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The Economic Drivers of 5G


By Josh Simer, AFL's Service Provider Market Manager

In our last blog post, Seán Adam, AFL's VP of Market Strategy and Innovation, spoke of the potential of 5G and its requirement for available spectrum and a strong wireline communication infrastructure. But to understand what that “strong wireline communication infrastructure” is, we first need to ask, “What does that infrastructure need to provide?” To answer that question, we need to understand how 5G adds value for its users and what that means for how service providers can monetize their investment to support it.
5G will require significant wireline infrastructure investment to operate. But that investment has to provide value for its owner – either through contributing to net profit in the case of a private operator or contributing to economic growth in the case of a public operator (and therefore, to profit in the form of tax receipts).
To get that value, the network owner must provide value to their customers. But customers – end users – don’t get value from a pulse of light or a burst of radio waves following a certain protocol. It’s the application, and what the application enables them to do, which provides that value. What are those applications? To answer that question, let’s look at the three main use cases for 5G and how they can add value through applications:
Enhanced Mobile Broadband. Think of this as being like current 4G LTE, but better – as in more bandwidth. This enables applications like virtual and augmented reality, higher-definition video streaming, and greater use of “the Cloud” for applications and data. It also holds the potential to replace Wi-Fi and physical LAN connections entirely.
Massive Machine Type Communication. This refers to the ability for many more devices to connect with the wireless network – several orders of magnitude more. This is what will truly enable the “Internet of Things (IOT),” like wearable devices, monitors, smart homes, and smart cities. It will also enable the IIOT or Industrial Internet of Things, bringing huge amounts of sensors and logistics information online, allowing companies and organizations of all types to run their operations more efficiently. This is the capability that enables “Industry 4.0,” the vastly higher level of automation and sensing that will allow businesses to operate at previously impossible levels of efficiency.
Ultra-reliable Low Latency Communications. “Latency” refers to how quickly one can send a signal and get a response. Think of an autonomous car trying to merge onto a highway near another autonomous car: it might not take a lot of data for the two cars to identify the conflict and avoid each other, but you want that small amount of data exchanged quickly. 5G will reduce the communications delay enormously, to as little as 1 millisecond – or 1/100th of a “blink of an eye.” Plus, you don’t want a lag or hiccup in the network to cause this communication to get dropped – hence the “Ultra Reliable.” In addition to the autonomous vehicle example, remote surgery is another one – to communicate a tactile response that the surgeon can feel, it’s important to have almost no delay or lag. An interruption here could also be equally deadly.

What this means for the business case: Look back at the applications mentioned above, and one thing that stands out is that in only a small fraction of them is the individual subscriber the one gaining the most direct value – and, therefore, the one likely to pay for that value. In some cases, like autonomous vehicles, it remains unclear what the value stream will look like. The most value-added business cases, like widespread sensors, logistics, and Industry 4.0, are enterprise use cases. The experience so far with 5G is bearing this out.  So far, service providers have not been able to successfully charge large premiums for 5G service compared to 4G/LTE. They have also acknowledged publicly that enterprise use cases will instead be the main drivers of their 5G ROI.  
If the focus of applications and business cases is changing, the network must be designed and constructed to enable these applications and business cases. What does that mean for the physical layer network that Lights Up 5G? We will begin examining that in our next blog post.  


About the Author

Josh Simer is AFL’s market strategy & innovation manager for service providers and multiple system operators (MSOs). He has been in the optical fiber and ICT industries for 15 years, prior to which he was a US Army Infantry Officer. Simer has and continues to serve in a variety of roles, including product, solution, and program management and has worked with a full range of customers, including large to small service providers, MSOs, utilities, co-ops, enterprises, and data center operators. Simer can be reached at

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