Vodafone has suggested the industrial 5G market in the UK will be skewed unfairly towards elite private enterprises, in position to invest more easily in their own private network infrastructure, and collectively screwed out of £7 billion per annum in potential economic gains, mostly from uneven public 5G access, unless the government does more to back traditional mobile network operators.
Among a number of recommendations, based on new research into potential economic gains and losses for private and public sector from the UK’s policy on national 5G rollout, Vodafone said the UK government should create a “pro-investment environment” to establish “a level playing field between private and public 5G networks”. The implication is the playing field for private 5G is already tilting away from the operator community.
The message from Vodafone is that UK operators will struggle to stand-up nationwide industrial-grade 5G infrastructure for enterprises that cannot afford their own private 5G networks unless the government intervenes – and that much of the small and national medium-sized enterprise (SME) market will be cut adrift, as bigger and richer firms in the manufacturing, energy, healthcare, and transportation markets drive digital change on their own terms.
Vodafone stated: “a level playing field between private and public 5G networks can ensure that public 5G infrastructure is a viable investment and the full benefits of 5G are not limited to large businesses who can afford to deploy their own private networks.” Between the lines, its new recommendations on public 5G policy suggest that 5G is an enterprise game, so far as the financial returns (ROI) for national rollout of “full 5G” infrastructure goes.
And Vodafone implied UK operators will be disinclined to build regional standalone (SA) 5G networks, offering public access and sliced access to the kind of network performance that will stand-up smart factories and smart grids and smart hospitals, unless they can see a clear way to recover their investments. “Investors in 5G infrastructure need a competitive environment which enables investment at sufficient scale to recover their large fixed costs,” it said.
It said the SME sector, in particular, should be provided with government support to join the ‘fourth industrial revolution’, and not be stranded as a second-class enterprise sector by a new digital divide. It cited the government-funded Help to Grow scheme, for SMEs to grasp digital change, as precedent for how to, effectively, monetize public 5G investments.
It said: “Making SME uptake of 5G a priority would be particularly valuable in focusing policy on the need for public networks, to make sure that public 5G infrastructure is a viable investment and that the full benefits of 5G are not limited to large businesses who can afford to deploy their own private networks.”
Vodafone said the UK government needs to establish a ‘pro-investment’ environment for public 5G infrastructure, managed by national network operators, to spur industrial revolution in the country. It said the UK government will fail its own Levelling Up agenda, to boost private sector productivity in under-performing UK regions, if new 5G network-building is not made easier for national operators.
The potential cost to the UK economy is £7 billion per year by 2030, it calculates, and smaller cities and towns, where the Levelling Up agenda claims to be focused, will be hit the hardest by a failure to “make the UK a great place to invest in the new technology”. The report makes implicit that a major driver for the UK’s Industry 4.0 scene will be publicly-available standalone 5G (5G SA; “full 5G) infrastructure, and not just private 5G systems.
The report notes 5G is not about consumers and smartphones, but about broader national and global economic growth. Vodafone cites healthcare, manufacturing, transport, energy, and public services (cities) as they key industrial sectors to win and lose from government policy on 5G building. It lists key 5G use cases, applicable across all sectors, as file transfers, IoT streaming, AR assistance, robotics and automation, and intelligent transportation.
Vodafone states: “Most of the biggest benefits of 5G will be seen not by individuals but by businesses… and public services – ushering in, in conjunction with IoT, a… ‘the fourth industrial revolution’… To be fully realised, we will need the rollout of full 5G – that is to say, 5G SA rather than the NSA hybrid 5G we are seeing in the initial 5G rollout.”
Vodafone, via WPI Economics, has got to its £7 billion figure by taking its top-end productivity forecasts from 2020, part of a previous Levelling Up report, when it suggested the cumulative benefits for UK businesses moving from 4G-LTE to 5G stand at £38 billion for the five-year period to 2025 and £120 billion in the subsequent five-year period to 2030. But that £158 billion 10-year forecast hinges on “how favourable the investment environment is,” it said.
The new report models a baseline ‘investment environment’ for 5G that matches the UK rollout of nationwide LTE in the period to 2017, when the UK’s big urban centres deployed latest-generation cellular infrastructure at a faster rate (‘high’) than anywhere else (classified as ‘average’ or ‘low’ for their deployment rates). It then projects economic gains and losses from future 5G rollouts based on whether cities and towns that ranked ‘average’ previously for LTE are brought in line with the ‘high’ performing cities, remain ‘average’, or fall into the ‘low’ end.
It calculates that, in the worst scenario, 5G coverage in “average” areas will go 52 percent slower at the “low” rollout-rate and 32 percent faster at the ‘high’ rate. WPI Economics has gone city-by-city and town-by-town, to figure out the economic delta for industry between an accelerated and decelerated national 5G rollouts. London, and the UK’s other major cities to a lesser extent, will be unaffected, whichever way the ‘average’ UK city goes.
But other venues will suffer from a “poor investment environment”, said Vodafone – the East Midlands, North West, South West, and South East will lose £590 million, £460 million, £495 million, and £1.4 billion per year by 2030, compared to the same schedule that went with LTE. The worst scenario will see the UK lose £1.6 billion and £4.4 billion a year by 2025 and 2030; the best scenario would deliver an additional £1 billion and £2.6 billion by 2025 and 2030. The £7 billion figure is the 2030 delta between the two, it explained.
The UK should have a “clear, ambitious vision” for national 5G as an economic driver, to be backed-up with “strategy, policy and regulation”, it said. Big national operators will be too slow, otherwise, and industry will fail to grasp the Industry 4.0 nettle. “Operators [will otherwise make] limited upgrades to existing sites, gradually rolling out hybrid 5G [to] deliver some incremental speed and capacity… [but not] unlock[ing] the step-change… that full 5G promises.”
It stated: “If the return on investment is not there, then the investment will not happen in the first place. The investment will not happen in areas with less commercial potential, outside the main population centres. The return on capital employed (ROCE) needs to be at 10 percent, and certainly above the weighted average cost of capital (WACC) to persuade investors of the case for investment.”
Vodafone pointed to the example of South Korea, which set a five-year plan in 2017 for nationwide 5G, with state promises about IoT connectivity, public policy on flexible cloud-based infrastructure, and a support for 10 ‘strategic industries’ (including network gear, smart devices, connected robots, edge computing) and five ‘core services’ (including smart factories, autonomous vehicles, digital healthcare, smart cities).
It said the UK government must act, and demanded certain key policy items: firstly, that its 2027 target for full population coverage specifies 5G SA, and not any-old 5G; secondly, that measures – including policy and regulatory reform, public funding, and incentives – are introduced to shore-up infrastructure returns for mobile operators. It said 5G must be prioritised for key sectors; namely: healthcare, manufacturing, agriculture, transport, and utilities.
Other recommendations include: fair management of radio spectrum “to enable unused or under-utilised spectrum to be traded between operators”; new planning rules that “do not stop 5G infrastructure from being rolled out where it is needed and wanted”; and net neutrality regulations to enable mobile operators to “maximise demand by offering consumers attractive propositions that make use of the full technological capabilities of 5G”.
Ahmed Essam, chief executive at Vodafone UK, said: “5G technology enables both massive innovation and huge gains in productivity, especially for industrial uses such as smart factories, and public services such as hospitals which will require ultra-reliable and ultra-low-latency communications. But the benefits of this will not be felt equally across the UK in the current regulatory and policy environment – we have to ensure the UK can attract investment in future technologies.
“5G rollout could be a major boost to the Levelling Up agenda. But it could also leave some places falling further behind. It all depends on getting the investment environment right. As our research reveals, there is a £7bn per year difference between getting this wrong and getting this right. We want to see the whole of the UK – and in particular our smaller towns and cities – enjoying the incredible benefits that the 5G revolution can deliver.”
