Published: April 13, 2020
The 451 Take
- 3GPP delays. 3GPP recently announced a three-month delay for the completion of Releases 16 and 17, which we have previously identified as the 'showstopping' bits of 5G. This news does not surprise us, given the group's inability to conduct face-to-face meetings until at least June. This is a major disruption that affects all 5G stakeholders globally; it should be noted, however, that this should not delay Release 15 networks because the standard is already commercialized. This impacts Phase 2 and Phase 3 of 5G rollouts.
- Delay characterization: Moderate
- Network and device-level supply chain disruption. COVID-19 has created some supply chain disruptions, but thus far they appear to be well managed by TEMs such as Nokia, Ericsson and Huawei. On the device side, Apple may be facing a short delay on the release of its 5G iPhone (at least partially) due to supply chain disruption. Apple is also weighing uncertainty around demand for its newest, most expensive phone. Prior to the COVID-19 outbreak, consumers indicated that they were wary of spending more money on 5G network services. According to our VoCUL: Communications, Streaming Media and 5G survey conducted in Q4 2019, 43.1% of respondents would not be willing to pay anything extra per month for 5G coverage.
- Impact: Minor
- Site licensing/administration. This is an under-the-radar but important area that sits in the critical path of 5G deployment. 5G networks are different in that they take advantage of low-, mid-, and high-band spectrum for coverage and performance. The use of high-band spectrum will require deployment of small cells, which will require cooperation from the municipal government agencies responsible for issuing such siting permitting and licenses. Operators often complain about this process being challenging in normal conditions; with COVID-19 restrictions we can expect even more delays. Many city halls are closed, and a large percentage of municipalities consider site infrastructure licensing a nonessential service, which means it's closed.
- Impact: Moderate
- Delays in spectrum auctions. This is the most impactful blow that can be dealt to a country's ability to roll out 5G services at scale. Spain, France and Austria have all made the decision to delay 5G spectrum auctions due to COVID-19. We expect that countries with spectrum delays will impact 5G rollout plans by at least two quarters.
- Delay characterization: Major.
- Lowered demand for 5G services. The unprecedented disruption to the global economy is putting people out of work and causing them to reprioritize their spending. 5G was already going to be a difficult selling job for network operators and device builders. The COVID-19 pandemic will drive down demand for anything considered nonessential. While it's true that home broadband and mobile services will hold up well, those are the existing LTE services people pay for, not 5G.
- Delay characterization: Major.
The COVID-19 pandemic has elevated our dependence on broadband, and 5G will be an important next phase of the broadband landscape. According to 451 Research's Voice of the Enterprise: Digital Pulse, Coronavirus Flash Survey 2020, 32% of respondents expect to spend more on bandwidth/network capacity as a result of the coronavirus outbreak, with large enterprises (more than $1bn in revenue) expected to spend even more at 55%. Interestingly, both Verizon and Vodafone have stated that they will increase their network spending in 2020, with Verizon committing about $500m in capex. Globally, operators have also implemented compassionate measures, such as the removal of data caps, late fees and service discontinuation for customers at a time where broadband connectivity is as critical as electricity. These steps should increase brand trustworthiness and goodwill once things get back to normal.
In the telecom sector, COVID-19 has mobilized the telecom industry to focus on bolstering broadband infrastructure capacity and availability to support consumer, work-from-home, government/public safety and enterprise demand. One of the positive outcomes of COVID-19 could be stronger demand for 5G as a replacement for legacy broadband infrastructure such as DSL. The deployment of 5G FWA offers a unique value proposition encompassing high-speed broadband and low latency packaged in a cost-effective solution that doesn't require cable or fiber connectivity, making it an ideal alternative for rural or remote areas with poor network infrastructure.
5G performance is also getting a chance to shine as a result of COVID-19, especially in areas like telehealth, where the long-term impact is expected to be high. In China, 5G networks are already being stood up and used to support telehealth in hospitals throughout the country. Recently, a program was launched at a hospital in Wuhan, China, to test 5G-enabled robots as they carried out tasks typically done by medics, such as taking coronavirus patients' temperatures, delivering meals and cleaning the facility. We expect COVID-19 to accelerate the development of telehealth measures such as remote procedures or consultations – things that might not have been on a fast-track timeline if not for the virus.
Finally, COVID-19 will place a magnifying glass on the use cases that a year ago may have seemed far-fetched, such as remote medical procedures and consultations, 100% automated and robotic plants and warehouse systems, and an increase in the viability and acceptance of AR/VR. Much of this will be driven by our experience with social distancing, since COVID-19 will undoubtedly change the dynamics of social interactions, gaming, travel, learning, business transactions, training and field working, to name a few.
Vice President Brian Partridge leads the Applied Infrastructure & DevOps Channel at 451 Research. In this role, Brian has overall responsibility for the team's syndicated and custom research deliverables. As a researcher he actively contributes to the Internet of Things (IoT) research agenda and has subject matter expertise in connected device, telecom, enterprise mobility and enterprise networking domains.
Raymond Huo is a Senior Research Associate who sits on both the Internet of Things (IoT) and Applied Infrastructure & DevOps Channels at 451 Research, where he covers the adoption of 5G as it pertains to connected devices, telecom, enterprise mobility and enterprise networking.
Keith Dawson is a principal analyst in 451 Research's Customer Experience & Commerce practice, primarily covering marketing technology. Keith has been covering the intersection of communications and enterprise software for 25 years, mainly looking at how to influence and optimize the customer experience.