Operator spending on 5G networks may come as a big disappointment to some government authorities, says mobile expert.

Iain Morris, International Editor

December 14, 2016

4 Min Read
5G Guru Predicts Rollout Disparity

A leading telecom expert reckons there is a mismatch between some of the ambitious 5G targets set by government authorities and the slow pace at which private sector operators are likely to roll out the next-generation technology.

Bengt Nordström, the CEO of consulting firm Northstream and a former C-level telco executive, thinks "mass" deployments of 5G are at least six years away and that many operators will be in no hurry to launch it.

Nordström was speaking to Light Reading on the same day the UK's National Infrastructure Commission (NIC) issued a report complaining about the state of the country's 4G networks and urging the government to take immediate steps on 5G planning or risk further disappointment. (See Eurobites: UK 5G Report Slams 4G Network.)

Meanwhile, the European Commission wants to see all European Union member states "targeting early [5G] network introduction by 2018 and moving toward commercial large-scale introduction by the end of 2020 at the latest."

Judging by Nordström's analysis, such goals are wholly unrealistic.

For one thing, the first 5G standard is not expected to materialize until 2018 and most industry figures do not envisage commercial deployments of that standard before 2020, at the very earliest.

Moreover, to provide much higher-speed services than on advanced 4G networks, 5G operators will need access to so-called millimeter-wave spectrum, which is not good for transmitting signals over long distances. As a result, those services are likely to be unavailable outside urban hotspots or "small cells" -- at least for the foreseeable future.

"That [small cell network] can never be as big as the macro basestation rollout of a new network in previous generations," says Nordström.

Perhaps more important is the lack of a clear business case for 5G technology while capital expenditure constraints are growing.

"There is one tangible business case in 5G and that is fixed wireless access," says Nordström. "Why would operators suddenly invest in a new technology if they don't understand the return on investment? It will not happen."

Although many telcos seem interested in using 5G mainly to support an Internet of Things (IoT) strategy, the Northstream boss remains unconvinced this would pay huge dividends. Future IoT sales will account for no more than 1% of revenues generated by most operators, he says, and for just 3-5% at the most successful companies.

By the time operators face a decision on 5G investment, of course, the gulf between soaring levels of data traffic and stagnating revenues will be even bigger, weakening the typical telco's capex capability.

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Light Reading.

All of this leads Nordström to express skepticism that a cycle of 5G spending will generate significant sales growth for equipment vendors such as Ericsson AB (Nasdaq: ERIC) and Nokia Corp. (NYSE: NOK).

"I think we'll need 5G over time but it's not something that will generate a boost in revenues for operators or vendors," he says. "If I was a vendor planning for the next five or six years, my prayers would go on operators continuing to invest in 4G evolution -- not on them trialing 5G or increasing capacity in hotspot areas."

Operators certainly appear to be taking greater interest in more capable 4G technologies based on the LTE-Advanced Pro standard. Only this month, Nokia revealed that it has now signed 110 contracts with service providers for the rollout of its 4.5G technology, and it expects future improvements to support multi-gigabit-speed services. (See Nokia Boasts 4.5G Momentum With 110 Deals.)

But spending on these technologies, which rely on upgrades to existing LTE infrastructure rather than a network overhaul, will not prevent a revenue decline next year, as far as Nokia is concerned. The Finnish vendor last month predicted that its network sales would fall by about 2.2% in 2017. (See Nokia to Create Standalone Software Biz, Target New Verticals.)

Northstream is not the only company to suggest that government authorities may be heading for a 5G disappointment.

Following this morning's announcement from the UK's NIC, network operator Three UK flagged its usual unhappiness with a perceived spectrum imbalance in the UK market, having repeatedly complained that larger rivals BT Group plc (NYSE: BT; London: BTA) and Vodafone UK control most of the country's airwaves.

"One of the main causes of the UK's poor 4G coverage has been the historic imbalance in mobile airwaves," said 3 in a company statement. "We'll face the same issues with the rollout of 5G with consumers and businesses suffering as a result."

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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