Can Europe compete in 5G? Not without addressing barriers in our way
So why does it matter when we launch 5G? Our 5G Outlook for Europe report warns that this lag will harm both enterprises and consumers, and, as a result, the economic uplift from 5G is likely to be weaker in Europe than in East Asia and North America.
These findings are based on the likely rollout of 5G population coverage in mid-band spectrum (3.5GHz-6GHz) for the largest operator in France, Germany, Italy, Japan, Spain, the UK and the US (see Figure 1). The report argues that while Europe has plenty of mid-band spectrum available and dense network grids that can be upgraded cost-effectively, the higher investment incentives afforded to US and Asian mobile operators are the key differentiators. While they benefit, other continents aren’t acting fast enough.
Figure 1: 5G population coverage in Europe will lag Japan and the US
5G population coverage in mid-band spectrum (3.5GHz-6GHz). Source: Northstream
While leading European operators don’t have to carry out as many upgrades and or build new sites than their US counterparts, high spectrum prices create economic barriers. In Europe only Swisscom are pushing forward. They’re targeting 90 percent 5G population coverage in less than 8 months after launch, seems to have mobile 5G rollout plans that are similarly ambitious as operators in the other regions.
Why the wait and learn strategy won’t work
Some European regulators and operators believe it makes sense to wait and learn from their Asian and American peers before ramping up 5G deployments themselves, but the 5G Outlook for Europe report suggests this strategy is unlikely to work, as US operators will remain capable of continuously outspending their European counterparts thanks to their higher average revenue per user (ARPU) levels, which are 50-65 percent lower in Europe than in the US and Japan (see Figure 2).
Figure 2: Mobile ARPU is much lower in Europe than in the US and Japan
2018 Mobile ARPU for each country’s largest operator (EU5: Germany, France, Italy, UK, Spain).
With more revenue coming in, mobile operators in the US and Japan can invest far more in their networks on a per-capita basis than their peers in Europe, and the resulting gap will likely widen even further in the 5G era (see Figure 3).
Figure 3: Europe’s mobile capex per capita trails well behind the US and Japan
(EU5: Germany, France, Italy, UK, Spain). Source: Ericsson
Expensive spectrum is hindering 5G investment
Another obstacle to 5G rollout in Europe is the short-sighted spectrum policy across the continent. Our report finds that frequency assignments are not well coordinated across country borders. Some auctions have resulted in hefty price tags, where the auctions have cost operators so much that the speed and quality of actual 5G rollouts may well suffer as a result.
Overall the underlying problem in Europe, however, is a structural one. European operators are trapped in a vicious circle, which leads them to continuously underinvest in their networks. To prevent Europe falling behind other developed regions when it comes to rolling out 5G, policymakers need to adjust spectrum and infrastructure policies to alleviate the financial burdens on mobile operators, improve cross-border coordination and reduce regulatory hurdles to site buildouts.
At the end of the day, Europe’s digital economy needs 5G. One of the fundamental prerequisites for successfully digitizing a society is to have a reliable, high-quality mobile network infrastructure in place. But as in the US and East Asia, European governments’ strategies need to reflect the importance of leadership in 5G. Mobile connectivity has become an essential enabler of economic growth, delivering major benefits well beyond the mobile and broader communications sectors - and Europe can’t afford to miss out.
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