McKinsey: Cutting through the 5G hype: Survey shows telcos’ nuanced views
Operators see a marginally positive business case, expect rollout at scale to take until 2022, and don’t think the increase in capital-expense-to-sales ratio will be as big as skeptics claim.
For a technology that gets as much attention as 5G, we know precious little about what telco operators truly think about how it will play out for the industry and what they truly plan to do. Optimists tout the great benefits of low latency and high capacity that will eventually enable new value-added use cases, while pessimists focus on the lack of actual new use cases to emerge so far and what they see as a wobbly commercial rationale, not to mention the huge capital expense required.
To get a sense of what momentum there actually is toward building out 5G and realizing its potential, we recently conducted a proprietary survey of 46 chief technology officers (CTOs) directly engaged in 5G-development plans around the world. The results, combined with our own experience in helping companies develop 5G strategies, execute pilots, and move toward rolling out the technology, paint a much clearer picture of 5G in the coming months and years.
Free from the necessity of public posturing, the industry experts in the survey portray a more nuanced view of 5G, resisting the sentiments of both the true believers and the skeptics alike. Globally, they expect that the rollout will take until 2022 and that it will likely increase the capital-expense-to-sales ratio, but not as massively as many naysayers have claimed.
Finding the business case
The biggest uncertainties for industry professionals lie around the strength of the business cases and the underlying economics, as well as other emerging commercial considerations. Confidence in the technology is high, but less clear is whether and how soon it can fuel new products and services that customers are willing to pay for. Consequently, at least at the outset, the majority see enhanced mobile broadband and the Internet of Things (IoT), rather than fixed wireless access or mission-critical applications, as the most prevalent applications. These are not the revolutionary use cases lauded by 5G proponents, but they provide advancements that are still meaningful.
The survey results also show, somewhat surprisingly, that the uncertain economics of 5G are spurring telcos to consider some alternative business models. So far, at least in public, most operators have been reluctant to take a stand on whether they expect to work even more with other providers to share network infrastructure or if they intend to use third-party “neutral hosts” that have their own, or shared, 5G infrastructure and will run it for the operators in certain regions or buildings. Yet in the survey, fully 93 percent of the respondents said they expect network sharing to increase with efforts to bring 5G to areas where it doesn’t make sense to have multiple networks. And approximately 90 percent expect third-party neutral hosts to supply a part of the network to run for several operators. While these results align with what we see in our own proprietary models, the large industry consensus is remarkable.
Equally surprising is that operators also envision a relatively limited investment in operational support systems (OSS) and business support systems (BSS)—the very systems needed to be able to market, price, sell, provision, and operate the new uses cases so many of them have been talking about, such as enablement of connected cars and mission-critical solutions.
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Cutting through the 5G hype: Survey shows telcos’ nuanced views
