External Identities licensing

After some more reading it appears that Premium is indeed required.

The pricing tier that applies to your guest users is based on the highest pricing tier assigned to your Azure AD tenant. For example, if the highest pricing tier in your tenant is Azure AD Premium P1, the Premium P1 pricing tier also applies to your guest users. If the highest pricing is Azure AD Free, you'll be asked to upgrade to a premium pricing tier when you try to use premium features for guest users.

https://docs.microsoft.com/en-us/azure/active-directory/external-identities/external-identities-pricing#about-monthly-active-users-mau-billing

Now the question is how does this new model work compared to the 1:5

In the 1:5 you would assign a Premium licence to users based on how many guests you needed.

In this new model how is the Premium license assigned? 

FAQ https://azure.microsoft.com/en-au/pricing/details/active-directory/external-identities/