A case of déjà vu? Europe must invest now or risk falling further behind in 5G race
As a result of the pandemic, the value of connectivity and mobile networks has reached a new level in Europe. Things have changed. And whatever comes next, one thing we know for sure is that 5G and mobile networks will be part of that conversation.
As Ericsson’s CEO and CTO announced at last year’s B20 summit, the road to recovery will be digital first and, for Europe, those opportunities will arrive through the deployment of new consumer 5G services, primarily fixed wireless access (FWA) and, critically, the digitalization of Europe’s industries.
Europe has a unique industrial expertise in many segments from retail to tourism, and automotive to agriculture. For European CSPs and supply chains, this is where the innovation opportunities can differentiate Europe as a 5G frontrunner.
Europe 4.0 and mid-band spectrum
In recent years, Ericsson has partnered with many of Europe’s leading industrial enterprises and CSPs to pilot and deploy 5G private networks across Europe’s factory shop floors, mines, ports, airports and utility systems. While this has served to demonstrate the power of 5G in industrial operations, its impact has so far been limited to small pockets across our continent. To scale that potential far and wide, Europe needs mid-band 5G – and it needs it now.
Mid-band spectrum will be critical to delivering the full potential of 5G, IoT and industry 4.0 use cases in Europe. Yet, today, owing to a staggered release of spectrum across the continent and a lagging investment climate, Europe continues to fall behind other regional markets in the mid-band stakes.
Among 14 of the largest communications operators service providers (CSPs) in the EU and the UK, the average mid-band 5G nationwide coverage stands at less than 10% percent in 2021 and will rise to an average of 15 percent in 2022.
While this may suggest that Europe cannot match the pace of global competitors, it is by no means a suggestion that it lacks the ambition or technological acumen to do so. Quite the opposite, in fact.
Recently, major European CSPs such as Vodafone and Deutsche Telekom have sent clear signals to the market and the industry that they intend to ramp up their 5G investments in coming years. We must also not forget that the research for 5G began here in Europe. METIS 2020 and other EU-funded research projects have made significant contributions to the advancement of innovation on the continent. In addition, early 5G adopters in Switzerland and Poland have showed us that the opportunity is there.
To scale this position of research leadership and early technology leadership, and build a pervasive 5G digital infrastructure, it is clear that Europe must learn from their North American and North East Asian counterparts with regards to the per capita network investment, while also working to expedite the removal of barriers preventing full 5G mid-band deployment, such as bottlenecks on spectrum licenses and radio site access. To help shape Europe’s digital future, the European Commission has provided their give operators access to the spectrum they need to rollout 5G and to encourage operators to further invest in 5G coverage.
Europe cannot afford to repeat past mistakes
The situation today bears striking similarities to the rollout of 4G networks more than ten years ago where Europe, again, began on the back foot and was never able to penetrate so-called “app economy” markets as well as competitors in North America and North East Asia.
Similarly, today, European CSPs – bound by red tape, sluggish regulatory processes, and fewer financial incentives – are already lagging behind counterparts in the US, South Korea and China in the race to new 5G revenue opportunities.
For European policy makers, the carrot to solve the issues is most certainly there. Accelerating 5G deployment can help the EU unlock its huge potential and gain economic and social benefits. According to an update to the Analysys Mason report commissioned by Ericsson, the potential economic value of full 5G as an ‘open innovation platform’ is estimated to unlock €250 billion in net GDP benefits across the continent. Similarly, a report conducted by Deloitte and commissioned by Vodafone recently put numbers to the economic opportunity that digitalization could deliver. An interesting insight is that if EU investment was directed at ensuring all Member States achieved a DESI score of 90 by 2027, GDP per capita across the EU would be 7.2% higher – equivalent to an overall increase of over EUR 1 trillion.
On the other hand, by not deploying expansively, Europe could see the inequality in digital connectivity we see today widen significantly in the future. The digital divide could become a digital chasm.
Mind the connectivity gap
And this digital divide between Europe and global 5G frontrunners is already plain to see in the latest 5G figures.
Western Europe, with just one percent 5G mobile penetration, sits fourth in the global rankings for 5G maturity and lags markedly behind other regional markets of North East Asia (nine percent), North America (four percent) and the Gulf Cooperation Council (two percent).
There is hope, however. The same forecasts from the Ericsson Mobility Report indicate that Europe can make quick ground on its global competitors, provided that deployment barriers are removed, and a positive investment climate is encouraged. By the end of 2026, Western Europe is forecast to have the third highest 5G mobile penetration globally, with 69 percent – ahead of today’s leading markets in North East Asia, and slightly behind both Gulf Cooperation Council and North American markets.
The 5G devices are now there. The European consumer and enterprise markets are warming up. So, what is stopping us?
Keeping pace with global 5G investment
European CSPs must be given fair conditions to compete with global counterparts in the race to new 5G revenue opportunities. Here, governmental backing will continue to be a critical factor.
Last year, China announced plans to invest at least USD 1.4 trillion into building out 5G infrastructure over the next five years. And South Korea, who today are racing ahead with 5G deployments, also recently doubled down on their initial government-backed 5G investment packages by announcing further infrastructural investments.
The momentum is certainly there in Europe too. The EU’s Horizon 2020 program has invested around EUR 80 billion into European R&D since 2014, and Ericsson has been a key contributor to many of these projects. Today, Ericsson is helping to drive many ongoing initiatives within Horizon 2020 including 5G-INDUCE to drive the development of industry 4.0 use cases in Europe, NEXTGEN SIMS to support the development of smart intelligent mining systems, and projects REINDEER and Hexa-X to drive next-generation 6G technologies.
The Horizon 2020 project has been backed up by a more aggressive policy stance by European policymakers over the past year which aims to fast-track the deployment of very high-capacity networks and ensure timely access to 5G spectrum, represented through recent policy moves such as the Digital Decade Action Plan, Annual Sustainability Growth Strategy 2021 and the European Commission’s Common Union Toolbox. The EU has also set aside a fifth of its EUR 750 billion recovery fund to improve its member states’ digital capabilities.
This continued support and investment will be crucial to determining the speed, scale and depth of Europe’s local 5G deployments, and it must intensify if Europe is to remain globally competitive and stay in the race for tomorrow’s innovation, jobs and GDP growth.
Europe must remove regulatory roadblocks
Back in 2019, Ericsson CEO Börje Ekholm, forewarned of the structural problems that would hinder 5G development, stating: “The biggest roadblock relates primarily to regulatory policies.” He also said that 5G must be viewed as a critical part of European national infrastructures. Those messages are as relevant today as they were then.
To maximize 5G private sector investment and accelerate the deployment of 5G mid-band, European policy makers must act fast to address any regulatory bottlenecks or barriers which currently prevent 5G commercial deployment, such as he IMF to boost infrastructure investment through temporary investment tax credits particularly for ‘digital and green tech’.
In Europe, the allocation of spectrum – although steady – still lags behind other leading regional markets and, with higher costs, is less conducive for investment in infrastructure and building out the necessary capacity and coverage.
By adopting a more harmonized approach to regulatory conditions, as well as extending the period for spectrum license and maximizing its usage – for example, by allowing licensed spectrum sharing or enforcing the lease of unused spectrum – Europe can overcome its current fragmented approach and make it easier for CSPs to plan for long-term deployments of 5G mid- and high-band services.
European policy makers and the wider telecommunications industry must also work together to drive better connectivity in rural areas and close the digital divide by embedding FWA in investment and deployment roadmaps. According to our own data in the Ericsson Mobility Report, FWA connections are forecast to grow more than threefold and reach over 180 million by the end of 2026, accounting for around 25 percent of total mobile network data traffic globally.
In her State of the Union Address late last year, European Commission President Ursula von der Leyen, stated that: ”…it is unacceptable that 40 percent of [Europeans] in rural areas still do not have access to fast broadband connections. These connections are now the prerequisite for home working, home learning, online shopping and, increasingly by the day, for new important services.”
5G and FWA, with the potential to solve traditional “last mile” connectivity challenges in rural communities and provide new revenue opportunities with little CAPEX investment, should therefore be a key priority for both European policy makers and CSPs.
Ericsson’s commitment to Europe
At Ericsson, we will commit everything to support Europe on its 5G journey.
We were the first to deploy 5G in Europe, and currently have 138 commercial agreements with unique CSPs, including 81 announced contracts with European CSPs.
Through our industry-leading Ericsson Radio System, and easy-to-upgrade 5G software solutions such as Ericsson Spectrum Sharing and Ericsson Carrier Aggregation, we make it easy for CSPs to deploy and scale 5G rapidly – which we demonstrated together with Swisscom when we helped to deliver 90 percent population coverage in Switzerland within just eight months.
We also offer the market’s broadest mid-band radio portfolio, which is part of the reason why Ericsson has been selected as the preferred choice for nine out of ten major vendors swaps in recent years.
5G continues to promise huge potential to help Europe build for a better future.
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