5G as the major enabler for the Connected Economy
Dr. Evangelo Damigos; PhD | Head of Digital Futures Research Desk
- Emerging Technologies
- Sustainable Growth and Tech Trends
Publication | Update: Oct 2021
The Covid-19 pandemic has had a profound impact on the health and livelihoods of individuals and communities around the world. In these trying times, connectivity has emerged as a lifeline for society by enabling many social and economic activities to continue amid unprecedented social and travel restrictions, supporting new ways for enterprises to operate safely and facilitating effective response measures from government and other stakeholders. Mobile technology will play a key role as governments look to reinvigorate their economies and build a better, more inclusive society. Further, positive decisions that help drive the availability of spectrum are crucial for governments and regulators that want to realize high-performance networks and services, particularly for 5G.
By the end of 2020, 5.2 billion people subscribed to mobile services, representing 67% of the global population. Adding new subscribers is increasingly difficult, as markets are becoming saturated and the economics of reaching rural populations are becoming more difficult to justify in a challenging financial climate for mobile operators. That said, there will be nearly half a billion new subscribers by 2025, taking the total number of subscribers to 5.7 billion (70% of the global population). Large under-penetrated markets in Asia and Sub-Saharan Africa will account for the majority of new subscribers.
Mobile revenue growth fell sharply in the first half of 2020 due to store closures, loss of roaming revenue and discounts on mobile services to support vulnerable customers. The financial outlook is mixed. Lower consumer spending in developed markets could compound limited subscriber growth and price competition, while developing markets could see sustained growth from mobile data uptake and a surge in new subscribers, given the reliance on mobile networks for internet access.
Most 5G launches globally so far have relied on 3.5 GHz spectrum, with very few exceptions.
This is because this type of spectrum adequately supported the required bandwidth and speeds for initial 5G services. But as adoption increases and more consumers and diverse services migrate to 5G networks, spectrum across low, mid and high bands will be needed in order to deliver widespread coverage and enough capacity to support the delivery of 5G.
5G commercialization is well underway, with operators scaling their 5G networks and services to reach more consumers and enterprises. By the end of 2021, 5G networks will cover a fifth of the global population. The pandemic has had little impact on 5G momentum; in some instances, it has even resulted in operators speeding up their network rollouts. In China, for example, the government made 5G deployment a priority, supporting operators’ aggressive network rollout efforts. The sudden slump in economic activities and disruptions to products and services supply chains due to the Covid-19 pandemic affected IoT sales volumes across multiple sectors, including connected vehicles, smart cities and smart buildings. While global IoT revenues will triple by 2025 to just over $ 900 billion, this is 20% lower than what it would have been without the pandemic. The challenge of integrating IoT solutions with legacy infrastructure further adds to the complexity of the overall landscape. When it comes to IoT integration, 69% of enterprises (no change from the 2019 survey) still find information technology (IT) systems tough to tackle, while almost half point to operational technology (OT) as a difficulty.
In 2020, mobile technologies and services generated 5.1% of global GDP, a contribution that amounted to almost .4 trillion of economic value added. The mobile industry also supported approximately 25 million jobs (directly and indirectly) and made a substantial contribution to the funding of the public sector, with more than 0 billion raised through taxes on the sector. By 2025, mobile’s contribution will grow by 0 billion (approaching trillion) as countries around the world increasingly benefit from the improvements in productivity and efficiency brought about by the increased take-up of mobile services.
As digital technologies become more integral to the way people live and businesses operate, the urgency to bring more people online is becoming ever greater. This has resulted in renewed efforts by mobile industry players, governments and other stakeholders to address the challenges people face in accessing and using mobile internet services. Despite a meaningful reduction in the coverage gap in recent years, the pace of growth in mobile internet adoption has been relatively slower, with the usage gap remaining large. The mobile sector has been credited by the United Nations (UN) for achieving a critical breakthrough towards its mission of combatting climate change. Being the first major sector to achieve the rigorous criteria set by the UN’s Race to Zero campaign demonstrates the commitment and leadership of mobile operators in the push to meet the goals of the Paris Agreement. This comes at a time when global political and economic leaders are giving renewed impetus to delivering a zero-carbon world. The digital economy creates significant social and economic benefits for society through ongoing investment and innovation. This is largely underpinned by a healthy and competitive mobile sector, which enables enterprises to expand, societies to develop, and citizens to access new opportunities and life-enhancing services. With the Covid-19 pandemic casting a spotlight on mobile technology, the importance of a digitally connected world has never been clearer.
Objectives and Study Scope
This study has assimilated knowledge and insight from business and subject-matter experts, and from a broad spectrum of market initiatives. Building on this research, the objectives of this market research report is to provide actionable intelligence on opportunities alongside the market size of various segments, as well as fact-based information on key factors influencing the market- growth drivers, industry-specific challenges and other critical issues in terms of detailed analysis and impact.
The report in its entirety provides a comprehensive overview of the current global condition, as well as notable opportunities and challenges.
The analysis reflects market size, latest trends, growth drivers, threats, opportunities, as well as key market segments. The study addresses market dynamics in several geographic segments along with market analysis for the current market environment and future scenario over the forecast period.
The report also segments the market into various categories based on the product, end user, application, type, and region.
The report also studies various growth drivers and restraints impacting the market, plus a comprehensive market and vendor landscape in addition to a SWOT analysis of the key players. This analysis also examines the competitive landscape within each market. Market factors are assessed by examining barriers to entry and market opportunities. Strategies adopted by key players including recent developments, new product launches, merger and acquisitions, and other insightful updates are provided.
Research Process & Methodology
We leverage extensive primary research, our contact database, knowledge of companies and industry relationships, patent and academic journal searches, and Institutes and University associate links to frame a strong visibility in the markets and technologies we cover.
We draw on available data sources and methods to profile developments. We use computerised data mining methods and analytical techniques, including cluster and regression modelling, to identify patterns from publicly available online information on enterprise web sites.
Historical, qualitative and quantitative information is obtained principally from confidential and proprietary sources, professional network, annual reports, investor relationship presentations, and expert interviews, about key factors, such as recent trends in industry performance and identify factors underlying those trends - drivers, restraints, opportunities, and challenges influencing the growth of the market, for both, the supply and demand sides.
In addition to our own desk research, various secondary sources, such as Hoovers, Dun & Bradstreet, Bloomberg BusinessWeek, Statista, are referred to identify key players in the industry, supply chain and market size, percentage shares, splits, and breakdowns into segments and subsegments with respect to individual growth trends, prospects, and contribution to the total market.
Research Portfolio Sources:
Global Business Reviews, Research Papers, Commentary & Strategy Reports
M&A and Risk Management | Regulation
The future outlook “forecast” is based on a set of statistical methods such as regression analysis, industry specific drivers as well as analyst evaluations, as well as analysis of the trends that influence economic outcomes and business decision making.
The Global Economic Model is covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure. We aim update our market forecast to include the latest market developments and trends.
Review of independent forecasts for the main macroeconomic variables by the following organizations provide a holistic overview of the range of alternative opinions:
As a result, the reported forecasts derive from different forecasters and may not represent the view of any one forecaster over the whole of the forecast period. These projections provide an indication of what is, in our view most likely to happen, not what it will definitely happen.
Short- and medium-term forecasts are based on a “demand-side” forecasting framework, under the assumption that supply adjusts to meet demand either directly through changes in output or through the depletion of inventories.
Long-term projections rely on a supply-side framework, in which output is determined by the availability of labour and capital equipment and the growth in productivity.
Long-term growth prospects, are impacted by factors including the workforce capabilities, the openness of the economy to trade, the legal framework, fiscal policy, the degree of government regulation.
Direct contribution to GDP
The method for calculating the direct contribution of an industry to GDP, is to measure its ‘gross value added’ (GVA); that is, to calculate the difference between the industry’s total pretax revenue and its total boughtin costs (costs excluding wages and salaries).
Forecasts of GDP growth: GDP = CN+IN+GS+NEX
GDP growth estimates take into account:
All relevant markets are quantified utilizing revenue figures for the forecast period. The Compound Annual Growth Rate (CAGR) within each segment is used to measure growth and to extrapolate data when figures are not publicly available.
Our market segments reflect major categories and subcategories of the global market, followed by an analysis of statistical data covering national spending and international trade relations and patterns. Market values reflect revenues paid by the final customer / end user to vendors and service providers either directly or through distribution channels, excluding VAT. Local currencies are converted to USD using the yearly average exchange rates of local currencies to the USD for the respective year as provided by the IMF World Economic Outlook Database.
Industry Life Cycle Market Phase
Market phase is determined using factors in the Industry Life Cycle model. The adapted market phase definitions are as follows:
The Global Economic Model
The Global Economic Model brings together macroeconomic and sectoral forecasts for quantifying the key relationships.
The model is a hybrid statistical model that uses macroeconomic variables and inter-industry linkages to forecast sectoral output. The model is used to forecast not just output, but prices, wages, employment and investment. The principal variables driving the industry model are the components of final demand, which directly or indirectly determine the demand facing each industry. However, other macroeconomic assumptions — in particular exchange rates, as well as world commodity prices — also enter into the equation, as well as other industry specific factors that have been or are expected to impact.
Forecasts of GDP growth per capita based on these factors can then be combined with demographic projections to give forecasts for overall GDP growth.
Wherever possible, publicly available data from ofﬁcial sources are used for the latest available year. Qualitative indicators are normalised (on the basis of: Normalised x = (x - Min(x)) / (Max(x) - Min(x)) where Min(x) and Max(x) are, the lowest and highest values for any given indicator respectively) and then aggregated across categories to enable an overall comparison. The normalised value is then transformed into a positive number on a scale of 0 to 100. The weighting assigned to each indicator can be changed to reﬂect different assumptions about their relative importance.
The principal explanatory variable in each industry’s output equation is the Total Demand variable, encompassing exogenous macroeconomic assumptions, consumer spending and investment, and intermediate demand for goods and services by sectors of the economy for use as inputs in the production of their own goods and services.
Elasticity measures the response of one economic variable to a change in another economic variable, whether the good or service is demanded as an input into a final product or whether it is the final product, and provides insight into the proportional impact of different economic actions and policy decisions.
Demand elasticities measure the change in the quantity demanded of a particular good or service as a result of changes to other economic variables, such as its own price, the price of competing or complementary goods and services, income levels, taxes.
Demand elasticities can be influenced by several factors. Each of these factors, along with the specific characteristics of the product, will interact to determine its overall responsiveness of demand to changes in prices and incomes.
The individual characteristics of a good or service will have an impact, but there are also a number of general factors that will typically affect the sensitivity of demand, such as the availability of substitutes, whereby the elasticity is typically higher the greater the number of available substitutes, as consumers can easily switch between different products.
The degree of necessity. Luxury products and habit forming ones, typically have a higher elasticity.
Proportion of the budget consumed by the item. Products that consume a large portion of the consumer’s budget tend to have greater elasticity.
Elasticities tend to be greater over the long run because consumers have more time to adjust their behaviour.
Finally, if the product or service is an input into a final product then the price elasticity will depend on the price elasticity of the final product, its cost share in the production costs, and the availability of substitutes for that good or service.
Prices are also forecast using an input-output framework. Input costs have two components; labour costs are driven by wages, while intermediate costs are computed as an input-output weighted aggregate of input sectors’ prices. Employment is a function of output and real sectoral wages, that are forecast as a function of whole economy growth in wages. Investment is forecast as a function of output and aggregate level business investment.