The digital ecosystem is growing at a frenzied pace, with 5G now offering higher bandwidth, low-latency and speeds that will be way faster than the outgoing 4G networks. This has the potential to transform the telecommunication industry.
5G is capable of supporting 1,000 more devices for every metre of coverage, as compared with 4G networks, and that’s a big deal. As a result, transferring and downloading high-resolution video content will only take mere seconds as opposed to several minutes.
A study conducted by the Emodo Institute in March 2021 found that 80% of 5G phone owners reported noticing a compelling speed difference on 5G networks. This will have implications not only on the consumer experience, but potentially on telco revenue and profitability too.
What does it mean for telcos?
Telcos are uniquely positioned to offer a one-stop platform providing connectivity as well as content creation, marketing and distribution services. 5G will bring out new opportunities for telcos, allowing them to monetise and add value proposition to connectivity.
5G networks can support latency levels as low as 1 millisecond – implying almost instantaneous data feeds. This will allow for the wider adoption of IoT, cloud and edge computing, and the usage of augmented and virtual reality (AR and VR) platforms, among others. This tech breakthrough is promising to turn into reality numerous innovations that, only two decades ago, would have been regarded as science fiction.
According to Ericsson, telcos that make a dedicated push towards innovation, 5G can help push revenue by as much as 30% by 2030, and 5G consumer user cases can generate additional direct revenue of $131 billion. The key opportunities will result from high-speed data consumption, enhanced video, live sports and event streaming, music streaming, gaming, AR and VR, various kinds of IoT services and applications, automated mobility and connectivity, and digital advertising.
Exhibit: What are the biggest 5G consumer opportunities?
Singtel, one of the largest telco companies in Singapore, recently unveiled its XO Plus plans which provide users with a 5G handset, 150GB data allowance, and a three-month complimentary subscription to its AR educational content on Bookful and VR live music content with MelodyVR. The Bookful app brings to life stories using AR and 3D animations to enrich the learning experience. Meanwhile, “MelodyVR provides unlimited access to the world’s largest library of 360-degree VR concerts from global hitmakers like Imagine Dragons, Kelly Clarkson, Lewis Capaldi and more.”
While telcos can typically charge customers a premium for new generation technology, the ongoing pandemic has complicated matters and there were several instances of 5G services being rolled out without being priced at a premium in the first three quarters of 2020. But this has encouraged 5G bundling – or in other words, adding digital media services to 5G packages.
According to Omdia, in the first six quarters of the 5G rollout (between Q2 2019 and Q3 2020), almost two-thirds of tariffs were bundled with either third-party over-the-top (OTT) services or telco’s own digital services. In fact, 44% of 5G tariffs were bundled with OTT services and an additional 19.5% with both OTT and telco VAS services.
Looking ahead, in addition to video and music, cloud gaming and live sports will be the most significant services that bundling will help unlock value in. 5G’s impact is going to cut across almost all industries and plenty of individual consumer use cases. Telcos are well-positioned to capitalise on the revenue growth opportunities 5G uptake will provide.
Hoops to jump
But the cost of obtaining 5G licenses and rolling it out will certainly put a burden on telcos. And telcos will have a hard task to ensure their subscribers are ready to pay for the premium fees that come with 5G. The average 5G monthly tariff is expected to be about $89 as compared to $68 for 4G plans. But telcos have been innovative in ensuring they keep their subscriber base intact while rolling out bundled plans that include 5G connectivity. For example, Korea Telecom has provided a 50% discount on its premium family plans, along with unlimited roaming data of speeds up to 3mb/s and VVIP membership for its 5G unlimited plan subscribers, justifying the $51 price increase from the 4G unlimited plan.
5G is still in its infancy and the full extent of its use cases is still not completely imagined. It is, however, clear that if leveraged well, 5G could drive the next phase of growth for telcos globally. What works in the telcos’ favour is that they do not need to reinvent the wheel – they have been in this sort of position earlier too, when 3G and then 4G services were rolled out.
But telcos must be smart about how 5G offerings are packaged, and offered in a manner that customers are extended cutting-edge and tailored services for which they are willing to pay a premium.