Intelligence Brief: Handicapping the race to 5G – what the data says - Mobile World Live

Intelligence Brief: Handicapping the race to 5G – what the data says

09 MAY 2018

Let’s return to the argument that 5G is a battle between nations – that the first markets (national or regional) to get to 5G will enjoy an insurmountable economic advantage, establishing 5G winners and losers in the near-term as 5G commercialisation takes hold.

Don’t get me wrong; I have no particular affinity for the argument. You might recall from our earlier analysis that I’m somewhat suspect of the logic. Operators in different markets, after all, don’t directly compete and the technology suppliers who will power all of our grand 5G visions aren’t limited to selling their wares in their home country. Regardless, the argument isn’t losing any steam with people in positions of power. Consider recent comments from Wilbur Ross, the US Commerce secretary: “Whoever pursues it, whoever does it, we’re very much in support of 5G. We need it. We need it for defence purposes, we need it for commercial purposes.” It’s no wonder, then, that T-Mobile US and Sprint claimed 5G investment as a key driver behind their planned merger. Seems like a solid way to build support, right?

Now, to be fair, there is a legitimate argument to be made for the risks of lagging too far behind in 5G. To recap our Intelligence Brief from two weeks back, a country which seriously delays on commercialising 5G could theoretically miss out on the innovations 5G networks and capabilities help to incubate. The question we posed, then, was how long of a lag would be too long?

Good news: we have an example to look at.

Similar to aspirations around 5G, 4G has been hailed as responsible for enabling a wide array of digital innovations – everything from video everywhere business models, to pervasive IoT and the sharing economy. And while, circa 2018, we might take solid LTE coverage for granted across most developed markets, it obviously didn’t get rolled out simultaneously across the globe. China, for example, might be today’s leading 4G market by subscribers, but it wasn’t always this way. So, when discussions around a Race to 5G between the US and China are invoked, it seems like looking at the history of 4G rollouts in each is a worthwhile exercise.

We all know China lagged in the race to 4G, but by how much?

Let’s look at this along two different dimensions: total LTE connections and share of connections on LTE.

China didn’t start ramping its LTE uptake until about the start of 2014 (see top chart, click to enlarge). It didn’t take long for China to reach about the same base of LTE connections as in the US (Q1 2015), but that was still four years after LTE rollouts and connection uptake began in the US.

And on the share of connections front? You could argue that this is the more important metric.

Where total LTE connections might signal the scale (and scale efficiency) opportunity, share of connections on LTE point to the technology’s reach within the market – the opportunity for LTE-driven innovations to touch people. Here, we could look at a few milestones. China reached the 25 per cent penetration mark in Q3 2015, about two years after the US (see bottom chart, click to enlarge). The 50 per cent penetration mark was hit in Q3 2016, a year after the US. But if we’re talking about a race, then the important milestone is when China caught the US, right? That would be sometime between Q3 and Q4 of 2017, more than six years after US consumers began experiencing LTE.

Clearly there was a massive lag in the Race to 4G between the US and China. And what have been the results?

Today, China maintains two of the top LTE networking infrastructure vendors. It remains a major LTE smartphone market for vendors from around the world, while generating its own top-tier smartphone makers. It’s executed on new LTE technology innovations like NB-IoT and leveraged LTE to power new business models innovations (for example, the on-demand pushbike rental craze). Ultimately, it would be hard to argue that the lag in getting LTE commercialised in China irreparably harmed the country.

That doesn’t mean there isn’t a feeling that 5G will be different, that nobody can afford to be late to the game. Because of how 5G will open up new enterprise business models. Because of how 5G will allow service providers to benefit from two-sided business models like never before – potentially on a global scale. Because of the way in which 5G is so intricately linked to massive technological movements like artificial intelligence, IoT and mass digitalisation. Because of the hope 5G can help establish competitive advantages if regulation can deliver support, not obstacles.

Hope, of course, springs eternal, no matter what past experience suggests. In this case, however, if 5G truly is a race between nations, history suggests it is much more akin to an ultra-marathon than a sprint.

 – Peter Jarich, Head of GSMA Intelligence

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

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