Telecom companies around the world have invested a staggering $109 billion in their networks, with the majority of this amount going toward the deployment of 5G technology. Despite these hefty investments, returns on investment (RoI) have been disappointingly low, hovering around 3%. The discrepancy between the anticipated and actual revenue has caused global concern among telecom operators. The lack of significant 5G use cases, as well as the marginal speed differences between 4G and 5G, has led to slower-than-expected monetization. As a result, the progression toward the next generation of mobile technology, 6G, might face delays extending beyond the year 2030.
Challenges in 5G Monetization
Low Returns on Investment
Telecom operators face a concerning dilemma as their substantial financial commitment to 5G networks fails to yield expected profits. The initial expectation was that 5G would unlock a plethora of enterprise-level innovations. This included advancements in sensors and the Internet of Things (IoT). However, these technologies have failed to materialize on a scale large enough to generate meaningful revenue. Additionally, the consumer sector has not significantly compensated for this shortfall. Most users experience only minor improvements in speed between 4G and 5G, further diminishing the perceived value of upgrading.
S.P. Kochhar, director general of the Cellular Operators Association of India (COAI), has warned against aggressive infrastructure investments due to the current slow pace of revenue generation. Kochhar stresses the importance of developing viable 5G use cases within the next two to three years. Without this, the ambitious timeline for rolling out 6G may need to be reassessed. Telecom operators worldwide echo this sentiment, underlined by a cautious approach to future investments. The challenge extends beyond mere technological advancements, encompassing the need for sustainable and financially viable business models.
Enterprise Innovations and Consumer Market Limitations
The forecasted explosive growth in enterprise-driven applications such as IoT and advanced sensors has not come to fruition, leaving significant gaps in expected revenue streams. Mahesh Uppal, director at ComFirst, indicates that launching 6G will necessitate robust business models, explicit use cases, and clear cost benefits. The aim is to avoid the financial pitfalls experienced with 5G. The inability to develop and popularize these technologies on a large scale has hampered revenue potential. Furthermore, the consumer market’s response has been lukewarm due to the negligible speed improvements perceived between 4G and 5G networks.
Efforts to monetize 5G through fixed wireless access (FWA) by companies like Airtel and Jio show promise. These initiatives, while beneficial, remain insufficient for propelling forward to 6G adoption. Stakeholders, therefore, have been tasked with finding innovative ways to demonstrate 5G’s value proposition compellingly. This becomes even more critical as telecom operators brace for another transition to potentially more complex and costly 6G technologies. The pressure mounts to redefine the 5G narrative from basic service enhancement to offering transformative experiences capable of reshaping industries.
Strategic Adjustments and Necessary Support
Facilitating Government Role and Spectrum Access
The role of government policy and support cannot be overstated in shaping the future of 6G deployment. Telecom operators emphasize the necessity of creating an environment that fosters innovation while allowing companies the flexibility to determine the best timing for infrastructure upgrades. Rakesh Bhatnagar from VoICE underscores the importance of spectrum availability for private enterprises. Enhanced spectrum access could ignite the development of new 5G use cases, thereby driving demand and revenue. Without such regulatory and infrastructural support, the transition to 6G remains fraught with significant hurdles.
Currently, the lack of funding support for private companies wishing to engage in 6G research and development poses another challenge. Murtuza Kachwala, managing director at Protiviti Member Firm for India, outlines the potential benefits of a phased deployment strategy. Initiating targeted pilots to test new use cases could both manage costs effectively and build a stronger foundation for 6G. This approach allows for gradual scaling, minimizing financial risks, and providing time for developing market-driven use cases. It also offers a buffer period to address any technical or regulatory challenges.
Financial Sustainability and Revenue Sharing
The call for a fair revenue-sharing model among over-the-top (OTT) players and traditional telecom operators is becoming increasingly urgent. The economic viability of future technological advancements may be at stake. Without an equitable financial structure, sustaining progress could prove difficult. Globally, 11 telecom operators have already ceased operations due to inadequate profitability, raising red flags about the industry’s long-term sustainability. The alignment of financial incentives and the development of comprehensive use cases are crucial for ensuring the feasibility of future upgrades.
Addressing these financial concerns will require a collaborative effort involving operators, regulators, and technology developers. The successful introduction of 6G hinges not just on advancing technology but also on the creation of a robust financial ecosystem. Operators must consider novel funding mechanisms, partnerships, and innovative revenue models to ensure a smooth transition. By fostering a supportive environment with a balanced revenue-sharing framework, the industry can better prepare for the challenges and opportunities presented by 6G.
Future Considerations and Next Steps
Telecom companies worldwide have poured a massive $109 billion into their networks, with the bulk of this spending focused on the rollout of 5G technology. However, despite these substantial investments, the return on investment (RoI) has been strikingly low, averaging only around 3%. This significant gap between expected and actual revenues has sparked global concern among telecom operators. The slower-than-expected monetization of 5G is largely attributed to the lack of substantial 5G use cases and the relatively minor speed difference between 4G and 5G. Consequently, this has led to a slower rate of adoption and has raised doubts about the timing of the next generation of mobile technology, 6G. With the current pace and low RoI, the shift to 6G could face delays extending beyond the year 2030. This situation underscores the industry’s struggle to effectively capitalize on the advanced capabilities of 5G, which could impact future technological advancements and economic growth within the telecom sector.