Indistinguishable from magic - Divining the real worth of 5G
With near warfare breaking out among telecoms rivals over whose network offers the best 5G, and the global feud between Five Eyes members over putative national security concerns related to the adoption of Huawei technology reaching boiling point, the real benefits of these next-generation services can get completely lost in all the noise.
In the midst of this confusion, what does 5G mean for UK consumers and businesses?
Since the arrival of the mobile phone in the 1980s has there been never been so much overstated publicity about a new technology. Take the 3 network’s latest video, which presents a veritable cornucopia of virtual reality, fulsome fun and folderol. The message seems to emerge from all the noise – Aladdin’s magic cave is about to be opened, borrowing for its inspiration from just about every cinematic influence over the past 30 years, including Blade Runner and Total Recall!
Despite the dizzying cinematic cross references of 3’s video – and one likely needs to be certain age to catch them all – the big challenge has to be to monetise this huge new investment because the benefits come with a huge price tag.
GSMA Intelligence forecasts that by 2025, network operators worldwide will have spent $1.3 trillion in capex, presenting them with a significant challenge when, as most industry commentators recognise, 4G is good enough for most customers. With most of the initial benefits of 5G being modest at best for most ordinary people, where does the ultimate value of introducing higher baud rates really lie?
For network operators, the commercial payoff from 5G will be dependent on their working with a myriad of business partners, to realize the potential of creating significant value together, and then capturing for themselves enough of the value to make the venture worthwhile. Certainly, for 5G operators, the amount of investment that they must make means that market growth simply cannot be about the latest ‘killer app’ proposition. Instead, one needs to think about wholly new levels of investment in innovation, in intrapreneurship and in entrepreneurship, and likely entirely new commercial players being folded into the mix. As a guide, think of the many potential applications for IoT, and the range of new opportunities presented by the automotive and entertainment sectors.
For the would-be dedicated followers of marketing hyperbole, 5G network’s numbers promise much, with download speeds of more than one gigabit per second that will evolve to hit 10Gbps, more than 100 times faster than 4G. Moreover, 5G will be able to deliver latency of less than one millisecond, tens of times faster than any 4G network – truly rendering Arthur C. Clarke’s famous quotation that ‘..any sufficiently advanced technology is indistinguishable from magic’ into technicolor reality.
For dedicated followers of entertainment, 5G speeds can be a big draw for virtual reality devotees and gamers. With self-driving vehicles coming into sharper relief, these speeds may also make a big difference. For user, Aladdin’s cave would seem to beckon – some day! For operators, making 5G pay is a big challenge because the network investment is so significant. Given that 4G is plainly good enough for most mobile customers, how do network operators defeat that old marketers’ conundrum, how to make money from a product or service that doesn’t yet exist?
What price can therefore be placed on simply having even higher download speeds? Success will likely come rather in the form of operators, working together with new partners developing new markets. In the UK, the West Midlands, once the centre of the automotive industry, is busily reinventing itself and is looking for for opportunities to capitalise on developments in 5G, AI, IoT and robotics, and businesses and local governments have clearly been scouting for platform opportunities. The UK government has awarded a £19m grant to expand the region’s network of roads for autonomous vehicles, and local companies in Coventry local companies are developing new applications for 5G to mark the City of Culture events in 2021.
Whatever new opportunities might come to fruition, the UK will need to, as with the rest of the world, think big. This is a time, as the French might say, of the Grands Projets. The world waits with baited breath.
Visiting Lecturer for Strategy and Entrepreneurship at London Business School, Michael Davies
Postscript
In response to an article which appeared in the Financial Times, pg. 7 on March 11, ‘Tory rebels fire ‘warning shot’ on Huawei 5G’, Michael Davies had the following comment to make:
Tory rebels fire ‘warning shot’ on Huawei 5G, FT, March 11, 2020 reminds us of the concatenation of technologies and investment which goes into most modern telecommunications networks.
The fundamental argument, promoted by US security forces and the 36 Conservative MPs who voted against the government over Huawei’s involvement in the UK’s 5G network, is that the Chinese vendor might one day forge a ‘backdoor’ access for agents of the Chinese state.
Is the risk worth a complete ban?
Consider carefully the costs and benefits: while there are some (core) parts of 5G networks that are more sensitive, there are other portions that present much less risk. In some cases there are robust alternatives, and while in some other areas there is less risk and the options are much more limited, including some areas where Huawei has a stronger offering.
It is worth reminding ourselves of the wise words of Norman Lamb, Chair of the UK’s Science and Technology Committee. His 2019 letter to the Department of Digital, Culture, Media and Sport explains that, “Supply chains for telecommunications networks have [long] been global and complex …Many vendors use equipment that has been manufactured in China, so a ban on Huawei equipment would not remove potential Chinese influence from the supply chain.”
The reality is that it is very difficult or impossible to remove China from the global supply chain in electronics completely (and also as it happens in medicines, for which it is the exclusive supplier of many key ingredients). And China is not the only threat, other technologically sophisticated nations, including the US itself, also seek to eavesdrop wherever they can, as do many bad actors with nastier motives.
Surprise cyberattacks facilitated deliberately by Huawei is the bogeyman issue summoned by the 36 rebel Tory MPs, but legitimate concern about cybersecurity applies much more broadly than for just Huawei’s gear.
BT has been using Huawei’s gear since 2003, as well as gear from many other vendors. It has never experienced a failure instated by an enemy state or would-be criminal, nor any known large-scale security breach.
Yes, one should be concerned about cybersecurity, but don’t pretend that a complete ban on a single Chinese vendor in these UK networks is going to make us safe. And consider the collateral damage of the difficult or impossible task of completely reconfiguring the global supply chain that is the logical next step.
Taking this broader and more nuanced view, and recognising the challenges involved in cybersecurity and the complexity of the global supply chain, the Huawei ban being promoted by the 36 can only be considered political posturing.
