Will People Pay More for 5G?

Will People Pay More for 5G?

Australians won’t welcome extra costs for 5G, Deloitte survey suggests 

Deloitte’s Mobile Consumer Survey 2019  suggests people won’t pay more for 5G than they already do for 4G. Here’s a glimpse at some of the results of the June survey of some 2,000 Australians:

  • 84% won’t pay the $15 that’s likely to be the additional cost for the premium service.
  • 57% won’t pay any amount more than what they are paying for 4G.
  • Only 8% will pay $10 to $15 more.
  • The amount of those willing to switch is down 5% this year compared to last year.
Deloitte survey suggests customers won’t pay more for 5G.

Customers won’t pay more for 5G, Deloitte survey suggests. Source.

This is bad news, considering telcos are banking on 5G to improve their declining revenue. Optus’ financial report for their most recent quarter shows no increases in revenue. The report also shows a 4% decline in mobile service revenue. Optus blame the increase in SIM-Only adoption, which is a low-profit sector, as well as the increased competition in data.

Telstra has also been struggling with revenue declines. They, too, blame competition in the mobile market, along with disruptions in the fixed-line service market. Telstra also tags on a bevy of other reasons in their recent request to the government for investments, research, and a policy framework regarding 5G.

Both Telcos believe 5G will save the day, and so Deloitte’s survey result’s suggestions to the contrary are concerning. But there are several reasons why these survey results don’t tell an accurate story.

Despite Deloitte survey results, consumers will likely welcome 5G eventually, even with price increases

There are a lot of factors at play here that may have affected consumers’ current take on 5G:

  • 4G is already pretty fast, and consumers are satisfied with it;
  • Benefits of 5G haven’t been properly promoted;
  • The wide application of 5G hasn’t been properly marketed either, considering most upcoming innovations (IoT, driverless cars, etc.) will need 5G’s benefits to work as advertised;
  • Fears about dangers associated with 5G have been peddled so much that consumers actually believe them (cancer-causing electromagnetic fields, for example).

Deloitte actually acknowledge some of these reasons as why their survey has produced these results. Peter Corbett, Deloitt partner, points out that 5G’s benefits weren’t as clear to customers as 4G was.  He also attributes this to the fact that current 4G speeds are already pretty fast, and so customers are already satisfied.

But the impact of 5G is wide-ranging — it goes beyond fast speeds for streaming videos on your smartphone. The technology is a critical anchor for upcoming innovations such as the Internet of Things (IoT) and Artificial Intelligence applications.

Perhaps until consumers are aware of just how much that driverless car of the future will require a 5G network, or how those smart home devices will be less efficient without a 5G connection, or how smart city benefits won’t be fully experienced without a 5G connection, they won’t be able to fully appreciate the question of extra costs for 5G. The fact is that, at a certain stage, 5G will be the norm, just as 4G currently is.

Other factors also probably contribute to the results of Deloitte’s survey, but they mostly all point to lack of knowledge about 5G. Many simply aren’t fully informed about this technology and, perhaps, many may even be misinformed. There have been several theories about dangers associated with 5G, and Telstra actually addresses the seriousness of such claims and how they negatively affect the 5G market, in their recent submission to the Federal Government’s 5G Inquiry.

Telstra’s calls on the government for policy framework, money, and research to debunk negative 5G claims

Telstra has submitted requests for a policy framework to spark some incentives in the telco market. The telco listed their losses over the years and their substantial investments of over $8 billion in the pursuit of 5G. They seek investments from the government, as well as differentiation policies to create incentives for telcos.

Telstra touched on a point that might be turning consumers away from 5G — the claim that 5G will result in dangerous electromagnetic energy (EME). Telstra believe this claim to be misinformation; one that may hinder 5G’s acceptance. Telstra requests the government to fund research and education on this issue, and to promote 5G to ensure its demand.

Telstra is probably right about the effect of these claims of dangerous 5G EME. This is certainly a concern amongst consumers — the multiple antennas that will have to be placed in residential areas, so close to your front door, is a reasonable worry. But Telstra is right about there not being enough research to support the claim of danger that is being spread, and that claim seems to really be turning consumers away as evident in Deloitte’s recent survey.

This is, of course, cause for concern for Telstra, given how much they are banking on 5G to pay off. The telco claims to have spent over $8 billion on 5G over the last 5 years, and expects to have spent an additional million by the end of 2020. Telstra, obviously, would like to recoup these expenses and make a substantial profit in the process, and they look to the government for support in doing so.

Telstra also requests differentiation policies as a means to reasonable returns on their 5G investments so far. The telco suggests network slicing as an example of service differentiation in the 5G market. Network slicing  is a form of virtual network architecture that allows the provider create many other virtual networks on top a shared physical infrastructure, with each virtual network customised to meet the distinct needs of distinct devices or applications. For example, a driverless car would require a different 5G benefit (mostly low latency) than video streaming (mostly high throughput). Allowing the network to customise services this way will reduce operating costs and increase revenue.

To them, allowing differentiation boosts their ability to get good returns on their significant 5G investments. They also believe that avoiding policies that undermine differentiation, such as forcing them to share their 5G equipment with other carriers, is bad for business and the return on investment that they hope for.

Final words

Deloitte’s survey suggesting that Australians won’t pay more for 5G is more of a reflection of consumers not being fully educated on the benefits on the technology. In fact, 5G will likely become a necessity at some point, as future innovations need the technology to be fully experienced. From the IoT to driverless cars to Augmented Reality and beyond, 5G will be an anchor to a broad range of technology that will require a connection. Such lack of information on 5G as a future necessity is battling against loud claims of 5G EME dangers. With the financial stakes so high for telcos, expect the 5G educational campaign to pick up substantial speeds.

 

Neil Aitken

Having worked in 3 countries for 4 telcos on both voice and data products, Neil is in a position to give you the inside track. Get beyond the marketing messages to the best plan for you.