The Path to 5G Realisation: Part One
2019 is a big year for 5G. Around the world, consumers, business leaders, governments and everyone with a stake in telecoms are looking on expectantly as 5G leaves the proof of concept stage and the first commercial networks, closely followed by the first 5G-ready devices, are rolled out. There is much to anticipate. 5G has long been touted as having a potentially transformational impact. The combination of massive bandwidth, incredible speed and low latency is expected to redefine communications and IT. Yet for all the promise, it remains potential only. As one McKinsey report puts it, mobile operators are approaching 5G rollout with as much resignation as anticipation. Charged with building out the new networks that will drive a 5G-enabled future, they know that the stakes are high.
Nothing is proven yet, many lucrative new markets touted for 5G are just ideas and there remain significant hurdles, in technology, in regulation, in economics, yet to be overcome. For operators and the equipment vendors driving 5G rollout, the next 12 months are critical. In this report, we will assess what barriers to realisation still remain and ask what needs to be done in terms of investment and innovation to get through them. We will also look closely at the strength of the business case for 5G - the key ingredient that will both encourage investment and drive market take up - and the rewards for all stakeholders successful realisation will bring.
Jorge Graça, CTIO of Portugal’s leading multi-play provider NOS, believes at this stage 5G still faces barriers both in network implementation and in defining its value propositions. The main barriers to 5G network implementation are related to spectrum, regulation and technological maturity,” he said. “An adequate amount of available spectrum (e.g. 100 MHz in 3.5 GHz plus spectrum from lower bands) is required to setup an initial 5G capacity that can create a point of difference with what 4G gigabit networks offer nowadays. Depending on spectrum usage, getting the required amount spectrum is proving challenging in most European countries. “Governments and regulators should avoid artificially increasing spectrum prices as they risk limiting network investment and driving up the cost of services, putting 5G rollouts at risk. Moreover, they need to adopt national spectrum policies that reinforce solid and long-term heavy investments in network infrastructure.” Jorge’s views are supported by figures from the European 5G Observatory which show that, up to January 2019, just nine out of the 28 EU member states had published national 5G roadmaps. But rather than spectrum being unavailable, the key issue appears to be underutilisation - 87.2% of spectrum in the 3.4 - 3.8 GHz band remains unassigned across Europe, with just 11.5% assigned and usable ready for 2020. Nokia CEO Rajeev Suri is on record at MWC 2019 saying that spectrum in Europe is “overregulated” and rollout policies inconsistent, adding that he expected this to lead to delays in 5G introduction across the continent. The EU-backed 5G Infrastructure Association (5GIA) has similarly complained that there is little cross-border collaboration in European 5G initiatives - 5G Observatory figures confirm there have been just 10 such trials so far.
In terms of technology, a main barrier facing operators is cost. A study McKinsey carried out in one European country predicted that network-related capital expenditures would have to increase 60 percent to 2025, nearly doubling TCO. That is on the back of having to achieve a near 10-fold performance increase in latency, throughput, reliability, and scale, with upgrades required in RAN, transmission and core network capabilities. A 2018 report by the UK’s Broadband Stakeholder Group (BSG) pointed out that, as higher frequencies don’t travel so far, dense small cell networks will need more infrastructure to achieve the level of coverage currently available from 4G. Not only does this further raise costs, in urban areas in runs into the issue of physical space. Although massive MIMO architectures may pose a solution, the increased need for antennas potentially raises planning concerns. Compounding the need for increased investment from operators is that the case for strong returns is, to use the BSG’s word, “uncertain” as yet.
It concludes that more needs to be done to communicate the wider value of 5G to consumer and business markets, to stimulate interest in and demand for enhanced and brand new 5G use cases so positive returns on investment can eventually be made.
The 5GIA, in its own roadmap to 5G rollout, suggests that 5G now must now move beyond “laboratory trials” so that technologies and approaches can be validated “in multivendor and multi-user environments”. The European 5G Observatory agrees, stating that European mobile operators should now be preparing for the deployment phase ready to perform tests in “real” conditions. The consensus is that partnerships will be essential. The BSG makes a total of 21 recommendations for next steps, calling on operators, vendors, vertical stakeholders and public authorities to come together to achieve goals like streamlining access to sites and land for infrastructure construction, agreeing a coherent approach on planning, coordinating efforts across regions and developing strategies to communicate the benefits of 5G. It is a similar story on technology. The 5G Observatory outlines the interrelationship between network infrastructure, chipset development and device development to underline how Next Steps to Realisation dependent operators and vendors are on each other when it comes to reaping the benefits of 5G. It acknowledges the important role of partnerships between operators, OEMs and chipset manufacturers in trialling infrastructure technology so far, and how chipset manufacturers like Qualcomm and Samsung have been proactive in signing agreements with OEMs for their 5G-ready basebands, paving the way for 5G-ready devices.
On networks, there are various ways operators can mitigate upgrade costs. As confirmed by the 3GPP Release 15 standard, the first wave of 5G networks will mostly be non-standalone (NSA), i.e. they will be based on existing 4G infrastructure. Operators are looking wherever possible to upgrade their 4G assets to achieve the required densification and capacity hikes without having to build out brand new small cell networks. McKinsey suggests one such solution is network convergence through virtualisation and software-defined protocols, a process already in motion in many place with LTE upgrades. Not only does convergence increase capacity, it lowers unit costs and increases agility. Another possibility advocated by McKinsey is network sharing. It describes sharing of network assets as another ‘accelerating trend’, with operators achieving TCO reductions of up to 30%. On brand new 5G infrastructure such as small cell deployments, McKinsey has modelled investment savings of up to 50% for three or more operators pooling resources. It suggests that stakeholders such as tower companies are already basing commercial models on sharing.
Given the challenges faced in making 5G rollout a commercial success, innovation will be critical. As Jorge Graça put it: “Innovation is a process that builds up on more than new technology capabilities, but essentially on the ability to gather different visions on a same problem. 5G networks are just platforms to enable such exploration. The value created is likely to result from complementary collaborative partnerships.” Vendors are certainly stepping up to the challenge of finding innovative solutions. At MWC 2019, Ericsson unveiled a raft of new products aimed at facilitating the next phase of 5G rollout. One solution it announced was an automated, AI-based service orchestration platform designed for hybrid (physical, virtual and containerised) and multi-supplier environments.