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12 January 2021

China will still lead global 5G roll-out but may not close digital divide

China’s latest target of 600,000 new 5G base stations in 2021 will still leave the rest of the world in its slipstream but is well down on an earlier stated ambition to build onem this year.

The latest goal has just been stated by Chinese state news service Xinhua, quoting Xiao Yaqing, minister of industry and information technology, but like all such pronouncements from supposedly official sources should be treated with caution.

The same should be said for claims of 5G subscriber numbers, which tend to be overstated partly to offset accusations that the country’s 5G roll-out is widening the digital divide, at least for now.

In China as in most countries, the reality is that 5G roll-out is being driven by the drive for increased competitiveness rather than to extend digital equality. However, China is making better progress in bridging the rural divide than many nations. China’s rural population is was around 545m in 2020 and according to World Bank figures, Internet penetration increased from 39% in 2019 to 46% as of March 2020.

This still leaves a huge number of people who have inadequate or no Internet access, but for now, rapid fiber expansion and 4G may be nearer term remedies than ultra-rural 5G.

There is no doubt China is building 5G base stations at the same dizzying pace it can construct roads and railways, with the total having just passed 700,000. Of those, 600,000 were built in 2020, based on figures from the three carriers China Telecom, China Mobile and China Unicom. Of these, the largest by subscriber numbers, China Mobile, has been stated in various sources as having 385,000 base stations as of the end of 2020, or about 55% of the total.

Unicom and Telecom are sharing much of their 5G active and passive network build-out, with the former’s head of 5G deployment, Miao Shouye, discussing the broad benefits of sharing at the Huawei 2020 Global Mobile Broadband Forum (MBBF) in November 2020. He said the two operators were now sharing 200 MHz of 3.5 GHz spectrum and recently demonstrated peak downlink rates of 3.2Gbps, achieving this more quickly through the joint roll-out. “With a sharing approach, the benefits are very visible,” he said, pointing to savings in capex of 30% and opex of 35%.

He added that 3G and 4G antennas at base stations would be converged to reduce power consumption, while the 2G network would be shut by the end of 2021. This last point highlights how a substantial proportion of China’s population still relies on 2G, with 273m mobile subscribers still using it as of May 2020, probably over 20% of the total. By contrast, fewer than 1% of South Korean subscribers are still on 2G.

All three Chinese operators stepped up efforts to migrate subscribers from 2G in 2018, but in 2020 focus was diverted to the new infrastructure pandemic recovery program, diverting resources to 5G and other projects designed to boost competitiveness rather than digital equality.

Almost inevitably, new generation deployments begin in areas of highest potential revenue generation and densest deployment and that has been accentuated in China by the pandemic response. We can see that 30% of base stations, that is 56,000 in Shanghai, 45,000 in Shenzhen and 44,000 in Beijing, reach just 4% of the population. This disparity reflects the density of infrastructure required to cover a heavily populated urban area.

At the same time, operators are emphasizing speed rather than coverage, unlike say AT&T in the USA. China Unicom made the most of a claim to be the world’s first operator to deploy 5G in 26 GHz millimeter wave spectrum, with potential peak speeds of 9Gbps.

We should be a little skeptical over claimed numbers of 5G subscribers, with the stated totals seeming high. China Mobile claimed to have added 18.6m 5G subscribers in November 2020 alone, bringing the total to 147.38m, against just 6.7m a year ago in January 2020. China Telecom said it added 7.62m 5% subscribers in November taking the total to 79.48m, while China Unicom did not state a total.

We wonder whether these are all subscribers who have paid extra for 5G access and own phones capable of accessing the faster services, or regularly within range. Estimates of 140m 5G capable phones shipped so far in China do not quite add up to the stated aggregate total subscriber numbers in excess of 200m, even assuming every such phone was hitched to a 5G service. It could be that some subscribers with 4G phones are paying for a service level they cannot yet experience.

There is also some discrepancy over the number of 5G base stations that will be required to establish national coverage. A former government official was quoted in December 2019 estimating that 6m 5G base stations nationwide, at a total cost of around RMB1.35 trillion ($185bn), would be needed for full national coverage, achievable by 2027. But Zhang Yunyong, president of the China Unicom Research Institute, recently estimated that China will need 10m 5G base stations, at a total investment of RMB2 trillion ($280bn).

This would take until 2030 at current rates, the year China has slated to start rolling out 6G.