Operators Need 5G Monetization Strategies Besides the Right Spectrum Choice

5G deployments are speeding up across different markets and telecom policy makers are prioritizing the necessary steps for the 5G market progress. In order to promote 5G market development, a Canadian regulator completed a 5G spectrum auction in late July 2021. As the result of the auction, the regulator allocated 200 MHz of spectrum in 3.5 GHz band to various operators raising US$7.2 billion of license fee. A total of 1495 licenses were awarded to 15 Canadian companies. Rogers won 325 licenses spending CAD 3.3 billion, Bell received 271 licenses paying CAD 2.1 billion, and TELUS won 142 licenses for a price of CAD 1.9 billion. Videotron and Xplornet won 294 and 263 licenses receptively. The rest of the licenses were awarded to small and regional providers.

Mid-band (between 3.4-3.8 GHz) spectrum is an important band for 5G deployments. A number of markets in Europe, the Middle East, and Africa focus on mid-band range for 5G deployments at the present. However, in Canada, 3.5 GHz band has been initially used for fixed wireless access (FWA) internet access services. The 5G spectrum auction for 3.5 GHz band was, in fact, scheduled for 2020, however, it was postponed due to the COVID-19 pandemic. Since 3.5 GHz spectrum was not available for 5G, early 5G deployments in 2020 by Canadian operators such as Bell, Rogers, and TELUS used lower bands, ranging from 600 MHz to 2.5 GHz. Although lower bands provide an advantage in coverage due to better propagation, 3.5 GHz bands support advantages in both high bandwidth and good coverage. Support of higher bandwidth is beneficial for both service providers and end users to enable the use of bandwidth intensive applications via mobile networks.

Current state of 5G network coverage in Canada is limited. Bell’s 5G network is now available to 35% of the Canadian population and it is on track to expand its 5G coverage to 70% of the population by the end of 2021. Rogers’ 5G network covers 700 communities across the country and it is aiming to reach 1,000 by the end of the year. TELUS’s 5G network is now available in select major cities and the operator is targeting to cover 600 urban and remote communities by the end of 2021. Allocation of 3.5 GHz band for 5G services will enable operators to expand their 5G networks coverage across Canada supporting high bandwidth.

Similar to Canada, Indonesia, Sweden, the United Kingdom, and the United States completed mid-band spectrum auctions in the first half of 2021. Specifically, Sweden and the United States issued spectrum licenses in 3.5-3.6 GHz, Indonesia allocated 2.3 GHz band spectrum, and UK issued 3.6 to 3.8 GHz bands, as well as a lower 700 MHz band for 5G deployments. While majority of the markets focus on mid-band, regulators are also facilitating for 5G deployment in mmWave. Australia completed 5G spectrum auction in 26 GHz band in April 2021. 5G networks mmWave is currently deployed only in select markets including Japan, South Korea, and the United States. However, operators and regulators are considering mmWave to enable new use cases and services which need high speed and low latency, for example, last-mile fiber complements, 5G broadcast, AR/VR, online gaming, etc.

Although more mmWave deployments are expected to target markets with high bandwidth demand, low-band spectrum will still be important for wide coverage. Mid-bands are likely to remain critical spectrum for 5G deployments for achieving the balance between coverage and capacity. Canada’s recent spectrum auction is one example of importance of mid-band. Based on Opensignal’s global operator analysis in early 2021, Canada has some of the fastest 4G networks in the world. Its major operators, such as Bell, Rogers, and TELUS, stand in the top ten list in terms of 4G network download and upload speed. However, Canada’s 5G download speeds only falls in the top twenty list, mainly because initial 5G deployments are in lower spectrum bands. Ability to access critical 3.5 GHz spectrum is expected to improve Canada’s 5G network performance. At present, mid-band is widely used spectrum for 5G deployment across the world, and markets such as Brazil and Mexico are now allocating of mid-band for 5G deployment. To harmonize 5G deployments, the International Telecommunications Union’s (ITU’s) WRC-23 is considering expanding the amount of 3.5 GH range allocated to mobile services.

Regardless of the spectrum choice, 5G deployments around the world are progressing quickly and the ecosystem is reaching maturity. A number of 5G mobile device options are now available to end users, reaching over 1.4 billion smartphone unit shipments last year. Recent and upcoming spectrum auctions will certainly speed up the 5G network roll outs across different markets. Expanding network coverage and device availability will continue to drive 5G user base in different markets. According to ABI Research’s market data, 5G user base will surpass 494 million at the end of 2021. Availability of 5G certainly benefit mobile users by supporting smoother streaming, faster downloading of files and data, and the ability to use latency sensitive applications. Despite the impressive 5G developments, operators need to have a strategy to monetize 5G the most effectively. Currently most of the operators which offer 5G don’t charge extra for users to be able to access 5G network, but instead allow users with premium mobile packages to access 5G network. Such a model can drive the 5G adoption rate as well as promote mobile users to get higher tier packages, however, it provides little incentive to operators for network infrastructure investment. Operators should consider applications and services which can take advantage of 5G speed and latency. Ultra-HD live streaming, cloud-based gaming and applications which use AR/VR are some examples of services to promote 5G. AR/VR applications can be targeted for both consumers and business segments for social networking, entertainment, retail, healthcare, education, etc. The ability to offer these applications and services will enable operators to maximize monetizing opportunity.  While the right spectrum choice is important to support bandwidth demand of different markets, strategies to create new revenue stream is crucial for operators to improve average revenue per user (ARPU) and achieve sustainable return on investment.