5G not to make major differences to long-term traffic

• MNOs are caught between finding high-yield use cases for 5G to justify the investment, Analysys Mason says

Dubai: Mobile traffic on fifth-generation network (5G) is likely to lead to only short-term surges and will not dominate as quickly as 4G traffic did, industry expert said.

5G traffic will overtake 4G traffic in 2025 (if fixed-wireless access (FWA) is included) but the 5G handset traffic will be similar to 4G handset traffic in 2025.

Analysys Mason has long predicted that 5G will not bring about particularly profound changes to the general long-term trend in mobile traffic (where ‘mobile’ here excludes FWA).

 “We expect that cellular traffic growth rate will decline and eventually converge with the overall IP traffic growth rate. Coverage is still very limited in some of markets in which 5G has been launched, but 5G does introduce a huge block of additional capacity to cellular networks,” Rupert Wood, lead analyst for telecom research at  Analysys Mason, said.

Weak traffic

In the past, he said that the industry has observed that mobile traffic volume is primarily a function of supply and pricing, and not of extrinsic demand: volumes rise quickly when supply is plentiful, and slowly when it is constrained.

However, he added that new capacity or generations of networks and new pricing (which often go hand-in-hand) have, over time, created increasingly weak surges in traffic.

“MNOs are caught between finding high-yield use cases for 5G to justify the investment, and falling back on high-volume and low-yield ones,” he said.

GSMA Intelligence forecast that operators will invest $1.3 trillion in their mobile networks between 2019 and 2025, of which $1tr (more than 75%) will be spent on 5G.

GSMA, recently, said that they expect most markets to be within 2% of its original estimate of 5G cellular connection by the end of 2021 despite Covid-19..

However, they are forecasting longer-term reductions in a number of key markets including Italy (12%), France (10%), Spain (8%) and China (5%) by 2025..

GSMA expects 1.7b 5G cellular connections by 2025, representing 19% of the global connections.

Asia Pacific region will see the largest share of these connections with 63.9%, followed by Europe with 13.3% and North America with 12.4% while Mena will have 47m 5G connections, representing 6% of the total connections.

Inexpensive data contracts dampen WiFi usage

The Analysys Mason research shows that cellular networks accounted for 39% of all handset traffic worldwide in 2019 (with huge variations between countries), but it will be close to 50% by 2025 while this trend will be reversed in countries with rapidly expanding fixed broadband penetration.

The average cellular network usage by handsets worldwide will grow from 5.4GB per month in December 2019 to 19.7GB in December 2025 while the average data usage by handsets on all networks worldwide will grow from 13.5GB per month to 40.5GB per month over the same period.

FWA will account for 13% of all cellular traffic by 2025. Of this, handsets and data-only devices will account for 80% and 7%, respectively.

The WiFi’s share of the total IP access network traffic will increase from 53% in 2019 to 66% in 2025. The cellular share will rise from 12% to 18% over the same period.

Wood said that the common and inexpensive unlimited data contracts are dampening WiFi usage on handsets in both public WiFi spaces and, much more importantly, private WiFi networks (home or office).

The WiFi’s share of handset data varies greatly between countries depending on mobile pricing and home broadband take-up, but it was 61% worldwide in 2019.

“We forecast that this will fall to 50% by 2025. This is a fairly slow decline; although unlimited data contracts stop disincentivising the use of cellular networks, they do not actually incentivise their use.

The real challenge for MNOs

“WiFi will continue to be the dominant radio access technology in terms of the overall traffic (there is currently four times more WiFi data traffic than cellular traffic) for two reasons: other, more bandwidth-demanding, wireless devices rely solely on WiFi, and fixed gigabit broadband plus WiFi6 should provide a superior indoor experience to 4G or 5G,” Wood said.

 “Simple mobile handset usage is not going to change MNOs’ fortunes, as most acknowledge; hence their interest in novel (often B2B) use cases outside eMBB, particularly the idea of ‘permission-in’ network slices sold at, we must assume, highly differentiated rates that generate higher yields per gigabyte than end-user-pays best-efforts internet,” he said.

If cellular traffic volumes show that consumers are fundamentally underwhelmed by 5G and find little to do on 5G that they could not already do on 4G, then “we expect that some MNOs will use FWA to monetise their investments in spectrum and the newly expanded, yet empty airwaves.”

The opportunity for FWA may be slipping away in countries in which there has been significant investment in fibre, and is almost non-existent in super-advanced telecoms economies, he said.

Predicting that 5G traffic will catch up with the 4G traffic by 2025 may appear bold, he said, but with operators will not allow the networks to lie fallow amid invested large sums in 5G networks.

“The real problem for MNOs is whether these networks get filled with the right kind of traffic,” Wood said.