‘Customers are unwilling to pay more’ for 5G: Omdia; analysts see 5G and fiber adoption increasing but ARPU dropping in the next five years
Since 5G was commercialized in 2019 (2018 if you count pre-standard offerings), operators have been looking for ways to not only benefit from the operational efficiencies associated with the latest generation of cellular, but also to leverage 5G to drive new service revenues—or at least combat declining ARPU. As it turns out, charging a premium for 5G, particularly in the absence of a “killer app,” hasn’t happened to date—and won’t in the next five years according to new research from Omdia.
In terms of 5G as a vector for new consumer service revenues, things like cloud gaming and mobile XR have long been floated, but have yet to materialize. This, to degrees, reinforces the premise that money will be made from 5G on the back of enterprise digital transformation, something operators are addressing in earnest. Back in the consumer segment, 5G has opened up a fixed wireless access home broadband play which is indeed creating new revenues with the likes of T-Mobile US and Verizon articulating big ambitions in the space.
Best efforts notwithstanding, analyst firm Omdia doesn’t see 5G providing operators with a revenue lift. Per a note from the firm, “In mobile markets, it is now evident that 5G will not be sufficient to offset ARPU decline as customers are unwilling to pay more for it. Unlimited data and video streaming services bundled exclusively on 5G contracts have had some success, but this only gives the industry the illusion of a 5G ARPU lift.”
Omdia projects there will be 5.9 billion 5G subscriptions in 2027. Then, looking at fixed broadband subscriptions, the analysts see 1 billion fiber-to-the-home subs by 2027. That said, the firm estimates monthly ARPU for fixed and mobile will decrease by 4.2% between 2022 and 2027.
“People don’t buy technology; they buy fun exciting new experiences,” Omdia Research Director Ronan de Renesse said in a statement. “There is a misconception that operators should be reselling the technology they buy directly to consumers, and it doesn’t work. The network is the bedrock on which innovation and creativity can flourish like 4G and mobile apps. It is not just up to operators to solve the ARPU growth challenge but rather the rest of the digital services ecosystem.”
The notion of investing billions of precious capital dollars into networks that don’t help operators make more, new money likely keeps executives and investors up at night, but at a system-level 5G can deliver bandwidth more cost-effectively than previous generations of cellular. And in it’s cloud-native form, the development of 5G and network automation go hand-in-hand, lighting a path to more operational savings.
