5G NETWORKING DIGITAL SYMPOSIUM – Operators have been scathing about government plans to reserve valuable 5G spectrum for organizations outside the telecom sector. Now, a senior technology executive at one of Europe's biggest service providers has slammed these moves in Germany as bad news for the country's smaller firms.

Arnaud Vamparys, the senior vice president of radio networks at France's Orange, said only very large German companies, with the resources to build their own private networks, would benefit from a government decision to reserve about 100MHz of 5G spectrum for industrial use.

"If you want many companies to benefit, the French model is better than the German one," said Vamparys during Light Reading's 5G Networking Digital Symposium this week. "It is only the very large companies that can benefit from that and all the small companies will not have access."

Germany's move has been controversial ever since it was first aired. The decision meant that airwaves between 3.7GHz and 3.8GHz were not included in Germany's 5G auction for telecom operators last year. Service providers including Deutsche Telekom and Vodafone Germany blamed this squeeze on supply for driving up prices during the auction, which eventually raised nearly €6.6 billion ($7.4 billion), far more than analysts had expected.

French authorities have so far decided not to reserve spectrum for industrial use and will license it to operators in the usual way. Instead, there will be more stringent obligations on service providers to meet business customers' needs over the next few years.

In Germany, companies have been able to apply for "local" industrial licenses since November last year, with license fees reportedly ranging from just €1,000 ($1,117) to €1 million ($1.12 million). By April, organizations including BMW, Bosch, Volkswagen, BASF and Lufthansa had submitted applications, according to a report from the Wall Street Journal (WSJ).

But despite the low fees, only about 35 applications have been made so far, says Vamparys. Along with the WSJ report identifying applicants, that suggests only the industrial giants have taken advantage of the scheme. The Bundesnetzagentur, Germany's telecom regulator, did not respond when approached for a comment.

While Germany's plan does not prevent operators from catering to business customers in the 5G market, it has been criticized for limiting the amount of 5G spectrum they can use. Without sufficient airwaves, service providers will struggle to support more demanding 5G applications, they insist.

"We are in a situation where the midband – 3.4GHz to 3.8GHz in Europe, for example – has a bit of scarcity," said Vamparys. "Quality is really proportional to the size of the band. You can divide that in three or four depending on the number of operators in your country."

A desire to ensure data remains on premises and off the public network appears to have driven some of the interest in building private 5G networks. However, this security could be guaranteed through the installation of a local gateway and does not require a company to have its own spectrum license, according to Vamparys.

Operators including Orange are pushing an alternative concept of the private network that draws on a technique called network slicing. This would essentially reserve a "slice" of the 5G network for a particular customer group or even for an individual organization, providing security guarantees to satisfy customer demands.

German industrial groups appear to be moving ahead before the 3GPP, the main 5G standards body, has finalized its Release 16 specifications, which are supposed to include more support for network slicing. The German scheme has also taken off while the practical details of network slicing have yet to be worked out.

"It is a little bit in the early stages," says Bhaskar Gorti, the head of software for Nokia, a Finnish vendor developing network-slicing products. "We are seeing two different models – people doing it by vertical and people doing it by the top five, 10 or 20 customers. It is more a business model discussion that is going on."

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Critics also say that telcos fear being shut out of 5G business markets if more regulators follow the German example. According to research carried out last by Heavy Reading, numerous countries now have similar plans to reserve spectrum for local or industrial use, including the Netherlands and the UK in Europe.

Nearly one third of enterprises have already bypassed operators and ordered private 5G networks directly from vendors such as Nokia, according to separate research carried out by Omdia, a sister company to Light Reading, and commissioned by BearingPoint//Beyond, a consulting firm and software specialist.

In a stark example from Germany, the Volkswagen group has now issued a request for proposal for private 5G networks across all its 122 factories. A pilot uses equipment from Sweden's Ericsson, while data analytics and applications are being developed under a contract with Amazon Web Services.

"It is still open whether the networks will but managed by a CSP [communications service provider], by an alternative provider, or internally," say the report authors.

Gabriel Brown, a principal analyst with Heavy Reading, says recent spectrum decisions by governments such as Germany's could reflect some concern that large businesses were overly dependent on the telecom sector and the pace at which it moves. "If it is all operator-managed, it is also on an operator's timeline and processes, which isn't what everyone wants."

But earlier attempts to reserve spectrum for specific purposes ultimately failed, insists Vamparys, referring to the example of WiMax, an ill-fated technology promoted by Intel and other parts of the computer industry as an alternative to 4G. "Each time there was some action to dedicate one band for one usage it was very difficult to have a return on investment," he said. "That is why it is better to have a number of operators by country with obligations about coverage and quality."

Orange is now working with a group called 5G ACIA – whose membership page lists numerous operators, vendors and industrial groups – on best practices for the rollout of 5G technology to business customers. With network slicing, organizations can avoid the exorbitant costs of building a full private network, said Vamparys.

His stance was backed by Ian Hood, the chief technologist of IBM's Red Hat business, who said the US regulator's plans for the so-called CBRS frequency band could similarly leave smaller companies at a disadvantage.

"It is only large companies that will benefit from doing their private thing," he said during the Digital Symposium. "It is about getting benefits to all companies and not just ones that have access to spectrum based on regulation."

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— Iain Morris, International Editor, Light Reading