ITEM: Evidence is mounting that early 5G will forsake the sexy new business models flaunted by vendors in favor of sensible consumer mobile broadband boosts as operators mind their capex budgets.
According to a new report from Rethink Research, tension is growing between vendors promoting the new business models 5G will bring – and working with operators to enable them – and operator spending plans, which indicate their bigger concern right now is sustaining the growth curve of mobile broadband.
RAN Research has forecasted 5G deployment trends to 2025 by asking 78 MNOs in Q3 2018 about their spending plans for base station gear (both macro cell and small cell) and the timing of that spend. Result: Rethink expects a small capex peak in the near future, but that will recede to business as usual.
According to Rethink, the main differentiation of 5G over 4G (and thus the business case for blowing a lot of capex on it) boils down to three criteria: diversification of services beyond data connectivity, higher densification and virtualization (including vRAN and software-driven capabilities like network slicing).
The problem is that as commercial 5G draws closer, many operators are becoming more conservative in their capex roadmaps, according to Rethink’s executive summary of the report:
One year ago, over 50% of Tier 1 and 2 operators said they planned to deploy 5G ‘small cell-first’, but that now the consensus is that two-thirds of 5G sites deployed in the first two years of commercial rollout will be macro.
Similarly, MNOs are holding off on investing in virtualization technologies like vRAN – in part, interestingly, because the development of fully commercial-grade virtualization platforms and open interfaces has not kept up with the sudden rush to deploy 5G earlier than most MNOs initially planned:
“While 84% of MNOs aim to deploy a 5G vRAN, only 24% believe they will do that in the first two years,” says Caroline Gabriel, research director and co-founder of Rethink Research.
Rethink’s report notes that two years ago, the chief goal of MNOs for the first phase of 5G deployments was boosting enterprise and IoT service offerings. In Q3 2018, they’re now more concerned with lowers costs and faster throughput speeds for conventional mobile broadband services.
The upshot is that the push by vendors to get 5G to market sooner has shifted the spending priorities of MNOs who forged their initial 5G capex/ROI roadmaps on the assumption that it wasn’t going to be a thing until at least 2020.
That’s potentially bad news for vendors who have been banking on 5G to revive the telecoms equipment sector. Rethink estimates that in the next few years, operators are going to be mainly buying 5G macros and 4G micro/small cells, and will postpone densification until it makes more sense economically (and presumably until their respective regulators make it easy and cost-effective to install all those small cells).
That in turn could delay both the realization of new revenue streams from 5G and the impact of a more open ecosystem driven by software and commoditized hardware. Even when 5G starts to ramp up a few years from now, Rethink says, MNOs are more likely to maintain careful capex control – which means vendors can forget about seeing major spikes in spending down the road.
That doesn’t mean equipment vendors aren’t recovering from the spending doldrums of the last couple of years, Rethink says – but if they’re hoping to return to the 4G spending peaks of 2013, they’re in for disappointment:
5G will deliver a far lower boost to overall network capex than in previous generation. Spending on 5G will be offset almost entirely by rapidly reduced expenditure on other technologies, as these commoditize, and as more operators adopt an opex-heavy model (relying on hosted networks, network sharing or infrastructure partnerships, for instance).