Operators are making full use of 4G, so what about 5G?

In the early stage of 4G development, the dividends brought by population and traffic once made operators enjoy the pleasure of eating the front abbot. Unfortunately, now the weak income growth and the increase in network maintenance costs have brought huge pressure to operators, and "increasing volume but not increasing revenue" has become an inevitable reality for operators.

As this market has become a red ocean, let us first take a look at what the operators have experienced in the 4G era.

[[232283]]

Early 4G period: some missed the opportunity while others took the lead

As early as the early stages of 4G development, China Mobile took the lead in promoting the 4G brand and actively promoted 4G commercial use.

• In terms of users, China Mobile cooperated with terminal manufacturers to launch a number of mid- and low-end 4G mobile phones, and increased subsidies to encourage a large number of 3G users to migrate and upgrade to 4G, laying the user foundation for subsequent development.
• In terms of packages, the traffic proportion of China Mobile's 4G packages has increased significantly, but the traffic price has been reduced by nearly half compared with the 2G/3G period. It has launched 4G Feixiang packages, 4G Internet packages, 4G self-selected packages and separate Internet traffic packages; and launched upgrade plans for old users of Global Communication and Business Travel packages. The packages fully cover users with different needs.
• In terms of infrastructure, China Mobile had built 720,000 4G base stations in 2014, far exceeding the total number of 4G base stations of its competitors during the same period, providing smooth network services for its huge number of users.

Since China Unicom was allocated the largest WCDMA network in the 3G era, it did not invest heavily in 4G infrastructure in the early days of 4G. Despite the aggressive approach of competitors, China Unicom still built 160,000 3G base stations in 2014, but only built 93,000 4G base stations. China Unicom upgraded its 3G network to 42M and developed users with the "3G/4G integration" plan. In terms of marketing, it used contract phone package discounts and free data for stock upgrades to attract users. In terms of package settings, it mainly promoted 9 levels of 4G national packages, 4G combination packages that allow users to purchase voice packages, data packages, and SMS packages separately according to different needs, and local packages including provincial data.

China Telecom was quite cautious about 4G, and did not officially launch 4G marketing until the FDD trial license was issued in early 2015. Telecom mainly promoted the Enjoy 4G package, 4G Building Block package and 4G pure data cloud card, and combined the advantages of fixed network to create the "4G double 100M" marketing slogan. However, due to the limitation of CDMA network standard, the number of 4G terminals supporting Telecom package is very small, which has buried a hidden danger for Telecom's 4G development.

Although China Telecom and China Unicom hoped to develop their business by combining their own advantages in the early stage of 4G, they did not expect that within a few months of hesitation, they would quickly open up a huge gap with China Mobile's 4G development. As of 2015, China Mobile's 4G users have reached 300 million, while China Unicom, which relies on 3/4G hybrid network development, has only 44 million 4G users, and China Telecom, which is limited by the network standard, has only 58 million 4G users. In terms of revenue, the total profit of China Telecom and China Unicom combined is less than 30% of China Mobile's. Such a huge gap makes both China Unicom and China Telecom sweat.

Later stage: Start the battle of grabbing users with low-priced packages

In order to seize more market share and save its own income, China Unicom took the lead in launching daily rental cards in August 2016. The slogan of "500M for 1 yuan, no need to spend" brought a huge impact on traditional 4G packages. China Telecom followed suit and launched the "Tianyi Daily Rental Card" with a daily rental of 800M for 1 yuan.

In March 2017, China Unicom took the lead in launching the unlimited data "Ice Cream Package". Compared with the 4G packages with fixed data quotas, the unlimited data package allows users to save data without being cautious about saving data, fearing that a picture or a video will cause the package data to exceed the limit. In May of the same year, China Telecom also launched an unlimited data package, and combined the advantages of fixed networks to bundle fiber broadband and high-definition TV to form a fusion package, and used the marketing method of giving away secondary cards to quickly occupy the family market that can develop multiple users at one time.

In 2017, China Unicom once again innovated and actively cooperated with Internet companies to launch the first "Internet card" - Tencent King Card. The biggest advantage of this Internet card is that it can be used to waive the flow of various apps under Tencent, so that users do not need to trigger the daily rental flow in many cases, and can even be exempted from the flow charge. Taking advantage of Tencent's strong Internet appeal, Tencent King Card was quickly promoted and spread among users, turning China Unicom's net increase in users from negative to positive, and becoming a landmark product in mobile phone packages.

At present, China Unicom and China Telecom have launched more than 130 types of Internet cards. In the context of cooperation with Internet companies, operators can quickly expand their user base and use the advantages of Internet companies to achieve twice the result with half the effort in publicity.

As of the end of 2017, China Unicom had 175 million 4G users, and China Telecom had 182 million 4G users. Although these numbers are dwarfed by China Mobile's 650 million, the two operators have emerged from their difficulties and opened up a new path.

After 5G commercialization: What can operators do

In the 4G era, operators racked their brains to "sell traffic", from daily rental cards that do not deduct fees when not used to targeted video traffic, and then to unlimited traffic that can be used at will. However, with the development of video applications, games, and e-commerce, users in the 5G era will have an increasing demand for traffic. In 2017, the average monthly traffic of mobile users in my country reached 1.77GB, 2.3 times that of 2016, and this data reached 2.75GB in December 2017. According to relevant agencies, by 2020, global mobile data traffic will increase to 8 times that of 2015, and the average traffic per household will exceed 4GB/month.

Faced with the rapid growth of user traffic and the homogeneity of product competition, what changes can operators who do not want to become "plumbers" do?

• Launch more refined products for segmented markets. For example, differentiate customers by age. Currently, there are phone watch packages for children and teenagers, and home-school communication services for school students. For young people, they are more promoting unlimited fusion packages and video overlay packages bundled with membership rights, but there is still a gap in the elderly market. In the context of China's aging population, many elderly people have also begun to use mobile phones to access the Internet. Filling the middle-aged and elderly market may be a new direction.
• Transform from traffic management to content management. In recent years, the development of the Internet and OTT industries has brought considerable impact to operators. The huge traffic has brought great pressure to the operators' networks, but Internet companies do not need to pay any maintenance costs for this. Therefore, operators can actively consider cooperating with excellent Internet companies, learn from and develop their own high-quality content in the fields of video, music, e-books, games, etc., and obtain the value of traffic.
• The speed limit threshold of unlimited products has been raised. The competitive point of unlimited traffic packages is actually the speed limit threshold. In order to ease the burden on the network, some unlimited products set the speed limit threshold at a lower level of 10G or 15G, or add directional video traffic to the package as compensation. The data obtained by China Unicom in the 5G base station test in Guizhou showed that the peak downlink rate of the 5G network reached 1.8Gbps. Obviously, the lower speed limit threshold cannot meet the needs of users. Only by improving infrastructure construction, increasing network load capacity, and launching unlimited products with high speed limit thresholds can we escape the swamp of price wars and stand out.

Future: 5G commercial market is worth a try

Although the cost of 4G has not been recovered, and the dilemma of increasing volume but not increasing revenue is tiring, operators have to step up their efforts to build 5G, because consumers will only choose faster and better network experience, and if they hesitate, it may be difficult to catch up. With the advent of the 5G era, the operator market structure may be subverted again, which makes us look forward to the coming era.