Forbes Column

January 21, 2021
Economic Analysis of mmWave 5G Highlights Potential Benefits

By Bob O'Donnell

For those who closely track the developments of the 5G market, one of the most widely debated issues surrounds the benefits and challenges of the extremely fast, but limited-reach, service that’s possible with millimeter Wave (mmWave)-based radio signals.

No one, of course, argues with the benefits of the tremendous speed it can enable—just this week, in fact, 5G chipmaker Qualcomm, network equipment provider Ericsson, and Australian telco provider Telstra announced throughput of a staggering 5 Gbps on a commercial 5G network, primarily via mmWave-based 5G. The problem is that the cost and logistical challenges of making the service widely available is impractically high.

Realistically, mmWave-based 5G was always going to be something that would be available in certain locations and would serve as a supplement to the primary connections that occur via various types of sub-6 based 5G signals (including what’s commonly referred to as “low-band” and “mid-band” 5G—see “The 5G Landscape, Part 2: Spectrum and Devices” for more details on sub-6 and mmWave radio spectrum). Telco carriers around the world, in fact, have been working to figure out what combinations of different 5G radio spectrum provide the best 5G service for the most efficient cost. Here in the US, the recent completion of the massive C-Band spectrum auction is proof that those efforts still continue. (See “CBRS Vs. C-Band: Making Sense Of Mid-Band 5G” for more.)

When it comes to mmWave in particular, however, part of the challenge has been trying to determine exactly where to use the speedy technology. The issue for telcos is that there are costs involved in acquiring licenses to use mmWave spectrum, costs to purchase and install the network equipment and antennas necessary to transmit on those signals, and costs to purchase or lease access to the physical locations where all that equipment can be installed. Bottom line is, it’s not an insignificant investment.

Similarly, for governmental regulators trying to determine how much and/or what type of mmWave radio spectrum should be made available for use within their countries, there are important questions about how to best leverage these precious spectrum assets, as well as economic models that need to be built to justify their decisions.

In order to help with these critical and challenging questions, the GSMA (Global System for Mobile Communications Association, an organization made up of over 750 mobile operators and 400 other telco industry-related companies that put on the Mobile World Congress trade show among other activities) recently completed an in-depth economic study entitled “The economics of mmWave 5G” that addresses these challenges head-on.

Specifically, the organization created a series of TCO (total cost of ownership) models to determine the cost effectiveness of deploying mmWave-based 5G service alongside existing mid-band based 5G in a number of different locations across different geographics regions. The industry organization looked at potential deployments in dense urban environments in Europe and greater China, fixed wireless access (FWA—otherwise known as wireless broadband service) in rural US, suburban Europe, and urban China, and private networks for large enterprises.

What the models found is that, if the amount of 5G traffic that’s handled over the mmWave portion of the total 5G service is higher than a certain minimum percentage and the percentage of people using a service that includes mmWave is above a certain market share threshold (both numbers varied across each of the different scenarios), then an economic payoff by 2025 could be achieved. In particular, there were several situations where the decision to potentially deploy mmWave seemed very obvious. For example, in dense urban areas in China, the additional capacity that mmWave-based 5G would enable could translate very quickly into additional revenues for the carriers that deployed, it, even if the percentage of traffic carried on mmWave was less than 10% and market share was 15%.

In contrast, for dense urban areas in Europe, though payoff was still possible, it would take more than 25% of the traffic to be carried over mmWave and better than 30% market share to get a reasonable cost benefit, which could be challenging to achieve in the short term.

In the case of fixed wireless access (FWA), the numbers were even more challenging because of the extensive costs involved in deploying a network large enough to serve a large number of customers. If mmWave is added on top of an existing 3.5 GHz-based mid-band 5G service, the situation improves quite a bit, though it still requires about 30%, or even higher, market share (that is, percentage of customers getting broadband via FWA) to achieve meaningful cost savings in all three regions.

Finally, in the case of private 5G wireless networks, the dependencies shift to the total percentage of mmWave 5G-capable devices that would connect to the network and the amount of concurrent usage. The curves for this scenario are very different from others, in that even a relatively modest percentage of devices using 5G could lead to some cost savings, but only if the concurrent use of these devices hit 20% or more.

The bottom-line takeaway from all this data is that there are definitely situations in which deploying mmWave as a supplement to existing mid-band based 5G services makes a great deal of sense and other situations for which the timing could take a bit longer. Of course, there are quite a few variables that could potentially impact all of these models, but it’s interesting to see the GSMA providing an economic justification for the technology. That’s an angle that few have given serious consideration to up until now, yet the results provide some tangible advice that carriers and government regulators around the world can take into consideration as they develop their own plans for deploying the speedy mmWave 5G option.

Disclosure: TECHnalysis Research is a tech industry market research and consulting firm and, like all companies in that field, works with many technology vendors as clients, some of whom may be listed in this article.

Here’s a link to the original column: https://www.forbes.com/sites/bobodonnell/2021/01/21/economic-analysis-of-mmwave-5g-highlights-potential-benefits/

Forbes columnist Bob O'Donnell is the president and chief analyst of TECHnalysis Research, a market research and consulting firm that provides strategic consulting and market research services to the technology industry and professional financial community.