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The 5G Race: Will the Need for Speed Win? Or Will Carriers Continue to See Churn?

TransUnion
Blog Post05/12/2021
Business
The 5G Race: Will the Need for Speed Win? Or Will Carriers Continue to See Churn?

US carriers vying for the same airways to increase spectrum have pushed auction bids to a record $66.4 billion. With fierce competition to buy spectrum licenses, big telecom companies like AT&T and Verizon are taking center stage as the 5G wars rage on.

But ongoing moves by the FCC to release spectrum for auction has been met with mixed sentiment.

Proponents like CTIA say that since the spectrum is globally harmonized, economies of scale will allow it to be quickly put it to use in US-based 5G networks, reducing network deployment and consumer costs.

Critics like WISPA (Wireless Internet Service Providers Association) say the competition for spectrum could reduce competitiveness in the market. The organization is vying for the requirement that no single entity can acquire more than one-third of the spectrum in a geographic area. Bidders of all sizes, including smaller ones, could then acquire the highly sought-after mid-band spectrum, thereby encouraging the creation of a more competitive wireless landscape, they say.

Cellular carriers of all sizes, however, must ultimately find ways to offer the new 5G service to the end-consumer at competitive pricing. Otherwise, they might find themselves facing a new twist in the consistent battle against churn. A recent TransUnion study of consumer financial behavior looked at what would be necessary to reduce churn in the Telecom Industry. The study revealed that consumers continue to look to the lowest pricing along with performance as a key component of their decision to switch cellular carriers or not.

Even consumers with high levels of satisfaction can’t be considered a lock; 12% of those respondents who indicate they are extremely satisfied with their cellular provider are considering switching.

Cellular Consumer seem to be more satisfied and less likely to consider switching

Even consumers with high levels of satisfaction can’t be considered a lock; 12% of those respondents who indicate they are extremely satisfied with their cellular provider are considering switching.

More specifically, 21% of Gen Z who are considering switching say this is primarily due to lower pricing available elsewhere, making it the top reason given by this youngest group of consumers. This constituency grows with age — 35% of Millennials, 46% of Gen X and 59% of Baby Boomers cite pricing as their primary reason for switching carriers.

At the same time, for Gen Z, 5G was among the top five cellular attributes to influence a decision for one carrier over another. Gen Z, the youngest generation, uniquely listed 5G service in this top five ranking.

Network coverage, speed, and pricing are the largest reasons to go with a carrier

That said, the youngest consumers still have the greatest propensity to switch, even given their focus on 5G as a top five attribute since younger generations are less likely to be very or extremely satisfied with their cellular provider in comparison to their older counterparts. It remains to be seen, therefore, whether Gen Z and other generational groups are willing to pay a premium for access to 5G bandwidth.

The sweet spot for carriers, however, might just be the already high demand for streaming services. According to Deloitte’s recent “Connectivity and Mobile Trends Survey,” close to half of Millennial and Gen Z respondents indicated that 5G will allow them to watch streaming video on their mobile devices more than ever before. Specifically, if 5G were available, more than 40% of Gen Z and Millennials would play more mobile video games and about 35% would use AR/VR, according to the Deloitte study.

Also according to the survey, however, these younger generations are more likely to consider switching even with high levels of satisfaction with their carriers. For these groups to consider bucking the trend, the need for lower pricing will soon have to have to take a back seat to demand for 5G performance.

Younger generations are more likely to consider switching even with high levels of satisfaction with their carriers

Putting these findings and the 5G bidding frenzy into context, there are multiple challenges that lie ahead for cellular carriers.

If the bidding war in the US follows a similar trajectory as the UK’s spectrum auction, which recently ended with winning bids totaling a staggering $35.4 billion, carriers may have challenges ahead to make the 5G service affordable for US consumers. Or, on the flip side, demand for 5G streaming services may just become the outlier.

Will younger consumers, who typically own the largest number of connected devices, choose performance over price? Will they definitively have to make that choice? Projections seem to be saying “yes.” If so, the industry could quickly see increasing demand for 5G across all generational groups as younger consumers drive market demand overall. If not, we might just see more gradual 5G adoption rates as demand for lower pricing across all consumers of all ages remains the top priority.

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