The fifth generation of mobile phone networks is essential for the internet of things and self-driving cars to become a reality but before that operators need to assure themselves that the rollout of the network will be profitable.
One of the big stars of the latest Winter Olympics was 5G technology. Viewers of a number of the events held in Pyeongchang in South Korea were able to follow those events live in virtual reality due to wireless technology. Several multinationals such as Intel and Samsung took advantadge of the games to show off their advances in fifth generation (5G) mobile telephone network technology.
This is just a first step. 5G is destined to have a huge economic impact way beyond that of sport and show business. But there are also obstacles in the way of its mass rollout, the solution to which is not easy to see.
Why is 5G so important? One of the big advantages is the speed of transmission. The aim is to reach a speed of transmission of a gigabit per second and latency (in telecommunications this is the sum of the lags in a network during data transmission) of below 10 milliseconds.
This speed makes 5G the tool that can allow the internet of things (IoT) to become an everyday reality. Devices will share information non-stop and in the moment involving a volume of data that today is technically impossible. Self-drive cars will probably be the most important application of this progress.
So, 5G will change cities, homes, offices and factories… but when? The technology is almost ready, but the problem lies in the economic costs of rolling out the network, which has sown doubts in telecommunications operators.
Requirements for the rollout
The rollout of networks is expensive. Although technically 5G is not standardized, it is taken for granted that data ‘will travel’ in highest radiofrequencies, which means that the transmission range will be short. The shortest wave lengths suffer more on going through buildings and overcoming obstacles. As a result, the transmission network will need more capillarity. This means 5G needs more antennas, base stations and fiber optic cable that the previous technology 4G which was launched in the market at the end of the past decade.
Operators, who will have to assume all of the investment for this, don’t see things very clearly. The global association GSMA, conducted a survey in 2017 of more than 750 chief executives in the telco sector in which over half of those interviewed saw the lack of a clear business model as the biggest impediment in rolling out the 5G network. Paradoxically, the big beneficiaries of the rollout will foreseeably be the so-called OTT (Over The Top) companies such as Google, Amazon, Microsoft and Alibaba. The consultant McKinsey, which has published a number of studies on the rollout of this technology points out that operators are also investing in improving their 4G networks to meet the insatiable demand for data. McKinsey estimates that in the case of a European country, capital investment on improving the network will grow 60% between 2020 and 2025.
So what’s the solution for operators? There are well-respected voices such as that of Jon Fredrik Baksaas, a former president of the GSMA and the Norwegian operator Telenor, who has called on telcos to ‘change their mindset’ and begin to work together both in network-sharing as well as in looking for business models based on the new services 5G will usher in. “All need to understand that the competitive landscape has changed and operators need to shape their value creation strategies accordingly”.
Greater collaboration is not the only proposal on the table. There was a big-to-do in the United States at the end of January when a report by the National Security Council recommended to the White House that the government itself should roll out and manage the 5G network. The recommendation was basically motivated by cybersecurity, but indirectly put the focus on the need for network-sharing among companies. Otherwise, it could be economically inviable for very operator to have its own network.
What could happen in the face of these doubts? The British weekly The Economist predicted in an article that operators will create their networks bit by bit with prudence and only in those places where the numbers added up. 5G will probably have a big but gradual impact. It will change mobile communication as we know it today but it won’t be a rapid change nor from one day to another.