5G regulation: Ensuring successful industrial transformation

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5G can transform the performance of industries and generate significant social and economic value. This report explores the role of regulators and governments in ensuring that 5G’s promises are realised.

How should governments regulate 5G?

The old regulatory models are less relevant for 5G

Regulators in different markets around the world have a tried and tested formula for making spectrum available for new networks and for regulating the operators that run those networks. They have successfully used this formula for 2G, 3G, and 4G.

However, 5G is different and may require a different approach for both licensing spectrum and for regulating mobile network operators’ services. As we outline in the section 5G benefits industry and society, unlike its predecessors, 5G is not simply a faster pipe which therefore benefits individual end-users. Instead, it has been designed with new capabilities that can have a profound effect on enterprises and entire industries.

These capabilities and how they compare to LTE and to other wireless technologies are outlined in the Appendix. Because 5G can create so much value to all constituents of society, STL Partners contends that the focus of governments and regulators should be in ensuring that:

  1. It is rolled out as quickly as possible;
  2. Regulation is sufficiently flexible and focussed to reflect the needs of different industries and of consumers;
  3. Mobile network operators are encouraged to deliver more value to their existing customers and potentially new ones by contributing to cross-industry activity that benefit governments, enterprises, and consumers.

Put simply, our analysis suggests that the upside from rapid 5G deployment far outweighs the short-term benefits of high spectrum licensing fees. From a pure economic perspective, 5G should contribute an additional $1.4 trillion of Gross Domestic Product globally in 20301. The higher rates of employment, corporate profits, and consumer spending associated with this increased GDP will translate into significant increases in receipts of corporation and income taxes, national insurance contributions, and sales tax for governments as well as enhanced national competitiveness.

These annual inflows to the public purse will be far bigger than the one-off payment from licensing spectrum. But these benefits only accrue if 5G is deployed quickly and effectively so that its full potential is realised by industry in each market. A slow 5G rollout risks enterprises investing in workaround solutions that do not require 5G and do not generate the same value.

Spectrum licensing: Auctions vs beauty contests

A focus on short-term auction fees could be counter-productive as it may inhibit operators’ ability to invest aggressively in rolling out 5G. But as we show in graphic below, it is easy to administer, shows the regulator is ‘doing a good job’, and results in higher short-term economic benefits. We believe that governments need to look at the longer-term sustainable benefits of 5G deployment and, potentially, opt for spectrum licensing ‘beauty contests’ – in which spectrum is allocated on a detailed raft of requirements such as rollout speed and network performance – rather than auctions. Such an approach may require input beyond the telecommunications regulator. For example, the treasury, health and social welfare, business, transport and energy ministries might also be needed to evaluate whether a spectrum beauty contest offers a better social and economic return than a spectrum auction.

And it’s not all about money, globally 5G could result in 1 billion patients with improved access to healthcare globally in 20302. Governments, therefore, need to evaluate the social benefits of 5G as well as the economic ones. But managing a regulatory approach for 5G via input from different government departments is complex and may require management at the highest level.

The 5G spectrum licensing conundrum

5G spectrum licensing conundrum

Recognising that not all markets are the same

While we have outlined above a bias towards spectrum beauty contests over auctions for 5G, it is important to note that the right approach will vary by country. Based on what we have already seen from the 5G deployments and announcements in 2018 and 2019, there is a clear delineation between countries in their 5G rollout speed. We have segmented markets into three types in Figure 2:

  1. Leaders: countries where all operators are pushing ahead aggressively with 5G deployment (in part owing to the role of the regulator in the way they have managed spectrum licensing);
  2. Followers: countries where 5G rollout is patchier and many operators are reluctant to deploy 5G and are essentially doing it under duress, in other words, they worry that they will suffer if they don’t deploy and their competitors do so they do enough to be seen to be ‘keeping up’;
  3. Laggards: (developing) countries where the current network deployment focus of operators is LTE rather than 5G.

The table below outlines reasons why segments are operating at different 5G rollout speeds and offers suggestions for how governments might wish to stimulate operator 5G investment in each segment.

5G spectrum licensing country segmentation5G spectrum licensing segmentation

Table of contents

  • Preface
  • Executive Summary
  • How should governments regulate 5G?
  • The old regulatory models are less relevant for 5G
    • Spectrum licensing: auctions vs beauty contests
    • Recognising that not all markets are the same
    • Local vs national regulatory issues
    • Principles and options for 5G regulation relating to industrial IoT
  • 5G benefits industry and society
    • Introduction: 5G is estimated to add c.$1.4 trillion to global GDP in 2030
    • Healthcare benefits
    • Manufacturing benefits
    • Telecoms industry energy efficiency benefits
  • Telcos (may) need encouragement to invest in 5G
    • Lower revenues, lower profits
    • 5G per se won’t change the game for operators
    • Fast 5G network deployment needs to be encouraged
  • Appendix
    • Comparing apples with apples: how to compare nascent 5G with established 4G
    • It’s not all about LTE: 5G must be compared to all available technology
    • 5G deployment: 5G will mature over the next ten years

Table of Figures

  • Figure 1: The 5G spectrum licensing conundrum
  • Figure 2: 5G spectrum licensing country segmentation
  • Figure 3: Managing national and local mobile networks and services
  • Figure 4: 5G will contribute around USD1.4 trillion to global GDP by 2030
  • Figure 5: Global impact of 5G on healthcare (annual cost savings USD Billions)
  • Figure 6: Benefits from 5G to global manufacturing (USD Billions) by use case
  • Figure 7: Annual global emissions from mobile networks under 4 scenarios (metric tonnes of CO2)
  • Figure 8: Global mobile services revenues 2009-2022 (USD Trillions)
  • Figure 9: Global mobile operators EBITDA margins 2007-2017
  • Figure 10: 4G rollout did not produce sustainable revenue increase
  • Figure 11: Mature 5G benchmarked against the capabilities of mature 4G
  • Figure 12: 5G can address some key shortcomings with existing technologies
  • Figure 13: Forecast of 5G deployment in major regions