Spotlight: The expectations and challenges for 5G in Chile

There are promising expectations for 5G in Chile and growth in these connections is forecast to be in line with the global average despite the various challenges that remain to be overcome.

Entel and Movistar have already announced that they have switched on their 5G networks and they expected to end January with 400 base stations in operation.

Claro, meanwhile, confirmed to BNamericas that it is also starting to roll out its 5G network in the country with a focus on B2B services.

The various companies aim to deploy some 9,000 5G antennas over the next three years, but operators do not have an easy road ahead to achieve this and to continue expanding the market, as supply chain disruptions exacerbated by the COVID-19 pandemic have continued into 2022.

“The situation we see today is dynamic. Last year we thought that by the middle of 2022 it would already be resolved, but now with the new Omicron variant we expect that it will be closer to 2023 when things return to normal," José Ignacio Díaz, senior telecommunications analyst at IDC Chile told BNamericas. 

Díaz said the interruptions in the supply chain have meant delays of up to 120 days in the delivery of equipment for mobile networks.

The shortage of chips has apparently not had too much impact on the availability of 5G smartphones – although perhaps it has affected the offering of cheaper devices – but it certainly has impacted the supply of 4G phones, which is and will continue to be the dominant technology for some years to come in in Latin America.

Most of the 5G mobile phones marketed in Chile currently are high-end models. "Even so, we see that 5G phones are entering the mid-range, especially from Chinese brands," Diaz said.

The pandemic has also delayed the definition of 5G standards. Although the final standard for the technology is already been outlined in the group of 3GPP standards, specific standards for IoT services and convergence between 5G networks and satellites have yet to be defined.

In any case, IDC has raised its global growth expectations for lines connected to 5G over the next five years because very rapid adoption is expected once the technology is available.

Today there are 700mn 5G lines in the world, including mobile IoT, broadband and telephony connections. By 2025, IDC projects there will be 4bn 5G lines, which would be a compound annual growth rate (CAGR) of 93%.

Although IDC did not share figures for Chile, Díaz said that the expectations are in line with global figures.

THE GREAT OPPORTUNITY IN B2B  

One of the biggest business opportunity for telecommunications operators is in services aimed at companies.

A first approach to this market is to offer edge connectivity to companies that have employees working remotely. “With the pandemic we have seen how companies and educational institutions provided mobile connectivity to those people who might not have good fiber optic or HFC [cable modem] connectivity at home,” said Díaz.

IDC estimates that the use of mobile services as a backup for fixed connectivity may continue to grow in the coming years with a migration to 5G, which provides better speeds, latency and performance.

The consultant expects the business networks of the future to be hybrid, that is, including traditional, SD-WAN and mobile connectivity.

But the biggest opportunity for 5G is in IoT. "In Chile, the growth of IoT in mining has already been strong," he pointed out.

IDC forecasts a CAGR of 23% in connectivity for the next few years, as well as 25% for software and 20% for IoT-related hardware.

Díaz also sees an opportunity in private 5G networks, particularly in the mining sector, which is already working to facilitate its operations with 4G and 5G services.

Companies such as Gold Fields and Codelco have already started tests with both 4G and 5G networks.

IDC also expects the adoption of private networks in the salmon industry.

"Now, connectivity is one thing, but the other is added value, and it will be important there how the operator associates and generates a good ecosystem of partners that helps it implement value solutions," Díaz said.

OFFERING ADDED VALUE TO THE FINAL CONSUMER

In the mass market, the challenge for the Chilean mobile industry is to have customers renew their mobile devices so they can access 5G networks.

While in December 2015, 20% of the devices in Chile were 4G and the rest 3G, by December 2021, IDC estimates that 92% of devices were 4G.

The problem is that the devices that are currently marketed with 5G are high-end models and are accordingly expensive.

The other challenge is to associate with applications to give added value to the client and be able to achieve an increase in the amount that users pay on a monthly basis.

"Although it is true that in Asian countries it has been possible to raise the prices of plans, in other countries it has been more difficult," Díaz pointed out. it is for this reason, he added, that in Latin America the opportunity lies in forming partnerships with applications.

Although 5G fixed broadband (FWA) does not seem to be a priority for Chilean operators because the country already has high levels of fiber optic penetration, IDC does expect growth in FWA to provide last-mile connectivity in remote areas.

For example, around 50 districts in Chile have almost zero connectivity levels.