5G Revenue and ARPU

History will note that 2020 was the year that 5G cycle really kicked in high gear with major markets accelerating their deployments and coverage despite the pandemic. Though operators in key markets started rolling out services in 2019, the coverage and usage were fairly anemic as one would expect at the start of a new technology cycle. However, 5G cycle is moving 3-4 times faster than how 4G evolved around the world almost a decade ago. We also have years’ worth of data to analyze from three key markets of US, China, and South Korea from which we can get early clues of how 5G markets might evolve, the trajectory of consumer behaviors, and most importantly, the dimensions of 5G revenue streams which are essential to sustain the industry ecosystem.

Revenue is the currency of disruption and ecosystems. The flows, the transitions, the germinations, the rebirth, and the reimagination power how new technologies transition over time and how their impact is felt. It is the output which stamps its permanent markers of history. Of course, revenue is not the only dimension that matters but it is one of the most important ones. Revenue traction triumphs almost everything else. If we understand these trajectories, we can develop a better framework for strategic roadmaps.

The factors governing the 4G growth were clear – they were based on mobile data. As more users got converted to data subscribers, the ARPU and revenue expansion took place. The trajectory was predictable because it was a greenfield situation (data services were new) in almost every market. Mobile data ignited the ecosystem that gave us an unprecedented decade of growth. However, as outlined in the 2012 paper “Operator’s Dilemma (and Opportunities): The 4th Wave” the role of the 4th wave revenue streams became critical. In the subsequent years, the 4th Wave thesis shaped operator strategies around the globe. It has been one of the most remarkable periods of disruption and innovation. The impact of 4th Wave has been far and wide.

In the 2012 paper, we wrote,

It is inevitable that the 4th growth curve for the wireless industry is going to bring in disruption in the industry structure, technologies used, revenue models, and at some point, the regulatory framework itself. An operator’s ability to recognize the importance of the 4th Wave in its long-term survival plans will define their role in the ecosystem. Many will fail and get assimilated by the tides of consolidation. But some will move and adapt, either forced by the financial climate or the desire to innovate and launch new services that fuels their growth for the next decade. Indeed, their future will be defined by how they react to the 4th wave of mobile.

Most of the 4th Wave analysis from a decade ago has come to fruition. Operators, who have invested in the 4th Wave have reaped the rewards, are better prepared, and are likely to do better in the 5G cycle that is well underway.

How has operator’s mindset evolved given the 4G experience? Given that the data revenue curves are approaching a plateau, how do 5G revenue streams get formulated during the coming decade. Clearly, we are in the very early phase of knowing that but there are some clues in the data and that’s what this paper explores in detail through the lens of history.

The good news is that unlike the 4G cycle, the 5G cycle operators are familiar with the 4th Wave and what it takes to launch new services, why they are important, how to coalesce their management teams and boards on a strategic roadmap, be realistic about data and subscriber growth patterns, and how to forge relationships and partnerships with the ecosystem who are going to create new services and disruptive forces that takes advantage of the 5G access layer of the Connected Intelligence era.

5G cycle also has two unique dimensions that were not present in the 4G cycle: Geopolitics and Synchronous S-curves. There is universal consensus that US led the 4G cycle with not only deployment but also dominated the 4th Wave that powered it. It created more new billion-dollar revenue streams than any other nation. While China was 3-4 years behind the US on LTE, the two nations are starting the cycle on an equal footing with 5G. We have documented how LTE, Smartphones, and the Cloud shaped the 4G cycle. The three interconnected trends enabled the new companies and revenue streams.

With 5G, we are seeing a more intense S-curve cycles which will undoubtedly have a compounding effect on disruption and revenue creation. Will the industry adjust to the shift by inventing new business models and new collaborative approaches to unlock revenue streams? It is possible that the first phase of 5G is going to be about enhanced mobile broadband that gives consistently higher speeds. The revenue generated during this phase is likely to fund the expansion of the 5G network nationwide and investments into vertical industry solutions. So, it is important to get the strategy, business models, and the economics right.

We have had eight quarters of 5G data from the market. Is that enough to provide some guidance as to how things will shape up for the operators and the larger ecosystem? Which operators are better positioned for the short-term vs. the longer-term in the 5G cycle? How does the ARPU and revenue profile of the various operators and countries compare to what happened in the 3G and the 4G cycles? What are some of the 5G pricing benchmarks for the industry? How long will the 5G premiums last? By understanding what’s happening on the ground, we can help learn the direction of the shifting winds and benchmark the progress on the 5G front. This is the first industry paper that takes a critical look at the impact of 5G on operator ARPU and revenues in some key markets. We discuss the data from different markets to read the tea leaves for the coming decade.

  • Introduction
  • 4th Wave – Thesis Recap and Role in 5G
  • Mobile Operator Revenue Models
  • Mobile Operators: Capex vs. Revenue – Last 10 years
  • 5G Revenue – What to expect
    • 5G Revenue Distortion Effect
  • 3G vs. 4G vs. 5G ARPU: The First Year
    • Impact of 3G on ARPU
    • China: Network Cycles and ARPU
    • 4G vs. 5G First Year: US
    • 4G vs. 5G First Year: South Korea
    • 4G vs. 5G First Year: China
    • 5G ARPU Impact: Other Nations
  • 5G Pricing Benchmarks
  • 5G ARPU: Likely Trajectory
  • Operators: Narrating the 5G Story
  • Conclusions and Future Work

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