Faster Mobile Will Not Justify €2.4B 5G Spectrum Fee, Says Telecom Italia Exec
LONDON -- Software Defined Operations & the Autonomous Network -- Telecom Italia is under pressure to find new types of service that 5G could support, according to a senior executive at the company, after it splurged €2.4 billion ($2.7 billion) on new frequencies during Italy's recent auction.
Giuseppe Ferraris, the head of Telecom Italia's IP, transport, and core innovation departments, said he did not believe higher-speed connectivity would justify the huge outlay.
"If we want to pay €2.4 billion for spectrum we need to generate new revenue streams from 5G," he said today at Light Reading's Software Defined Operations & the Autonomous Network conference in London. "Due to strong competition, bandwidth becomes a commodity, and so it is really important to find new use cases."
Italy's 5G spectrum auction left jaws agape after spending on licenses dramatically overshot the government's initial target of about €2.5 billion ($2.9 billion), raising nearly €6.6 billion ($7.5 billion) overall. Calculations by Light Reading show that Italian operators spent about ten times as much per megahertz, per head of population, as service providers in Finland during an auction that finished around the same time. (See Italy's $7.6B 5G Bonanza Puts Telcos on the Rack.)
The spending has stoked concern about the outlook for Italian operators. Telecom Italia (TIM) is one of Europe's most heavily indebted telecom operators, while Vodafone Italy and Wind Tre, its established mobile rivals, have suffered customer losses and a decline in revenues since France's Iliad (Euronext: ILD) launched an Italian mobile service in May this year. (See Wind Tre: The New Weakling of Italian Mobile.)
While 5G equipment vendors have talked up the potential of the technology in new connectivity markets, most service providers are currently focused on using it to provide additional capacity for smartphone customers or as an alternative to fixed broadband.
Asked to provide examples of non-consumer opportunities, vendors typically refer to connected cars and remote surgery, arguing that both would benefit from 5G's low latency -- a signaling delay that occurs on data networks. But critics have cast doubt over the need for a 5G connection, in either case, insisting that other technologies could be used.
Ferraris said a few other use cases hold interest for Telecom Italia, including industrial automation and robotics. "We are working with companies building robots, and they want to use a reliable and low-latency network to control them," he said.
To support these as well as standard mobile services in a more efficient way, operators hope to use a 5G technique called network slicing, whereby many different types of virtualized network service are provided over the same 5G infrastructure. However, this would not address the backhaul problem, said Ferraris.
"You have to remember that in the end-to-end service you have backhauling and that is something that strongly impacts reliability and latency," he said. "In my view, it is important to have something to orchestrate this chain to guarantee the performance you need for service."
Backhaul is the link between the 5G basestation and the operator's core network. While some operators have used microwave technology in the era of 3G and 4G services, higher-speed 5G connections are driving investment in fiber-optic networks for backhaul purposes.
Ferraris said Telecom Italia's 5G trials have already started and that commercial services could arrive next year in some parts of Italy, depending on device availability.
— Iain Morris, International Editor, Light Reading