With the coronavirus pandemic appearing to gradually subside and the China-US trade war gaining momentum, how has the 5G-aliser changed this month?
The month of May has seen a wide variety of developments in the world of 5G, from the fluctuating levels of spectrum availability to the introduction of AI-supported autonomous robots to help screen for the coronavirus. But no factor has been as prominent this month as that of the ongoing geopolitical battle between China and the USA, of which 5G technology is becoming a key battleground. Taken together, do these developments mean we are a step closer to the 5G world envisaged by so many at the start of 2020? The answer is: it’s complicated. While there has been a lot of movement in the 5G sphere this month, it has been a story of both advancements and setbacks. As a result, we believe that the overall measure of the high level supply and demand for 5G services remains unchanged, as reflected in the 5G-aliser. Although the industry has had time to adapt to the changed operating environment during the COVID-19 pandemic and is no longer is the crisis mode of last month, diverging and fragmented national responses to managing the crisis have had knock-on effects for the telecoms industry and development of 5G. The biggest one of these has been the rapid deterioration of US–China relations, which we expect to have potentially wide ranging effects on how 5G technology develops over the coming years. As a result, we have raised the absolute level impact of US–China trade relations on 5G, while slightly lowering the impact of COVID-19.Below we discuss how fragmented national responses are playing out across several 5G drivers in more detail. For a broader view of the potential implications of a fragmented global recovery across other areas of the industry, such as IoT, regulations, and cloud services, see STL Partners’ earlier COVID-19 report.
May 2020’s key drivers • Spectrum availability: The coronavirus pandemic has forced many regulators to rethink spectrum availability this month, with allocation varying significantly from one market to the next. For example, New Zealand has scrapped its upcoming spectrum auction and will instead offer it to operators at a low price, while other countries such as Poland and Austria have delayed auctions for several months. On balance, global availability of licensed 5G spectrum has declined, dragging the relative lever down in this month’s update. • Indoor coverage: We have moved this bar up slightly to reflect growing awareness across the industry of how to make technologies such as indoor mmWave work. For example, most operators deploying 5G are using dynamic spectrum sharing, which if applied to lower spectrum bands could ensure that 5G works indoors – not at full 5G capacity, but at least showing up on end-user devices. • vRAN / Open RAN: Although this technology is on a 10-year cycle of development, as a key enabler of private cellular and neutral host networks it is rapidly rising up the agenda for telcos. This month saw the creation of the Open Ran Policy Coalition, a new organisation – notably lacking in Chinese participants – to promote open RAN to policymakers. The key focus for the industry right now is understanding what open RAN is and where it can deliver shorter term value for operators. See STL Partners report Open RAN: What should telcos do? for more detail. • Private networks: This area continues to enjoy strong interest and investment from the industry, with growing trials using CBRS spectrum in the US, as well as allocation of local spectrum licenses in many more countries, including Belgium, the Czech Republic, and Sweden. • Gigabit / fixed broadband and Wi-Fi: This is where the industry is experiencing the biggest uptick in activity, as social distancing regulations are making it far easier for operators to dig up roads and deploy denser fibre backbones to support 5G networks. Meanwhile, at the end of April the FCC approved 1,200 MHz of spectrum in the 6GHz band for Wi-Fi use. This is the first new allocation of Wi-Fi spectrum in the US for 20 years, and will drastically increase wireless connectivity options for data-hungry applications. Wi-Fi and 5G are complementary technologies in enabling next generation use cases, so we see this development as important for driving overall investment and market growth. • US–China trade war and other geopolitical issues: This driver experienced the biggest drop on this month’s update to the 5G-aliser, as political tensions between the US and China have continued to escalate. The Trump Administration renewed its trade ban on Huawei, with the UK reportedly also looking at phasing out the Chinese giant from its 5G networks in the next three years. One potential risk of such continued division is a potential erosion of a single, global mobile standard, as US companies face pressure not to work with Huawei and other Chinese companies. See more from Dean Bubley on why this is not just a question of diverging technology, but also diverging technology “philosophies”. Drivers to watch: Predicting long-term change • Government 5G strategy & policy: During the pandemic, connectivity is rapidly rising on the priority list for governments, but we have not moved the dial on the 5G-aliser since this pertains to any and all forms of connectivity that can be used to increase reach and capacity. That said, this is positive for ongoing support for 5G testbeds and reducing regulatory barriers around land rights, etc. • Municipal government demand for smart cities: While we haven’t seen any real change yet to the size of this opportunity, the COVID-19 pandemic is weeding out “nice to have” consumer propositions or big smart city projects with vague business models, instead emphasising the importance of public safety solutions. For example, Google’s Sidewalk Labs project in Toronto has been scrapped, while Boston has launched a critical event platform for emergency alerts to citizens. • 3GPP releases: This bar has inched down very slightly to reflect the one quarter delay to Release 16 Stage 3. There is a risk that this means some of the 3GPP specs around ultra-low latency and reliability will not be ready in time to be included in the ITU-R IMT 2020 standards. However, given the overall long timelines in 3GPP standards, we don’t expect this delay to have a major impact on the overall 5G market development. • Edge computing: There haven’t been any significant developments specifically in edge computing, but Microsoft’s acquisition of Metaswitch and Affirm Networks and other similar moves could drive a faster shift of telco operations to the public or hybrid cloud, which could have implications for telcos’ edge computing strategies.
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