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Driverless cars and the business case for 5G

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5G technology will improve the world, when we can all eventually benefit from it (Image via Flickr)

As global technology moves into 5G, there are various aspects to consider from driverless cars to the ban on Huawei gear, writes Paul Budde.

THERE IS A LOT OF HYPE around 5G but none of it is new. We saw the same propaganda – fuelled by the manufacturers – in the run-up to the launch of the 3G and 4G versions of the mobile technology.

Driverless cars and a range of other internet of things (IoT) applications can indeed potentially open new revenue streams. The reality, however, is that these markets might not eventuate until somewhere between 2025 and 2030. The reason for this is that many of these developments have little to do with technology. They depend far more on radical changes in society and the economy. This means that it is more likely we will see any large-scale implementation of such services over decades rather than years.

Obviously, there will be some low-hanging fruit when the 5G network is rolled out and starts covering larger parts of the country, but also this development will take many years.

Take, for example, autonomous cars and consider this — for that technology to work, a very large part of the road infrastructure will need to be covered by 5G. This would require a 5G antenna every 200 metres along those roads. In Europe, the telecoms operators have argued that if this is to happen car manufacturers will have to assist in such an investment. To date, there has been little or no interest from them in co-funding such infrastructure.

Apart from those logistics, the 5G technology would have to be extended with mm-wave technology and that would require new spectrum that has not yet been allocated. There are also questions regarding health safety that still haven’t been answered.

So, what is in it for the operators in the meantime? Basically, greater network efficiencies and extra capacity, at incremental costs. No new revenues but lower costs. It will also provide more backhaul capacity. This makes the operators less dependent on the fixed copper networks for their backhaul requirements.

In the heavily concentrated telecoms market in the USA, we also might see that carriers such as Verizon and AT&T will force users of the fixed copper network onto their 5G mobile networks, most likely at higher costs to the users and at lower costs to the operators. By doing so, they will hope to avoid rolling out fibre networks deeper into the market. Without any serious competition and regulatory oversight, they might well be able to get away with this. With competition declining in general, it will be tempting for operators in other countries to replicate such strategies.

It is, however, interesting to contemplate 5G as an infrastructure technology being applied by fibre network operators (FTT-5G). Rather than bringing fibre all the way to the home, can it be used to provide customers access for the last few hundred metres to this through 5G? If this is a reality (bringing fibre to every 5G cell/tower), then we could see massive cost savings on the consumer access end of the network.

In countries with poor network quality, we could see the lower end of the broadband market moving to mobile-only solutions. Of course, this only works in areas where 5G will be made available. However, bear in mind that a full rollout could take five-to-ten years. Unfortunately, those in already poor fixed broadband parts of regional and rural areas are not going to get 5G anytime soon. The reality being that initial networks will be predominantly rolled out in metro and urban areas.

Another observation here is that there is a ban in place on Huawei 5G equipment in the USA and Australia. These two countries will be at a disadvantage, as this Chinese company is the global leader in 5G, both in relation to innovation and price/performance. This will give all those 5G operators in countries that don’t have the Huawei ban a great advantage over those in America and Australia. The political ban could hamper innovations specifically in the area of IoT.

This could be seriously detrimental to technical innovation in the USA, as this country no longer has its own national telecoms infrastructure manufacturing industry. It might be less relevant to Australia as this country is not a technology leader, just a follower. The lack of innovation in Australia was recently lamented by David Thodey, Chair of CSIRO and Jobs for NSW and former CEO of Telstra and IBM ANZ.

5G equipment itself is only part of the overall costs of the 5G rollout. The fact that the other manufacturers are roughly one-third more expensive than Huawei will also affect the actual price that consumers will have to pay.

Don’t expect 5G miracles to happen any time soon. Initially, it will be a network efficiency play mainly about network efficiency and very few users will notice much change. As far as exciting new services are concerned nothing significant is going to happen in the next few years. Nevertheless, over the longer term, 5G will be an exciting new technology that will most certainly lead to a large range of new innovations and new developments in the telecoms market.

Paul Budde is managing director of Paul Budde Communication, an independent telecommunications research and consultancy organisation. You can follow Paul on Twitter @PaulBudde

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