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With 5G adoption at critical mass and necessary 5G radio capital investments finally starting to plateau, service providers are optimistic 5G Standalone (SA) will usher in long-anticipated revenue opportunities that leverage 5G’s robust value.
Money won’t start falling from 5G trees overnight, but we see encouraging signs revenue buds will blossom this year:
5G SA provides enhanced capabilities and flexibility required to deliver new revenue-producing services.
5G coverage has become table stakes with market momentum shifting to differentiation plays based on service quality of experience.
The development of vibrant ecosystems and partnerships all point to an optimal “growing” environment that supports success.
We’re tracking multiple developments on this front, including an inevitable evolution in unlimited data plans, positive signs for fixed wireless access initiatives, new opportunities in gaming and automotive, and new use cases in IoT.
5G unlimited data plans shift from quantity to quality
Unlimited data plans have driven 5G adoption, spurring large increases in data usage but with ARPU gains limited to just one to two percent. In mature, early adopter markets, 5G coverage is reaching upwards of 80 percent with data consumptions rates nearly tripling and users consuming 5G more than 40 percent of the time.
This is a good news story for 5G, but not a sustainable long-term strategy for substantive ARPU growth, unless data plan prices are increased. Most operators around the world have successfully increased prices to offset inflation and those increases have not impacted customer churn.
Driven by 5G SA, we will soon enter the data plan 2.0 phase which will see a gradual shift from unlimited data quantity to tiered, quality-based plans. While early adopters may want to keep unlimited plans, the broader market doesn’t truly understand what it needs and consumes.
New data plan 2.0 pricing could be as much as 15-20 percent higher than original contracts, offering data ranges, tiered thresholds, and speed or performance boosts that focus on quality. These tailored bread-and-butter 5G quality plans bode well for new revenues.
5G fixed wireless access is growing steadily
5G fixed wireless access (FWA) is expanding to add incremental revenue to service provider bottom lines. More than 110 service providers globally have launched consumer commercial FWA services with an average $49 monthly ARPU — twice the average mobile subscription in many markets. Additionally, more than 15 service providers have launched FWA offerings for enterprises and private networks.
This first phase of FWA is a “land grab” proving to attract new customers. With pricing structures combining volume and speed, service providers are rapidly expanding footprints. In North America, Verizon and T-Mobile combined added 3.6 million FWA customers comprising greenfield and former cable subscribers during 2023.
FWA’s second phase will target upsell experiences to increase customer stickiness. For consumers, value-added services include speed boosts to download games, application-specific service-level agreements (SLAs) for gaming and work-from-home video conferencing, and smart-home services like security cameras connected by 5G.
In mature markets, we’re starting to see enterprise opportunities around service-level agreements. Most FWA for enterprises are sold as fast, reliable gigabit connectivity for small and medium-sized businesses (SMBs), a resilient network offer for large enterprises or connectivity for remote locations, enabling pull-through of edge compute services and SD-WAN/SASE offerings as new monetization opportunities.
5G gaming playing field set for a win
While the 5G mobile gaming market is still in its infancy, partnerships are being formed. The ecosystem is coalescing, and momentum is building. Service providers like KPN in the Netherlands are partnering with cloud gaming service providers to offer new services. Big gaming publishers are developing games with feature sets and capabilities that have mobility in mind so people can game on the move.
National regulators are creating pro-gaming policies to attract the gaming industry and demonstrate leadership. Advertisers are excited by the potential for continuous participation to keep users engaged, whether in or out of the home, opening untapped revenue potential.
The gaming CPE market is heating up, too. At CES 2024, Acer and Qualcomm debuted the world’s first 5G router – the Predator Connect X7 5G CPE – to provide fast internet speeds through 5G and Wi-Fi 7 for in-home gaming.
With gaming attracting premium subscribers, service provider ARPU could grow to double digits, according to some analysts and Asian operators. There are numerous incremental revenue opportunities, including advertising revenue sharing, speed boosts, integrated immersive voice offerings, and pro-gaming events.
5G automotive turns a corner
A glacially paced 5G automotive market is finally pointing to a near future where most vehicles are 5G-enabled. The dominant use cases are personalized and immersive connected in-vehicle infotainment experiences, C-V2X for safety, and the next generation of vehicle cockpit platforms.
We expect 2024 to be a year of momentum for 5G automotive, driven by:
Regulatory mandates. Regulators, especially in Asia, are considering mandating 5G V2X for NCAP safety scoring. Others will follow, creating a crucial market driver for mass adoption. Car manufacturers will support that single-standard approach.
Connectivity platforms. Qualcomm’s Snapdragon automotive platform is gaining momentum, with 350 million vehicles already on the road. The platform is the 5G-enabled cockpit for the entire driving experience and supports C-V2X and infotainment chipsets.
The car is the device. Carmakers are seeing a positive business case for 5G automotive. They are incorporating 5G in vehicles, combining its use for V2X with telematics and infotainment systems. Mercedes announced native OS support for apps like Zoom and Door Dash, while GMC will forego Android Auto and CarPlay support in favor of a proprietary system that will require a data package.
Lightweight 5G RedCap to drive new IoT revenues
Part of 3GPP R17 standards, RedCap is a lightweight 5G capability designed to power industrial and enterprise IoT applications such as wireless sensors, wearables, and video surveillance. RedCap is the first IoT capability to benefit from 5G. It reduces 5G device costs while enhancing performance and reducing energy consumption. That is critical for mass market adoption and scaling.
Early trials in China during 2023 demonstrated RedCap’s value for intelligent healthcare and smart grids, and the country is continuing RedCap deployments.
RedCap is anticipated to reach 1.2 billion IoT connections between 2024 and 2030, with transportation, industrial manufacturing, and healthcare among the largest verticals, with an expanding footprint in the private 5G network story. Analysts predict heavy growth in IoT-enabled RedCap devices over the next six years.
This will also trigger a broader set of revenue streams across device ecosystems, such as application enablement platforms to manage devices remotely, connectivity packages, and private networks.
The 5G money tree is ready to bloom
What do all these monetization opportunities have in common?
They benefit from 5G SA, which supports better quality of service, and new types of services and differentiation.
They focus on delivering and assuring high performance, and quality of service and experience.
They have vibrant supply and demand ecosystems that are coalescing.
The market and industry are primed to develop these new revenue opportunities.
Spirent is a leader that is helping a range of industry players bring 5G SA to market faster and with better reliability. We are a trusted vendor-neutral provider of 5G test and assurance solutions that ensure performance, security, and quality of service.
Discover how Spirent can cost-effectively accelerate your 5G monetization journey with: our 5G Core Automation Platform, our 5G Core Test as a Service and our Automated Assurance solutions.
