European Affairs

“5G” Angst: Europe’s Bid to Drive Future of Wireless Technology     Print Email
By James D. Spellman, Strategic Communications LLC

spellmanIn summoning the heads of Europe’s top telecommunications companies to a recent meeting (January 12), the European Commission has signaled that it wants Europe to lead development and implementation of the next generation of technologies that cellphones and other wireless devices will use, the so-called “5G” bundle of software and hardware expected to be widely available around 2020, if not sooner.

The recent letter from Günther Oettinger, the European commissioner for digital economy, inviting telecom industry leaders to the meeting called for “closer EU co-ordination to achieve a timely deployment of 5G.” He suggested that, in the interests of “fair competition,” lighter regulation may be warranted to fuel R&D by Europe-based companies in telecommunications, broadcasting, and other sectors tied to mobile communications. Oettinger asked the CEOs of BT, Deutsche Telekom, Telecom Italia, Orange, Vodafone, Nokia, and Ericsson to attend.

At the meeting, EU sources said, the group assessed Europe's readiness for 5G deployment by 2020 and provided counsel to Oettinger on developing solutions that are hampering 5G deployment, including the “lack of a common calendar for 5G, the lack of sufficient demand from the vertical industries, and discrepancy between investment dynamics across Member States, or spectrum scarcity.”

Driving this initiative is the fear that Europe is lagging further and further behind the United States in efforts to catapult to tomorrow’s technologies first, a concern Oettinger has stressed repeatedly throughout his tenure. “We have so far missed many opportunities” in Internet and mobile platforms, he said. “Our online businesses are today dependent on a few non-EU players worldwide: this must not be the case again in the future.”[1]

Last June, the standards-setting body, the International Telecommunications Union, established an overall roadmap for the development of 5G mobile and defined the term it will use as “IMT-2020”.[2] “The next step is to establish detailed technical performance requirements for the radio systems to support 5G, taking into account the needs of a wide portfolio of future scenarios and use cases, and then to specify the evaluation criteria for assessment of candidate radio interface technologies to join the IMT-2020 family,” ITU said.[3]

CHART: PAST GENERATIONS OF TELECOMMUNICATIONS TECHNOLOGIES
spellman201601chart21
Source: Radio-Electronics.com. http://www.radio-electronics.com/info/cellulartelecomms/5g-mobile-cellular/technology-basics.php .


No one agrees yet on the scope of capabilities and benefits, let alone the standards, that 5G, or fifth generation technology, would bring, aside from it being faster, more powerful, more energy efficient, and hopefully cheaper. The consultancy Deloitte sees that “a key feature of 5G is that the network itself is ‘smart’, capable of understanding the needs of each connected device in real time and automatically optimizing bandwidth allocation accordingly.”[4]

CHART: ONE VISION OF 5G POTENTIAL

spellman201601chart22
Source: Stephen Shankland, “How 5G will push a supercharged network to your phone, home, car.” Cnet.com, March 2, 2015. http://www.cnet.com/news/how-5g-will-push-a-supercharged-network-to-your-phone-home-and-car/ .

Whatever the technologies pursued, usage of mobile devices will increase exponentially. By 2020, there will be more than 30 times as much mobile internet traffic in Europe as there was in 2010, according to EU forecasts. And this growth will have an enormous impact on Europe’s economy. Already, ”the information and communications technology (ICT) sector represents about 4% of EU GDP, and investments in ICT are responsible for about half of recent productivity growth in Europe,” according to the European Parliament Think Tank.[5]

CHART: SMARTPHONE SUBSCRIPTIONS WORLDWIDE, 2014 - 2020
spellman201601chart23
Source: Ericsson Mobility Report 2015. June 2015. http://www.ericsson.com/res/docs/2015/ericsson-mobility-report-june-2015.pdf .

The latest technology in use is 4G LTE. But the growth in the “internet of things,” that houselights, appliances, and numerous other devices used daily would be controlled through the Internet, driverless cars that need data each millisecond to navigate, and the emergence of both augmented and virtual reality—all demand faster speed and far greater capacity for transmitting enormous amounts of data at a fraction of today’s costs. Industry sources say Brussels plans to unveil a comprehensive plan to support the growing connectivity between machines as part of its Digital Single Market strategy.[6]

CHART: INTERNET OF THINGS WILL DRIVE DEMAND
spellman201601chart24
Source: Ericsson Mobility Report 2015. June 2015. http://www.ericsson.com/res/docs/2015/ericsson-mobility-report-june-2015.pdf .

The build-out investment for 5G in the United States is estimated at $1.7 trillion through 2020, one study says.[7] Equally enormous investments are projected for Europe, too.

To jumpstart the research in Europe, the European Commission announced in June 2013 a €700 million commitment, with private industry to contribute €3.5 billion investment in 5G technology development, to the European 5G Infrastructure Public Private Partnership. The initiative’s goals include exponential increases in capacity and services (1000 times the 2010 level), enormous energy savings (90 percent per service provided), “zero perceived” downtown, and lower costs.[8] Nineteen projects were launched in 2014; a second round of projects will be defined this year and initiated in 2017. In September last year, the EU and China agreed to jointly research development and application of 5G technologies. Similar cooperation agreements have been signed with Japan and South Korea.

Europe is home to Alcatel-Lucent, Ericsson, and Nokia, all global leaders in mobile devices. The Swedish company Ericsson and the Russian network operator Mobile Tele have partnered to conduct trials on a 5G mobile network during the 2018 World Cup in Russia. They hope to leverage the benefits of being pioneers.

Yet, there remains a “digital divide,” with the United States, as measured by the number of households linked to the Internet and subscribers to 4GLTE. The United States has the highest share of LTE subscriptions in the world, according to the Ericsson Mobility 2015 report.[9] “Eleven of the top 15 Internet businesses, most started in the last decade, are U.S.-based, with the rest coming from China,” notes Larry Downes, director at the Georgetown Center for Business and Public Policy. “None are from Europe.”

spellman201601chart25Source: Larry Downes, “How to Understand the EU-U.S. Digital Divide.” Harvard Business Review, October 19, 2015 . https://hbr.org/resources/images/article_assets/2015/09/W150921_DOWNES_TOTALFIXED.png .


CHART: FEW EUROPEAN COMPANIES IN TOP TEN IN MAJOR DIGITAL SECTORS
spellman201601chart26
Source: Boston Consulting Group, Five Priorities for Europe’s Digital Single Market. October 2015. https://etno.eu/datas/publications/studies/FINAL_BCG-Five-Priorities-Europes-Digital-Single-Market-Oct-2015.pdf .


Within Europe, too, is a digital divide between the northern countries and the rest of the bloc, as a report last year by the World Economic Forum shows. “While digitization varies across Europe, a broad classification by geography shows that Northern and Western Europe perform better than Southern and Central and Eastern Europe, even if the situation differs broadly within these groups,” the report finds. “The gap between North-Western European economies and the rest of the EU member states is reflected in virtually all areas analyzed by the report’s Index, including market and regulatory conditions, high levels of [information and communications technologies] ICT uptake, levels of usage by all stakeholders (citizens, businesses and governments), and economic and social impacts accruing from ICTs.”[10] The WEF report attributes the disparities to whether a country’s particular conditions foster “innovation and entrepreneurship.”


CHART: HOW DIGITAL IS EUROPE?
spellman201601chart27
Source: “INFOGRAPHIC: How Digital is the EU in 2015?” Euractiv.com, October 15, 2015. http://www.euractiv.com/sections/digital/infographic-how-digital-eu-2015-312828 .

In addition to the complications of not knowing precisely which direction to pursue, there are the inevitable technological, financial, and regulatory hurdles. The recent report from the European Parliament Think Tank outlines some these challenges.[11]

The 5G vision will rely on generational advancements in radio signaling, bandwidth, mobile device processing and transmission of data, and antenna devices, to name a few. More radio towers covering more areas with more capacity is one example of the deliverables that will be needed, researchers say. Radio frequencies must be dedicated to 5G. “Availability of spectrum is obviously a big thing,” said Gerhard Fettweis, who heads a Vodafone-sponsored program at the Dresden University of Technology.[12] The allocation of additional spectrum is unlikely until the World Radiocommunications Conference in 2019.[13] And, as Deloitte explains, the “networks” themselves will need to “think,” in that they must automatically route enormous packages of data from mobile devices to the “paths” that have the fastest transmission speeds available at that precise millisecond.

CHART: BANDWIDTH AND DELAY REQUIREMENTS FOR 5G
spellman201601chart28
Source: GSMA Intelligence. 2015. Used in: European Parliament Think Tank, “5G network technology: Putting Europe at the leading edge.” January 4, 2016. http://www.europarl.europa.eu/thinktank/en/document.html?reference=EPRS_BRI(2016)573892 .

Finding the capital is another challenge. Downes argues that the fall in Internet access prices since 2009, forced by regulators, he says, caused, in turn, a decline in private investment by European telecommunications firms. The companies’ poor financial performance has been another constraint, according to the Boston Consulting Group. In a sluggish economy with stock market performance sharply down at the year’s start, there is weak appetite for assuming new risks in the uncharted territory of 5G.

Ahead, Brussels’s stewardship of 5G has many issues to address, all tied to how much it will, can, and should guide the “invisible hand” of markets.


CHART: POOR FINANCIAL PERFORMANCE OF EUROPEAN TELECOMMUNICATIONS COMPANIES
spellman201601chart29
Source: Boston Consulting Group, Five Priorities for Europe’s Digital Single Market. October 2015. https://etno.eu/datas/publications/studies/FINAL_BCG-Five-Priorities-Europes-Digital-Single-Market-Oct-2015.pdf .


[1]Daniel Thomas and Duncan Robinson, “Brussels summons European telcos to 5G meeting.” Financial Times, January 11, 2016. www.ft.com (available by subscription).
[2]ITU Press Release, June 27, 2015. https://www.itu.int/net/pressoffice/press_releases/2015/27.aspx .
[3]Ibid.
[4]Deloitte, Technology, Media & Telecommunications Predictions 2015.
https://www2.deloitte.com/content/dam/Deloitte/xe/Documents/technology-media-telecommunications/TMT_Predictions_2015_MiddleEast.pdf .
[5]European Parliament Think Tank, “5G network technology: Putting Europe at the leading edge.” January 4, 2016. http://www.europarl.europa.eu/thinktank/en/document.html?reference=EPRS_BRI(2016)573892 .
[6]“Commission to unveil Internet of Things plan by mid-2016.” EurActiv.com, December 1, 2015.
http://www.euractiv.com/sections/innovation-industry/commission-unveil-internet-things-plan-mid-2016-319886.
[7]The U.S. amount is from GSMA, the mobile industry trade group, cited in: Amy Thomson, “Mobile Industry’s 5G Revolution Heralds the Rise of the Machines.” Bloomberg, February 26, 2015. http://www.bloomberg.com/news/articles/2015-02-26/mobile-industry-s-5g-revolution-heralds-the-rise-of-the-machines . “According to the GSMA, mobile operators are expected to spend $1.7 trillion on their networks between 2014 and 2020, much of it on upgrading to 4G architecture. That’s almost double the $878 billion spent from 2009 to 2013 when 3G was being built.” The GSMA report is “Understanding 5G: Perspectives on Future Technological Advancements in Mobile,” which was published December 8, 2014. https://gsmaintelligence.com/files/analysis/?file=141208-5g.pdf . Various industry sources suggest that the European investment may be equivalent given the size of the European market.
[8]European 5G Infrastructure Public Private Partnership, “Europe launches a 3.5 Billion investment in 5G.”
https://5g-ppp.eu/the-5g-ppp-has-started/ .
[9]Ericsson Mobility Report 2015. June 2015. http://www.ericsson.com/res/docs/2015/ericsson-mobility-report-june-2015.pdf .
[10]World Economic Forum, Global Information Technology Report 2014. Geneva: World Economic Forum, 2015.
http://www.weforum.org/reports/global-information-technology-report-2014 .
[11]Op cit., European Parliament Think Tank, “5G network technology: Putting Europe at the leading edge.”
[12]Mikael Ricknäs, “5G faces technical, political hurdles on the way to offering multigigabit speeds.” PCWorld News, March 17, 2015. http://www.pcworld.com/article/2898292/5g-faces-technical-political-hurdles-on-the-way-to-offering-multigigabit-speeds.html .
[13]Steve McCaskill, “EU And China Will Work Together On 5G Networks.” TechWeekEurope, September 29, 2015. http://www.techweekeurope.co.uk/mobility/4g/5g-eu-china-network-development-177770#0qqS6oj2AfGSvP5V.99 .

 
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