Why Europe will miss 5G business targets vs China and US

The latest Reuters report indicates that Europe will miss its 5G targets in 2021 despite the European Union funneling a fifth of its 750-billion-euro ($914 billion) recovery fund to improve countries’ digital capabilities.
Several European mobile operators did not step up investment in 5G networks, which could support smart factories and self-driving cars, due to a lack of political clarity about whether they must accede to U.S. demands to exclude leading equipment supplier Huawei and other Chinese vendors, the news report said.

Deutsche Telekom said its engineers have made 45,000 antennas fit for 5G in Germany in the last 12 months. People in over 4,700 cities and towns are benefiting from this. The majority of antennas transmit on the 2.1 GHz frequency.

In addition, 5G is available in 26 cities on the 3.6 GHz frequency. Telekom is thus offering high-speed 5G in places where many people move in a confined space. More than 1,000 antennas are in live operation on this frequency.

Deutsche Telekom aims to provide around 80 percent of people in Germany with 5G by the end of 2021.

Europe lags

Strand Consult said it is cautiously optimistic for 5G in 2021. Operators can excel building and running and networks during a crisis. The question is whether the applications for 5G will prove compelling for consumer adoption.

Global 5G mobile subscriptions are expected to reach 220 million by the end of this year, with China accounting for almost 80 percent of the total, Ericsson said in a report last month. North America is expected to have 4 percent.

“Europe is, unfortunately, behind,” Pekka Lundmark, chief executive of Finnish network equipment maker Nokia, said. But the rollout “is accelerating already and in 2021 I think it will gather more speed in most countries”.

Ericsson forecasts Europe’s 5G coverage should grow from around 1 percent of mobile subscriptions across the continent in 2020, to 55 percent in western countries and 27 percent in central and eastern states over the next five years, underpinning a longed-for economic recovery.

Yet it is the mobile operators who must pay companies like Ericsson, Nokia and Huawei billions of dollars for the 5G equipment.

The EU agreed its rescue package in July, and companies started drawing up digital plans.

“We spent the whole summer since the announcement working to set out tangible projects,” said Jose Maria Alvarez-Pallete, CEO of Spanish operator Telefonica.

A European Commission spokeswoman said the first payments could be made in the summer of 2021.

Among various digital projects, Telefonica calculates the funds could help cover all of Spain with fast fibre-optic Internet and extend standalone 5G – capable of giving the highest performance – to around 85 percent of the country by 2025.

Bleak future

IDC forecast for the 5G network infrastructure market for 2019–2023 indicates a bleak future for mobile operators for the time being.

Release 15 paved the way for initial commercial 5G launches. Release 16 (1H20) and beyond will unlock 5G’s potential including expanded feature sets such as fixed-mobile convergence at the core domain, URLLC, industrial IoT, and 5G NR in unlicensed bands.

“Timing issues, including spectrum auctions, particularly in the midbands, will also limit Capex through the forecast period. The industry vertical ecosystem will need to come online, including chipset, device, endpoint/sensor, and modem/module providers, which will take several years and look very different across specific regions,” says Patrick Filkins, senior research analyst, IoT and Mobile Network Infrastructure.

While an individual consumer can use 5G for making calls and browsing the internet, the technology’s main benefit lies in creating new businesses, automating factories and running critical infrastructures like power grids.

An Ericsson spokeswoman said: “Unless Europe moves quickly, it risks lost growth and weakening industrial competitiveness in manufacturing and logistics that could cost billions of euros in new wealth.”

Pressure from the United States on its allies to shun Huawei’s equipment from its networks is unlikely to disappear. The United States accuses Huawei of facilitating Chinese spying, allegations denied by the company and Beijing.

U.S. President-elect Joe Biden, however, may be more open than his predecessor to engaging in talks, reducing operators’ worries that sudden policy changes could mean ripping out billions of dollars worth of existing 4G equipment.

Telecom operators had been planning to use their existing 4G infrastructure as the cheapest and fastest way to start the upgrade to 5G, which will be able to transmit data as much as 20 times faster than current networks.

But nearly half of this existing hardware was made Huawei, forcing operators to look elsewhere for suppliers.

Nokia and Ericsson have profited handsomely from this shift, winning deals from former Huawei customers, some of whom are discussing contracts with Samsung, a new entrant to the European market.

Huawei acknowledged the quandary facing clients who have had to navigate the U.S.-China dispute.

“You can’t make seven to 10-year investment decisions unless you know that those investments are protected for that period,” said Kenneth Fredriksen, Huawei’s executive vice president, Central East Europe and Nordic Region.

While some operators stuck with Chinese equipment, other operators moved forward on replacing Huawei equipment without increasing cost or slowing their timeline to 5G, Strand Consult said.

Successful reboots include Denmark’s TDC, Norway’s Telenor, and Telia and Proximus in Belgium. It took TDC just 11 months to launch a 5G network with non-Chinese equipment covering 90 percent of the country. In most countries, these upgrades occur without operators having to increase their Capex.

The delay in auctioning of 5G spectrum – airwaves necessary for operators to start offering commercial 5G – has been one of the main obstacles to a rollout. Operators were disappointed this year when planned auctions fell by the wayside as governments focused on battling the pandemic.

Swedish operator Telia’s technology chief Stefan Javerbring said the delay in spectrum allocation had been “the major stumbling block” in the Nordic nations and further afield.

Germany, Europe’s biggest economy, says it will present draft rules for auctions in January, and Spain plans to put spectrum on the block before the end of February.

Several countries are also making progress with legislation to enact the European Union’s so-called 5G toolbox, a series of recommendations aimed at cutting costs and red tape, giving access to 5G radio spectrum and smoothing cross-border coordination for radio spectrum for 5G services.

The auction for the C-Band (3.7–3.98 GHz) in USA is on track to set a world record for a spectrum auction, breaking $70 billion. Europe’s short term spectrum licenses have led to dire situations in which licenses expire and cannot be renewed, Strand Consult said.

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