The road to 5G: The inevitable growth of infrastructure cost

Network cost could double as operators strive to meet demand for increased capacity and deploy 5G. How can they maintain their profits?

Each generation of technology opens new opportunities for telecommunications players. But when 4G launched in 2009, mobile operators didn’t see the great returns they’d captured with earlier generations. Despite their investments in 4G infrastructure, revenues showed flat or tepid growth. In a few regions, including Europe and Latin America, revenues even dropped after 4G’s introduction.

Now 5G technology is under testing and poised to launch in some markets later this year. Mobile operators are preparing with a mixture of resignation and anticipation. They know that it will open opportunities to capture value from new 5G use cases and widespread adoption of the Internet of Things (IoT). At the same time, they are keenly aware that they’ll have to increase their infrastructure investments in this technology. Meanwhile, operators will still have to upgrade their 4G networks to cope with growing demand. In an analysis of one European country, we predicted that network-related capital expenditures would have to increase 60 percent from 2020 through 2025, roughly doubling total cost of ownership (TCO) during that period.

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Are you ready for 5G?
Smart operators will consider seven no-regrets moves to position themselves for advantage amid radically changing industry dynamics.

The fifth generation of wireless technology promises lightning-fast speed, incredibly low latency, and the capacity to carry massive numbers of connections simultaneously. Not surprisingly, the imminent arrival of 5G is creating a buzz in both the industry and the wider world.

Although standards will not be fully defined until the 2019 World Radiocommunications Conference, early progress indicates that two distinct “flavors” will emerge: low- and mid-band 5G focused on spectrum below 6 gigahertz and high-band 5G on spectrum above 6 gigahertz, particularly in the millimeter wave bands. Both these flavors will be used to augment and enhance existing LTE networks rather than replace them.

Network sharing and 5G: A turning point for lone riders
Network sharing has become a standard part of the operating model for mobile operators, and the trend is accelerating. Operators have been able to reduce the total cost of ownership by up to 30 percent while improving network quality through sharing a variety of both active and passive equipment. 5G will be no exception, with operators eyeing new ways of accelerating the deployment of an otherwise daunting investment.

The cost savings potential for network sharing is even stronger with 5G, as greenfield deployment is better suited for sharing because it avoids the cost of network consolidation. For example, the cost of small-cell deployment can be reduced by up to 50 percent if three players share the same network. But the rationale for sharing extends beyond cost, as it could solve many practical roadblocks of 5G deployment in urban areas, such as the potential for urban disruption and visual pollution from the installation of excessive equipment and fiber.

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