Top five telcos for sustainability in path to net-zero

STL Partners’ 2022 telecom’s sustainability scorecard benchmarked performance of 45 companies (telecoms operators’ and a selection of adjacent market companies) against seven sustainability related criteria. Companies included Telefonica, Verizon, Microsoft, Amazon, KPN, Apple, BT, Meta – see the full 45 companies here.

Sustainability Criteria

STL Partners’ sustainability scorecard benchmarks the performance of a selection of companies against seven sustainability-related criteria which extensibly relate to company commitments to net-zero, biodiversity, and social and governance targets, as well as their activities to enable customers to achieve net-zero ambitions. They are designed to highlight the areas in which the listed companies are more and less mature in their sustainability strategies.

  • Based on this seven criteria, the scorecard shows that companies with a global footprint are generally more mature with their sustainability strategies and energy market dynamics play a big role in companies’ carbon intensity.

Top five sustainability telcos

KPN ranked 4th

stl-partners-sustainability-score-card-top-five-telcos-2022

Source: STL Partners

The sustainability scorecard recognises the top five telecom telecom operators in terms of their sustainability efforts and journey towards achieving net-zero. They include:

  1. Telefonica has been reporting on its scope 1 and 2 emissions for more than 10 years, and achieved its 2020 sustainability targets two years ahead of schedule. Its goal to reach net zero in scope 1 and 2 emissions by 2025, and including scope 3 emissions by 2040 is among the most ambitious in the industry. In 2021 it was on the CDP’s “Climate A List” of 200 best practice companies for the 8th year in a row.
  2. Verizon – Since 2014, ESG factors (split equally between diversity, supplier diversity and carbon intensity reduction) have accounted for 5% of short term incentive rewards for employees. In 2020 this increased to 10% of the STI award for corporate employees — including for their CEO, Hans Vestberg. In 2019 Verizon appointed a Chief ESG Officer, reporting directly into the board, supported by an Executive Climate Oversight Committee. In 2020, Verizon aligned their reporting with the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD). By 2021, Verizon had issue three individual green bonds of $1bn each.
  3. Proximus – Like Telefónica, Proximus scores highly on its transparent and detailed reporting on sustainability KPIs. In 2021, alongside its annual report Proximus published an excel ESG Factbook for the first time, covering energy, emissions, abatement, circularity and supply chain (as well as social and governance KPIs) back to 2017.
  4. KPN uses both short-term and long-term incentives to promote sustainability in the Board of Management. If sustainability targets are met, KPN grants its Board of Management share-based awards. For example, sustainability targets made up 12.5% of share-awards until 2018. In 2018, environmental targets rose from 12.5% of total LTI to 15%.
  5. SK Telecom has evaluated its CEO’s performance on financial and non-financial KPIs for over 5 years, but in 2019 increased social value to 50% of the CEO’s KPI – although it does not specify the contribution of environmental targets to the social value KPI. Nevertheless, the strong focus on social value has likely contributed to SK Telecom’s efforts to begin applying its experience in digital service innovation to carbon reduction. Examples of this can be seen from SKT’s happy habit project and mobility as a service initiatives (see our Telecoms net-zero enablement use case directory for more detail).

How did 40 other telecoms and adjacent market companies score?

This research tool is part of STL Partners’ Sustainability Insights Service, which aims to identify how the telecoms industry can drive growth through sustainability

• It is accompanied by an excel scorecard
• It builds on recent reports, as well as our Telecoms net-zero enablement use case directory

The sustainability scorecard

About the sustainability scorecard

This sustainability scorecard benchmarks the performance of a selection of companies against seven sustainability-related criteria, and is designed to highlight the areas in which the listed companies are more and less mature in their sustainability strategies. The companies listed includes telcos and small selection of others in adjacent industries (technology, infrastructure).

It supports telcos and their partners to:

  1. Benchmark sustainability performance against competitors
  2. Understand areas of relative strength
  3. Highlight areas that require greater focus in order to guide future sustainability strategies

Our list of companies are scored against seven sustainability criteria including:

1. Structured sustainability reporting. Whether the company has history of publishing sustainability reports over a period of time shows a sustained commitment to sustainability.
2. Sustainability commitments and incentives. Evidence of board level incentives tied to ESG targets demonstrates that the organisation sees achieving sustainability targets as core to its long term competitiveness.
3. Public reporting on scope 1, 2 and 3 with associated emission reduction targets.
4. Green finance. This includes the issuing of green bonds or sustainability linked bonds.
5. External recognition of social initiatives to highlight the full spectrum of ESG initiatives.
6. Commitment to biodiversity.
7. Enablement. Companies that are committed to enabling their customers to reduce their carbon footprint will have concerted initiatives that are delivering measurable benefits.

Companies included in the scorecard

1. Telefónica
2. Verizon
3. Proximus
4. KPN
5. SK Telecom
6. Amazon
7. Apple
8. Vodafone
9. Deutsche Telekom
10. Swisscom
11. Google
12. TELUS
13. Elisa
14. Sony
15. Softbank
16. KDDI
17. Orange
18. AT&T
19. BT
20. Meta
21. Microsoft
22. Telia
23. Millicom
24. Bell
25. Singtel
26. MTN
27. America Movil
28. Telenor
29. Cellnex
30. Saudi Telecom Company
31. T Mobile
32. China Mobile
33. Telkom Indonesia
34. Telstra
35. Rogers
36. Netflix
37. Tata Communications
38. Globe
39. China Telecom
40. Bharti Airtel
41. American Tower Corporation
42. Veon
43. MTS
44. Jio
45. Digicel

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The net-zero enablement use case directory

About the Telecoms Net Zero Enablement Use Case Directory

This telecoms net-zero enablement use case directory highlights a selection of sustainability use cases that telcos could offer to their customers to enable them to reach net zero. Each use case has one or more related case studies of companies (including, but not limited to, telcos) which highlight examples of the use case in practice.

It supports telcos and their partners to:

  1. Accelerate sustainability strategy through exploring a range of real world case studies that are driving solutions across different industries and for consumers.
  2. Drive alignment within the organisation on the proposition and requirements of use cases.
  3. Highlight the monetisation opportunities and roles that need to be filled in order to deliver a sustainability solution.

To download the PDF version of our Telecoms Net Zero Enablement Use Case Directory, click the button below

Our list of use cases and case studies provide detailed insights and analysis

Each use case features the following:

  • How it works
  • How the use case enables net zero
  • Potential ecosystem partners
  • The telco business benefit (e.g. connectivity revenue, access to green finance)
  • The telco capabilities involved in the use case (e.g. 4G, 5G, edge, systems integration)
  • Whether the use case has a direct impact (clearly articulated link to sustainability in proposition) or an indirect impact (sustainability is currently a by-product)
  • The applicable business model (e.g. B2B, B2C, B2B2X)

Each case study highlights:

  • A specific example of a telco or other company offering a sustainability use case
  • An overview of how the case study works
  • STL Partners’ SWOT analysis
  • Key solution partners
  • Indication of solution maturity

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Where are SPs in their roadmap to net zero?

Where are SPs in their roadmap to net zero?

The telecoms industry has a key role to play in reducing global carbon emissions, but as it stands there is huge variety in how close SPs are to achieving net zero. This article explores where SPs are in their sustainability journeys, and their key areas of focus moving forwards.

The telecoms industry has a key role to play in reducing global emissions

There are over eighty telecoms operators globally that turn over $1 billion or more in revenues every year. As major companies, service providers (SPs) have an essential role to play in reducing global carbon emissions. So far, they have been behind the curve. While there is evidence of SPs reducing their carbon emissions over the last five years, the speed of reduction is slow. For example, twelve of the leading SPs1  have only managed to reduce their carbon emissions from a cumulative total of 33.31 million tonnes of carbon dioxide emitted in 2016 to 30.53 million tonnes in 2020.

The largest SPs globally have all committed to net-zero carbon emissions – but will deliver in different timeframes 

Where are SPs in their sustainability journeys?

While some SPs are taking committed and ambitious actions around carbon emissions, many others are still trying to determine what they need to be measuring and reporting in the first place. All have their own unique challenges, though even the most ambitious SPs are still struggling with the circular economy and its impact on scope 3 emissions in particular.

European SPs are leading the way

The market an SP operates in has a significant impact on its carbon emissions journey. This is because it impacts the regulations that the SP needs to operate within, and because factors like the dirtiness of the country’s grid impact the challenges an SP faces. Market dynamics are a key reason why many European SPs are further ahead in their journey and are more likely to have committed to net-zero emissions in a more aggressive timeframe. Impending EU regulation like Fit for 55, means that many SPs feel they have little choice but to introduce reduction initiatives, while SPs in North America and Asia are weighing up whether reducing carbon emissions will increase their customer, employee or shareholder satisfaction.

For SPs who are further ahead in their sustainabiltiy journeys, a large focus is on the supply chain. This is where all SPs will eventually need to focus since supply chain activities account for more than 70% of overall SP emissions. Since measuring these emissions requires capturing information from the very beginning of a supply chain to the very end, many SPs struggle to measure and report their supply chain emissions. This is a particular challenge in markets where suppliers are less geared to sustainability, such as in Asia or Africa. Therefore, despite the supply chain being the biggest contributor to an SP’s carbon footprint, it is also the most nascent area in terms of measures being undertaken to reduce it.

Data capture and the circular economy were identified as key challenges 

The focus for SPs earlier in their carbon emissions reduction journey tends to be on procuring green energy (e.g. from renewable sources) or on being more energy efficient, since this is an obvious way to make a tangible impact on emissions (with clear associated cost savings). However, the playing field for moving to greener energy is not even. Some regions in South America and Western Europe have very green electric grids already, so there are fewer barriers to the SP purchasing green energy. In others, particularly in Asia, this is very challenging or simply not possible.

Many SPs in Asia are therefore further behind in their journey to net zero emissions. This is also driven by the lack of a strong market influence; there is no need to prioritise sustainability efforts when customers or stakeholders do not request it.

SPs must build sustainability into all areas of the business

In order to deliver on their net zero emissions commitments, SPs will need to see change across all areas of their business. This will require consistent and formal backing of sustainability initiatives by both CSR (corporate social responsibility) teams and senior board members, and collaboration and sharing of best practices between teams. We have explored how stakeholders across the organisation can play a part in furthering efforts in our report: Telco roadmap to net zero carbon emissions: why, when and how.

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Telco journey in reducing carbon emissions

Telco journey in reducing carbon emissions

Understanding the practical steps service providers are undertaking to reduce their carbon footprints as part of their sustainability journey

There are over eighty telecoms operators globally that turn over $1 billion or more in revenues every year. As major companies, service providers (SPs) have a role to play in reducing global carbon emissions. So far, they have been behind the curve. In the Corporate Knights Global 100 of the world’s most sustainable corporations, only five of them are telcos (BT, KPN, Cogeco, Telus and StarHub) and none of them are in the top 30.

STL Partner’s October 2021 report Telco roadmap to net-zero carbon emissions: Why, when and how explores the aims, visions and priorities of SPs in their journey to become more sustainable companies.

Service providers (ISPs) have committed to net-zero but within different time frames

Source: STL Partners

STL’s Partners’ report seeks to understand the practical steps service providers are undertaking to reduce their carbon footprints. This includes discovering how they define, prioritise and drive initiatives as well as the governance and reporting used to determine their progress to ‘net-zero’. Each SP’s journey is unique; STL Partners explored how regional and market influences affect their journey and how different personas and influencers within the organisation approach this topic.

 

Some of the leading SPs have significantly reduced carbon emissions over the last 5 years 

Source: Company sustainability reports of AT&T, Verizon, Orange Group, KDDI, BT, Bell Canada, SK Telecom, Singtel, Swisscom, Rogers Communications, MTN, Virgin Media, Telefonica, STL Partners analysis

Different elements of sustainability are moving at different speeds.

Some SPs have been actively pursuing bold sustainability agendas for years. However, there has been a more recent and universal development across the industry, inspired and spurred by national governments’ and high-profile corporations’ pursuit of ‘net-zero’ commitments. This has catalysed many SPs into action.

Sustainability efforts across SPs nonetheless remain highly variable and fragmented. While some SPs are taking committed and ambitious actions around carbon emissions, many others are still trying to determine what they need to be measuring and reporting in the first place. All have their own unique challenges, though even the most ambitious SPs are still struggling with the circular economy and its impact on scope 3 emissions in particular.

Pressure to ramp up efforts around sustainability stem from many parties:

  • Employees: who want their personal values to align with the corporate values of their employer
  • Investors: who believe that the long term economic costs of climate change will have a negative impact on share value
  • Regulators and public policy makers: who are mandating that companies make efforts to reduce their carbon footprints
  • Consumer customers: who want to purchase products and services from green companies
  • Enterprise (including public sector) customers: who have their own carbon emission reduction targetsthat they want to hit and want SPs, as suppliers, to ensure they work with them to achieve this

Microsoft carbon emissions targets

Source: Microsoft blog, January 2020

What do we mean by scope 1, 2 and 3?

Many SPs making commitments to becoming a net-zero company will have specific carbon reduction targets which have been validated by the Science Based Targets initiatives (SBTis). Targets are considered ‘science-based’ if they are in line with what the latest climate science deems necessary to meet the goals of the 2015 Paris Agreement – limiting global warming to below 1.5°C above pre-industrial levels.

For most SPs, scope 1 (e.g. emissions from the fleet of vehicles used to install equipment or perform maintenance tasks on base stations) and scope 2 (e.g. the electricity they purchase to run their networks) makes up less than 20% of their overall footprint. These emissions can be recorded and reported on accurately and there are established methodologies for doing so.

Scope 3, however, is where 80%+ of SP carbon emissions come from. This is because it captures the impact of the SP’s whole supply chain, e.g. the carbon emissions released from manufacturing the network equipment that they deploy. It also includes the carbon emissions arising from supplying customers with products and services that an SP sells, e.g. from shipping and de-commissioning consumer handsets or servers provided to enterprise customers.

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All emissions commitments are for zero, but some are more equal to zero than others

All emissions commitments are for zero, but is “zero” the same for all?

As part of our ongoing research programme, we have spoken to dozens of operators globally about their plans for net zero emissions. Most of those we have spoken to have made commitments to reduce to zero their direct (scope 1) and electric energy (scope 2) greenhouse gas emissions by a certain date. Some claim to have achieved this already. Most acknowledge that their indirect embedded emissions (scope 3) are their largest emissions, most difficult to tackle and will take longest time to reduce. We will discuss scope 3 in our forthcoming report.

For various reasons, operators tend to focus (initially at least) on emissions from the electricity that powers their networks (scope 2). Commendably, they look at introducing energy optimisation measures and not rely only on using ‘greener’ electricity. Partly, this is because electricity is something that they already measure, or should be measuring. Partly, there is also a strong cost saving incentive in reducing energy, so they can more readily justify this as meeting simple business logic. And partly, it just appeals to an engineering mindset as an addressable engineering problem.

The “zero-emission” claim

While these measures may secure cost benefits, they may not be progressing emissions objectives as intended. It turns out that the way operators (and any other electricity consumers) ensure that the energy they buy is zero-emission varies considerably. Indeed, there is a hierarchy of mechanisms for claiming use of zero emissions electricity with a list of new acronyms to accompany these (much to the delight of those in an industry already awash with acronyms) each with an arguably greener claim to zero emissions (see the table below for our take on the hierarchy).

Main mechanisms to claim zero emissions generated power for networks and operations (not exhaustive)

At the heart of this hierarchy is to what extent these different mechanisms are genuinely additive and generating new non-emissions electricity and to what extent are they simply displacing the bad stuff onto others. At their worst, they may be undermining genuine projects.

 Is 100% zero emissions achievable?

Even where the most genuinely additive mechanisms have been adopted, there is doubt as to whether they can claim to be 100% zero emissions. With the possible exception of a handful of countries with abundant hydro, geothermal (or arguably nuclear) power, renewables energy is either from biomass (burning non-fossil fuels, which creates CO2 emissions albeit more recently extracted from the atmosphere) or from non-emissions but fickle renewable sources: solar and wind power.

The simple truth is that networks need a continuous power supply to work. Even where operators have purchased 100% renewables energy, their 100% renewables suppliers have usually had to ‘borrow’ some electricity from another (typically fossil fuel based) source when the sun isn’t shining, and the wind isn’t blowing.  This energy ‘loan’ is then given back later so that the result is 100% net renewable.  An elegant accounting trick that does not actually reflect the reality of what happens.

And this problem doesn’t go away if we increase renewables generation capacity because windless, dark days still mean energy has to come from somewhere else.  Storage (in batteries or as hydrogen or by pumping water back up into dams) can potentially alleviate this and get away from accounting trickery to more genuinely 100% renewable sources, but this is hypothetical.

Even if and when storage is possible, there will be some embedded carbon required to build and install the generating and storage facilities (in the worst cases hydro-electric dams can have many years of carbon payback embedded in civil works, concrete and lost carbon capture of submerged ecosystems).

Next steps

All this to say that operators are right to keep emphasising optimisation and energy efficiency and reducing the power they use to run their networks.  However, those operators furthest on their net zero emissions journey are now also tackling the scope 3 elephant in the room that is the embedded carbon from their supply chain. With the risk of mixing metaphors, this is altogether a far tougher nut to crack.

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When it comes to selling the virtues of their services, mobile operators appear to be stuck in the 1970’s

​When it comes to selling the virtues of their services, mobile operators appear to be stuck in the 1970’s

In the middle of the 1970s’ oil crisis, many auto ads were promoting power and speed of their products, even for family saloons (warning: anyone looking to verify this assertion, will find the auto advertising industry objectifying women with jaw-dropping regularity). The car industry has evolved…a bit. Much advertising now promotes the virtues of fuel efficiency and low emissions (or in the case of EVs, range). It isn’t that the car industry is enlightened. It is responding to regulatory and market pressure. And pressure is mounting. 2020 saw an explosion of campaigns seeking outright bans on SUV advertising.

So… what has this got to do with telecoms? Partly encouraged by industry comparison sites such as Opensignal, telecoms operators promote the ever-faster download (and now upload) speeds enjoyed by their customers. This is presented as providing an objective yardstick to guide consumer decisions. Consumers have been trained to consider average network download and upload speeds (along with coverage) as the most desirable attributes from their provider. On the face of it, this is a good thing. Independent reporting exposes false claims and forces operators out of complacency. But metrics matter and the current ones need refining. It is time to take some lessons from the car industry.

I recently discussed energy efficiency best practice with a telecoms executive who highlighted that operators were reluctant to implement sleep modes in 4G and 5G networks for fear of having lower average performance reported by independent tests.

  • Explainer: Today, most networks are on full-power 24hrs a day 365 days a year. Network vendors have introduced a host of technologies that allow 4G and 5G networks to be partly shut down during off-peak times, thereby reducing energy consumption and improving energy efficiency. However, this may result in lower download and upload speeds at off-peak times when there are very few users on the network, so operators are reluctant to implement sleep modes and other similar energy optimizing measures for fear of being reported to under-perform against rivals.

This leads to inefficient, wasteful outcomes and greenhouse gas emissions that nobody wants. So, the challenge for the industry, media and the independent performance reporting organisations, is to agree on better metrics that should be presented to consumers for comparing operators’ performance. Here are a few starting suggestions.

  • Peak-hour average download speeds(instead of simply daily averages)
  • Peak-hour average upload speeds(instead of simply daily averages)
  • Network energy efficiency:Defined as the energy per unit of data transmitted over cellular networks. Based on the work undertaken by STL Partners, the current target should be 1 Joule of energy per KB of data for most networks.
  • Network emissions efficiency:Defined as CO2eq emitted per unit of data transmitted over cellular networks. We propose that the industry start with considering the emissions arising from the direct and indirect use of energy, excluding any offsetting and for now, excluding embedded emissions. Targets will need to vary by country due to different grid electricity generation profiles.

One final lesson that telecoms should take from the car industry is that it is better to do this pro-actively rather than respond belatedly to the demands of society, advocacy groups, investors, regulators and ultimately customers. Oil and airlines may be the current climate pariahs. Let’s make sure telecoms is not next.

 

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Will 5G facilitate or hinder our quest for a carbon-neutral future?

​Will 5g facilitate or hinder our quest for a carbon neutral future

The introduction of 5G networks will act on global carbon emissions in 4 domains:

  • Energy consumption of telco networks
  • Energy consumption of devices
  • “De-carbonisation” of energy supply
  • Reducing energy demand from enterprises and consumers

On the face of it, 5G promises to be a key enabler in our quest for a carbon-neutral future. In simple terms, due to much lower kWh/TB transmitted, 5G should outperform 4G by an order of magnitude and 2/3G networks by many orders of magnitude. Mathematically, carrying more traffic on 5G should translate into lower energy consumption than leaving it on 4/3/2G networks. The potential catch is that 5G will accelerate volumes and energy consumption from new applications (such as more immersive gaming) and/or displace traffic from even lower energy fixed or WiFi connections. In some respects, this mirrors the challenge faced by the airline industry which is constantly reducing emissions per passenger mile traveled but also seeing an inexorable growth in volumes. The big difference however, is that the airline industry is not enabling rapid transformation in other industries. 5G has a key role to play in what STL Partners has termed the Coordination Age.

We are modelling this as part of a wider research project and will be publishing findings in the coming months. More needs to be done, particularly to inform policy makers and telcos themselves in how to ensure that 5G can indeed enable a carbon-neutral future sooner.

Energy consumption of telco networks

MNOs’ main direct carbon footprint originates from their networks with around 2/3 of total telco energy from access networks. Telcos can contribute to reducing their own direct carbon emissions by reducing their energy consumption and consuming lower-carbon forms of energy (although here, they largely rely on others’ efforts in de-carbonising electricity generation). With traffic volumes increasing 30-40% annually, simply maintaining energy consumption levels is challenging. Reducing these is even more so. This will not be possible without moving to 5G for the reasons set out above: due to much lower kWh/TB transmitted, 5G should outperform 4G by an order of magnitude and 2/3G networks by many orders of magnitude. Mathematically, carrying more traffic on 5G should translate into lower energy consumption. Determining how much lower 5G’s kWh/TB will be is challenging (not least due to practical considerations, such as availability of sites) and we will need to see the results from actual deployments.

Energy consumption of devices

The second area where 5G has a potential impact on global carbon emissions is in the energy consumption in devices. In practice, a number of factors (including device antenna designs) contribute to device energy consumption. For smartphones (by far the device category with the largest contribution to carbon emissions), 5G’s higher frequencies and NR will result in lower device energy consumption for the same applications and throughput. In practice, we can expect 5G to result in more energy and throughput-intensive applications being enjoyed for longer periods. However, battery technology is only seeing modest annual improvements and will therefore continue to constrain energy consumption. Also, gamers who power their devices in will find them too hot to handle for long sessions.

Other devices (especially the billions of sensors and actuators that we anticipate) will benefit (in terms of energy consumption) from optimised 5G slicing although here the alternative may not be similar 4G devices consuming more energy but no devices at all.

“De-carbonisation” of energy supply

As we move to greater reliance of renewable energy to supply our homes, transport, offices and industries we will need to get much smarter with how we manage the supply volatility that is inherent in renewable sources such as wind and sun. Partly, this can be addressed through demand control (e.g. washing machine turning on when supply is plentiful) and distributed energy storage (e.g. treating electric vehicle fleet as an enormous battery). This means getting much smarter in predicting and responding to the balance of supply and demand. It also means squeezing more out of renewable sources. This will require reliable, secure, inexpensive connections to billions of sensors and actuators. Although other networks may well be able to serve part of this need, 5G was largely conceived with these applications in mind and will do a far better job of it.

Reducing energy demand

The largest potential impact from 5G and the hardest to estimate will come from reducing energy demand by reducing inefficiencies and waste from (public and private) enterprises and consumers. This will be an indirect impact in that enterprises and consumers will reduce their energy consumption and carbon footprints by adopting applications that are (more viably) enabled by 5G technologies.

These applications will not necessarily have energy reduction as their main objective. They may be primarily concerned with optimising other resources (e.g. machines), saving time or reducing non-energy costs (e.g. maintenance). For example, an augmented reality application supporting field workers and data from on-site sensors will reduce the number field visits, which in-turn reduces both total distances traveled annually by field workers and the number of vehicles (and field workers) needed. For consumers (and prosumers), 5G will grow the sharing economy by enabling remote safe access to homes, cars, rides, pets, or food that is approaching its “sell-by” date. Reduced energy consumption will be a considerable, if unintentional benefit from these 5G-enabled applications.

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