Kearney’s “5G Readiness Index 2022” and How to Monetize 5G
A new report from management consultancy Kearney analyzes a year of 5G progress across 33 countries around the world. The Kearney “5G Readiness Index 2022” assesses 5G and how close countries are to realizing all the potential and benefits of widespread 5G in the context of the overall maturity of a country’s telecoms market and its socio-economic position. The report covers 33 countries, all of which had launched 5G by the third quarter of 2022. To be included, countries must have launched 5G by the fourth quarter of 2021.
“Europe is falling behind on 5G!” is a cry we heard at the latest Mobile World Congress. The Kearney 5G Readiness Index 2021 reflected it, and our 2022 Index confirms it, at least for now (see Figure 1).
11 out of 28 countries tracked have at least one operator with a standalone 5G core network launched. Asia leads with seven countries, while Europe trails with just Finland and Germany reaching this point. Only in two countries have all operators launched standalone cores—Singapore and China—opening up their markets for a 5G transformation.
This year’s Index reveals that only 10 countries have made high band spectrum available, and operators in just five of them (the United States, Australia, South Korea, Thailand, and Japan) have launched full commercial services within it. So far, no European countries have gotten this far, although select services have been launched on limited mmWave licenses, including in Germany. The lack of availability of mmWave spectrum is disappointing because its advantages are the cornerstone of new, high speed 5G-enabled services.
The Index identified more key developments during the past year:
- The United States continues to push ahead of other countries. Its regulator has provided spectrum in all three band classes, and national operators have made the most of it by launching services. One operator has launched a standalone 5G core. Canada also has an operator offering 5G services via its new standalone core.
- South Korea, which ranked second in the 2021 Index, has dropped to fifth because it has not made low band spectrum available, despite high subscriber penetration.
- Most Nordic countries are pulling ahead, thanks to wider spectrum availability and broader deployment across bands, but Sweden is held back by the lack of mmWave spectrum as full availability of 26 GHz isn’t planned before 2025. This slows Sweden down and risks muting consumer excitement.
- Germany moved from laggard to leader of the EU4 (France, Germany, Italy, and Spain) plus the United Kingdom, thanks to operators launching 5G in multiple bands. Only one operator has launched a 5G standalone core.
- France now trails other larger European countries because of its late launch of 5G (November 2020) and customers’ apparent limited interest in it.
- A strong showing in the Middle East (Saudi Arabia, United Arab Emirates, and Qatar) is a testament to their networks’ quality and strong rollouts. Penetration is 9 to 11 percent. A Saudi operator has launched a standalone 5G core.
- Australia was one of the first countries to launch 5G, has continuously expanded spectrum access across all bands, and enjoys successful commercialization. It has 18 percent 5G penetration, the second highest in the Index.
Kearney also uncovered the following findings:
- Take-up (as a percentage of total subscribers in the first quarter, 2022) is paltry across Europe. Switzerland is the best with 13 percent but launched in April 2019. Belgium is the worst offender at 1.7 percent of connections. Take-up is 31 percent in South Korea.
- In South Korea, the government has announced a push for creating an ecosystem of companies that innovate and leverage 5G (aiming for 1,800 5G service firms by 2026). They understand operators won’t be solo drivers but enablers.
- Rollout of new capacity in the United States allows operators to launch impactful services, such as 5G fixed wireless access (FWA). One operator is using
- 5G to equip ambulances with high-quality video feeds that medical professionals can view while patients are en route.
Europe is behind, but not irreparably so. Vigilance and focus are required, together with operators’ preparation to win with 5G when their countries have reached ready status.
Monetize 5G step-by-step, building up to an ecosystem of products, services, and partners:
Currently, 5G lacks killer uses cases to drive customer uptake. Without seductive 5G products or services, people won’t see its benefits. Yet, operators wonder whether advancing investment in 5G is wise. It’s classic chicken-and-egg, but it will start somewhere, spearheaded by first-mover operators along with third-party providers that will figure out what will make everyone want 5G. Plan monetization first with small steps, and then plan the ecosystem to realize its potential.
It still may seem like early days in the 5G journey, but time grows shorter for European telcos to catch up with the United States and other markets. Getting your strategy rolling now is the only way to take advantage of the European market when it becomes fully 5G ready.
References:
In November 2023, Ericsson predicted there would be 5 billion 5G subscriptions in the world by the end of 2028, as operators took advantage of new spectrum licenses and built out their networks. This would mean 5G accounting for about 55% of all mobile subscriptions that year. By June, however, Ericsson had made a rather dramatic downward revision. The forecast of 5 billion subscriptions had been lowered by a whopping 400 million, or 8%, to 4.6 billion instead. Putting a dent of 100 million subscribers in Ericsson’s forecast of total mobile subscriptions, this change cuts 5G’s share of that total to about 50.5%.
This is all rather alarming for Ericsson. Although it is branching into software and pitching its wares at carmakers, factory owners and other companies that have never previously bought network products, it still generates most of its income by selling 5G equipment to operators. If those operators aren’t building networks because they can’t afford it or don’t have the spectrum, Ericsson isn’t making money.
A 400 million difference in subscriber numbers might affect Ericsson’s customers more than it hurts Ericsson. One scenario is that cash-strapped consumers refuse to upgrade to the 5G networks operators have built. Something like that could be blamed on the “difficult macroeconomic conditions” Ericsson refers to in its latest mobility report.
But operators in many countries don’t even attempt a 5G upsell – they simply provide it to subscribers with compatible gadgets at the same low rates previously charged for older network services. A likelier explanation for the missing 400 million is that 5G networks don’t exist. And auction delays – the other reason Ericsson gives for its adjustment – would obviously hinder their rollout, directly harming Ericsson. This is why the Swedish company routinely complains about authorities that take ages to release spectrum to the telecom sector.
Ericsson’s downgrade implies there will be 73 million fewer 5G subscribers each year over the forecast period than it previously expected, a figure that represents nearly 7% of subscriber numbers at the end of March. To put it in another context, it is roughly equal to the sum of customers served by all four mobile networks in France.
A big concern for Ericsson right now is some of the negative publicity surrounding 5G. It is frequently made out to be a disappointment that has brought no obvious benefits for consumers while driving up capital expenditure for telcos. To counter that, Ericsson is now trying to convince operators that 5G has already fueled sales growth.
But its case is relatively weak. In countries ranked as the “top 20 5G markets,” where average smartphone penetration has risen to about 20% since 2020, telco revenues today are only about 4% higher than they were in 2017, a chart included in Ericsson’s latest mobility report appears to show. Desperate times.
https://www.lightreading.com/5g-and-beyond/ericsson-slashes-5g-outlook-by-400m-subscribers/a/d-id/785418?