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Mobile Communications April 2018 Viewpoints

Technology Analyst: Michael Gold

Indoor Coverage for 5G: Challenges and Opportunities

Why is this topic significant?

The best spectrum for indoor communications is already occupied. Homes and businesses may need new customer-premises equipment to support the use of 5G indoors. Suppliers will need some combination of new technologies and new business models.

Description

Separately, Ericsson, Nokia, Huawei, and Qualcomm recently acknowledged that 5G will rely on radio frequencies whose characteristics include limited ability to penetrate the walls of buildings. Each company is developing customer-premises equipment to provide indoor 5G coverage. Modern buildings will pose special obstacles to 5G service delivery. A 2013 technical report from NYU Wireless found that "typical exterior surfaces of urban buildings," including tinted glass windows, pose difficult barriers for radio waves near 28 gigahertz (GHz)—a frequency band that sees much use in 5G tests and trials.

Implications

Existing mobile-communications services already face impairments indoors. Aggravating the situation, goals for 5G network capacity likely require use of frequencies above 6 GHz, which penetrate buildings relatively poorly. To some extent, users may be satisfied with—or will have to live with—indoor use of 4G and Wi-Fi networks.

Alternatively, 5G's promised high data rates and low delays might become vital for emerging indoor applications—perhaps for future augmented-reality eyewear. In such cases, some combination of end users, enterprises, and service providers would need to invest in customer-premises equipment that ensures that smartphones continue to deliver 5G performance when the devices are indoors. Some possibilities are listed below.

  • Users may need to install small indoor base stations that are sometimes marketed as femtocells and that rely on an existing fixed-broadband connection. Perhaps users will find that 5G benefits will be compelling enough to justify the cost and installation effort. Another possibility will be increased adoption of femtocell-like hardware that has a through-the-wall connection to a fixed-mount outdoor cellular antenna. Such hardware generally requires installation labor and additional monthly fees. As with other types of services, nonrecurring installation-labor costs might be hidden in recurring fees.
  • Employers and property developers may find that they are the parties responsible for deploying indoor 5G networks, if they believe that 5G is important for indoor use—possibly as a perquisite that attracts and retains high-quality talent and desirable tenants.
  • Part of the solution may involve large numbers of new, small 5G base stations that would add to carriers' cost burdens. If the small cells are located outdoors and near enough buildings, indoor coverage will improve—though not necessarily in buildings that include much reflective glass. An alternative or additional investment that carriers might make would involve widespread and substantial improvements in handover among cellular and Wi-Fi networks.

Impacts/Disruptions

If appropriate investments do not materialize, indoor coverage for 5G services might be spotty. When indoors, smartphones might remain connected to existing types of networks for the foreseeable future. To improve indoor coverage, services may need to continue investing in improved 4G capabilities in the near term—at the same time they are funding 5G deployments.

What is the road map for delivering the full set of 5G benefits indoors? Eventually, carriers could scrap their 4G and previous infrastructures, whose frequencies work relatively well indoors. A boost in indoor performance would come about by reassigning those frequencies to 5G. Such developments could be ten years away, in which case stakeholders might actually reassign the frequencies for use with 6G technologies.

Scale of Impact

  • Low
  • Medium
  • High
The scale of impact for this topic is: Medium to High

Time of Impact

  • Now
  • 5 Years
  • 10 Years
  • 15 Years
The time of impact for this topic is: 5 Years to 10 Years

Opportunities in the following industry areas:

Equipment manufacturing, small-office-home-office systems, home-electronics retailing, enterprise information-technology systems, network-management services, real estate, property development, property management, general contracting, construction trades

Relevant to the following Explorer Technology Areas:

Price Wars Implied by GSMA's Forecast

Why is this topic significant?

In February 2018, the GSM Association, whose members provide service to the vast majority of cell-phone users worldwide, described its expectations for 2025. The forecast highlights industry strengths and opportunities, but also reveals some weaknesses and threats to industry health.

Description

On the surface, a forecast that the GSM Association (GSMA) recently published expresses optimism about industry progress and the social impact of mobile communications. The organization expects the number of people equipped with cell phones to grow from about 5 billion at the end of 2017 to nearly 6 billion in 2025, and for the number of users with data plans to increase more than 50% from 3.3 billion (a minority of the world's population) to 5 billion (a majority).

Despite today's hype about 5G, the GSMA predicts that 5G technologies will mediate only 14% of cellular connections worldwide in 2025, with more rapid deployments occurring in some regions (49% in the United States, 45% in Japan, 31% in Europe, and 25% in China). The forecast anticipates that 4G technologies will mediate a slim majority of mobile connections worldwide in 2025 (53%, up from 29% in 2017). Large regions where 2G technology now mediates a plurality of connections will largely bypass 3G upgrades in favor of 4G, which will gain plurality status in Africa, the greater Asia-Pacific, Latin America, and the Middle East.

Also, despite technological progress, the GSMA expects total worldwide service-provider revenue to grow extremely slowly, roughly from $1.05 trillion to $1.10 trillion between 2017 and 2025, with "China driving most of the increase." Those figures imply an average annual growth rate of about 0.6%—less than the likely inflation rate. Yet industry will make capital investments amounting to nearly half a trillion dollars between 2018 and 2020—about 15% of industry revenue, not including the costs of spectrum. The organization says there is "little guidance" about capital expenditures after 2020 (see the November 2017 Viewpoints).

Implications

For most people, the GSMA's forecast implies very good news: An increase from about 5 billion to 6 billion users, coupled with 0.6% annual revenue growth, implies an 11% decrease in average spending per user by 2025. However, the forecast implies an even larger decrease in the average price of connecting a handset—potentially 20% to 30%—because a substantial share of industry revenue will supposedly derive from Internet of Things and machine-to-machine applications rather than from handset use.

The GSMA attempts to quantify overall economic effects, estimating that mobile communications accounted for $2 trillion worth of improvements to global productivity in 2017 and forecasting a rise to $2.8 trillion in 2022. Though the economic benefits of mobile communications are driving a groundswell of demand, intense competition may preclude real growth in industry revenue.

Impacts/Disruptions

The GSMA's forecast implies that 5G services will have limited availability for the next five years. However, many cellular services are now vigorously engaged in preliminary marketing for pilot 5G service offerings. Why they are doing this is a mystery, but the report seems to shed some light on the matter. The GSMA mentions four user segments that emerged in its analysis of large surveys: Aficionados, Pragmatists, Networkers, and Talkers. Aficionados likely account for relatively high profit margins. Cultivating this segment might be a competitive necessity to survive the coming price wars.

Scale of Impact

  • Low
  • Medium
  • High
The scale of impact for this topic is: Medium to High

Time of Impact

  • Now
  • 5 Years
  • 10 Years
  • 15 Years
The time of impact for this topic is: 5 Years to 10 Years

Opportunities in the following industry areas:

Equipment manufacturing, mobile-communications services, investment banking, marketing, advertising

Relevant to the following Explorer Technology Areas: