By Tanya Seda
In our line of work, we spend a lot of time digging through invoices and contracts to identify and validate costs. Almost always, we find things that are wrong, shouldn’t be there, or can be optimized, often for substantial savings. Because of this focus on the details, we’ve been researching the rapidly increasing speed to which businesses are moving to incorporate 5G into their corporate networks. And we’ve found a surprise or two!
From both international sources and here in the US, we’re hearing about operating expense increases due to the new technology. One of the unexpected costs we’re beginning to see is the added expense to power the network—good old electricity. As it turns out, these electricity costs are very significant and must be added to the project cost, as well as the ongoing total cost of ownership. Industry reports show 5G base station consumes up to twice the power (or even more) of 4G base stations. The disparity grows at higher frequencies, due to a need for more antennas and a denser layer of small cells.
Add to this the expansion of edge computing facilities to support local processing and new Internet of things (IoT) services, you’ve got a double hit to network power usage. Typically, when considering electricity costs, a rule of thumb is that 5-6% of overall operating expenses will be for utilities. As a side note, it’s interesting to consider that for operators in the majority of countries rolling out 5G, an increase in data usage is not increasing average revenue per unit (ARPU).
As we continue to watch the 5G world grow, it is plain to see that additional energy costs will need to be taken into account; data consumption will continue to grow even as ARPU continues to decline. As the telecom providers’ margins dip, we need to stay vigilant around how 5G will be priced out. We will continue to closely monitor the 5G rollouts as they happen and see whether the unit economics will be enough to offset what is not a challenging corporate business case.