Network Value Drivers in a 5G World

5G upends many assumptions about the wireless industry. From the consumer perspective, speed, latency and number of connections will far surpass current expectations. From network operators’ perspective, integrating previously unusable mmW (mmW) and upper mid-band frequencies and significantly increased demand for backhaul will rearrange the relative value contribution of these network components. Traditional valuation relationships will change and will require updating in a 5G world, such as the economic relationships that drive spectrum and backhaul value. Although the rules of value creation have not changed, the realization of value creation is changing. In particular, based on FCC auction data, this paper empirically evaluates the factors that influenced value of traditional wireless spectrum and evaluates whether the same models can be applied to make value inferences for mmW spectrum bands, as well as the change in relative value between urban and rural geographies. We find that the factors that explain spectrum value for lower and mid-band spectrum are not the value drivers for the mmW spectrum, and do not perform well in explaining the geographic variation in value either.