The correlation between radio access network (RAN) infrastructure revenues and mobile data traffic growth is weak (mobile data traffic is up >1,000x since the 3G iPhone was released while the RAN market is lower now than in 2008), yet the fate of the timing and the magnitude of the 6G ramp will be largely dependent on the mobile data traffic growth trajectory.
Both 4G and 5G have failed to alter the flat carrier revenue trajectory that has help to shape the mobile infrastructure market for over a decade, but there are some key differences between them.
User experience
First, 4G improved the user experience, with end users as the primary beneficiaries due to a noticeable performance boost. In contrast, the performance gains with 5G are marginal, and its primary objective is to enhance cost efficiency and expand capacity. While consumers benefit from larger data packages with 5G, the combination of large swaths of upper mid-band spectrum and technological advancements that enable operators to essentially leverage existing site grids underpins a fundamental shift in mobile data delivery economics for the telcos.
Another key difference between 4G and 5G is the gap between vision and reality. While the hype surrounding new technologies is nothing new, early 5G discussions may have placed too much emphasis on low-probability use cases. As a result, the disconnect between expectations and actual outcomes may appear more amplified with 5G.
Managing expectations
As we look ahead to 6G, it will be crucial to manage expectations and align investments with revenue-generating opportunities while realistically assessing the likelihood of new use cases achieving mass adoption. The industry should continue to think ambitiously about 6G-era opportunities and the potential for integrating the physical, digital, and human worlds, as outlined in Nokia’s 6G vision paper. At the same time, it is essential to distinguish between visionary concepts and low-probability use cases when forecasting the future of 6G.
Similar to 5G, the base case is that 6G is for the telcos. This does not mean enterprises or consumers will not benefit. But it does mean that from a financial perspective, the business case for investing in 6G should mostly be justified based on the cost efficiency improvements and capacity upside.
The industry should continue debating the use cases and the value of 6G. However, the ROI analysis is more straightforward if the operators consider the probabilities of the various scenarios and tilt the focus between the known and unknown revenues.
In contrast to previous technology shifts, the sensitivity to changes in mobile data traffic trends will be more pronounced with 6G. Investment requirements will largely depend on the state of the existing mobile broadband (MBB) networks and the expected demand. If mobile network traffic (mobile plus fixed wireless access) continues to grow ~15% per year on average, the network will start running into utilization problems by the end of this decade.
At the same time, the successful introduction of a new mobile augmented reality device for the masses could boost data traffic growth and accelerate the need for RAN capacity. Similarly, mobile data traffic CAGRs of 0% to 10% would completely change the picture and the 6G business case. In this scenario, the existing spectrum might be good enough until 2035, delaying the need to invest in new technologies and spectrum.
The tradeoffs
The fundamental tradeoffs that underpin the RAN toolkit do not change in the 6G era. Once the operators run out of capacity, they have three high-level options:
- Expand the capacity using new spectrum
- Expand the capacity using the existing spectrum, or
- Throttle the users.
And given the delta in the expected 6G RAN ascent between the new spectrum macro first approach, refarming the existing macro grid, and densifying with small cells, it is clear that the deployment strategy will significantly impact 6G and the broader RAN market.
In other words, 4G primarily benefited consumers, while 5G's upper mid-band deployment was essential for the telcos (2 GHz spectrum was not enough).
Similar to 5G, 6G is unlikely to provide significant consumer benefits, and the telcos will be the primary beneficiaries. But in contrast to 5G, the need for the telcos to invest in 6G will come with caveats, and there is no way around it — the mobile data traffic trajectory will play a crucial role in determining the scale and timing of 6G deployments.
Stefan Pongratz is VP and mobile infrastructure analyst at Dell'Oro Group, where he leads the company's research programs for the Radio Access Network (RAN) market and Telecom Capex. Pongratz joined Dell'Oro in 2010 and has written for the Dell'Oro blog, including a March 2024 article on the impact of the pandemic on the worldwide telecom equipment market.
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