European operators have previously taken umbrage at suggestions they are lagging their US peers in the 5G race. A 5G standard does not even exist, Vodafone scoffed at the start of this year. Using very high frequency bands to provide last-mile broadband connectivity, as Verizon intends, is not much to shout about, said Luke Ibbetson, the UK-based operator's director of research and development. (See European Telcos Slam '5G' Efforts in Asia, US.)
Those may be fair points, and the 5G talk could mean nothing if US telcos stumble on the 5G walk. But the European case is getting harder to make. A recent 3rd Generation Partnership Project (3GPP) decision to speed up the development of the 5G new radio specifications makes a commercial 5G launch look feasible in 2019 rather than 2020. Telcos that remain tight-lipped about their 5G intentions, continuing to insist it is "years away," risk appearing seriously unprepared. (See 3GPP Approves Plans to Fast Track 5G NR.)
Nor can the European cohort still dismiss US plans as "niche" broadband affairs. Last week, T-Mobile US Inc. said it would build a nationwide 5G network by the end of 2020, using 600MHz airwaves it bought in a recent auction along with spectrum in higher frequency bands. As challenging as that plan will be from a cost perspective, it is "technically feasible," analysts have told Light Reading. (See Is T-Mobile's 5G Plan Just a Pipe Dream? and T-Mobile Promises 'Nationwide' 5G in 2020 With New Spectrum.)
If T-Mobile can rapidly build a 5G network in a country as big as the US, then why can't Europe's operators do the same in their much smaller national markets? European operators are certainly thinking of deploying 5G in the 700MHz spectrum band, says Heavy Reading Principal Analyst Gabriel Brown. Those low-band airwaves, which are ideal for covering large geographical areas, have already been auctioned in countries including France and Germany. Companies also expect to make use of "mid-band" spectrum in and surrounding the 3.5GHz range. Yet none has announced any firm 5G targets, or even said much about 5G trials outside laboratory conditions. (See 5G Spectrum to Cost Less Than 4G, Says Expert.)
Of course, promising a nationwide 5G service by 2020 is not the same as delivering one. Having scorned AT&T Inc. (NYSE: T)'s recent 5G marketing as "fake," T-Mobile will invite plenty of derision if "nationwide" turns out to mean well below 100% coverage, as may well happen. Vodafone Group plc (NYSE: VOD) could defensibly be as dismissive of T-Mobile's 5G plans as it has already been of Verizon's.
But Europe's biggest operator could not, simply because it happens to be T-Mobile's majority owner. Of all Europe's leading players, Germany's Deutsche Telekom AG (NYSE: DT) has seemed the loudest 5G cheerleader. At the Mobile World Congress this year, it promised to deploy 5G technology across the entirety of its European footprint. Unlike T-Mobile, however, it avoided attaching any deadlines to this ambition. Because every mobile operator on the planet will eventually move to 5G, that vagueness essentially robs the operator's 5G announcement of much impact. (See DT Plots 5G Across Entire Footprint.)
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It is understandable, though. The cost of blanketing Europe with 5G could be anything between €300 billion ($327 billion) and €500 billion ($544 billion), said Timotheus Höttges, Deutsche Telekom's CEO. Costs must fall or 5G "won't work," said Bruno Jacobfeuerborn, the operator's chief technology officer, in a conversation with Light Reading. (See DT CTO: Costs Must Fall or 5G 'Won't Work'.)
Using lower-band spectrum could certainly help to reduce the bill, but Ovum Ltd. analyst Daryl Schoolar still thinks a nationwide 600MHz-based 5G network might cost T-Mobile as much as $25 billion -- similar to what he estimates AT&T spent on its 700MHz-based 4G network. That figure is about five times what T-Mobile plans to invest in capital expenditure this year. Amid concern about the budget implications of the 5G plan, T-Mobile's share price has lost 3% of its value on the Nasdaq since May 2, the date of its 5G announcement. (See T-Mobile 5G Plan Could Drive Capex to Record Highs.)
Next page: Justifiably wary
Justifiably wary
Europe's operators are perhaps right to be warier than some of North America's. While T-Mobile's revenues have risen at a compound annual growth rate of roughly 17% since 2012, those at Deutsche Telekom's domestic business are down about 0.8% over the same period. Not all US operators are prospering in the same way as T-Mobile, but competitive and regulatory conditions have been more favorable in the US than in Europe, from a telco standpoint. A US relaxation of rules on net neutrality could further bolster their position.
Deutsche Telekom has hinted at this disparity, arguing that Europe has "different market needs" from the US. But it has also downplayed the significance of T-Mobile's announcement. "If people speak about 5G these days, most of them are talking about details and certain use cases -- not the big picture," said a spokesperson for the German operator. T-Mobile, he notes, was talking about 5G new radio, and "5G is not just the next mobile radio standard."
He has a point. Many of the core network changes that facilitate "network slicing" and support other 5G features will probably come after T-Mobile's service launch in 2019. And as far as some operators are concerned, it is this overhaul -- rather than anything on the radio side -- that will open up new service opportunities. With network slicing, for example, 5G operators will be able to run multiple virtual networks over the same physical infrastructure, with each virtual network supporting specific service characteristics. (See The Growing Pains of 5G.)
Those opportunities might not translate into a revenue boost for operators, but simply providing higher-speed connections almost definitely won't -- if past experience is anything to go by. Moreover, while the 5G moniker will give T-Mobile something to brag about, the users of smartphones and other mobile devices may notice little improvement on 4G if 5G is delivered over 600MHz spectrum. Such a bandwidth-constrained sub-GHz range looks ill suited to the task of providing the very highest-speed services. (See EE: New Tech Is Mobile Revenue Savior.)
None of this may alter the perception that Europe has fallen behind other parts of the world in the next-generation mobile technology stakes. If 5G is capable of spurring economic growth, a genuine lag should matter to everyone from policymakers and regulators to operators and end users. That spur seems likelier to come with iterations of 5G that follow those now in the crosshairs of T-Mobile, Verizon Communications Inc. (NYSE: VZ) and AT&T. It is up to Europe's operators to prove they are competitors in that race.
— Iain Morris,

, News Editor, Light Reading