Unlocking the value of 5G in the B2C marketplace

Telco operators typically seek to pack their networks with as many customers as possible, while other sectors, such as airlines and hotels, occasionally leave space open. These empty seats and rooms may present as lost opportunities, but in fact they are inevitable by-products of yield management: an approach to price optimization that telcos have been largely unable to pursue during the 3G and 4G eras.

The rise of 5G, however, has the potential to change that—paving the way for a significant shift in how telcos engage with customers. As the telco industry confronts a surge in network traffic volume, a massive proliferation of connected devices, and a future built around widespread automation and augmented reality (AR), carriers are facing a new opportunity to charge customers for what 5G promises and delivers.

Operators have already identified the enormous value that 5G core can bring in the B2B arena, and on this basis the 5G revolution is already under way. In the B2C market, however, the value proposition of 5G remains murky.

While 5G boasts dramatic improvements in specific areas—the technology can vastly improve the gaming experience, for example, by reducing lag time, and it can allow people to stream high-quality video from just about anywhere—there is currently no 5G use case compelling enough to transform the everyday consumer’s life. Potential “killer apps” may emerge, prompting large swaths of customers to pay extra for supercharged connectivity. But without knowing whether and when these apps will appear, telcos are struggling to put a price tag on 5G for consumers.

Despite this backdrop of uncertainty, there is a suite of promising innovations—including, but not limited to, yield management—that could allow telcos to monetize 5G in the B2C marketplace in the near term. Based on McKinsey’s experience working with telco operators across the globe, as well as on several recent surveys, including a survey of 2,400 customers in six countries that we conducted in April 2021, telcos have a clear path to monetize 5G in the B2C sector. Companies that want to stay ahead of the competition should consider investing in 5G core now.

The urgency of the moment

The 4G evolution changed the world. Suddenly, people could use their smart phones to order dinner, call a cab, post to social media, refresh their wardrobe, or watch a movie. Entire industries shifted and sprang up around this sea change, which the telco industry made possible.

The anticipated 5G evolution is poised to reshape the world again. But this time, carriers are positioned to capture the value they create. Only now does the technology exist to manage customers in real time, offer (and charge them for) precisely what they need, and create opportunities for expansive partner ecosystems.

Just a few years ago, simplicity was paramount for customers. They may have rejected pay-per-use connectivity boosts, for example, or the notion of paying each content provider separately for the premium connectivity specific to their game, app, or experience. However, as people’s digital lives become more robust and complex, customers are growing more comfortable juggling multiple devices and content subscriptions. Increasingly, they are embracing the kind of immersive, interactive experiences that may have seemed like science fiction only a few years ago. Telcos that invest in 5G core are in a position to meet these and other needs, at a time when the opportunities for monetization are ripening.