure to effectively market and sell these services. Let’s look at three of the most promising areas for 5G.
Fixed Wireless Access. This is going to be an exciting area to watch as Verizon and others roll out FWA to select cities later this year and into 2019. 5G FWA is different than previous versions of FWA, which has historically been ‘broadband of last resort’ in areas unserved or underserved by cable or DSL. 5G FWA will mainly be in cities and pockets of denser population, where operators will usually be selling against at least one fixed broadband provider, on the basis of network quality, price/bundle, or some other attribute (i.e. you don’t like your cable company). This is a sales and marketing proposition different than mobile. Plus, many FWA implementations will require professionally installed CPE, so there’s the factor of the user experience and somebody mucking around with the wiring of your home. There are also legacy customer perception humps to get over here, such as the historic ‘variability’ of cell phone service (works here, but not there), issues with indoor coverage, and so on.
IoT. Much of the success of 5G rests on these ‘billions of connected devices’. And while IoT is seeing fairly steady growth, it’s more singles than home runs, and it’s spread across numerous verticals, each with their own ecosystem – smart cities, connected car, smart home, industrial IoT, etc. It is going to take time for the operators to acquire the domain expertise and build the relationships needed to sell into these verticals. It will be difficult for them to go it alone. Operators will have to develop partnerships with firms that are effective solution sellers in some of these IoT segments.
Enterprise. One issue with Wave One (LTE) of mobile broadband is that it is sort of a one size fits all service. It has been difficult for operators to sell a differentiated, SLA-based 4G service to an enterprise. That changes with 5G. One of the most promising attributes of 5G is network slicing, which allows an operator to parse off specific capacity to sell in a virtually dedicated way to a particular customer. For example, an operator might be able to sell a specific swath of capacity, at a guaranteed level of service (speed, latency, etc.) to an enterprise customer. This is one of the more promising areas of incremental revenue opportunity likely to come from 5G. It will also require the operators to develop a larger and more capable enterprise sales force. It’s not just going in and selling a bunch of devices and a discounted price plan. It requires a specific understanding of needs of the enterprise, and a fair bit of back office integration to monitor what is being delivered to the customer. Operators are at a very early stage of configuring themselves to sell network slices.
There are certainly some customers who will pay a price premium for 5G just because it’s faster, in the same way that customers pay Comcast an extra $10 per month for a boost from 150 Mbps to 250 Mbps even though they don’t know exactly why. But the most significant incremental opportunities that will come from 5G are in new areas that require a different and more proactive selling proposition. Operators will have to think carefully about how to configure and retool their organizations to most effectively address these opportunities.