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18 April 2023

UK sets 5G SA coverage target, but MNOs beg for funding support

The UK government is the latest to try to accelerate roll-out of 5G Standalone (SA) on a nationwide basis, but some operators claim they have no firm business case to do this without some form of state support.

The UK’s Department for Science, Innovation and Technology (DSIT) recently set a target of full 5G SA coverage in “all populated areas” by 2030, as part of its Wireless Infrastructure Strategy. It is not clear that there will be direct government financial support for the SA target.

DSIT said it was setting out “a clear pro-investment framework” for MNOs, but confirmed that it would not subsidize any network upgrades. However, it did promise an unspecified “range of measures” to support commercial investment. It is unclear what these entail.

DSIT has said that the operators themselves believe market consolidation, reducing the number of MNOs from four to three, would improve their ability to invest in 5G SA at scale. This may be a hint that the competition authority will be willing to countenance consolidation (most likely between Vodafone UK and Three UK, which are in active merger talks), something it blocked when a merger between Three and O2 UK was mooted in 2016.

The wireless strategy does include an investment package worth almost £150m ($186m), within which there is £40m earmarked for 5G innovation to encourage adoption “at a local level”. This may show the UK, like some other countries, aiming to accelerate 5G SA roll-out by empowering non-MNOs to do some of the heavy lifting.

This is particularly so for industrial and smart city deployments, which are the most relevant to government strategies for 5G-led digital transformation.

Operators, by contrast, generally argue that they are fully capable of supporting the use cases that would drive industrial transformation, but they need to have a strong business case to do so. Big-hitters like Vodafone Europe argue that they cannot be the sole investors in another round of ‘build and they will come’ nationwide networks, but instead need other stakeholders, including enterprises, cloud giants and governments, to share the cost and risk – co-investing in the infrastructure they need for their next-generation applications.

Of course, this is part of a wider argument, currently raging in Europe in particular, about ‘fair contribution’ to the cost of telecoms infrastructure, including 5G, given that non-operators may be the biggest beneficiaries.

That debate largely centers on the public cloud giants, but it is also shifting to enterprise and government departments in the context of 5G SA. The full-blown standalone version of 5G is essential to support new use cases and revenue streams, such as those requiring very high levels of security or QoS. But operators often find enterprise connectivity hard to monetize at a premium, and argue that if industries and governments believe 5G SA is critical, they should contribute to its cost.

In the UK, about 77% of the population currently has access to 5G, but this is entirely to the Non-Standalone version, which still uses the 4G core, and so delivers similar applications and user experiences to 4G (though with additional spectrum, this should be faster).

5G SA is in the very early stages, with Vodafone UK launching the country’s first trial network in January this year. This is not unusual – only about 40 operators worldwide have launched 5G SA commercially in their public networks (there is often more activity in private networks). Most of those 35 have only limited SA coverage, with a few key exceptions such as the three main Chinese MNOs and T-Mobile USA, which have achieved wide coverage.

The main problem that many operators highlight is that of achieving full coverage with 5G SA profitably. If the main commercial drivers to invest in SA are to support new enterprise revenue streams, many MNOs believe they should deploy selectively, to target areas where those enterprises are located. This could be done via localized private/hybrid networks, for instance, while continuing to rely on 4G/5G NSA for broad coverage.

But government strategies like that of the UK want every citizen to have access to the most advanced 5G services. There is no tangible business case for this, argue some MNOs, such as Vodafone, especially against a backdrop of global economic crisis, in which advanced industrial use cases are, for most operators, jam tomorrow, not bread and butter today.

In January this year, Vodafone UK said that “support is needed from the government and the regulators” if 5G SA is to be extended beyond the major cities. The operator’s UK CTO, Andrea Dona, made the demand as he announced customer trials of 5G SA in seven cities – London, Manchester, Liverpool, Bristol, Bath, Glasgow and Birmingham.

For now, only customers on Unlimited Max plans, and using Oppo Find X3/X5 Pro or Samsung Galaxy S21/S22 handsets – are invited to take part in the trial. The chosen subscribers will be encouraged to try applications involving AR/VR, video streaming, telemedicine and online gaming, so that Vodafone can gather analytics about the network’s performance in these key target use cases.

But in its official announcement of the trial, Vodafone said that roll-out would remain limited unless the UK government provided the same kind of financial and regulatory incentives that have been given to fiber-to-the-home deployment. The migration to SA is not just about implementing the cloud-native core (from Ericsson), but also upgrading all the cell sites to be able to use the low-band spectrum in which Vodafone is first deploying 5G SA, in a bid to maximize coverage, including indoors (which will be essential for enterprise applications).

In a blog post, Dona wrote: “The roll-out is a significant financial commitment for the telecoms industry, and we cannot do it alone. We need support from the Government and regulators. This could take the form of providing low-interest loans; reforming regulation around net neutrality; encouraging public procurement of 5G services; or reducing barriers to roll-out. Industry consolidation also has an important role to play in providing the scale necessary to invest.”

The last point clearly aims to strengthen the argument for Vodafone to pursue a joint venture with Three UK, which it claims would improve its scale and efficiencies, though antitrust regulators in Europe have typically been cautious about deals that reduce the number of competing MNOs in a market.

The post continued: “Ofcom [the UK regulator] and the Government have helped to create a pro-investment environment for full-fiber broadband networks, leading to the speed at which they are being made available today. The same efforts should be replicated for mobile networks as they can act as a catalyst for economic growth across the UK – as much as £150bn ($185bn) worth of economic potential can be unlocked using 5G Standalone.”

Vodafone initially launched 5G NSA services in the UK in July 2019 and in Germany, it switched on 5G SA in 2020, the first MNO to do so in that country.

The slow progress of SA, compared to what was envisaged at the start of 5G roll-out, is concerning for various stakeholders. The big networks vendors, Nokia and Ericsson, both referred to the negative impact on revenues of slow SA adoption, in 2022 financial results discussions.

Freddie Södergren, Ericsson’s head of technology and strategy at Business Area Networks, commented in this year’s Mobile World Congress: “We have a number of operators that are struggling with monetizing 5G. They are in very competitive markets where their ability to increase the ARPU is really a challenge. As a result, the business case is difficult. It’s a chicken and egg problem. [European operators] need to get a little understanding of what are the consequences of falling behind on 5G.”

And governments recognize that, without 5G SA, many of the goals they set for 5G-enabled services and industrial innovation will not be achievable. Some have taken the step of mandating 5G SA as a condition of winning spectrum, as in Thailand. An example is Singapore, but even in that compact city-state, where there are few under-populated areas, operators were furious at the decision.

When the Singaporean regulator IMDA first announced its plan in August 2019, market-leader SingTel said it wanted to wait until there was fully commercialized, and therefore affordable, SA equipment supporting millimeter wave spectrum. For now, it argued “there is no confirmed roadmap for chipset and network equipment for mmWave devices on a Standalone 5G network architecture.”

At the time, Aileen Chia, director-general of Singapore’s IMDA, said that SA would enable more rapid innovation in services. She said regulators had to ask ‘what can 5G do for us?’. The answer, she said, was that “the policy approach for 5G would not be the same as for 3G and 4G, of just making spectrum available and letting the operators roll out the network.” Instead, 5G would have to support national goals in broad innovation and the digital economy.

“So, we made the leap to say that for nationwide spectrum we would want an SA technology deployment,” she added, even if that caused some delays in commercial roll-out. “The race is not to be the fastest, but how do you bring a technology that makes sense for innovation for the country.”