Indian consumers willing to pay 15 percent premium for 5G services

Indian consumers are willing to pay a premium of 15 percent for 5G services. 5G is still seen as the next generation of mobile telephony. However, the pandemic and shelter-in-place rules have proven that it is the need of the hour, especially in markets like India. Last year, Ericsson said that smartphone users worldwide are willing to pay a 20 percent premium for 5G services. The Ericsson ConsumerLab report said half of early adopters would pay as much as 32 percent more for 5G. In India, the country with cheapest data services, the picture is identical to global markets.

Jasmeet Singh Sethi, Head of ConsumerLab at Ericsson, told me that Indians are willing to pay a 15 percent premium for 5G. In fact, around 40 percent of consumers globally want to invest on a 5G handset to prepare for the future. Thus, 5G is the next big thing in the world of mobile telephony. While 4G enabled man to machine communication, 5G will allow machine to machine communication. It will make this happen with little or no latency and yet consume less data. As every device around us gets smarter, 5G is the gateway to add intelligence to these devices. However, it seems like India is falling behind the curve.

“5G is made for innovation,” said Jon Gamble, Business Builder at Ericsson, during The Unboxed Office virtual event on Monday. With over 30 live 5G networks across four continents, Ericsson CEO Börje Ekholm says next three years will be critical for 5G adoption. Daniel Staub, Head of Mobile Network at Swisscom says 5G is an ecosystem play. Swisscom was the first telecom player in Europe to launch commercial 5G services in April last year. It achieved nationwide 5G coverage within only eight months. In the middle of the pandemic, the importance of this new network infrastructure cannot be understated.

Why 5G is important

During the lockdown, the mobile data traffic increased by around 20 percent depending on the market. We reported that a quarter of Indian consumers saw between 20 to 50 percent increase in mobile usage during the quarter. While globally time spent on 4G increased by an hour, Indians spent around 2.2 hours more per day on 4G networks. A lot of traffic was absorbed by fixed networks around the world but in India, the stress was visible on mobile networks. Sethi says 5G could have supplanted the pressure seen by mobile data networks.

Ericsson Mobility Report, which comes out next month, will show how networks performed from January to May of this year. However, the initial findings shared by the Swedish network major shows that networks stayed resilient against all the odds. Patrik Cerwall, Head of Strategic Marketing, Ericsson says networks experienced a number of peaks during the day. Cerwall, who is also the executive editor of Mobility report says there has been an increase in voice traffic across 2G, 3G and 4G VoLTE. It also found that a lot of gaming applications were used during the initial days of lockdown around the world.

However, consumers immediately moved towards video calling applications, which are bi-directional and put a lot of strain on a network. This is the kind of use case where both download and upload speeds matter. While the 4G networks have stayed resilient, a 5G network would have made these tasks easier and effective for networks to handle. “Future depends on the way we work going forward,” said Cerwall during Ericsson Unboxed Office virtual event this week. It is clear that the future depends on widespread availability of 5G and faster adoption across the world.

5G adoption: Impact and Price Premium

Patrik Cerwall said that there has been a slight decrease in 5G adoption globally due to the pandemic. However, the Chinese market has not seen any major decline in adoption despite the country being the first to witness a coronavirus outbreak. The company is also offering a revised forecast for 5G this year. Ericsson Mobility Report will see a prediction of 2.8 billion 5G subscriptions by 2025. Ekholm added that Ericsson has 91 commercial agreements for 5G deployment around the world. He also said that 5G will help networks with higher ARPU (average revenue per user) and churn will be lowest among highest quality networks. The latter makes 5G lucrative for network operators. In India, the network operators are under significant financial stress and deployment of 5G could help them get back to a firm footing.

However, the plan to auction 5G spectrum, which has been delayed and lacks a strong business model, makes 5G a distant dream for Indian consumers. These are the same consumers who are willing to pay 15 percent premium on 5G services. Jagmeet Singh Sethi notes that this premium depends on offering compelling services and use cases around 5G. He says operators in South Korea, the leader in 5G, are seeing a premium of over 20 percent due to strong services. This includes tied subscription to streaming services and access to IoT applications. Indian telecom players have evolved and introduced new services since the launch of 4G services by Jio in 2016. Can they prepare themselves for the 5G revolution, only time will tell.

5G: Five key trends to watch

With 5G, we are looking at a generation that may never speak of data speeds in Megabits per second. Instead, the future generation could gobble up gigabits of data in a second. With the wider availability of WiFi 6 and gigabit internet connections, data speeds that clock in Gbps could become the new normal. This increased speed will be the single big reason for a lot of consumers to adopt 5G initially. Ericsson, however, thinks the evolving use cases will eventually trump the data speed. This is in line with 4G, which also promised better speed than 3G, but showed that there can be new business models built with the premise of this new network technology.

It made Netflix possible and it also became the harbinger for services like Uber, Lyft, Ola and others. The easy access to 4G network made consumers ditch physical shopping for online shopping. It also made the idea of ordering food online a new normal. With 5G, there is a need for such business models and use cases for it to thrive. Our world right now is not only the new normal but also the one that will continue to remain the normal. In other words, social distancing and contact-less exchanges are expected to stay even after the lockdown. A large number of people are expected to avoid large gatherings and unnecessary travel in the post-COVID world.

Jasmeet Singh Sethi sees autonomous commerce being the biggest trend emerging in the post-COVID world and powered by 5G. He explained it as a shopping experience with contact-free transactions. The autonomous commerce will be complemented by secure borderless workspaces. In other words, the remote work will stay in place even if organizations around the world start to reopen like earlier. Twitter has already announced that its employees can work from home indefinitely. For these two trends to emerge and succeed, networks need to be redefined. Sethi sees this happening as soon as lockdown gets lifted by authorities.

He says authorities and employers will put the health of their employees above everything else. However, for these actions to materialize, there is a need for networks to redefine services and experience. He also sees synchronous care or care provided via Telemedicine and Telehealth as the next big frontier. The pandemic has shown how our healthcare system is unprepared to tackle such a situation. It has also painted a clear picture where our healthcare professionals and frontline workers are struggling to find enough personal protective gear. With telehealth and telemedicine, healthcare professionals can be at the forefront and yet not expose themselves to the virus.

For telehealth and telemedicine to succeed, robotics and virtual reality experiences should improve. Facebook and Microsoft are leading in the VR and AR space. With Apple’s acquisition of NextVR, we might see great products from the iPhone maker. Apple CEO Tim Cook has said the company’s biggest contribution to mankind will be in health. One of the interesting things Sethi told me is that conspiracy theories have not affected consumer sentiment towards 5G. While people are concerned about health issues caused by 5G, they are also willing to see the bigger benefits. The real benefit, according to Ericsson, won’t be high data speeds but new use cases, business models leading to better living.

—BGR