Can 5G Standalone save the telecoms industry from a 5G winter?

The high costs and low returns from 5G are seeing telcos pull back on spending on infrastructure and services. How can 5G be brought back from the brink, and can 5G Standalone prevent a cooling of progress?

5G promised us fast connection speeds at ultra-low latency, but also massive connectivity enabling new IoT applications, driverless vehicles, VR/AR, and more.

So why does it seem like telcos are hunkering down for a 5G winter, reducing their CAPEX spend or already looking ahead to 6G?

It’s undeniable that 5G hasn’t been the rip-roaring success many hoped for, and isn’t likely to be for a while – based on current forecasts, it will take until 2027 to become the dominant mobile standard, nearly a decade after its initial launch, and even then will only hold a 47% share of total subscribers, according to a recent Advancing 5G report.

For early adopters of 5G, it made a good impression – to begin with. Now, as traffic on these networks increases, median performance is declining, according to findings from Ookla. However, with still too few customers to justify significant expenditure levels, telcos are stalling on improving existing or building new networks.

And this expenditure is significant, from more base stations and antennas to software for hosting virtualised infrastructure. On top of that, available spectrum is limited, and highly regulated, which can make it difficult for telcos to acquire through costly auctioning or refarming of 2G / 3G bands.

Though data consumption continues to grow, worldwide phone shipments fell 7.8% in the second quarter of 2023 compared with the same period last year, as customers hold off from upgrading handsets, unimpressed and untempted by the promises of 5G.

If customers aren’t quite feeling the benefits yet, Ericsson’s Mobility Report insists that 5G is making money, growing by 7% in the last two years after a period of decline in ARPU since 2019, highlighting the potential for growth to continue with the right strategy in place.

Is it apathy from customers or cynicism from industry creating a self-fulfilling prophecy when it comes to 5G?
Many are looking to 5G Standalone (5G SA) as the much-needed reboot that’ll bring the standard back from the brink, offering new revenue opportunities through capabilities such as network slicing.

Currently, most 5G offerings are the product of 5G RAN grafted onto extant 4G infrastructure. According to the Advancing 5G report, the three largest barriers to deploying 5G SA, based on a survey of 120 industry professionals, are:

• Lack of viable monetisation models to justify investments
• Costs of deployment
• Managing both cloud-native and legacy components

According to Frontier Economics, despite the telecoms industry’s investments of approximately £9 billion for 5G by 2030, it still faces a significant 5G funding gap.

Vodafone’s chief exec in the UK has opined that investment in infrastructure will have to be cut if the proposed merger with Three is blocked, warning that the new firm “won’t be able to invest as much and… deliver the 5G ambition that’s coming in the wireless infrastructure strategy from the government.”

Meanwhile, Three’s own people say that structural change is needed to address high infrastructure costs: “We’ve been investing in higher levels of CAPEX than we’ve been generating for the last three years... and that’s unsustainable. You can’t keep spending more than you generate.” Should its merger be approved, the combined Vodafone/Three has pledged £11 billion for 5G SA, and aims to reach over 99% of the UK population by 2034.

In June, Dish Wireless succeeded in reaching 70% of the population in the United States – nearly 250 million people – with 5G SA, per the terms of its FCC commitment, with its world-first greenfield network. Realising this network came with a hefty price-tag, the company issued $2 billion of Senior Secured Notes to support the build-out.

Operators like Dish, with established Standalone networks, will be able to differentiate themselves from competitors running on non-standalone architecture (NSA) through enhanced network performance and a greater range of service offerings. But if Dish doesn’t reach its next stipulated target of 75% of the population by 2025, the firm faces $2 billion in fines, and the forfeiture of its precious low- to mid-band spectrum, valued at almost $30 billion.

Continued investment in network infrastructure is essential, and governments, telcos, and other stakeholders must work together to ensure that all necessary resources are available to support deployment, through direct financial support, subsidies, or favourable policies.

However, infrastructure is only half the story; messaging must be laser-focused on how 5G can deliver more than just faster network speeds, whether it’s enabling new enterprise services, enhancing the user experience, or driving innovation. Already, people believe that 5G will improve society more than AI; as Sanjiv Gossain, Group VP for EMEA at Verizon Business, told the Financial Times: “it’s about explaining the art of the possible.”

The high costs and underwhelming returns from 5G deployment so far have led many telcos to reevaluate their investment strategies in both infrastructure and services. Now, by decoupling the core network from legacy systems, 5G SA has the capacity to streamline operations and enhance flexibility while diversifying revenue streams.

Just as 4G faced initial challenges before eventually becoming a cornerstone of modern connectivity, the setbacks witnessed in early 5G endeavours can serve as a catalyst for refining strategies and galvanising collaboration. The future of 5G is contingent on proactive measures that rekindle enthusiasm and investment in this technology. 5G Standalone holds the promise of tapping into 5G’s true potential, but its success rests on collaborative efforts and forward-thinking business models that realise its spectrum of benefits.

Update [04/03/2024]: BT have announced that their 5G Standalone network is set to launch "later this year."