In September 1830, the world's first intercity passenger railway was built between Liverpool and Manchester. This 56-kilometer railway connects the port of Liverpool to the textile industry in Manchester, forming the first industrial chain of the second industrial revolution. Subsequently, the British Isles entered the famous railway rush era in industrial history. By 1945, more than 1,000 railway projects had been proposed.
But if we go back to the historical scene, we will find that in the early days of railway development, a large number of newspapers, speakers and salon commentators put forward various negative opinions on railway investment, believing that it was too much, too fast, relatively advanced, but nothing could be transported. Railroads only lead to huge waste. Eventually history gave the answer about railroads, and by then no one remembered what the critics had said.
In fact, many investments in deterministic technologies will encounter this problem during the development stage. Even if the technology direction and value prospects are fixed, there are always people who question whether the investment can be recovered in the short term and whether the construction can be applied - such as 5G.
Today, China leads the world in the scale and quality of 5G network construction, 5G terminal ownership, and 5G traffic usage. However, whether at home or abroad, many voices can be seen questioning whether 5G investment is reasonable and whether 5G is necessary for consumers. The problem, however, is that similar debates often end up in a stalemate where public opinion is reasonable and it is difficult to reach consensus.
As to whether 5G investment is heading towards success, we may need a more comprehensive and standardized basis for judgment. Fortunately, there are many business analysis models in business science that can help us solve this problem. Instead of repeatedly debating whether 5G is successful using the few cases around us, it is better to use scientific coordinates to understand the real landscape of 5G.
Many friends know the SWOT business model. However, this model is more biased towards the internal development of enterprises and technologies and lacks external judgment factors. Therefore, the SPACE matrix, that is, the Strategic Position and Action Evaluation Matrix, was created based on SWOT. It is mainly used to comprehensively analyze the internal and external environment of business behavior, so as to obtain the strategic combination that the enterprise should adopt.
Let’s do some simple science first. The SPACE matrix has four quadrants, which respectively represent the four strategic modes adopted by enterprises: aggressive, conservative, defensive and competitive. The two axes respectively represent the two internal factors of the enterprise, financial advantage (FS) and competitive advantage (CA); and the two external factors: environmental stability (ES) and industrial advantage (IS).
If we regard today's 5G as an industrial behavior and business goal, and bring it into the SPACE matrix for analysis, we may be able to more scientifically determine whether 5G is heading towards success. When facing 5G investment, should we follow the trend and wait or be proactive?
FS (financial advantage) coordinates:
5G business feedback model
The core of the internal factors in the SPACE matrix is the consideration of financial advantages. This coordinate includes factors such as investment returns, leverage ratios, liquidity, and business risks of business activities.
After 5G has been commercialized on a large scale in China for some time in 2021, we can get a glimpse of the business feedback model of 5G from the financial data of operators.
Not long ago, China's three major operators released their first-quarter financial reports. It can be seen that operators have generally achieved positive growth in revenue and profits, and the performance of the 5G consumer market has been summarized as an important supporting factor in their financial reports.
For example, the total number of China Mobile customers is approximately 940 million, of which the total number of 5G package customers has reached 189 million, and the total number of 5G network customers has reached 92.76 million. 5G has promoted China Mobile's information and communication consumption upgrade, achieving a mobile ARPU of 47.4 yuan, a year-on-year increase of 0.9%.
China Unicom's financial report shows that through 5G innovation, its mobile billing users have increased by 3.48 million to 309.29 million, and 5G package users have increased by 21.02 million to 91.85 million, effectively boosting mobile billing user ARPU year-on-year. Increased 11.5% to 44.6 yuan.
China Telecom's financial report data shows that the number of 5G package users reached approximately 111 million, with a penetration rate of 31.2%, and the number of mobile users reached approximately 356 million, with a net increase of 5.23 million. The total mobile Internet traffic increased by 43.9% year-on-year, and mobile user ARPU was 45.6 yuan, a year-on-year increase of 2.7%, achieving a stable recovery.
From the first quarter financial report data of the three major operators, we can basically conclude that the benefits brought by 5G have formed a key part of the operators' financial reports and become a key indicator to support the overall improvement of the operators' performance.
It is not difficult to find from business data that the business feedback from 5G comes earlier than market expectations, which is completely different from the direction identified by many negative opinions.
The reason is that 5G has irreplaceable competitiveness in the consumer space.
CA (competitive advantage) coordinates:
Real 5G competitiveness
The coordinate of competitive advantage mainly examines market share, product quality, user loyalty, and product service life.
Judging from these factors, 5G has a high competitive advantage in the current wireless communication network. The reason may be that the video interaction form opened in the second half of the 4G network actually always requires basic network upgrades.
Emerging application areas that are of great concern to users, such as live e-commerce, large-scale games, and live variety shows, must rely on the deterministic experience brought by 5G. Large bandwidth, large uplink, and low latency are becoming key fulcrums for users to upgrade their video and gaming experience. In other words, even with the current consumer demand supported by short videos, live broadcasts, and mobile games, 5G can bring a cross-generational experience that 4G cannot satisfy. Specific to the network experience, China's current 5G network is constructed according to the 100MHz bandwidth standard, which means that the experience of 5G users when using 5G is several times better than that of 4G.
This cross-generational competitiveness has brought about a general increase in consumption willingness. According to GSMA's early 2021 statistics, Chinese consumers' willingness to upgrade to 5G is the highest in the world, reaching 62%. The smooth 5G experience promotes users' in-depth use in multiple fields such as video, social networking, games, and live broadcasts. The proportion of high-resolution video traffic in the total video traffic under the 5G network is higher than that of 4G, reaching 29.3%, which is about 14% higher than that of 4G. This is the most direct inherent competitiveness of 5G.
Supported by this cross-generational network capability, many 5G pioneers, such as telecom operators in South Korea and Saudi Arabia, have reaped the value of 5G to a large extent and achieved industry breakthroughs compared to 4G networks. For example, in South Korea, with the explosive growth of AR/VR applications during the epidemic, the traffic of LG U+ VR business increased by 27% compared with 2019. At the end of last year, LG U+'s 5G user penetration rate reached 20%, contributing more than 40% of network traffic. In January this year, the number of new 5G users in South Korea exceeded 1 million for the first time in a single month, which is considerable for South Korea’s population and users.
In Saudi Arabia, operator Zain took the lead in CITC's 2020 Q4 network evaluation by building a low-latency 5G network. Based on the 5G network, it has greatly improved its service capabilities and user base in the gaming field.
These cases prove that 5G has real competitiveness that is different from 4G and can attract a wide range of users. On the other hand, the 5G industry cycle is still very long. Users will be more involved after switching to 5G, which will affect other users to switch and use. The competitive advantage of 5G in mobile networks is a diverse and aggregated state of development.
ES (Environmental Stability) coordinates:
A consistent 5G environment
After examining these two aspects, let us look at the external environment of 5G. The ES coordinate mainly observes the stability of the external environment of a business model and business behavior, such as technological certainty, possible demand changes, and stability of related product values.
Whether in China, East Asia, West Asia or Europe, we can see that the attitudes and development direction of 5G are very stable among countries, industrial organizations, operators, and software and hardware companies.
In China, in the past two years, we have continuously seen the introduction of 5G-related policies, and the industrial environment has stabilized and improved. According to news on May 4 this year, the Ministry of Industry and Information Technology drafted the "5G Application "Sail" Action Plan (2021-2023)". It pointed out that by 2023, the goal is to have the penetration rate of 5G individual users exceed 40% and the number of users to exceed 560 million; the proportion of 5G network access traffic exceeds 50%; the number of 5G base stations per 10,000 people will exceed 18, and more than 3,000 5G base stations will be built. Industry virtual private networks... provide good policy endorsement for the next stage of China's 5G development.
Another key external environment for 5G development is the terminal market. As of 2020, the number of global 5G connections has reached 230 million, there are more than 400 commercial terminal models, and the average price of 5G smartphones has dropped by 1/3. In 2021, as China's major mobile phone brands continue to promote low-priced 5G products to the market, it can It is foreseen that global 5G mobile phone prices will continue to decline significantly within the foreseeable range, creating a solid terminal-side foundation for network use.
With the two-way prosperity of network construction and terminal markets, 5G networks will significantly reduce the cost per bit, which basically means a deterministic traffic surge. This will give a solid support to the 5G development environment.
In the industry stage of 2021, favorable 5G policies continue to be released, spectrum resources are stable, and the goals of operators and terminal manufacturers in the industry are clear and unified. No one should doubt that 5G is a development environment for the technology industry.
IS (Industrial Advantage) coordinates:
5G’s growth potential
Finally, let’s take a look at the industrial advantages of 5G in IS coordinates.
The so-called industrial advantage focuses on the development possibilities of a business behavior in a wide range of industrial chains, such as growth potential, sustainable profitability, value feedback brought by technology, etc. The characteristic of 5G is that it has not only released energy in extremely popular business types such as live e-commerce, video variety shows, and mobile games, but is also associated with a wide range of industrial possibilities. For example:
1. Lowering the threshold for hardware: 5G mobile phones are reducing prices, and the cost for consumers to apply 5G terminals continues to decrease.
2. Refinement of services: Operators’ 5G operation capabilities are being further strengthened, and 2021 is becoming a key cycle for the refinement of 5G services.
3. Increased willingness to develop: The infrastructure for APP developers to develop new functions with the help of 5G is constantly improving, and 5G development has become a new hot word.
4. AR and VR are brewing mid-term singularity: VR equipment will become popular again in 2020 and will continue to explode this year, bringing more industrial space to 5G networks. The price of VR equipment has begun to drop to 2,000 yuan, and the popularization period of VR and AR seems to be in sight.
5. Long-term value compensation of 5G toB: In the long run, the large-scale commercial energy of 5G toB cannot be underestimated. 5G factories, 5G terminals, and 5G multimedia have all launched large-scale solutions, opening up new market space.
Combining the growth potential of various 5G industries, we can see that 5G industrial investment can be released in various ways, and there are no obvious problems or challenges with industrial advantages.
From the SPACE matrix,
Find out the path to 5G success
Comprehensive analysis of the current 5G situation from the SPACE matrix can clearly determine the aggressive form and complete wider investment in construction, which is currently the most appropriate 5G investment and development method.
From the perspective of the SPACE matrix, the development characteristics of 5G today combine the following characteristics:
Technical certainty: The development path is unified. We cannot stay at 4G or detour to 6G.
Application connectivity: The application value of video takes over the development bottleneck of 4G. Live streaming, mobile games, and VR must be improved on the basis of 4G. The application connectivity of 5G is very sufficient.
Proposal for business feedback: From the perspective of traffic, usage, and business feedback, the 5G business model is more effective than expected and has obvious business gains for operators.
The aggregation of industry momentum: hardware, software, operators, B-end customers, and various momentums form a new aggregation space for the industry. The combined forces for 5G's success are abundant.
In the late 1980s, the Clinton administration launched the famous information highway plan in the United States. But at a time when home computers were in the ascendant and the Internet was nowhere to be seen, a large number of media and commentators believed that the information superhighway was pure hype and worthless. However, the final result was that the information revolution was about to begin, and the United States once again took the global lead due to this investment.
We might as well go back to 5G and think about the significance of early investment and first development? In the face of deterministic technologies that are bound to be digested and absorbed, do we need to do more short-sighted doubts?
Embrace the future, it will give answers to many things.
