Walking the 5G tightrope
Implementing the latest mobile technology comes with no guarantee of success, writes Jesus Alcocer
Large capital investment, pricey spectrum and affordable handsets are some of the challenges fifth-generation (5G) mobile technology faces in rapidly growing developing markets like Thailand. “Typically, a standard is valid for 10 years,” said Johan Wibergh, chief technology officer of Vodafone, at the 2017 Global MBB Forum held in London last week. First-generation mobile networks were introduced in 1982, and 4G was launched in 2009 in Nordic countries and adopted in Thailand by the end of 2014.
The first standard version of 5G is expected to be released in 2018 by the 3rd Generation Partnership Project (3GPP), a collaboration by groups of telecommunications associations. It is expected to be rolled out in most developing markets by 2020, said Huawei.
In Thailand, the auction for the 1800- and 850-megahertz 5G spectra is scheduled for next June, and 5G service is expected to be available by 2020.
Experts agree that in order to be considered 5G, a network has be to “ultra-fast”, have low latency (response time), be reliable, and be able to provide quality connection in devicedense areas.
A 5G network is expected to play an integral role in Internet of Things (IoT) devices, machine learning, automation and other phases of the digital revolution. For example, remotely controlled drones and taxis need an extremely reliable network with low response times that will allow operators to steer away from obstacles in time.
On Nov 7, British telecom Vodafone, in conjunction with Huawei, achieved the first 5G data connection in Italy using massive multiple-input multiple-output technology. The prototype met the requirements of 3GPP in terms of capacity and coverage, reaching download speeds of 2.7 gigabits per second, with a latency of just over a millisecond.
Mr Wibergh said the project’s first base station was installed in November, and the company plans to cover 80% of the city by the end of 2018 and 100% in 2019.
The pre-commercial test in the northern Italian city of Milan is aimed at testing the technical and economic feasibility of 5G. “We have a tendency as an industry to overhype things, and there is a lot of disbelief among analysts about what people say will be possible in the last two years of 5G [validity],” he said.
The project will include more than 40 test cases with 28 partners in industries spanning from healthcare to security to manufacturing. “In healthcare we are testing what an ambulance can do when it is fully connected to the hospital network. On the security side, we are working with the police to deploy wireless surveillance cameras and drones that can respond in emergencies,” he said.
The implementation of 5G opens the door to new revenue streams for telecom operators, who are locked into a highly competitive industry.
OPPORTUNITIES FOR GROWTH
“People debate over whether is this the worst time for mobile or the best,” said Ken Hu, deputy chairman and rotating chief executive of Huawei. There are already more than 5 billion mobile subscribers, and 120 countries have mobile penetration rates above 100%. “The market is crowded and competition is fierce, but I think this is the best time for mobile,” he added.
Developing markets represent important opportunities for operators that know how to implement cost-effective solutions.
Emerging markets (except for China) represent a market of 4.93 billion people, and a GDP of 19.4 trillion. This segment is expected to grow 39% within the next five years, close to twice the average for advanced economies.
Developing economies are heavy mobile users. For some, mobile devices are the only way to access the internet. According to Huawei, more than half of network traffic in these markets is generated by mobile, 22% more than in advanced economies.
Within the next five years, these countries will generate close to 1 billion new users, which will represent additional revenue of 33 billion even under a conservative average revenue per user assumption of US$3 (98 baht).
In these economies, mobile broadband (MBB), which is already sued by 2.67 billion, will double in by 2022. Turning a non-MBB user into an MBB data consumer would increase the revenue of operators by $1, and create an additional $25 billion in revenue.
“5G is more cost effective than 4G, by a factor of almost 10,” said Mr Wibergh. Lower costs will allow mobile operators to serve individual customers more cheaply, as well as transmit massive data volumes where demanded.
PRICEY SPECTRUM
While the opportunities are large, so are the challenges. One of the main obstacles to effectively implementing 5G in developing economies is the lack of spectrum, which is often more expensive than in developed markets.
Thailand, for its part it’s one the most expensive markets, as its 1800 MHz spectrum is priced above $4 per person, far more expensive than in Germany where it goes for about $1.5 per person, and even Bangladesh where it can be used for about $2 per person, according to Huawei.
The spectrum should be priced carefully, as overpricing will harm sustainable growth, and a price that is too low will not promote innovation. “There will be no cost benefits to 5G if the cost of the spectrum is too high,” said Mr Wibergh.
In Thailand, the planned 5G spectrum auction is expected to generate 150 billion baht to the state.
EXPANDING SMARTPHONE OWNERSHIP
Aside from the cost of spectrum, the adoption widespread adoption of mobile devices that can support broadband will be an important component of a successful 5G business case.
The cost of entry level smartphones in developing markets is about $70-80 after tax. In Thailand where the weekly income of 20% of the population is $88, removing taxes from these devices would set the average price at $60-70.
Operators in Thailand have already gone the distance to ensure that broadband devices are available for a large majority of the population. In 2012, only 12% of Thai mobile users had access to broadband, but this number increased by 50% in both 2013 and 2014.
In 2012, according to Huawei, the average price of 3G phones ($250) was almost six times more expensive than 2G phones. Prices fell dramatically however, after operators introduced entry-level brands from China and India and subsidised devices.
Advanced Info Service (AIS), for example, collaborated with an Indian phone maker to bring $70 smartphones to the market and DTAC collaborated with a Chinese phone maker to introduce $50 smartphones by the last quarter of 2014. True Move, for its part, put in place subsidies that decreased the price of entry level 3G smartphones to $30.
In part driven by these price reductions, MBB penetration reached 87% by the end of 2014. While handset subsidies were effective in expanding Thai operators’ customer bases, they also severely eroded their margins. “I’ve never seen such tough challenges like this year, after almost three decades of experience in the mobile industry,” said AIS chief executive Somchai Lertsuthivong of 2016, a year in which, aside from handset subsidies, operators had to shoulder the high cost of the 4G spectrum.
Moving forward, collaboration with the government may be essential to ensure high levels of access to 5G devices, while maintaining healthy profits for operators.
USING AVAILABLE INFRASTRUCTURE
The last piece of the cost effectiveness puzzle is the price of expanding network coverage. Implementing 5G will require large investments in new telecom equipment like massive multipleinput and multiple output, which will support faster and more reliable services, especially in dense areas.
Telecom operators usually expand their networks through expensive leased or purchased dedicated towers. Huawei and other companies are developing base stations that can be fit into already existing structures like street lights or traffic lights.
TubeStar, developed by Huawei, for example, measures two square metres (90% less than traditional base stations) and has a cost of ownership that is 40% cheaper than traditional bases. The solution is being tested in nine Latin American countries, and was deployed commercially in Brazil.
5G is more cost effective than 4G, by a factor of almost 10. JOHAN WIBERGH Chief technology officer, Vodafone