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CSPs focus on supporting advanced use cases and network technologies to maximize IoT revenue

Industry 4.0 will spark the adoption of advanced IoT use cases as well as the integration of network slicing and private 5G networks

TBR projects global CSP IoT revenue will increase at a CAGR of 24.9% through 2023 as the launch of mobile 5G services contributes to revenue growth acceleration starting in 2020, and operators, particularly in China, begin capitalizing on advanced use cases. As the 5G and digital ecosystems develop, advanced IoT use cases will emerge that can leverage the unique performance characteristics 5G offers, specifically high bandwidth and low latency. Connected transportation, AR/VR, and mission-critical IoT are all likely to be preliminary use cases for 5G technology, but the commercialization of these use cases will take a couple of years to unfold.

Though advanced IoT use cases that require the precision promised by 5G, such as remote surgery, are being explored, many of these services will not become commercially available until the mid-2020s at the earliest. Additionally, solutions such as remote surgery and V2X (vehicle-to-everything) automotive services will be burdened by significant regulatory and societal challenges.

TBR anticipates Industry 4.0, which includes mass 5G adoption globally, will ramp up around the 2022 to 2025 timeframe and result in heightened spend on ICT infrastructure as demand for new use cases, including advanced IoT solutions, increases. As Industry 4.0 progresses, leading enterprises in certain verticals such as manufacturing, logistics and warehousing will likely opt for private 5G networks that they buy, own and control. Private 5G networks will provide enterprises enhanced data security and the precision needed to support advanced IoT solutions. Private 5G networks will provide new revenue opportunities as customers will in many cases be purchasing these networks directly from telecom vendors rather than CSPs.

Though some larger enterprises will opt for private 5G networks, TBR expects most smaller companies will need to support advanced IoT solutions via a slice from a CSP. Though network slicing solutions will provide revenue opportunities for telecom vendors, adoption will be limited initially as most global operators will delay migrating to 5G core networks, which is essential to support network slicing, for another several years. Though many operators outside of China and South Korea will delay upgrading the 5G core because the system will be costly to install, early adopters will gain a time-to-market advantage capitalizing on advanced IoT use cases requiring the accelerated data speeds and ultra-low latency enabled by network slicing.

5G market development (2017-2030)

5G market development (2017-2030) graphic

CSPs accelerate 5G deployment for traditional network use cases to realize the significant cost-efficiencies that are inherent in the technology

Though a viable business case for operators to grow revenue from 5G has yet to materialize (with the exception of fixed wireless broadband), the main driver to deploy 5G is to realize the efficiency gains the technology provides over LTE.

Operators in lead markets (U.S., China, Japan and South Korea) as well as a growing list of key operators in other developed markets have accelerated their 5G deployment timetables over the past year, primarily because 5G is a significantly more cost-effective solution to handle rising data traffic in their traditional connectivity businesses but also to remain competitive in their respective markets.

TBR expects most Tier 1 and some Tier 2 and Tier 3 wireless operators will have begun deployment of 5G by the end of 2022. This will be driven by the need to add capacity to support growing data traffic and to tap into new revenue opportunities brought on by emerging use cases for the network that materialize in the 5G era.

TBR expects new, economically supported use cases for the network will arise in the early to mid-2020s, particularly around advanced IoT services, which will drive another wave of 5G investment.