To 5G or not 5G – that is the question that telco execs should be asking

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Amongst the many interesting and informative discussions at the Great Telco Debate in London this week was one about 5G. It not only touched on the benefits it would bring, but also questioned if it was even needed at all.

Rahim Tafazolli, founder and director of the 5G Innovation Centre at the University of Surrey, and Christian Hedelin, head of strategy for network products at Ericsson, were positively glowing (as you would expect) in their joy about the progress being made in 5G technology. And how it will combine mobile and fiber to deliver seamless and contiguous connectivity for the billions of IoT devices being predicted. And who could blame them for their excitement? The hype around 5G is positively intoxicating.

It took Nik Willetts, acting CEO of the TM Forum, to add a tempering note to what was basically a “for and against debate” spurred on by moderator Chris Lewis. 5G is still some way off, warned Willetts, and network operators were still investing heavily in 4G and 4.5G infrastructure that could and would fill the gaps until 5G was commercially viable. He also stressed that the business cases for 5G investment are still being formulated, and that existing network stakeholders would like to sweat their existing assets for as long as possible.

Which raises the point that many network board members and stakeholders are asking – why are we constantly investing in new technology for more speed and capacity when we haven’t utilized the investments and assets we already have?

Jumping on the 5G bandwagon might be a popular pastime for CEOs of the world’s largest telcos to impress their customers and suppliers, but it’s doing very little to warm up their shareholders and potential investors. Many of them are not being carried away by the hype that Willetts warned about and they are reading the well-researched news articles that claim 5G is “simply a marketing term”.

“That’s because there is no 5G standard — yet. The International Telecommunication Union plans to have standards ready by 2020. So for the moment 5G refers to a handful of different kinds of technologies that are predicted, but not guaranteed, to emerge at some point in the next three to seven years”.

Many are being pushed by suppliers hoping their version of 5G will be favored. Some have already partnered with telcos to test their own 5G technology. No wonder alarm bells are ringing.

Just this week, Telstra’s chief operations officer Brendon Riley announced a new program called Network 2020 that would include providing 1-Gbps mobile signals in key central business districts by 2019, rolling out 5G mobile, and shutting down old technology such as 2G and 3G mobile networks.

At the same time, chief executive Andy Penn said Telstra will be “consulting investors” in the coming months as it reviews its capital allocation strategy. Not that Telstra needs to search out funding, because it expects to receive up to $8 billion from NBN, the national broadband network that has acquired much of Telstra’s fixed line network. But it is in a unique position.

One thing is certain about 5G – it will require a combination of fiber and mobile technologies. 5G broadband to the home or enterprise will almost certainly require fiber close to or at the premises, linked to small cells that would then beam wireless internet to a router and devices using MU-MIMO (therefore receiving data and sending data at the same time), all in a very efficient way.

That’s all great, and it makes sense, but it will require massive investment by network operators not only to roll out the technology but also to acquire the additional spectrum and bandwidth that will be needed – another windfall for governments, and more potential headaches for network operators in terms of regulation that will almost certainly arise around 5G.

Telcos are also not particularly popular with investors these days. Telstra’s share price, for example, was sitting at a 12-month low last week and it only rose 2.5% after the latest announcement. Network equipment suppliers are suffering a similar downturn in investor interest despite the promise of 5G.

Could it be that the industry overall is being seen as a black hole constantly in need of massive capital investments yet showing diminishing returns caused by price competition and market demands for faster yet cheaper access? Despite efforts to lower costs by streamlining and automating their businesses, telcos are generally seen as lumbering dinosaurs that may be killed off by an approaching and unforeseen asteroid hit that could take any number of forms.

5G is not the solution in itself. Maybe it’s time for radical change on all fronts, but who will be the first? It’s such a shame that all those network operators can’t overlook their own competitive situations to join together and tell governments and regulators to take a running jump. After all, we are entering the Trump age where bullying, threatening, posturing, bullshitting, avoiding taxes and breaking down barriers is promoted by the soon-to-be-most powerful man in the world, is favored by the masses and may become the new norm.

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