Last year, the Chinese government allocated 5G spectrum to the three existing telcos, and also to state-owned cableco China Broadcasting Network (CBN), ushering in a new entrant at the start of the world’s biggest 5G build-out process. Now the newcomer has received government approval to start deploying its 5G network, in 16 cities initially. The surprise is that it will be using newly allocated 4.9 GHz spectrum for these first deployments, rather than the 700 MHz with which it was issued in June, and in which it has conducted trials.
CBN says it plans to invest CNY250m ($35.8m) to deploy 5G service in the 16 cities, which include Beijing, Shanghai, Guangzhou and Shenzhen. It will start offering services at some point this year, and aims to complete its full roll-out by the end of 2021.
As a newcomer, it will become one of the world’s first operators to deploy 5G in its Standalone form (with a 5G core) from day one, which will help it to steal a march on rivals in some ways, since it will have no legacy coexistence or migration to manage – but which will also force it to work with brand new technologies before they are fully tried and tested. The company began trials of Standalone networks in the 700 MHz band in October, in Shanghai.
Other bands in use in the vast 5G roll-out projected for 2020-2022 are 3.5 GHz, which is being used by China Telecom and China Unicom, plus China Mobile’s 2.6 GHz and 4.8 GHz.
The aim of introducing a new operator was not primarily to boost consumer competition but to facilitate faster convergence between telecoms, Internet and broadcasting services and infrastructure. That should deliver some economies of scale over time, and potentially encourage investment in new services that can run on the converged platforms. But in the short term, the profit and ROI models for any of the Chinese operators, given the huge pace and scale of the planned deployment, look uncertain, amid falling growth in ARPU and a failure to charge a ‘5G premium’.
For a complete newcomer, the prospects of gaining significant ground against the three giants, unless CBN confines itself to 5G broadcasting, look weak. But for all four operators, the business case will rely heavily on sharing of assets and on co-investment with one another, and with other industries.
China Unicom set the pace in co-investment when the government brokered an arrangement by which large Internet and industrial players took stakes in the ailing operator, to improve its viability and boost its ability to deploy 5G. In return, they will have the ability to influence its network priorities to ensure the resulting platforms will support their own requirements.
Over the past year or so, the three MNOs have become involved in a string of sharing initiatives. First, they placed most of their passive infrastructure into the world’s largest towerco, China Tower, whose remit could expand to active equipment in time. Then, China Unicom and China Telecom agreed to an extensive deal to share 5G build-out, greatly improving their cost base while stopping short of the full merger that has often been rumored.
Further sharing agreements have been discussed, though not finalized – in particular, between CBN and either China Mobile or the other two.
Meanwhile, CBN announced its own build-out partner from another sector last month, announcing a joint deployment with utility giant State Grid, which would bring its fiber and grid infrastructure to the party to reduce the imbalance between the cableco’s 5G resources and those of its far larger competitors. The utility would also contribute direct funding and 2.9m towers, in return for anchor tenant rights.
But the allocation of 4.9 GHz spectrum to CBN at the turn of the year has sparked speculation of a larger deal that could be in the offing, this time with China Mobile (since its 5G will occupy the adjacent airwaves).
Previous talks between the largest and smallest MNOs have reportedly fallen foul of tensions between the MIIT, which regulates the three telcos, and CBN’s regulator, the
National Radio and Television Agency (NRTA). CBN cannot realistically succeed in 5G alone, but analysts believe it could make a dent in Mobile’s market share with the backing of the huge State Grid (whose 2018 revenues were about three times larger than China Mobile’s).
That prospect may have prompted the two regulators to set aside their differences rather than be outdone by another industry altogether, and clear the way for a sharing arrangement between Mobile and CBN, or even a merger.