L1 Technology believes that 2019 will largely be the year of 4.5G

The telecoms industry debate about 5G will continue throughout 2019.

Unlike previous generations of wireless technology, 5G represents an evolutionary development.

In between 4G and 5G, there is a so-called transitory “4.5G”, which is an extension of 4G already enabling some of the 5G features, such as efficient “internet of things” connectivity and higher data rates.

While 5G is gaining ground faster than expected, L1 Technology believes that 2019 will largely be the year of “4.5G” where operators will focus on maximising the value of their 4G investments, stretching the existing capacity, and moving towards more software-defined (virtualised) networks.

For many operators, the moment of truth will come when it is time to decommission their old legacy 2G and 3G networks. For this reason, telecoms companies are already incentivising their customers to migrate to 4G. L1 Technology expects 2G and 3G networks switch-offs to happen in 2020-2022 in developed markets, and from 2022 in developing markets.

On the network equipment side, the industry is still struggling to diversify their supplier base with trade wars and sanctions against certain vendors complicating the issue. As a result, L1 Technology believes that major European and US vendors may benefit from a global market share re-distribution.

The telecoms industry network vision is focused around “software is the new hardware” mantra. However, while 5G promises to deliver the new technology, mainstream connectivity services and core IT systems remain to be telecoms operators’ main responsibility. Therefore, transforming them is crucial to harness the promise of new revenues in a 5G era.

Alexander Pertsovsky

Managing Partner L1 Technology