Will Covid-19 stop 5G from taking off?

While the 5G ecosystem and investments remain healthy, the global roll-out of 5G is expected to take a hit as the coronavirus pandemic delays trials, and the supply chain faces shortages and becomes more unpredictable from the lockdowns imposed. Raymond Tan reports.

Will 2020 remain the ‘Year of 5G’?

In March, the Global Mobile Suppliers Association (GSA) reported that 70 operators have launched commercial 5G in 40 countries. Compared to the same time last year, only 11 globally announced limited 5G services and 201 were then investing in 5G.

However, forced isolation measures by countries fighting the coronavirus pandemic and the prospect of a growing global economic slowdown are threatening to put a break on 5G deployments and impede adoption.

“The 5G market was growing faster than anticipated, with 2020 expected be the starting point for 5G Standalone (SA) core commercial deployments in Communications Service Providers’ networks. But that expectation may take a little longer to materialise,” explained Don Alusha, senior analyst at ABI Research, in its latest study of the impact of Covid-19 on 5G.

“Covid-19 will almost certainly derail further trials and testing to verify the processing performance and stability of 5G SA networks,” he adds.

The stay-at-home measures are likely to cause operators to spend more time expanding and densifying their networks – to manage the huge demand and spikes in network traffic – rather than deploying new ones.

Globally, 5G deployments may be limited to smaller and more densely populated cities as operators in new 5G markets spend more time managing the economic fall-out.

Speaking to APB+ on the 5G outlook, Cheang Wai Keat, Asean Technology Consulting Leader and Singapore Head of Advisory, Ernst & Young (EY), said that constrained consumer spending and cashflow concerns are key considerations for operators in 2020.

“In considering the financial via­bility of 5G, operators will need to evaluate if there is any set of existing IoT communications technology such as satellite, Wi-Fi and LoRa technologies, which can do a more cost-effective job than 5G,” he said.

“Liquidity challenges will impact Capex commitments across operators in the region who may be burdened by existing high Capex commitments on upgrading networks to 4G.

“Operators looking to invest in 5G infrastructure will also need to deal with the issue that 5G networks are expected to be an overlay network and not wall-to-wall to start with.”

Cheang advised that to navigate the challenges during this period, operators should focus on developing asset-lite models, active and or passive infrastructure sharing, digital adoption, remote workforce structures, and take a ‘razor sharp’ focus on reducing Opex and building greater Opex flexibility.

Indeed, operators should look at asset-lite LoRa wireless modulation that can create long-range communication link.

He added that emerging markets in the region now face limitations in their 5G device ecosystem and B2C use cases are still at the developmental stage. As such, operators in these markets would be cautious in making large-scale 5G investments.

“As mass adoption of 3G and 4G accelerated only when chipset and device price points came down, operators in the emerging markets facing tight cashflows may adopt a ‘wait-and-see’ approach, as they expect price points to similarly fall for 5G.”

This goes in line with ABI Research’s global predictions that revenue from 5G deployments will fall between 20% and 30% this year. The investment shortfall in modernising telecoms networks may be in the range of US$2 billion-$3 billion in 2020.

Cheang added that operators face supply side constraints around 5G devices and network equipment availability. As a consequence, they are focusing on diversifying their supply chains for resilience, which would collectively slow down the pace of 5G deployments.

With most components for 5G base stations and smartphones manufactured in China, the launch of new 5G smartphones is also expected to be deferred as supply chain companies struggle to get production running.

Globally, smartphone shipments were down 38% year-on-year at the end of February. In China, for the first time, mobile shipments in the first quarter dropped 34.7% since the pandemic outbreak. According to the China Academy of Information and Communications Technology, this represents the lowest level since 2012 when mobile shipment data was first published.

The delay is significant as slowdown of the replacement phone cycle effect will slow the transition to 5G.

At the same time, planned auctions are likely to be deferred in some emerging markets as governments will anticipate that these auctions might not attract the level of returns and economic growth that they hope for, said EY’s Cheang.

“The constraint on network equipment will get slightly alleviated where operators have spent money in buying the spectrum. The situation described earlier also shows that regardless of the pandemic, the rate of implementation of 5G across the region would happen at different stages depending on each country’s ecosystem.”

As a consequence of Covid-19, the 3rd Generation Partnership Project (3GPP) – the global organisation that develops telecommunication standards – has delayed the upcoming release of new 5G standards by at least three months.

5G device-makers working on industrial IoT devices or wearables will not have a clearly defined set of standards to build their devices around. These device-makers may have to reassess project timelines to ensure that the eventual products will be compatible with newer 5G devices. This uncertainty could further delay market delivery and impede the proliferation of 5G devices in the broadcast, media and ICT industries.

Funds meant for 5G pilots and projects are also likely to be diverted elsewhere by enterprise organisations. To cope with the impact of the pandemic, spending by the telecoms and ICT industry are being diverted to remote-working technologies, software-as-a-service applications and cybersecurity.

Globally, a secondary impact on 5G comes from the cancellation of major sporting events such as the Tokyo Olympics, European football leagues – from the English Premier League to the Euro Championship – and the NBA in the US, events which would have generated more use and development of 5G broadcasts. 

Tokyo, for instance, was supposed to be an important platform for mobile operators to showcase new 5G use cases beyond just enhanced-mobile broadband (eMBB), such as 8K virtual reality and other smart-city applications.

5G unlikely to be derailed

Despite the challenges facing the industry, EY’s Cheang is confident that operators and the government are realising that 5G is an enabler of smart cities and key in unlocking IoT propositions, and will supercharge the next wave of industrial transformation.

“We do expect an overall increased adoption in 5G use cases around Industry 4.0, especially to improve productivity, improve efficiency and lower operating expenditures.

“In the short to medium term, 5G adoption will concentrate on specific areas such as AI traffic forecasting applications and smart technology applications, where the latter would generate the most effective ROI for operators,” he said.

Telecoms industry body GSMA reveals that operators have committed to spending more than US$1 trillion on their mobile Capex between this year and 2025, with 80% of the spent directed at 5G networks.

There is ample evidence that the pace of 5G implementations is still on a steady roll in Asia-Pacific.

NTT Docomo became the first operator to introduce mobile 5G in Japan, with KDDI and SoftBank planning launches. More than 500 cities are expected to have access to Docomo’s 5G service by March 2021.

In Australia, Telstra has put planned job cuts on hold and increased investment in 5G this year as a response to the Covid-19 crisis.

Thailand has issued 48 spectrum licences and expects to be one of the first South-east Asian countries to launch 5G in the coming months. Singapore has issued licences to two network providers, with an initial launch expected next year.

China is leading early adoption and is on a tear – it has already built more than 160,000 5G base stations covering more than 50 cities. The 2020 China edition of GSMA’s Mobile Economy series forecasts that 5G will account for almost half of the country’s mobile connections by 2025, representing an adoption rate on par with other leading 5G markets such as Japan, South Korea and the US.

Governments play key role

Remote working and the greater use of video conferencing is driving a strong business case for 5G technology. 5G will mean quicker downloads, much lower lag and higher network capacities to stream and share video and data.

“The shift to remote working, for instance, will increase the demand for higher bandwidth, UCaaS, AR/VR and Telepresence-type, which will drive increased 5G adoption. B2B demand will also be a strong source of demand for 5G’s low latency networks,” said Cheang.

“The pandemic is driving more companies and governments to consider accelerating pandemic-
proof manufacturing, customer engagement and supply chain through automation and robotics, with tight data feedbacks and control loops.”

China’s 5G roll-out is expected to be massive and present investors with significant opportunities. In Wuhan, for example, Huawei installed a 5G network in a specialist hospital in three days. 5G-enabled robots can now help to take care of patients in the hospital and take measurements, reducing the amount of time medical staff need to spend with infectious patients.

Additionally, specialists are using 5G to control medical equipment in distant centres across the country, allowing them to remotely diagnose new cases and support local physicians.

Many governments in the region are already putting large investment plans to drive digital transformation, including infrastructure, to mitigate the effect of an economic recession.

They also play a vital role in deciding on which and how much spectrum to release first – be they low-bands (700MHz), mid to high bands (3GHz-4GHz range) or mmWave. Operators will need to use a mix of low-band, mid-band, and high-band spectrum to deliver the type of 5G experience that their customers demand, from coverage across larger suburban areas to those that can meet ultra-high broadband speeds.

“Governments play a critical role in helping to accelerate 5G adoption. Given the cashflow challenges currently faced by all operators, government aid in the form of supportive spectrum pricing, introducing alternative operating models, additional investment incentives and tax rebates, similar to the cash bail-out programmes for the pandemic, can help to rekindle the 5G implementation,” said Cheang.

Global telecoms research firm Analysys Mason predicts that demand and market output should begin to rise again in the third quarter of 2020 and is expected to return to where it was in 4Q 2019 by the end of next year.

Rupert Wood, Analysys Mason’s research director, said the telecoms industry should stay healthier than almost any industry in this crisis.

“The resilience of the telecoms sector is largely due to its emphasis on remote working and entertainment which will undoubtedly result in the successful performance of fixed broadband services.

“Telecoms should show some of the strongest post-crisis investments, in part because cashflow is more resilient in the telecoms sector than it is in most others, and because some governments will emphasise 5G and fibre in stimulus packages,” said Wood.

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