umlaut: Next horizon for 5G competition will be latency, availability

Spectrum strategy is the first and foremost factor that is shaping U.S. wireless carriers’ competitive position in 5G — and that helps to justify the enormous investments that they made in the C-Band auction, according to new analysis from benchmarking company umlaut.

“While the C-Band auction winning bids of $80+ billion spent was massive, umlaut argues U.S. carrier investment was completely necessary, and is strategically complementary to the accelerated expenditures in MEC and massive MIMO … to generate new revenue streams,” the benchmarking and analysis company said in a white paper released this week.

While available bandwidth is key to success in a 5G world — and part of the justification for C-Band spectrum — the company also expects that “the next competitive fight on the horizon will be based on latency, and ultimately availability.”

“Most analysts are looking through the traditional industry lens of potential ARPU (average revenue per user) when addressing the critical question of whether or not the [C-Band] license fees are justifiable in the long run, and whether US subscribers will be willing to pay a premium for 5G services to help the carriers monetize their investment,” umlaut says in the white paper. And there is some potential consumer ARPU upside: Based on its testing data, umlaut concluded that “in the majority of cases, the network providers rated best network maintain the highest average revenues per user in their respective markets. This may be coincidence without causality,” the company goes on to add,”but we claim that subscribers are willing to pay more for quality.”

However, the company expects that for the first time in wireless, consumer-related 5G revenues will take a back seat to enterprise-related ones.

From that perspective, umlaut says, it believes that the cost of C Band spectrum, massive MIMO and edge computing deployments “are critically necessary, complementary investments compared to the massive global growth engines that AWS and Microsoft Azure provide the industry.”

It also goes on to note that there are several potential reasons that the C-Band frequencies are likely to become the “backbone frequency” of operator networks in the long-term: It’s the “lowest band fit” for delivering gigabit speeds and will therefore be “the most valuable single spectrum asset for the mobile operators if at least some of the
5G prospects become reality”; it’s “at the edge of where massive MIMO kicks in” with beamforming that improves spectral and energy efficiency; and second only to T-Mobile US’ 2.5 GHz TDD band, umlaut says that TDD C-Band will be “the most efficient spectrum resource of the gigabit-era by delivering the best compromise of coverage and

The company also offers up the possibility that the upcoming auction of 3.45-3.55 GHz could leave room for other competitors beyond the big three (who now all have substantial midband holdings) or for new entrants to get a foothold — but on the other hand, it notes, having only midband spectrum would make it difficult to sustain a solid market position.

Umlaut also discusses how LTE networks factor in to the competitive landscape — and essentially raises the question of whether that 5G’s biggest competitor may actually be LTE networks, which offer substantially more coverage and meet the needs of most wireless applications that currently exist. “The key question facing the carriers is whether consumers will feel the need to use the unique 5G features of gigabit speeds and extremely low latency, and more importantly, will they pay a premium for 5G services. umlaut does not see many scenarios in which consumers will want to pay for a network slice. Many might rather seek lower prices but higher speeds and stick to 4G if it offers such – especially since U.S. network performance today on 4G in many markets rivals or beats 5G in both coverage and speed, courtesy of DSS,” the test company said.

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