5G is nearly here. The next generation of wireless connectivity promises superfast speeds, ultra-low latency and more network capacity than ever. 5G auctions have or are due to take place in the US, UK, Ireland, Italy, Portugal, Germany, Australia and host of other countries.
The Pyeongchang Winter Olympics was billed as a major 5G-powered event. Companies such as Nokia, Ericsson, and Intel are all promoting their 5G credentials, with Huawei pushing the issue particularly hard saying it will be selling 5G ready infrastructure in the coming months.
But is this actually the case?
“I believe 5G is really, really over-hyped considering that there's only a few known use-cases that people really know that we need it,” says Magnus Jern, Chief Innovation Officer at mobility consultancy firm DMI.
“Of course, we do need 5G; there'll continue to be a huge demand for increased capacity, lower latency etc, but we just need to be realistic about the timeline. There will probably be a lot of use cases that can really leverage 5G, but are probably going to take five to 10 years, rather than next year as some of the operators are promising.”
5G’s short term use cases are limited
Having worked at Orange and Vodafone previously, Jern saw first-hand the rollout of 3G, which didn’t offer the superfast speeds and perfect call quality initially promised. And he believes the current trend of telecoms manufacturers and operators pushing 5G is a solution looking for a problem.
“I think there is a need from the operators because of capacity needs in big cities and [that’s] why some of the big ones in China and Japan are really pushing ahead, and other dense cities, but beyond that I'm just not seeing it right now. We're also a couple of years away from smartphones with 5G from what I've seen.”
“If you look at the speed of 4G/LTE there's not that much that you're going to do on the smartphone where you need higher speed. There's a lot of talk about Virtual Reality but even there we're some way off before that becomes a completely mobile scenario, and once again you can just as well use Wi-Fi because in most cases you'll be somewhere where you have that kind of connectivity.”
While many companies argue that 5G will be essential to realize the potential of the internet of things, Jern argues the rise of edge computing and IoT-specific networks such as Sigfox or NB-IoT mean the problems this trend presents are largely already solved.
“I think the classic use case is the connected car, but the challenge for that is to get road coverage it's going to take at least 10 years for 5G.”
Instead, he argues, companies should continue to rely on 4G LTE for any wireless needs, or fixed connections where possible as its capacity has continued to increase at a much faster rate than wireless technologies.
“It's a big problem for the operators because there's no real business case for them to make these huge investments outside of the big cities.”
Toby Youell, Research Analyst at spectrum management consultancy firm Policy Tracker, agrees that early use cases are limited for true 5G.
“There’s a lot of skepticism about the ability of mobile operators to make money out of 5G," he says. "The first use case is likely to be Enhanced Mobile Broadband, which might effectively (at least initially) be a rebranding exercise for improved Wi-Fi and LTE-Advanced (4G), and it’s not clear if consumers are willing to pay more for data than they currently do. There might be more revenue available from other anticipated use cases (massive Machine Type Communications and Ultra-Reliable Low Latency Communication), but it’s not clear if mobile network operators will be best placed to provide those services, or even if there’s a need to label them 5G.”
5G: innovation to be seen as innovative
However, for many of the telecoms manufacturers and operators, this push for 5G is largely for show.
“Clearly the mobile operators and the telecoms manufacturers, they need something to hype. They are being squeezed and prices are going down,” says Jern.
There are a few exceptions to the rule with operators such as Vodafone, Telenor, and Telefonica publicly speaking about the lack of short-term gains 5G can offer. Recently the Cellular Operators Association of India asked the government ‘not to rush’ into any spectrum auctions for 5G until there is more of a robust ecosystem with more developed use cases for the technology. But they are the exception rather than the rule, at least in terms of marketing.
“We're starting to hear some operators are quite up front about the fact they don't think that there is a short-term business case to roll out 5G on a wider scale over the next couple of years. For others, the easy way out is just to say, ‘Yes we're going to do it,' but then they know internally it's probably just one big city in the country they're active in for the first couple of years.”
“They all have to say externally that's it's really a priority, because otherwise they wouldn't look very innovative, would they? I think one part is the PR part, the other part is what they are actually discussing with their investors and in terms of financing and the build-up plan.”
Cisco is currently testing 5G in rural locations in the UK through the government funded RuralFirst testbed program, and cities across the world are looking to become 5G pioneers and become testbeds for the technology. Jern argues a lot of the early 5G hyperbole was believed by governments around the world, which are now pushing for it to become a reality.
“The governments understand that it's something that is super high priority and is going to create lots of new jobs and so on because that's what the hype is telling them, that's what the media has been telling them," Jern says.
Does 5G require a new model of telco infrastructure ownership?
In February a proposed internal government memo from the National Security Council suggested that because China has a dominant position in the manufacture and operation of network infrastructure, US telecoms infrastructure can’t be safe and therefore US should build for and pay its own 5G infrastructure rather than let private companies roll out the technology. The memo was quickly dismissed by the White House and the FCC. But does the eventual arrival of 5G mean telcos may need to change their ownership models?
“For an industry that has invested more than $1.2 trillion globally in its networks since 2010, any new investment needs to be met with an expectation to generate a return,” says Sam Evans, Associate Partner at telecoms advisory and investment firm Delta Partners. “Some estimate 5G may require network investment of $250 billion in the US alone. The numbers do not seem to add up, yet.”
“And when it comes to 5G, the traditional telecoms logic of build-your-own network infrastructure on which to provision services may not hold. Services will need to be cloud-based and with global reach, and infrastructure may need to be shared, and partnerships created, between the network operators and global cloud providers such as AWS and Google.”
It’s an idea some big names have put their voices behind. McKinsey has said sharing networks could see operators reduce 5G-related investments by more than 40%, Google is keen for operators to share spectrum and infrastructure, and while former FCC Chairman Tom Wheeler said that he wasn’t “endorsing shared infrastructure in every and all circumstances”, he did say companies “ought to explore creative options on how best to build that infrastructure.”