A new study from Juniper Research has found that operator‑billed 5G service revenue will reach $315 billion in 2023; rising from $195 billion in 2022. This represents growth of over 60% in a single year.
The research predicts this increase in revenue will be driven by the accelerating migration of cellular subscriptions to 5G networks; owing to operator strategies that minimise or remove any premium over existing 4G subscription offerings. It forecasts that over 600 million new 5G subscriptions will be created next year, despite the anticipated economic downturn in 2023.
As shown in figure 1, Juniper Research anticipates that over 64% of global 5G connections will be in Far East & China. This is due to the early launches in South Korea by all Tier 1 operators, which was followed by significant launches of commercial 5G networks in China. By 2023, Juniper Research anticipates that there will be over 1 billion 5G connections globally.
The technology will provide the data infrastructure not just for the next generation of mobile communications but for serious developments in IoT, including smart cities and AVs (Autonomous Vehicles).
5G Service Revenue to Represent 80% of Global Operator Revenue by 2027
The report predicts that the growth of 5G networks will continue, and over 80% of global operator‑billed revenue will be attributable to 5G connections by 2027. The telecommunications industry demonstrated its robustness against the impact of the COVID-19 pandemic, and the report projects that the growth of 5G will also be resilient against this economic downturn; owing to the vital importance of mobile Internet connectivity today.
Research co-author Olivia Williams noted: “Despite the growth of the Internet of Things, revenue from consumer connections will continue to be the cornerstone of 5G operator revenue increase. Over 95% of global 5G connections in 2027 will be connected personal devices such as smartphones, tablets and mobile broadband routers.”
Private Networks Represent a Key Opportunity for Operators 5g service revenue
In addition, the report predicts that the ability of standalone 5G networks to offer ‘network slicing’ will act as the ideal platform for the growth of 5G private network revenue. Standalone 5G uses next‑generation core networks supporting network slicing technology, which can be used to take a ‘slice’ of public 5G infrastructure and provide it to private network users. In turn, this helps mitigate the cost of private 5G network hardware and increase its overall value proposition, all against a background of deteriorating macro-economic conditions.
Differences between 5G NSA (Non-standalone) and 5G SA (Standalone)
Telcom vendors such as Ericsson, Nokia, and Samsung are providing an innovative way through software to upgrade the 4G core to the 5G core without needing to replace the equipment, at a fraction of the cost. It is called vEPC (Virtual Evolved Packet Core).
For clarity, the differences between SA and NSA are shown below:
• 5G NSA: Refers to a network infrastructure with a base station based on a 4G core, but the radio antennas and smartphones are built on 5G stipulations. It is the first stage of 5G that is overlaid on an existing 4G LTE network core.
• 5G SA: In this type of network, the base station (core), radio antennas, and the end devices are entirely built on the 5G specification. The 5G SA network is scarce, and very few telecom companies have deployed it, as it is also costly.
Pricing of 5G Services 5G service revenue
Most early 5G launches offer 4G and 5G on the same plans. 5G is only available in premium or free in premium tiers but at a fee in lower tiers. It was concluded that putting 5G in premium tiers is the best approach. Imposing a straight-up extra cost for 5G is not a feasible option.
Major telcos have launched their 5G networks alongside commercial offers to acquire early adopters. Getting the 5G pricing right is crucial because it is a lever for ROI (Return on Investment). Operators must therefore leverage the key benefits of 5G to increase customers’ willingness to pay for 5G services.
Standalone 5G has more promise for pricing innovation than the 4G technology due to its virtualised core and software-based network design. Operators such as Verizon attempted to charge extra for 5G. The company initially rolled out its 5G service by charging an additional $10 per month.
Another 5G pricing concept European operators are experimenting with is speed-based tiered pricing. For instance, Finland’s Telia released a 5G service that offered packages with data speeds of 1Gbps for a set price and a lower price for a package with speeds of 600Mbps.
The key to success in the 5G market is maximising the ARPC (Average Revenue per Connection) of 5G connections. There is a decline expected over the next five years; primarily driven by the ‘race to the bottom’ in terms of pricing.