At a time when carriers are pulling back on their capital expenditures, Son Nguyen, Senior VP of Leasing Operations at Crown Castle, had a hopeful message. The capacity of today’s telecom networks is going to have to grow a “staggering” amount to handle the 5G data needs of the future, he told an audience at South Wireless Summit held this week in Nashville. Whether that network is built out depends on carriers’ ability and appetite to invest to meet that demand. He explained that there is ample historical precedent for that.
In the mid 1990s, the wireless industry rolled out the nationwide digital voice and text network at a cost of around $125 billion. Consumer adoption followed and the economic model proved out, which allowed the carriers to invest in 3G in the early 2000s. 3G introduced the mobile internet with a price tag of $200 billion. “Very similar to 2G, the 3G model played itself out; the network was built; and consumer adoption took place,” Nguyen said. “As a result, the carriers were able to monetize that network and then invest $325 billion into 4G in the 2010s, which brought the mobile internet and 96 times the data use.”
So far, the carriers have invested $225 billion in 5G, including $80 billion in the C-band auction. Nguyen cautioned the audience to be patient concerning the investments in the 5G buildout. “At Crown, we believe that this is going to actually be, in terms of duration and magnitude, much longer than what we have seen in other [technology] life cycles,” he said.
Even though the life cycle may be longer, Nguyen said the process is predictable. “You see it go from 2G, to 3G, to 4G, to 5G. Every cycle requires investments, and then the adoption comes and then it repeats itself,” he said.
The deployment of successive generations of wireless networks has been driven by U.S. consumers, which use more data than any other country, except South Korea. Wireless ARPUs and margins for the wireless carriers in the U.S. are higher than the rest of the world. On average, U.S. ARPUs of around $35 per subscriber are much higher than most other countries, which average $24 (France) or below, according to Statista. Additionally, U.S. margins are 58 percent, compared to 45 percent for the rest of the world, according to Nguyen.
“U.S. consumers are paying 46 percent more for wireless because we actually are using a lot more data, but we’re also willing to pay for it and we have the capabilities to pay for it,” Nguyen said.
Nguyen described many of the low latency and high bandwidth applications that are expected to eventually result from the 5G investment, including connected cars and massive IoT. “We’re seeing more and more of our customers pushing their compute power toward the edge of the network,” he said. “Our smartphones can launch a space shuttle, but they do not have enough compute power to handle the future use cases that are coming down the pike.”
Crown Castle is engaging in an “extensive, robust” investment in towers, fiber and small cell infrastructure. Towers continue to be the best and most effective way to provide coverage, according to Nguyen, and they need to be supplemented by small cells to bring more capacity, better reliability and lower latency to the network. Additionally, the 5G networks will need fiber to connect all of the network elements back to the core.
“At Crown, we believe that the shared infrastructure model is going to be the most timely and cost effective way to enable 5G,” he said.
By J. Sharpe Smith, Inside Towers Technology Editor
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