The prospects of millimeter (mmWave) 5G deployments have peaked the interest of mobile ecosystem players, investors included. While mmWave frequencies offer unmatched capacity, their coverage footprint lead to high network roll out and operating costs*. This raises questions on the financial viability of mmWave 5G. Vendors and suppliers continue to face tough decisions about supporting these frequency bands. To assess the prospects of mmWave 5G deployments, we apply the supply/demand economic framework. The ‘supply’ side consists of three critical factors: Spectrum, application and ecosystem. On the other hand, the pressure to deploy 5G – the need for capacity – represent the ‘demand’ side.
The Spectrum Factor
ITU member states will meet at WRC-19 in Egypt in November to decide on new 5G frequency spectrum in 24.25 to 86 GHz (agenda item 1.13). The mobile industry has aggressively targeted these bands while the satellite industry continues to defend its spectrum rights. Most countries will follow the WRC rulings, but a few already chose their own path within the bounds of international agreements:
- US: The FCC auctioned spectrum in the 24 and 28 GHz bands for primary mobile access. Next, The FCC plans to auction the upper 37, 39 and 47 GHz bands.
- South Korea: The regulator auctioned and assigned one 800 MHz in 28 GHz to each of the 3 mobile network operators.
- UK: Ofcom sold 28 GHz spectrum many years ago for point-to-multipoint connectivity which could support 5G deployments.
Spectrum harmonization is necessary for economies of scale that is critical in the consumer-oriented mobile market. Lack of harmonization in spectrum priorities adversely impacts the uptake of wireless technologies.
The Application Factor
How operators deploy mmWave 5G – the application and use case – is indicative of potential economies of scale. There is a large difference between the financial value proposition of fixed and mobile applications. See here for financial insights into the fixed access use case.
Today, the deployments of mmWave 5G are US centric. Verizon announced 5G fixed wireless access service in Sacramento and three other markets in late 2018 [see here]. Last April, it announced the availability of mobile 5G in Chicago and Minneapolis with 20 markets to follow by the end of this year. The extent of these deployments is not clear. To help understand that, I refer to Neville Ray’s blog post in last April on the performance of mmWave 5G [see here]. It is revealing as it comes from a service provider even with the caveat of being a competitor. [A side note: I would bet that this was the first time a mobile network operator specified the neighborhoods where service will be available!]
The Ecosystem Factor
Availability of devices plays a critical role in deciding the fate of wireless technologies. Successful wireless technologies secure a massive supply of handsets. USB dongles and fixed CPEs don’t make mobile wireless markets – handsets do. This requires wide ecosystem support: baseband vendors, RF component vendors and handset manufacturers. The ecosystem will focus production on mass markets to recoup the hundreds of millions in R&D investment dollars.
The Pressure to Deploy 5G
While spectrum, ecosystem and application drive the supply side of the economic equation, demand for 5G varies widely among markets. Korea leads in density of capacity utilization is leading in 5G deployments, albeit using midband frequencies. As of writing this article, Korean operators deployed over 86,000 5G NR base stations and serving over 2 million 5G subscribers [see here].
Most of the world will follow Korea’s lead in the midband strategy, including T-Mobile/Sprint. Operators will proceed at their own pace bounded by economics and a competitive perspective. To understand the pressure to deploy 5G, we can look at the penetration of LTE:
| % LTE connections | |
| Germany | 46% |
| Italy | 50% |
| Spain | 62% |
| UK | 79% |
| South Korea | 85% |
Final Thoughts
Making investments in products and services careful analysis of signals that are often contradictory. Vendors would like to see the uptake of mmWave 5G because the staggering numbers. Operators who are playing within the challenges of their own markets have no motivation to negate any solution for capacity augmentation.
* As an example, Nokia estimated that for a 2.25 sq. km in Manhattan, a 39 GHz deployment requires 2.4x the number of LTE sites operating in sub 6 GHz.
For additional information on spectrum for 5G, see: 3.5 GHz 5G C-Band Spectrum Valuation Benchmarks