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The big reason the Metaverse will be limited

December 5, 2022 | Much has been written and said about the metaverse in recent months. Aside from the poor financial results from Meta mainly due to its large investments in the metaverse that have not paid off (and the subsequent drop in the company’s market cap), just about every conference I go to recently seems to have discussion of the metaverse and how it will change the world. Time frames vary for this transformation to kick in but are usually later this decade. Some people believe that the real value of 5G networks will be in enabling the metaverse, while others point to 6G.

To me, there are multiple issues with the metaverse, aside from the amount of development that is needed – remember that the avatars in the initial release did not have legs! Small oversight that…. We have researched the cost of upgrading the mobile networks to be able to deliver the bandwidth needed and presented the results in a series of briefs. The costs for the mobile network alone are significant at about six times the current annual capital network investment (not including the cost of additional spectrum). And this does not include the cost of the end user devices, including the VR headsets.

The mobile operators have not done a good job over the last few decades of getting users (consumers and businesses alike) to pay for network upgrades and improvements and new spectrum investments. Despite the amount of bandwidth consumed on mobile networks increasing exponentially, the amount each consumer pays (ARPU) has declined steadily and shows little sign of increasing any time soon. Some say that the MNOs will soon start offering new services that will generate new revenue streams, but these have yet to materialize and I am skeptical.

The result is that the major operators are carrying ever increasing amounts of debt. Each new spectrum auction has us wondering if this is the time when the large U.S. operators shout ‘Enough!’ and do not bid. We have not seen this yet, but it is unlikely that a future auction tops the amount spent in the C-Band auction.

So if the metaverse is going to require significant mobile network investment and the MNOs are unable to source the necessary capital without an increase in user spending, how will the metaverse improvements be funded? It seems unlikely that consumers will pay more for 5G or 6G just to get the metaverse at present. And any advertising dollars that come from the metaverse are unlikely to find their way back to the MNOs any time soon.

In Europe, the mobile operators are already calling time on the current arrangement where they invest in networks and the large tech companies reap the rewards. Several telecom groups have lobbied to have the tech companies pay for network use and some countries have expressed interest in the idea. The EU is planning a commission to investigate, maybe starting in 2023. Any results from this are likely years away.

So what is the likely outcome? In iGR’s view, the metaverse will be developed for enterprises and businesses, perhaps using private networks. And home or business use on a Wi-Fi and broadband connection seems likely. But mobile access to the metaverse is likely years away, unless ‘access’ means some type of low bandwidth, low resolution solution. Field worker solutions using augmented reality and 5G connections are already in use, but this is not the immersive experience planned with the virtual reality metaverse. So any business plans that depend on significant use of the metaverse by millions of people in the next five years is, in our view, likely to fail. The end result is that the metaverse that evolves out of this is probably going to be quite different from the original promise. As is the case with many things in tech :)

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