5G Chetan Sharma Consulting

7/23/2019 5G Chetan Sharma Consulting

http://slidepdf.com/reader/full/5g-chetan-sharma-consulting 1/24

2015

5G:THE PAST, PRESENT AND FUTURE OF

THE MOBILE INDUSTRY EVOLUTION

CHETAN SHARMA



5G: THE PAST, PRESENT, AND FUTURE OF THE MOBILE INDUSTRY EVOLUTION

2 Introduction | www.mobilefutureforward.com

© Copyright 2015, All Rights Reserved. Use without permission is strictly prohibited.

Table of Contents

Introduction .................................................................................................................................... 3

Historical Evolution of Network Technology ................................................................................. 5

The current state of 5G ................................................................................................................... 8

What will 5G look and feel like? ....................................................................................................10

Shifts in Ecosystem Control Points................................................................................................ 13

Wireline and Wireless are becoming the same network ............................................................... 16

Winners and Losers ....................................................................................................................... 18

Conclusions .................................................................................................................................... 21

Acknowledgements ....................................................................................................................... 22

About Mobile Future Forward ...................................................................................................... 22

Mobile Future Forward Publishing .............................................................................................. 23

Papers ..................................................................................................................................................... 23

Books ....................................................................................................................................................... 23

About Chetan Sharma Consulting ................................................................................................ 24

About the Author .......................................................................................................................... 24

Disclaimer

Chetan Sharma Consulting is one of the most trusted advisory firms in the global mobileindustry. This research document presents some in-depth analysis about the future of

the mobile industry. However, the author or the company assumes no liability whatsoever.

This paper is part of the Mobile Future Forward Research Paper Series. For past papersand books, please see http://www.mobilefutureforward.com

Any use or reprint of the material discussed in the paper without prior permission isstrictly prohibited.

http://www.mobilefutureforward.com/













Introduction

The deployment of LTE otherwise known as 4G is in full swing. Operators in US, Japan,Korea, Finland, Australia, and others started deploying the new technology some yearsago and are nearing completion of their network build out. Others in Europe and Asiaare on an aggressive schedule to catch-up. We can expect that a majority of theoperators will have LTE up and running in the next couple of years. Operators have

sunsetted 2G. In some instances they even stopped investing in 3G and are putting all oftheir investments in the 4G bucket. As mobile networks transition to all IP, operators will be able to re-farm their spectrum assets for 4G deployments. Beyond LTE,operators are looking at LTE-A to provide more efficiency and network bandwidth toconsumers.

In mature LTE markets like the US, Korea, and Japan, the talk has shifted to the nextgeneration technology evolution – 5G. Even Europe, which still has a long way to go before their 4G is built out have set their sights on 5G to recapture the mantle and thepride of the GSM days. Korea and Japan led the world in 3G but lost the lead of 4G tothe US. They both are eager to be considered leaders in 5G. Japanese government has

set the ambitious goal of having 5G by the Tokyo Olympics in 2020. US regulators havestarted to talk about 5G and the future spectrum needs as well.

Since the launch of 1G networks in late seventies and the eighties, we are now onto the5th iteration of the network technology evolution. We have gone through a lot oftechnology skirmishes1 but with 4G and likely with 5G, we are narrowing the differences

1 GSM vs. TDMA, CDMA vs. GSM, WCDMA vs. EV-DO, LTE vs. WiMax, etc.










between technology options giving significant technology scale advantages to theecosystem.

As network technologies have evolved, the application landscape has changed as well.1G or AMPS was all about basic voice services. GSM and CDMA (2G) digitized mobile

and we saw basic messaging and data services introduced into the market. 3G (WCDMA,EVDO) introduced the potential of data services to the ecosystem and the consumers.The launch of iMode in Japan became the poster child of data services for much of the3G evolution around the globe. Midway in the 3G growth, new players like Apple andGoogle entered the ecosystem and laid the foundation of unprecedented data andapplication growth. Business models and control points in the ecosystem changedovernight. The insatiable data demand led to the acceleration of the 4G services in manyleading markets. For the first time, the network technology was data-led. We are clearlymoving towards an IP infrastructure where voice is just another app running on the datanetwork.

In fact, data is the primary revenue engine for the services providers and rest of theecosystem. In Japan, almost 80% of the revenue now comes from data services. In theUS, we are approaching 60%. Other nations are not far behind. Even the emergingmarkets have caught up very fast and in some instances leap-frogging their westerncounterparts in certain application and services segments.

All through last four generations, the f undamental business model of “metering”remained the same. Barring some exceptions, there has been a direct correlation ofusage and revenues. Will 5G be any different?

Another significant standard that has evolved is Wi-Fi. The impact of Wi-Fi on themobile ecosystem can’t be overstated. It has become so pervasive that we have ask the

question how long before nationwide Wi-Fi first networks start to make a run for the wallet share in major markets. How will Wi-Fi fit in with 5G, will the two standardsmerge?

Will 5G offer new business models or explore a different relationship between usage andcost? Will consumers warm up to the idea of value-based pricing? Or Will access just become a commodity layer like water and electricity and most of the value will reside inthe platform and application layers? Though we have started to see the shifts (asdiscussed in detail in our 4th wave series of papers), how fast will future accelerate? Willthe ecosystem landscape be markedly different than what we have in place today?

We won’t know the answer to some of these questions for a while but it is worthexploring the lessons from the past and potential disruptions that 5G could bring to theecosystem that benefits the end customers. In the end, it might not be about thetechnology at all but about the business models that shape the technology landscape.This paper explores 5G through the lens of the past and explores the wireless world beyond 2020.








5 Historical Evolution of Network Technology | www.mobilefutureforward.com


Historical Evolution of Network Technology

Like most evolution cycles, they tend to have a few characteristics in common. For the wireless network technology, the technology cycles typically last on an average of 20 years in any given country. Each generation brings its innovations and value

propositions that attracts new users and use-cases to the table. This helps in increasingthe net-revenue and broadens the ecosystem.

Figure 1. Mobile Network Technology Lifecycles (North America) 1G– 5G2

On an average, the time-to-peak has been 12 years while the time from peak-to-sunsethas been 7 years. Obviously, there are shifts in different countries depending onspectrum auctions; competitive dynamics, investment availability but they largely followthe 20 year cycle. For each of these 20 year cycles, the R&D and standardization timeperiod of 7-8 years typically precedes the first major deployments of the networktechnology. So overall, these are big cycles of 25-30 years from initial concepts to thelast subscription getting off the network technology.

In general, the time to peak (the point where the net revenues for the technology peakand start dropping) is generally slower than the time from peak to sunset. This isprimarily because as the last generation is peaking, investments and roll-outs of the newgeneration of technology starts thus taking away the share at a faster pace.

2 Source: Chetan Sharma Consulting, 2014










If we look at the North American market over a period of 35 years, we observe that thenew generation brings in roughly three times the cumulative service revenue for theindustry. This happened from 1G to 2G and 2G to 3G. The 4G story is still evolving and we are nowhere near completing the technology cycle but all indications are that the 4Gservice revenue will be three times the 3G cycle revenue.

In fact, by some measures, we are behind the 5G curve but are likely to make up as thereare more companies in more countries focused on the competitive battles of usheringthe age of even faster broadband. The research work on 5G started in 20123 and hasstarted to kick into high-gear in 2014 as governments, organizations, and companiesstarted to set targets for launch. Japan is motivated to launch 5G by 2020 for TokyoOlympics.4 Huawei and MegaFon are teaming up to launch 5G by 2018 for the soccer world cup.5 We are likely to see more announcements in 2015. ITU and regulators arealso getting organized to figure out the spectrum demands for 5G.6

Figure 2. North American Wireless Market Service Revenue by Generation(1985 – 2020)7

3 http://www.metis2020.com 4 https://www.telegeography.com/products/commsupdate/articles/2014/08/19/mic-looks-to-commercialise-5g-

services-by-2020-olympics/ 5 http://www.mobileworldlive.com/huawei-russias-megafon-plan-5g-launch-2018-world-cup 6 http://recode.net/2014/10/27/the-race-to-5g-is-on/ 7 Source: Chetan Sharma Consulting, 2014




http://www.metis2020.com/



https://www.telegeography.com/products/commsupdate/articles/2014/08/19/mic-looks-to-commercialise-5g-services-by-2020-olympics/




http://www.mobileworldlive.com/huawei-russias-megafon-plan-5g-launch-2018-world-cup



http://recode.net/2014/10/27/the-race-to-5g-is-on/














The capital required to deploy a new network has consistently increased over the lastthree decades. In the first 10 years, US operators spent roughly $24Billion collectively.For the last 5 years, they have been exceeding that figure each year.8 As the number ofsubscriptions grew, so did the demand on the network especially as smartphonepenetration started to increase at a good pace in 2007-8. The revenue/capex ratio has

also steadily increased until 2009. It has been on the decline ever since. Will 5G reducethe deployment cost by a significant factor to have a steady revenue/capex ratio for theoperators? Margins on the data business have been under significant pressure as welland have been declining in most markets for the past few years. Will 5G help stabilizethe margins?

As we have illustrated in our other papers,9 mobile is redefining the global GDP in more ways than one. All leading companies realize that now. Governments know that in aconnected world, jobs and economic growth is at stake and the smarter and agileregulators will do whatever they can to wrestle some of the edge that comes being aleader.

8 Source: CTIA, Chetan Sharma Consulting, 20149 Connected Intelligence Era: The Golden Age of Mobile, 2014,

http://www.mobilefutureforward.com/Connected_Intelligence_Era_Chetan_Sharma_Consulting.pdf and Mobile

4th Wave: Evolution of the Next Trillion Dollars, 2013 http://chetansharma.com/4thwaveandthenexttrillion.htm




http://www.mobilefutureforward.com/Connected_Intelligence_Era_Chetan_Sharma_Consulting.pdf


http://chetansharma.com/4thwaveandthenexttrillion.htm









8 The current state of 5G | www.mobilefutureforward.com


The current state of 5G

During the second half of 2014, the noise around what will 5G mean and who willdominate started to rise beyond the research community.Europe hasn’t done muchinnovative work on a broad scale in mobile since the glory days of GSM which unified

Europe and set the standard for the world, the rewards of which we are still reapingtoday. Japan started deploying 3G before anyone else and was envy of the world formuch of the last decade until iPhone and Android started to shape the ecosystem. Japancompletely missed the smartphone evolution and is still in catch-up mode. So, whileLTE came to Japan, the center of the mobile gravity had already moved to the US withoperators deploying LTE and software platforms becoming more important than anyother time in the history of the industry. At the end of 2014, US had over 50% of theglobal LTE subscribers.10

This brings us to 2015. Europe and Japan are anxious to regain old glory. Korea hasalways been keen on maintaining its top ICT player ranking.11 China which has had

some quixotic excursions to set its own standards has warmed up to the globalstandards and is very keen on leaving its own stamp on 5G. Its two heavyweights– Huawei and ZTE will have a say in the standards (as would China Mobile). But it is theup starts like Alibaba and Xiaomi who are more ambitious and aggressive in theirstrategy. Will the collective inertia allow China to be a dominant 5G player?

Then of course, there is the US market – clearly the current leader in almost everydimension. Qualcomm sets the baseline for growth in mobile, a majority of LTE subs arein the US, the mobile growth is led by the software renegades– Google, Facebook, Amazon, Microsoft, and Apple. There are transformative startups every couple of yearslike Twitter, Airbnb, Uber, and others who are fundamentally changing industries. Will

US let this lead slip as we enter the next 20 years of the 5G cycle?

At this starting point, we just don’t know what the global technology and economicclimate will be like in 5-10 years. However, a number of players, institutes, andgovernments have started to lay the ground work for the next big network evolutioncycle. The distance between the emerging and developed markets continues to shrinkand nobody wants to be left behind.

Here is the list of some publicly announced 5G specific initiatives around the world:

5G Innovation Center, University of Surrey, UK 12

5G Forum, Korea13

ARIB, Japan14

10 China will soon overtake US as its LTE deployments catch fire11 http://www.itu.int/net/pressoffice/press_releases/2014/68.aspx 12 http://www.surrey.ac.uk/5gic13 http://www.5gforum.org/eng/main/14 http://www.arib.or.jp/english/




http://www.itu.int/net/pressoffice/press_releases/2014/68.aspx








9 The current state of 5G | www.mobilefutureforward.com


5GPPP, EU15 METIS, EU16 5G Lab Germany 17 NGMN18 ETSI19

4GAmericas20 Most of the US activities are confined to research institutes and corporate R&D

initiatives.

Governments and research institutes in Europe, Japan, and Korea are putting a lot ofemphasis on 5G as if the various countries are in the race to put man on the moon– being first and stay dominant in 5G is a critical policy goal for these countries. In the US,the FCC has started the exploration of the allocation of frequencies for 5G.21

15 http://5g-ppp.eu/ 16 https://www.metis2020.com/ 17 http://5glab.de/ 18 http://www.ngmn.org/ NGMN’s 5G white paper -

https://www.ngmn.org/uploads/media/NGMN_5G_White_Paper_V1_0.pdf 19 http://www.etsi.org/ 20 http://www.4gamericas.org 21 http://www.fcc.gov/article/doc-330009a2




http://5g-ppp.eu/

http://5g-ppp.eu/

http://5g-ppp.eu/

https://www.metis2020.com/



http://5glab.de/

http://5glab.de/

http://5glab.de/

http://www.ngmn.org/



https://www.ngmn.org/uploads/media/NGMN_5G_White_Paper_V1_0.pdf


http://www.etsi.org/



http://www.4gamericas.org/



http://www.fcc.gov/article/doc-330009a2








http://5glab.de/


http://5g-ppp.eu/





10 What will 5G look and feel like? | www.mobilefutureforward.com


What will 5G look and feel like?

There is some emerging consensus around the broad strategic direction of 5G. In mostof the western markets, we are likely to have consumers consuming 200 – 400GBs/month on mobile (including both cellular and Wi-Fi) by 2020. Some of the

potential 5G features will get incorporated in LTE-A+ which might be later termed as4.5G22 or 4.75G – essentially a precursor to the eventual launch of 5G. Unless thegoverning bodies are clear in the performance criterion, it is almost a certainty thatoperators will jump the gun and start calling some of the advanced LTE deployments5G. Some vendors have already started to talk about 4.5G.23

Some of technology features being considered are:

Use of Millimeter Wave Massive MIMO Native support for IoT/M2M

Wi-Fi First Networks Virtualized Network Functions and Software Defined Networking Device and application-centric network architectures

o D2D (device to device)o V2X (vehicle to everything)o Broadcast networks

Privacy by design Spectrum sharing and splicing Seamless networking within licensed and unlicensed spectrum bands

Service creation time reduced by 99%

Some of the performance goals for 5G under discussion are:

Average - 300-500 Mbps and > 10 Gbps < 1 ms latency (Almost) 100% network coverage 1000 times reduction in power consumption Very high reliability in all circumstances especially indoors (99.999%) Deep indoor coverage (+20dB) 30x higher device density 10-100x connected devices

100x average data rate Significantly higher security requirements

22 http://pr.huawei.com/en/news/hw-373886-4.5g.htm#.VIaGWTHF98E 23 http://www.samsung.com/uk/news/local/samsung-electronics-sets-5g-speed-record-at-7-5gbps-over-30-times-

faster-than-4g-lte




http://pr.huawei.com/en/news/hw-373886-4.5g.htm#.VIaGWTHF98E



http://www.samsung.com/uk/news/local/samsung-electronics-sets-5g-speed-record-at-7-5gbps-over-30-times-faster-than-4g-lte













A number of these requirements will be shaped by the standardization process and howthe industry builds the case for higher performance access networks that take intoaccount the diversity in applications, business cases, business models, end-points, bandwidth and latency requirements, geographical differences in requirements. Anumber of 5G scenarios will be accomplished by LTE-A and subsequent technology

features so a clear demarcation of where 4G ends and 5G begins will be a trickyproposition.24

Another point that should be noted is that the Gbps speed in discussion is for GHzfrequency bands and for short distances. That means, we will have to build much densernetworks than we have today involving D2D, P2P, tighter integration of licensed andunlicensed spectrum bands and as such new architectures and business models to carrythe bits.

It is also not entirely clear how the seamless handoff will take place between themillimeter dense networks and lower frequency macro networks without anyperformance degradation. There is also no consensus on the frequency bands thatshould be allocated for 5G around the world. The harmonization process is a longdrawn-out convoluted process. Without narrowing the number of bands, the economiesof scale can’t be reached to bolster the case for 5G.

Operators will have to justify the network investment based on the business case for 5G.Clearly, the infrastructure costs per GB will decline by a significant factor as most of thecomplexity management moves to software but it will still cost a fortune to acquire newspectrum and deploy new technology across the various spectrum assets. The volume ofthe traffic will keep growing and the margins per bit will keep declining. How willoperators make the case for more investment in these scenarios? Will 5G enable new business models that were not possible before due to industry and technology structure?

There are more questions than there are answers but many of these questions will besorted out as the industry finds its way to define 5G.

There is also the question of how much bandwidth do we really need? Historically,anything that is been offered up to the consumers gets gobbled up pretty past. The USmarket is doing 2.2GB/sub/month as of 2014 with T-Mobile reporting at least doublethe usage.25 Similarly, in Korea and Sweden, we have seen 7-10 GB/sub/monthconsumption so it is not out of the realm of possibilities that we are looking at 20-30GB/sub/month consumption rates in some of the markets by the turn of the decade andthis is just cellular data. Wi-Fi consumption will grow even faster.

But, can human eye discern speed after a certain point? Can we really tell the differenceon a smartphone between 30 Mbps and 70 Mbps when the data downloads prettyrapidly and we might not notice the difference as the bandwidth availability increases.

24 We are almost certain that some vendors and operators will jump the gun and start calling an interim technology

5G25 Source: Chetan Sharma Consulting, 2014










Will we consumer more HD or newer and higher resolutions of content that needs morethroughput? Hugh Bradlow, Chief Scientist of Telstra observed that the threshold at which an average consumer is satisfied with the throughput is roughly proportional tothe square of the diagonal of the screen size. As devices and screen sizes changes, thethreshold adjusts upwards or downwards.26

One significant flaw in the standardization process is the lack of Internet and puredigital players on the table. The standards are being designed the traditional ways– by vendors and by the operators. There is rich history and experience in traditionalecosystem that we should leverage but we would be remiss if we don’t involve the likesof Facebook and Google in the standardization process for it is the applications that aredriving the networks and devices and not the other way around.

Applications such as autonomous driving, multi-user video conferencing, operalivestreaming, multi-user gaming, telemedicine, distant learning, augmented reality,and many other application and service scenarios will inevitably drive the need for

higher performance from the network. As the industry figures out its journey towards5G, it might be the business models and the shifts in industry tension points that willshape the next 15-20 years.

26 Source: Hugh Bradlow, Telstra








13 Shifts in Ecosystem Control Points | www.mobilefutureforward.com


Shifts in Ecosystem Control Points

The first four generations have largely followed the same business model of “metering.”The operator will typically invest in assets such spectrum, network build out,operational capacity, etc. and then build the business based on the usage. In the early

days, it is more of a linear model with a tight correlation between the usage and cost ofthe usage but as the market matured, the past revenue curves melded into the new ones.That’s the reason voice and messaging are offered as unlimited package designedaround the data services.27,28

Figure 3. Lifetime Value share segmentation of a smartphone user29

Many progressive operators like AT&T, NTT DoCoMo, KDDI, Verizon, Vodafone, andTelefonica have been investing on the platform and the application layers and havealready built billion+ revenue streams.

27 For a more in-depth assessment of the revenue curves in the mobile industry and how they are shaping the

future of the industry, please see the 4 th wave series papers -

http://www.chetansharma.com/4thwaveandthenexttrillion.htm 28 While there are unlimited bundles of data available, they are still controlled. Even the unlimited usage is

throttled after a certain level of data usage in some shape or form. Most of the operators have largely abandoned

the unlimited data wagon.29 Source: Chetan Sharma Consulting, 2014




http://www.chetansharma.com/4thwaveandthenexttrillion.htm









If we look at the economic activity from a smartphone entering the ecosystem, the roleof applications and services is quite visible in both the developed and developingmarkets. As shown in figure 4, the percentage of revenue flowing into new areas over thelifetime of a smartphone is increasing. The areas of apps, commerce, advertising, andcloud are adding very tangible revenue streams to the ecosystem.

Figure 4. Revenue share across different mobile technology generations30

The second most important question for the industry will be around the control pointsand aggregation nodes. From 1G to 3G, the industry clearly rotated around theoperators. Almost all of the revenue in the industry flowed through the operators andthey controlled in excess of 75% of the industry revenue. However, primarily because ofthe broadband capability of the networks, the emergence of powerful computingplatforms in iOS and Android, and very powerful computing devices, the picture in the4G era is changing. We estimate that the overall control of the industry revenues by theoperators will shrink to 50% or lower. This doesn’t mean that the operator revenues willdecline in aggregate, they will continue to increase 1-3% globally but the ecosystem isgrowing much faster and as such the operator share will decline.

With 5G, it is very likely, that a highly distributed application and services ecosystem will become the dominant industry source of revenue around which rest of the mobilesolar system will evolve. The tectonic shifts are likely to result in fewer mobile operatorsin the 5G technology era. Most of the countries will have 2 or 3 major operators. Giventhat so much mobile traffic is indoor, we will see the wireline and wireless operators











merge at a frantic pace in the next 5 years. Many will also become content owners, banks, and might even operate car companies. On the flip side, we might see the rise ofnon-traditional MVNOs wherein vertical industry players will bundle in IP access withtheir services.








16 Wireline and Wireless are becoming the same network | www.mobilefutureforward.com


Wireline and Wireless are becoming the same network

Despite Wi-Fi’s overwhelming share of the mobile traffic, the cellular traffic is growing50-100% in most markets. There will continue to be a tremendous appetite for morecellular data but it is also clear that wireline will carry bulk of the mobile data traffic via

Wi-Fi. In 2014, in the US, Wi-Fi traffic was 3 times the cellular traffic and fixed dataconsumption was 10 times the mobile data traffic (figure 5).

Figure 5. Relative data consumption for different access technologies (US)31

When Wi-Fi broke onto the wireless scene in the 90s, it was considered a nichetechnology. Overtime, its role in the mobile ecosystem has risen to a significant one.Operators went from hating to loving Wi-Fi. More recently, we have seen tighterintegration of Wi-Fi with cellular with integrated base stations, Wi-Fi calling, seamlesshandoff, etc. Additionally, 70-80% of the mobile data consumption is taking placeindoors which poses the question not if but when a national service can be launched thatis Wi-Fi first and uses cellular as a complimentary network for outdoor needs. Differentflavors of this strategy are being tried out but they are all niche activities that don’tchange the traditional business. We could see such Wi-Fi first initiatives enter themarket even before 5G becomes a reality. This could happen both in small and emergingmarkets as well as big mature markets. The significant price delta such networks canoffer has a potential to dramatically alter the operator landscape but these Wi-Finetworks have to be nationwide or at least cover the major metros to have a significantimpact on the market.









17 Wireline and Wireless are becoming the same network | www.mobilefutureforward.com


It is well established that video will constitute bulk of data traffic both on wireline and wireless from here on. From a consumer point of view, the access technology will justdisappear in the background. They will care less what access medium is carrying the bitsof any particular content or traffic. There will be enough intelligence built into thenetwork framework that economics and performance requirements more than anything

else will dictate how bits are carried from point A to point B. This is the reason that it will make more sense to merge the wireline and wireless assets in a given country. Anoperator with assets in both categories will be better able to bundle services and content.

Figure 6. Broadband penetration and traffic for wireline and wireless(US)32

In essence, wireline and wireless are not at war with each other. Rather the two aremerging to become a single IP transport layer for applications and services. Of course,there are going to exceptions to this in countries where the wireline infrastructure isgoing to be poor and it makes little sense in investing fresh capital into wireline when itcan be deployed in wireless with better ROI. For example, the wireline penetration inBhutan is less than 5% but the wireless penetration is over 75%. While it makes financialsense to wire the population centers like Thimpu and Paro, it is better to connect the200+ villages with wireless. Similarly, in many countries in Africa and Latin America, it

is prudent to have a wireless first strategy for improving the nation’sdigitalinfrastructure.









18 Winners and Losers | www.mobilefutureforward.com


Winners and Losers

When the industry started back in the eighties, there were on an average 2-3x operatorsin each country compared to today. In 1999, US had 10 operators and have now reducedto 4 major operators. Through the sheer force of the market dynamics, most of the

markets have whittled down to 3 major operators.33 5G is likely to distribute (andcement) operator’s role into utility, enablers, or digital lifestyle solution providerssegments.34

On the infrastructure side of the house, there were 14-15 vendors globally in the eightiesand nineties. We have now reduced down to 5-6 and there is likely to be furtherconsolidation in the near future. With much of 5G intelligence and operations moving tosoftware, the capex required to deploy 5G could shrink dramatically making thetradition infrastructure product strategy incompatible with the new world. In fact,infrastructure providers will be primarily software players who use commodityhardware to the task at a fraction of the current cost. In 1990s, a macro base station

used to cost $125K in the western markets. By the time 4G came around, this numberdropped down to only $2.5K. We are likely looking at the 5G world, where the end-points are sub-$100 with some centralized capability that helps load-balance theintelligence and capabilities at various nodes. The infrastructure segment will also beshaped by any compromises on the geopolitical front especially between China and theUS.

The handset space has seen its own share of turmoil. The decay of the incumbentsstarted with the 3G cycle and was mostly complete as the industry matured into the 4Gcycle. The powerhouses and decades old brands just vanished in a matter of a few years.Nokia, Motorola, Blackberry, Sony are barely a carcass of their former self. Instead new

players have emerged like Apple, and Samsung. Even the mighty Samsung is facingtough competitive pressure from the top and bottom.35

The low cost OEMs like Huawei and ZTE have moved up stream only to be replaced byXiaomi, Micromax, and Fly. The ASP will drop down to a point that only a few players who can manage to operate at razor thin margins or have business models that shieldthe shrinking margins. Apple is an exception to the trend because of its highly verticalized and inimitable approach to the market. Will 5G change Apple? It is likely Apple (and others) will change 5G rather than the other way around. Will Androidsurvive OEM commoditization? Will successful companies built on the iOS and Androidplatforms such as Facebook, Uber, Twitter, Amazon, and others continue to derive value

from these aggregated nodes in the ecosystem?

33 http://chetansharma.com/mobilecompetition.htm 34 For more discussion, please refer the Fourth Wave Series papers available at

http://www.chetansharma.com/4thwaveandthenexttrillion.htm 35 http://chetansharma.com/usmarketupdateq32014.htm




http://chetansharma.com/mobilecompetition.htm





http://chetansharma.com/usmarketupdateq32014.htm












Computing itself has changed over the life of the wireless industry. From the early daysof the mainframe, 1G-to-early 3G coincided with the sheer dominance of the windowsplatform. With iOS and Android capturing much of the computing ecosystem, Windowsis left to fight for relevance.

Figure 7. The evolution of the computing landscape

The single most important factor of all these trends is that wireless has become asoftware and platform business and unless one has scale to attract and build a viableecosystem, any leverage and competitive advantage can disappear overnight.

5G will also be unique as the aggregate non-Phone devices will dominate phones for the

first time globally. We will have to figure out architectures, business models, andpolicies to deal with the consumer demand and expectations. 5G will not only reshapethe wireless industry but industries around it, pretty much every vertical ofsignificance.36

The component suppliers will be do well in the ecosystem as the number of devices perhousehold will continue to increase and despite the turmoil in the OEM space, thesuppliers will do better as the competition is less compared to other layers of theecosystem. However, they will have to also fight the commoditization trend.

It is quite likely that 5G will follow the same tradition and new players will be born thatattach the ecosystem stack in new and innovative ways. The value is already shiftingfrom access to the platform and from the platform to the applications. In fact, in mostinstances, the application layer will capture greater than 50% of the value. In someinstances, applications will command in excess of 90% of the ecosystem stack value.

36 For more discussion on this, please see Connected Intelligence Era paper at

http://www.chetansharma.com/connectedintelligenceera.htm













As is true with any technology cycle, there will be new and nimble players ready to take wallet share away from the incumbents. 5G will see an explosion of applications andservices companies who seek to digitize and automate the task economy to the mostgranular level.








21 Conclusions | www.mobilefutureforward.com


Conclusions

The noise around 5G will only grow louder in 2015 but it is normal. All mobile networktechnology evolutions have gone through the same cycle in the last 35 years and 5G will be no different. However, the ecosystem and the control points in 2025 are likely to look

markedly different from the first three cycles. The brilliant engineering community willno doubt respond with performance capabilities that will make 4G look like analog days. As the industry is embarking on its 5G cycle, mobile itself might disappear from thelexicon of the industry for it will be so pervasive, so embedded in everything we do thatit will become part of our digital consciousness. The connected intelligence era37 isclearly upon us and 5G will play an important role in defining it.

Mobile will continue to transform every industry with thousands new startups changingand contributing in their own ways. Tighten your seat belts and enjoy the ride. It will belike no other in the history of mankind.

37 http://www.chetansharma.com/connectedintelligenceera.htm












22 Acknowledgements | www.mobilefutureforward.com


Acknowledgements

Author would like to acknowledge the assistance of Wim Sweldens, Hugh Bradlow, andSarla Sharma for providing their feedback.

About Mobile Future Forward

Mobile Future Forward is mobile industry’s premier thought-leadership summitthat attracts some of the most influential minds in the mobile industry who are veryinstrumental in shaping the industry, in innovation adoption, and in managing thegrowth of revenues and profits. For the 2015 summit, the experts and visionaries fromaround the globe will gather in Seattle on September 29th to explore the mobile industry3-5 years forward, envision what the user experiences and use cases look like, discussand debate the challenges and opportunities in the journey to that vision. The focus will

be on understanding the opportunities and the challenges of the next technology wave.

More information at www.mobilefutureforward.com















23 Mobile Future Forward Publishing | www.mobilefutureforward.com


Mobile Future Forward Publishing

Mobile Future Forward Community produces some of the most thought-provoking

mobile industry papers and books.

Papers

Each year, Chetan Sharma Consulting researches and produces industry-defining papers that look at newopportunities, industry challenges, and the shifts in consumer behavior.

Books

Mobile Future Forward publishes the book series that consists of essays from speakers and thought-

leaders in the mobile industry. The Mobile Future Forward Summit is all about creating new ideas,discussion and debate of opportunities and challenges. The essays from CEOs and senior industryexecutives are focused on new technologies, trends, and business twists and turns of the industry.

More information at www.mobilefutureforward.com







http://www.chetansharma.com/blog/2012/09/13/mobile-future-forward-2012-book/

http://www.chetansharma.com/blog/2011/10/03/mobile-future-forward-2011-book/

http://www.chetansharma.com/blog/2010/09/17/mobile-future-forward-book/

http://chetansharma.com/OperatorsDilemmaFourthWave.htm

http://www.mobilefutureforward.com/docs/How_Mobile_Will_Change_How_We_Spend_-_Chetan_Sharma.pdf

http://chetansharma.com/yottabyteera2.htm






24 About Chetan Sharma Consulting | www.mobilefutureforward.com


About Chetan Sharma Consulting

Chetan Sharma Consulting is one of the most respected management consulting andstrategic advisory firms in the mobile industry. We are focused on evolving trends,emerging challenges and opportunities, new business models and technology advances

that will take our mobile communications industry to the next level. Our expertise is indeveloping innovation-driven product and IP strategy. Our clients range from smallstartups with disruptive ideas to multinational conglomerates looking for an edge. Wehelp major brands formulate winning, profitable, and sustainable strategies.

Please visit us at www.chetansharma.com.

About the Author

Chetan Sharma is President of Chetan Sharma Consulting and is one of the leading strategists inthe mobile industry. Executives from wireless companies around the world seek his accuratepredictions, independent insights, and actionable recommendations. He has served as anadvisor to senior executive management of several Fortune 100 companies in the wireless spaceand is probably the only industry strategist who has advised each of the top 6 global mobile dataoperators. Chetan serves on the advisory boards of Ericsson, Telefonica, Kymeta and a numberof other startups. Some of his clients include NTT DoCoMo, Disney, KTF, China Mobile, Toyota,Comcast, Motorola, FedEx, Sony, Samsung, Alcatel Lucent, KDDI, Virgin Mobile, Sprint Nextel,Skype, AT&T Wireless, Reuters, Juniper, Qualcomm, Microsoft, Reliance Infocomm, SAP,Merrill Lynch, American Express, and Hewlett-Packard.

Chetan is the author or co-author of a dozen best-selling books on wireless including Mobile Advertising: Supercharge your brand in the exploding wireless market and Wireless Broadband: Conflict and Convergence. He is also the editor of the Mobile Future Forward

Book Series. His books have been adopted in several corporate training programs and universitycourses at NYU, Stanford, and Tokyo University. His research work is widely quoted in theindustry. Chetan is interviewed frequently by leading international media publications such asTime magazine, New York Times, Wall Street Journal, Business Week, Japan Media Review,

Mobile Communications International, and TechCrunch, and has appeared on NPR, WBBN,and CNBC as a wireless data technology expert. He is also the chief curator of the mobilethought leadership executive forums – Mobile Future Forward and Mobile Breakfast Series.

Chetan is an advisor to CEOs and CTOs of some of the leading wireless technology companies onproduct strategy and Intellectual Property (IP) development, and serves on the advisory boardsof several companies. He is also a sought after IP strategist and expert witness in the wirelessindustry and has worked on and testified in some of the most landmark cases in the industrysuch as Qualcomm vs. Broadcom, Samsung vs. Ericsson, Sprint vs. Verizon, Openwave vs. 724

Solutions, and Upaid vs. Satyam. Chetan is a senior member of IEEE, IEEE CommunicationsSociety, and IEEE Computers Society. He has Master of Science degree in Electrical Engineeringfrom Kansas State University and Bachelor of Science degree from the Indian Institute ofTechnology, Roorkee.




http://www.chetansharma.com/





http://www.mobilebreakfastseries.com/







Documents

5G Chetan Sharma Consulting