Generative AI Fuels Demand for Premium 5G Connectivity, Users Willing to Pay More

Generative AI fuels demand for better mobile connectivity - and users ready to pay for it

Quality issues with AI-driven apps are making more mobile users unwilling to settle for standard best-effort 5G network connectivity. Issues with app quality have resulted in mobile users' unwillingness to settle for "best effort" 5G network connectivity, with some generative artificial intelligence (Gen AI) users willing to pay a premium for guaranteed performance. About 35% of 5G users will consider paying more for differentiated connectivity that guarantees better performance for essential tasks, revealed a study released by Ericsson. This number is 1.5 times more in densely populated markets such as Thailand, India, and Brazil, compared to the global average, according to the online survey, which polled more than 23,000 smartphone users, of whom 17,000 were 5G smartphone users from 16 markets, including Australia, France, Singapore, South Korea, Thailand, China, the UK, and the US. Also: 5G to hit 5.6 billion subscribers in 2029, but 4G will remain dominant in three regions "These are mobile-first markets, where reliance on mobile connectivity is particularly strong," Ericsson said. "In these markets, elevated demand for differentiated connectivity could be attributed to the need for improved capacity, rather than general network inadequacy." The telecom equipment manufacturer estimates that the market potential for differentiated connectivity is about 35% of 5G users across the 16 global markets. However, tapping this market will require service providers to offer segmentation strategies that identify key consumer groups, such as those who are more willing to pay for differentiated connectivity and require tailored service offerings. The study suggests that 5G users are willing to dig into their pockets to get differentiated connectivity for core services, such as video calls for work or personal reasons and streaming various media formats. They will pay the highest premium for niche services like multiplayer mobile and cloud games and dedicated augmented reality (AR) apps. For instance, 5G users in Singapore will pay the highest premium for creating and uploading content, while their peers in the US will pay the most for games as well as AR and Gen AI apps. In fact, a quarter of Gen AI users already expect guaranteed performance, such as real-time response, and will pay up to 35% more compared to other app categories. "Gen AI capabilities are increasingly integrated into popular apps such as TikTok and Snapchat, while new AI-driven apps for image and video upscaling or generation are set to add substantial mobile traffic in the near future," Ericsson said. Also: Like 5G, telcos must seek commercial use cases to move GenAI forward "We anticipate a substantial increase in Gen AI usage over the next five years, with an expected 65% of weekly [smartphone] users engaging with these applications," it said, citing its own research. "This trend will likely place new demands on 5G networks, as Gen AI apps are expected to drive an increased need for higher uplink speeds and low latency to meet user expectations for responsive and seamless experiences." Further integration of Gen AI capabilities in XR devices, such as futuristic AR glasses, will drive new demands on mobile networks, in particular, for uplink traffic. Demand for fast, reliable uplink also will climb with more AI-powered features on smartphones and products, such as Meta's Ray-Ban smart glasses, which run on multimodal AI. Also: 5.5G touted as the network to bring improved enterprise connectivity "Service providers must prepare for shifts in both expectations on 5G performance and network traffic with rising demands on uplink, downlink, and low latency as Gen AI usage grows," Ericsson added. It is unsurprising then that frequent issues with app quality, including at crowded and high-traffic locations, have resulted in four in 10 users no longer willing to accept best-effort 5G network performance. As it is, 30% have experienced inconsistent connectivity underground, while 26% report slower speeds at indoor locations.

Ericsson Survey Sees AI Apps Driving Demand for Differentiated 5G Connectivity Plans

CSPs can boost 5G ARPU by 5-12 percent by offering performance-based connectivity plans. 5G Smartphone users using Generative AI (Gen AI) applications are willing to pay more for differentiated connectivity. A new global study by Ericsson ConsumerLab reveals a surge in demand for differentiated connectivity as 5G users increasingly adopt Gen AI applications. According to the report, differentiated connectivity refers to guaranteed, uninterrupted, high-end connectivity when you need it most. A global survey found that one in four Gen AI users are willing to pay up to 35 percent more for differentiated connectivity to ensure fast and secure connectivity for high-capacity AI apps. Also Read: Telcos Have Reached a Saturation Point with Limited Monetisation Prospects? The report, "Elevating 5G with Differentiated Connectivity," finds that the number of smartphone users engaging with generative AI apps on a weekly basis is set to grow 2.5 times over the next five years. Ericsson notes that this category joins existing differentiated connectivity use cases, such as video calling, streaming, and online payments, for which smartphone users say they are willing to pay a premium. Ericsson's research shows that 35 percent of 5G smartphone users surveyed would be interested in paying for differentiated connectivity for essential applications. The report highlights regional differences, with markets such as India, Thailand, and Saudi Arabia showing double the share of smartphone users interested in differentiated connectivity compared to markets such as France and Spain. The findings also point to a revenue opportunity for Communications Service Providers (CSPs) as they shift toward performance-based business models, potentially boosting 5G ARPU by 5-12 percent. Also Read: Nokia Acquires Rapid's Technology Assets to Expand Network API Ecosystem Ericsson notes that, contrary to the belief that users will not pay extra for connectivity, the survey identified 20 percent of users, known as 'Assurance Seekers', actively seeking elevated connectivity for critical applications and are willing to pay for it. Jasmeet Sethi, Head of ConsumerLab, Ericsson, says: "The latest comprehensive Ericsson ConsumerLab research indicates that as AI-powered applications become more prevalent, users' expectations for enhanced connectivity are rising. This reflects consumers' expectations for AI apps' future capabilities - perhaps relating to image, audio or video generation - and their willingness to pay for those capabilities to perform in a speedy and high-quality way. This signals an opportunity for CSPs globally to meet this demand through tailored connectivity experiences." Also Read: Global Telecom Operators Launch New Network API Venture Sethi says the differentiated connectivity revenue generation potential for CSPs will increase as they transition to performance-based business models, offering tailored subscriptions and plans with assured performance for different consumer segments in the market. "This shift could drive a 5-12 percent uplift in 5G ARPU (Average Revenue Per User) as users seek guaranteed reliable performance for specific applications," he says. "Additionally, there is an opportunity to unlock new revenue pools from the significant demand among 5G users for high-performance apps with one-in-three 5G smartphone users willing to reallocate 10 percent of their current mobile app spend to purchase apps with in-built elevated connectivity. By exposing Quality on Demand (QoD) network APIs (Application Programming Interfaces) to developers, CSPs can tap into this demand, enabling developers to offer premium, high-performance experiences and unlocking new revenue streams in the process." Also Read: Ericsson Enhances Focus on AI, Gen AI and Network APIs at India R&D Centers More than 23,000 smartphone users between the ages of 15 and 69 were surveyed online for the research, more than 17,000 of whom were 5G smartphone users from 16 key markets globally. Ericsson researchers say the survey is representative of 1.1 billion people, including 750 million 5G smartphone users. According to Ericsson, surveyed 5G users came from: Australia, Brazil, Canada, Mainland China, France, Hong Kong, India, KSA, Singapore, South Korea, Spain, Taiwan, Thailand, UAE, United Kingdom and the United States.

Generative AI Apps Drive Demand for Premium 5G Connectivity: Ericsson

The CSP-focused report also addresses revenue generation opportunities for service providers based on the survey research. Jasmeet Sethi, Head of ConsumerLab, Ericsson, says: "The latest comprehensive Ericsson ConsumerLab research indicates that as AI-powered applications become more prevalent, users' expectations for enhanced connectivity are rising. This reflects consumers' expectations for AI apps' future capabilities - perhaps relating to image, audio or video generation - and their willingness to pay for those capabilities to perform in a speedy and high-quality way. This signals an opportunity for CSPs globally to meet this demand through tailored connectivity experiences."