Closing the generation gap: will 5G be adopted sooner in emerging markets?

Closing the generation gap: will 5G be adopted sooner in emerging markets?

At events such as Huawei's Global Mobile Broadband Forum in Zurich, 5G hype reaches fever pitch and the newest use cases are on display. However, it’s important to remember that for consumers and enterprises in emerging markets, 5G can still seem a long way off.

We spoke to the GSMA’s Pablo Iacopino and Kenichi Chidile Okeleke at the event to discuss the timeline for 5G in regions such as Latin America and Africa.

How quickly is 5G likely to be adopted in emerging markets?

Pablo Iacopino: 5G in emerging markets is a very interesting question. From a technology perspective, typically there is a gap between developed and developing markets. The reality is that this divide is getting shorter – ten years ago, technologies would typically be making it to emerging markets five or six years later. What we see is that across many technologies, it’s now a matter of a couple of years, maybe three. This is good news, and it’s probably the result of globalisation – the fact that now you have digital consumers also in emerging markets. We have a lot of insight into how people in emerging markets use some of the internet-based services, and the adoption in some cases is as good as in developed markets. This is a first starting point; there is still a divide but it’s not as huge as in the past.

If we look at 5G in particular, in Latin America we’ll probably see some deployments at scale across the next couple of years in some of the big markets – they won’t wait until 2025. There are trials underway in most Lat Am markets, whereas in Africa it’s 4 or 5 countries at best. Developing Asia is showing good progress in terms of 5G trials. Altogether, this means that there is an interest, and this is the case for commercial services but this will take more time. In Latin America, there are likely to be fewer than 100 million 5G connections by 2025, which is a very low percentage of the total customer base. Those regions will continue to use 3G and 4G, even though many markets are preparing to launch 5G. Brazil is aiming for 2021, Mexico for 2020; this doesn’t mean it will be available to everyone though – at the beginning it will cover the major cities – but they won’t wait too long. They want to be part of the 5G experience, the commercial deployments.

When it comes to use cases, in early 5G deployments it will be about consumer mobile broadband – essentially it will be what consumers are already doing with 4G networks but with faster speeds and better traffic capacity. Consumer enhanced mobile broadband (EMBB) is the key use case for the earlier deployments. For Africa, I don’t really see big deployments over the next couple of years because there is still a lot to do on network coverage. There are countries where coverage is not 100% and operators will need to invest in their existing 3G and 4G networks before 5G can be considered.

The main use cases will be enterprise and IoT – do you think that the initial focus on the consumer experience will push operators into greater 5G investment, enabling these use cases?

Operators investing in 5G networks are probably hoping to get consumers on board first. The reality is that in emerging markets, mobile is the only option in many countries if you want connectivity. In Europe you have fixed networks; Wi-Fi, fibre, cable – but in emerging markets it’s all about mobile. If you are an enterprise and you want to start your digital transformation journey, you have to rely on mobile because fixed coverage is not great. This is good news for operators. Digital transformation is already underway in the US, China and Europe, but when emerging markets start thinking about it then it will rely on 4G and 5G cellular connectivity. If enterprises in emerging markets aren’t ready for 5G yet, then consumers will be the initial use case – but at some point in the future, cellular connectivity will be the only option for enterprises.

There’s also fixed wireless – the use of 5G for connectivity at home – which is a third pillar together with consumer and enterprise. It’s interesting because there are deployments in the US and UK, but because fixed infrastructure is poor in many emerging markets, 5G could be a solution to supply connectivity to the home. Operators will need to invest to bring 5G to households; it could be an interesting use case but it’s a big investment so they’ll need to see some good momentum before expanding coverage. It could be a good use case but it’s difficult to say; while we can see the deployments underway in China and the US, in emerging markets there are so many open questions, and these countries will learn from Europe, the US, Japan and South Korea. If fixed wireless sees success in one of these markets, then other countries will begin to explore it. Brazil, India, Indonesia – these could all be suitable markets for fixed wireless access as they boast big populations that are already used to using 4G connectivity to engage in the digital world, so it wouldn’t be much of a shift to 5G.

These markets have quite challenging geographies – how will deployment pan out?

Initially coverage will be in the big cities, which is a good way to start because from a business model perspective, more affluent consumers are based there. If the whole point is to make some early money from 5G, this will come from the high-end market in big cities.

What do you see as the key use cases once adoption gains traction?

It will be interesting to see how companies react to 5G; by which I mean professional services. They may want to use 5G to provide their employees with good connectivity, low latency etc. For example, in hospitals there is a need for cellular connectivity – in many emerging markets, junior doctors can’t actually attend a hospital as it’s 200 miles away, but they can train remotely via video or AR with good enough connectivity. I’m interested to see if companies will want to make their staff more efficient by providing them with all these new technologies.

In the future, I can see a lot of mobile technologies being used for agriculture – to monitor everything. But the question is whether this requires 5G, as it’s already starting to happen and 4G seems to be good enough. It’s hard to think that the agriculture industry is big enough to represent a new use case for 5G.

Agriculture is a huge component of the GDP of many markets, so in a situation where companies realise that the use of mobile technology is important to make agriculture more efficient by making the output more predictable, that could be an interesting driver. Agriculturally, China is moving very fast – they’re using IoT for agriculture and mobile operators are involved in these, but for emerging markets it’s even more important.

From a technology perspective, and in terms of customer adoption, we are still far away from 5G but the groundwork has to happen now. There are big discussions between regulators and governments about spectrum – when is it going to be released for trials? How much is needed for them? This is important as 5G will never happen if we don’t have these discussions, particularly in regions like Africa where the business case is not clear.

Kenichi Chidile Okeleke: We published the first major comprehensive piece on 5G in Africa in July. Not much has been said about 5G in Africa, so to get perspective on the ground we spoke to operators, vendors and regulators. Pretty much everyone agreed that 5G in Africa is inevitable but not imminent; by 2023 only a handful of countries will have seen some form of commercial 5G deployment. By 2025 there will be around seven countries, but the vast majority are unlikely to have 5G in their markets until after this date.

What will be the key drivers in the region?

We expect to see FWA as the main use case, and there are obvious reasons for this – mainly the very limited (or lack of) fixed broadband access, even in big cities. For operators, FWA is a more economical and quick way of extending home broadband connectivity compared to greenfield fixed or fibre deployment. This would mainly be for enterprises and high-income areas; as time goes on there could be an expansion of services to other parts of the country. The consumer segment will be a long-term play, mainly because at the moment 3G and 4G technologies are largely sufficient. Immersive use cases that demand the enhanced connectivity of 5G – AR/VR etc – are either not yet developed in the region or simply unaffordable; the ecosystem is nonexistent in the region. For basic internet access, video streaming, online browsing, the existing networks can serve these purposes. There’s also the issue of 5G device costs – at the moment they’re around $1000 or more. They may become more affordable more quickly than 4G devices but we’ve yet to see that; if it happens over the next 1-2 years then perhaps we may begin to have a different expectation for the consumer segment. However, if we assume for now that the trajectory will be similar to that of 4G device costs, it will be at least another 4-5 years before devices come to the levels that will attract mass market adoption.

For other enterprise use cases, there’s some excitement as to what 5G can achieve, but what we’re seeing is that there’s not much understanding of the potential of 5G among enterprises in the region, so there’s a lot of work that needs to be done by the industry to educate businesses and enterprises on this. Beyond advanced connectivity and low latency, businesses need to know how 5G can help them improve productivity and increase efficiency. We’re seeing some operators in places like South Africa run some tests with mining companies; localised services in consolidated industries where you have companies that can fund the network deployment and use the kind of business models where 5G can be integrated are likely to lead the development of these enterprise use cases. Financial services will also help to some extent; we have big pan-African banks trying to introduce real-time banking services across their regional footprint. With very poor fixed connectivity, they could consider 5G as an opportunity to further these plans.

It will be a combination of affordability and use cases; there’s not sufficient demand in the lower income segments, and in these regions they account for a larger percentage of the population. There’s not demand for data services beyond basic browsing and maybe video, so until we begin to see people in those segments wanting to use connectivity for other use cases that will need faster speeds and lower latency, 3G and 4G will be sufficient. The whole world is moving towards 5G but for the region this is primarily going to be an enterprise play, and for the consumer they’re probably fine with existing technologies for the foreseeable future.

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