The Mobile World Congress in Barcelona offered new occasions for European institutions and stakeholders to compete in 5G declarations and intents. There is, however, the impression that the agendas of institutions and industry are disconnected. While European institutions are eager and ambitious to create the right environment for a rapid and successful 5G roll-out, mobile industry reveals a more realistic, short-term approach.
European institutions believe that 5G should be roll-out quickly (within a decade) in order not to be left behind other continental powers (such as US and China). Industrial and regulatory policies are mostly focussed on the need to harmonise national legislations, allocating new spectrum and setting-up a sound, investment-friendly regulatory framework. All such things are commendable and needed but, unfortunately, they are far from being decisive to allow Europe to win, or at least to honorably take part to, the 5G race.
The problem is that the amount of cash necessary to roll-out 5G networks in Europe is enormous and the European industry does not seem able – or even really willing – to afford it. Studies have shown different figures but, at the end, the bill is always beyond the capability of European telcos. The most mentioned paper, the Boston Consulting report of November 2016, found that the required investment to fund the Gigabit Society was €660 billion (including €360bn to enable FTTH broadband for all European households, €200bn in 5G radio access networks as well as €100bn for cloud). These figures did not include the cost of spectrum and do not consider the fact the national fragmentation will make costs to rise. Whatever the final bill will be, since European telcos are spending for their networks on average 40-45 billion per year (including maintenance), it is clear that close deadlines are “mission impossibile”. The same Boston Consulting paper indicates 20/25 year to achieve the objectives, unless the European institutions deliver some concessions: what was the final, ultimate goal of the paper 🙂 .
Thus, should these amounts be credible or at least not so wrong, we can say that Europe has already lost the 5G race. A rapid coverage will eventually achieve some metropolitan areas, in which even multiple 5G networks would compete; but, for the large part of European territory and citizens, 5G will remain longtime a chimera.
In addition, it is doubtful whether the European industry is really committed to run the race and bear such enormous efforts. As regards ultra-broadband, most of traditional European telcos continue to rely on mixed solutions exploiting legacy infrastructures (copper), while the progression towards FTTH goes ahead without hurry. Mobile is experiencing a similar scenario: although the 5G rhetoric pervades every stages, one should consider that 5G may be seen, especially at beginning, as an evolution of LTE and therefore established operators may have less interest in engaging in a new investment cycle while they can still monetize 4G investments.
In other words, the ambitions of the European industry are probably more modest that the ones of European institutions. Nevertheless, 5G is a good occasion for European telcos to submit a series of requests (a kind of list of dreams) to regulators and governments that, otherwise, would be inadmissible: less competition (too many operators around!); delivering spectrum for-ever (25 years at least); reducing net neutrality (W the Trump-net!); and so on.
European institutions are resisting to most of such requests (although one should wait and see how the current Trilogue negotiations will end up), bearing the risks that they be will finally blamed by the industry for not delivering what telcos consider necessary to speed-up 5G. However, whatever the European Union will deliver – more harmonization; more spectrum; more deregulatory cherries – it is doubtful whether such results will be useful to achieve the most ambitious objectives. The reality remains that the European telcos cannot afford the financial burden necessary for a rapid roll-out 5G network. It is just a matter of math. In addition, some traditional, well-established telcos may not have that big interest.
Under such circumstances, one should consider whether 5G roll-out require a new, revolutionary copernican thinking, rather than an adjustment of the current system. New network business models are needed, rather than some occasional deregulation. Few weeks ago a leaked paper from the US administration was largely echoed because it proposed the idea of a national 5G network in order to maintain US leadership in technology and trade, in particular vis-à-vis China. The document was utterly criticized and rapidly shelved, because of too many assumptions without robust evidences. However, one of the ideas of the paper – that is to say the convenience of a unique 5G national network – was not so stupid: a seen above, 5G networks are costly and the procedure for granting spectrum long and complex, therefore in order to rapidly install the new 5G networks (by 3 years in US, according to the leaked paper) new options should be considered, including a single national mobile network, delivering connectivity to everyone on equal terms. That reasoning was even not so stupid that the Economist itself dedicated a specific analysis, rebutting the idea that the US administration was willing to nationalize the sector: what really matters is the consideration that new business models are needed, in such a case a single, national 5G network (likely owned by operators and infrastructure funds, rather then by the State) which would allow to better collect financial resources (infrastructure funds are eager to fund utility-like networks rather than risky telecom businesses) and facilitate the award of spectrum (the querelle about the length of licenses would be overcome).
While one could understand the reasons why the European mobile industry may prefer to neglect the above as a sci-fi scenario, since a slow path towards 5G would probably be more convenient (guaranteeing stable cash flow, deregulatory dividends and current market positions), it is quite curious that the European institutions have not taken the occasion offered by the US administration to reflect about other ways 5G should develop in the EU. The various European 5G documents focus on spectrum allocation and harmonization, but they do not spend words about new network business models, giving for granted that the industrial environment which roll-out the first mobile generations will automatically fit 5G. And this happens despite the fact that the debated European Code for electronic communication addresses new investments models, such as the wholesale-only model (art. 77 of the new Code) aiming at attracting long-term, infrastructure investments.
If the European institutions really wanted to secure a rapid, successful 5G roll-out for its citizens, should therefore be more ambitious, rethink the 5G industrial path and better exploit its regulatory tools, rather than leaving the industry leading this process, the same industry that, otherwise, will feel satisfied with just some regulatory carrots.
Categories: Spectrum and 5G