Mobile operators in Asia, Europe and the US have now built their first fifth-generation (5G) networks and expect larger volumes of lower-cost 5G smartphones to become available this year. The only thing left for them to do is to convince more subscribers that 5G services are worth the upgrade from their existing 4G packages.

That could pose something of a challenge because the additional mobile bandwidth (350Mbit/s to 1Gbit/s in initial 5G deployments) and lower latency may not be enough to tempt mass customer migration in themselves. What operators need is a compelling application, service or content proposition that exploits the advanced capabilities that 5G delivers and fires consumers’ imagination while hitting a sweet spot of established demand.

Streaming video, online gaming and VR/AR prime candidates

The most likely candidates are probably those with performance requirements which current 4G networks struggle to support or maintain a consistently smooth end-user experience. That includes 4k/8k video streaming, for example, high-resolution multi-player online gaming, virtual reality applications and augmented reality experiences.

New forms of conferencing and collaboration have given fresh impetus and audiences amidst coronavirus lockdowns. Social distancing restrictions may also play their part as people get used to interacting virtually in high definition and potentially evolving to using avatars in virtual 3D environments. So too virtual events, with music concerts such as Travis Scott’s Astronomical gig held in a Fortnite universe and the Block by Blockwest virtual festival event in Minecraft last year, prove significant audience demand likely to continue even after lockdown restrictions are lifted. 

The availability of high capacity, reliable 5G bandwidth also opens up the potential to offer fixed wireless access (FWA) services as an alternative or rival to wired broadband connections. The threat of revenue cannibalisation may prove a deterrent for many, given that most mobile operators are also fixed-line telcos or owned by them.

Nevertheless, there are multiple factors – including spectrum availability and the limited reach of existing fibre deployments – which mean it could be more cost-effective to offer consumer residential broadband services over cellular rather than cable. And for those that do, combining subscription video on demand, music and gaming subscriptions customised for large screen devices like TVs, consoles and PCs, and smartphones may prove an attractive, customer winning proposition.

New business models and content partnerships required

To make the most of the many opportunities for content bundling that 5G now presents, telcos may also need to alter their existing business models, particularly when establishing closer partnerships with third-party providers. That challenge is brought into focus by Strategy& (the global strategy consulting arm of PwC) pinpoints in its report Making 5G Pay: Monetising the impending revolution in communications infrastructure.

Telcos have traditionally employed business models that directly involve selling voice and data connectivity to consumers, who then choose to enter separate contracts with third-party providers for the additional OTT content and services they want to access via their smartphones. Strategy& posits that a business to business to the third party (B2B2X) approach that allows operators to collaborate and share revenue and other rewards with their partners may be a better route to acquiring and retaining new customers.

That could mean bundling OTT services with connectivity subscriptions via explicit fees or making certain streams such as Netflix, Amazon Prime Video and Disney+ unmetered against the customer’s data bundle. An operator could also offer customers a 5G data plan customised for VR gaming, complete with VR content subscription and a headset at no extra cost, or offer access to cloud gaming services like Microsoft xCloud. PlaystationNow, Google Stadia or GeForce Now as part of the bundle.

These sort of partnerships with subscription video on demand (SVoD) providers are already in operation, as evidenced by Ovum’s Global OTT Video Bundling Deals and Service Partnerships Tracker. The OTT-CSP Partnership Study sponsored by Amdocs with 4,000 consumer responses, thirteen communications service providers, and twelve OTT players also indicate that bundled media services appear to make people spend more on their mobile broadband subscriptions.

Customer experience and ease of billing paramount

Customer experience will also play a part in driving consumer 5G adoption. That means making it easy for subscribers to access content, events, and services via their smartphones and simplifying how they pay for what they purchase or consume. Many of telco-OTT partnerships forged to date have involved direct carrier billing (DCB) relationships which see subscription fees charged to customer mobile phone accounts, a method of funding which is quick, convenient and accessible.  Particularly relevant for younger people without access to credit cards and segments of the population in developing countries that don’t even have bank accounts. Those billing mechanisms make even more sense for 5G packages that offer much greater scope for regular charges and one-off fees for single movie or game downloads and tickets to virtual events. 

The hunt for the killer, 5G app, was well underway even before there were networks or handsets to host them. Ultimately there may be no one single winner. But a combination of many different ones, bundled in a single, customised service subscription and funded from the customer’s mobile phone account via carrier billing may come as close as it gets.