Report Overview

5G to change the shape of UK mobile

The capacity boost with 5G will be more important than any speed or latency uplift. We estimate a 7-fold increase in mobile capacity in the UK and 13x+ for O2 and H3G

We view fixed mobile substitution products as quite niche although the number of mobile-only households is likely to creep up. mmWave would have the capacity to substitute for fixed but has many hurdles to overcome

Capacity-constraints have tempered competition of late and their removal risks an increase in intensity, especially as H3G views itself as sub-scale – good for policy makers but another challenge to add to the industry’s woes

Contents

Positive for consumers and policy makers

Longer-term prospects still have much to prove

5G competitive challenge for the mobile industry

5G – the technology smorgasbord

• 5G new radio – about 8 times better than 4G
• 5G core – potential new businesses and business models
• mmWave – lots of spectrum, little reach
• M2M/IoT 5G ‘use cases’ – still some way off

Spectrum and capacity – more on the way

• Effective spectrum resources is key
• Next auction will be important
• Spectrum caps unlikely to be the limiting factor
• Coverage lots with negative reserve prices
• mmWave – likely some time before auctioned in the UK

5G launch from Spring, but mass-market 2020

Speed improved and capacity limitations overcome

• Ten-fold increase in speeds, but will we notice?
• Speeds on a par with current commercially available fixed speeds
• Mobile capacity remains a small fraction of fixed capacity
• Capacity constraints evident in UK mobile
• 5G will alleviate capacity constraints for some time

Implications for mobile dynamics

A degree of fixed substitution is likely

1. Mobile-only households likely to increase
2. Dongles and datacards – stable niche market
3. 5G fixed wireless products – marginal rather than mainstream
   • Fixed and mobile capacity demands will continue to rise
   • Capacity for fixed substitution quite limited
4. Millimetre wave may have potential – but many hurdles to overcome

Limited opportunities from IoT/M2M

• MNOs struggle to capitalise on the opportunity
• The M2M connectivity market has hardly grown in revenue terms
• Many potential applications are fanciful

Demands for edge networks – only so far they should go

List of charts/tables

Figure 1. Timeline of UK mobile capacity

Figure 2. Outlook for change in mobile trends in 2019 by operator

Figure 3. Existing spectrum holdings and spectrum to be auctioned (MHz)

Figure 4. Effective spectrum resources: sector throughput potential (Mbps)

Figure 5. 2019/20 5G auction lots

Figure 6. Voice and data coverage, September 2018

Figure 7. Capex by operator (£m)

Figure 8. Bandwidth required for streaming video, Mbps

Figure 9. Network bandwidth capabilities, Mbps

Figure 10. Access capacity comparison, Exabytes per annum

Figure 11. Average 4G download speeds (Mbps)

Figure 12. Capacity utilisation by operator

Figure 13. 2018 operator total usable capacity and spare capacity

Figure 14. Total data capacity by operator (PB)

Figure 15. Spare capacity per operator (PB per year)

Figure 16. SIM-only pricing by data allowance (GB)

Figure 17. Smartphone-only homes (i.e. no fixed broadband) in US and UK

Figure 18. Smartphone-only homes by age, UK 2018

Figure 19. Mobile broadband dongle, datacard or Mi-Fi subscribers (m)

Figure 20. Network usage in 2018, GB/month

Figure 21. Growth in mobile and fixed data volumes

Figure 22. Capacity required per household per month, GB

Figure 23. Capacity utilisation

Figure 24. H3G ‘spare’ capacity as % fixed demand

Figure 25. Verizon 5G home map – Sacramento

Figure 26. UK M2M connectivity market

Figure 27. UK Emergency Services Network (ESN) contract

Figure 28. Plausibility of use cases and their requirements