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5G: The hype vs the reality. What will 5G mean for business owners?

(Image credit: O2)

The auction for the latest chunk of the UK's radio spectrum has closed and the networks are now hoping their bids will enable them to roll-out next generation 5G services.  Apart from raising almost £1.4m for the Chancellor of the Exchequer you might be saying “so what?”. 

5G has the potential to transform our daily lives - but only if the UK is at the forefront of this move to the next generation.

What is 5G? 

Firstly, it will be fast; about 10 times faster than 4G.  Meaning a high definition film should only take about a second to download.  It would also enable much touted virtual reality games.  

Secondly, there will be less latency than 4G. Whilst this is not always noticeable, there are brief lags between data being sent and received. This is important in relation to future technology; imagine that delay when applied to a driverless car communicating with traffic lights, or the gap between a surgeon remotely controlling a laser during surgery. 

Finally, 5G offers greater capacity, which means more devices can connect and communicate at the same time.  This is obviously important for the Internet of Things (IoT) as we connect our heating, front door cameras and even BBQs to the web.

That all sounds great but remember the fuss made around 4G? Did it deliver all it promised? How can it, when the UK is still ranked 54th in the world for 4G coverage?  There is no point in having great technology if you can only access it part of the time - especially if it relates to driverless cars.

Who remembers the “agreement” struck between the Government and the mobile operators in 2014 which gave them three years to improve coverage and remove not-spots in return for the Government not enforcing roaming in the UK?   The then Culture Secretary Sajid Javid said it was a landmark deal with the four mobile networks to improve mobile coverage across the UK. 

  • a guaranteed £5bn investment programme to improve mobile infrastructure by 2017;
  • guaranteed voice and text coverage from each operator across 90 per cent of the UK geographic area by 2017, halving the areas currently blighted by patchy coverage as a result of partial ‘not-spots’;
  • full coverage from all four mobile operators will increase from 69 per cent to 85 per cent of geographic areas by 2017;
  • provide reliable signal strength for voice for each type of mobile service (whether 2G/3G/4G) – currently many consumers frequently lose signal or cannot get signal long enough to make a call; and
  • make the deal legally binding by accepting amended licence conditions to reflect the agreement – it will be enforceable by Ofcom.

So what effect has that had? The answer is; not a lot.  Last year the National Infrastructure Commission concluded the UK is being held back by poor mobile phone connectivity, as it called for an end to “digital deserts” in places that should have adequate signals, such as rail routes, roads and city centres.

The Government has consistently failed to get the operators to improve coverage and yet these same networks, Vodafone, EE, O2 and Three, all won part of the bandwidth needed for the 5G networks.  So why will this auction result in a better outcome than with 4G?  

At least Ofcom recognises some of its past failures. It has said, ahead of its next auction in 2019, that "To ensure widespread improvements in mobile coverage across the UK, we are proposing to attach coverage obligations to some of the licences we will award for the 700 MHz band ….  These obligations will require winning bidders to roll out improved mobile coverage in rural areas and the nations."

But these obligations are not attached to the 5G auctions.

Forcing networks to offer free roaming across the networks would dramatically improve the situation. You can roam free across Europe – but not in the UK. The Government is talking about 5G services being launched in 2020 at the earliest – while the USA and many countries in Asia are already way ahead of us.

South Korea had a trial 5G network operational for the recent Winter Olympics and Japan is planning to deploy it as a key part of the 2020 Summer Olympics - including drone-based security.

As expected, China is at the forefront – a recent report by The GSMA (the body that represents the worldwide mobile communications industry) estimates that by 2025 China will have 40 per cent of the worldwide 5G connections – and this will have a hugely positive impact on jobs and China’s GDP.

The USA has opened up a lot of high-frequency spectrum for the benefit of 5G in the future.   It was very proactive in the rollout of 4G and has excellent coverage. The USA looks set to repeat this approach with 5G.  5G is expected to be available in some cities as early as Q4 of 2018.

Whilst Europe hosts the biggest event in the mobile industry calendar – the mobile world congress in Barcelona – the continent is lagging behind. The EU has set a target for each member state to have one major city running a commercial 5G solution by 2020.   The UK might actually benefit from Brexit in this area; it has the potential to move faster to make the necessary radio spectrum available sooner.  We’re already auctioning spectrum; the EU has only just agreed which spectrums to make available.

The UK Government regularly talks about the strength of the country’s digital economy. For that to succeed, grow and attract inward investment, we need the right infrastructure, and to be at the forefront, not lagging behind the rest of the world.

All this investment in 5G technology will need to be paid for. Yet the network operators are facing revenue pressures from applications such as WhatsApp. The heritage mobile networks have seen text messages volumes fall by 40 per cent over the last 4-5 years. This is a big drop in revenues.

Therefore, there is the potential that 5G will cost more. You will also certainly need to buy a new phone – so when you are signing your next mobile phone contract consider how long you’ll keep it and whether you really want the phone as well, or would you be better going SIM free?

5G represents a great opportunity for the UK. It can now, if it chooses, make up for the mistakes it made over 4G and the current terrible lack of broadband availability. This is the time to become genuine leaders in Europe.  But it needs to hold the operators accountable for failures to deliver and it needs to be radical about releasing the capacity within the spectrum.   In the same way it encouraged the oil industry with tax breaks perhaps the UK Government and Ofcom should be looking to do something similar with companies hoping to exploit the capabilities of 5G.

Dave Millett, Director, Equinox (opens in new tab)
Image Credit: O2

Dave Millett has over 35 years’ experience in the Telecoms Industry. He now runs Equinox, a leading independent brokerage and consultancy firm.