Between 2020 and 2035, IHS Markit expects that 5G will contribute 0.2% of the average annual global GDP growth of 2.9%, a contribution equivalent to total current GDP in India, the world’s 7th-biggest economy. At a regional level, a European Commission report published in 2016 estimated that that 5G investment will help create 2.3 million jobs in European Union member states, while a study conducted by the Korea Telecom research institute KT EMRI has suggested that commercial use of 5G in South Korea may generate 47.8 trillion won ($42 billion) in local value.
While this new value could be broadly distributed, certain industries may be able to unlock more of it than others as the first networks start rolling out - with features like enhanced mobile broadband connectivity and lower latency. A study conducted by the 5G Alliance for Connected Industries and Automation has estimated that digitalization-related revenue based on 5G at information and communications firms may exceed $1.2 trillion by 2026, of which approximately $234 billion would be accounted for by related manufacturing aspects.
With government support, this commercial impact can have social benefits - as long as commitments are made to aligning industry goals with public-sector goals in the interest of socio-economic progress. For example, 5G could improve so-called “cooperative collision avoidance” for self-driving cars, by ensuring that information is passed among sensors on thousands of connected cars in the same area reliably and in real time - even in areas without network coverage.
This could potentially help to reduce deaths and injuries from road traffic accidents, which are both a significant problem in many countries (annual worldwide road traffic deaths reached 1.35 million in 2018, according to the World Health Organization) and a potential impediment for industries banking on the mainstream use of self-driving vehicles.
The technology could spur trillions of dollars in new investment and benefit a number of industries. 5G brings with it the possibility for fundamental industry change, by enabling a whole new set of services based on its strengths.
If these services are properly enabled by the right mix of infrastructure and devices, they could create serious benefits for both governments and businesses; by the year 2035, 5G could enable an estimated $12.3 trillion in global economic value, according to a report published by IHS Markit, nearly equivalent to the value of all US consumer spending in 2016, and equal to more than all combined consumer spending in China, the United Kingdom, Japan, France, and Germany that year.
The Geo-economic and Trade Impacts of 5G
5G is designed to be a foundation connecting billions of devices and enabling better ways of doing things. The total number of 5G subscriptions has been projected to reach 2.6 billion by 2025 - though the COVID-19 pandemic halted the construction of base stations, and delayed related spectrum auctions in a number of countries. Ultimately, those countries able to take a leading position in terms of deployment are expected to enjoy relatively greater economic growth. The technology is fueling geo-economic one-upmanship, though COVID-19 threatens to delay rollouts.
According to a report published in 2019 by GSMA, a trade organization for mobile operators, 5G services provided on millimetre wave (“mmWave”) spectrum should increase GDP by $5.2 billion in Sub-Saharan Africa by the year 2034, by bolstering vital functions like port logistics and helping to better coordinate the movement of goods. 5G’s promise is one of the reasons it is a factor in trade tensions and geo-economic positioning; in 2019, for example, China established a two-year action plan to promote the purchase of consumer goods including 5G handsets as a means to offset the impact of an escalating trade war with the US.
In a related geo-economic move, legislation was introduced in the US in 2019 intended to boost the presence of American firms in global industry standards bodies - in a bid to check China’s influence on future 5G networks.
China is likely to be the first nation to launch a 5G telecom network at scale, it plays a significant role in setting global standards, and both Huawei and ZTE have been among the biggest filers of related patents. Overall, China holds a significant percentage of 5G-related technology patents, and a far higher share than was the case with 3G or 4G at a comparable stage in development. Eventually, China may come to hold nearly a third of global 5G-related patents, according to one estimate, and it continues to participate actively in international standards-setting bodies like the Institute of Electrical and Electronics Engineers (IEEE).
5G has only ramped up tensions between the world’s two largest economies; the US has expressed security-related concerns about China’s status as a leader in 5G technology development and implementation, and about its acquisition of related intellectual property rights.
5G Business Model Transformation
5G is a potential game changer for a number of industries, though they will have to adapt their business models in order to harness its true potential. The technology is a critical enabler of driverless cars, efficient factories and smarter power use.
The technology will initially exist as an overlay on existing 4G networks, and will likely only start achieving meaningful scale sometime in the early 2020s. Some important services made possible by 5G will include “digital twin” technology that creates a digital mirror of a physical object in order to predict its performance, augmented and virtual reality (thanks to better download and upload speeds), and predictive maintenance in factories. 5G is also expected to support high-density autonomous vehicle platooning (to improve aerodynamic performance and traffic flow), remote vehicle control, remote driver health monitoring, in-car infotainment, and smart traffic control.
Each individual use case has the potential to impact additional industries; autonomous vehicles will not only have an impact in the automotive sector, but may also impact the mobility space more broadly. The insurance industry, for example, may benefit as vehicle accident rates decrease. The energy sector could use 5G for the real-time monitoring of utility networks with drones, sensing hazards and maintenance needs, and monitoring residential smart meters.
As related technologies like artificial intelligence and virtual reality come to the fore, software companies and other industry players are expected to play a major role in designing new 5G business models. Those models will in turn rely on having a set of standardized regulations for 5G data monetization, related to cross-border data and services-sharing.
Ride-hailing platforms like Uber, Lyft, and Didi are expected transition within the next decade from human-driven, internal combustion engine cars to autonomous electric vehicles - potentially spawning millions of driverless cars on the roads, and potentially thousands of pilot-less vertical take-off and landing aircraft. An aggressive transition to self-driving vehicles is not a given, however.
For such a transition to occur, political and regulatory support will be required. This will in turn largely determine the investment available for necessary infrastructure like vehicle charging stations and 5G connectivity. Intel has predicted the rise of a "passenger economy" worth $800 billion by 2035, as people in cars have more time on their hands to shop and secure everything from entertainment to doctors' appointments.
5G Security and Critical Infrastructure
The Return on 5G Investment
As more things around us are connected to the internet at high speeds, security risks will proliferate. 5G networks can potentially create many new connections across a variety of services that have previously operated in relative isolation. They are also likely to dramatically expand the universe of devices connected to the internet, moving well beyond just computers and phones.
This promises to create unprecedented risks - which need to be considered carefully by a broader set of stakeholders than ever before. In addition to the relatively low latency and enhanced broadband quality enabled by 5G networks, enhanced security support is also critical. Providers of basic, fundamental services will increasingly come to rely on 5G mobile networks to run operations and provide access to customers - ranging from obvious candidates such as financial services, which is already providing a vast array of products via mobile networks and devices, to less-obvious candidates such as healthcare and transportation providers who may now be able to offer a greater number of interconnected services that rely on high-speed mobile networks.
Results of a survey published by Gartner in late 2018 suggested that some two-thirds of all organizations had plans to deploy 5G by 2020 - mainly to power the Internet of Things and support video transmission. This makes it imperative that these organizations prepare for a fresh wave of cyber threats to be unleashed on an already-vulnerable environment. 5G infrastructure involves a lot of moving parts, from base stations to mobile backhaul (connecting different parts of a network), edge clouds (matching computing resources to high-traffic areas), and core networks, not to mention devices.
Both the actual and perceived end-to-end security of 5G-related infrastructure, devices, and services will be key factors for the people, companies and public institutions pondering moving to 5G. Impending growth in the number of connected devices and a related proliferation of sensitive data demands comprehensive device- and cyber security measures.
According to an article published by the McKinsey Global Institute in 2015, the Internet of Things applications either in use or projected to be in use within a decade already had a potential $11 trillion economic impact annually. Backed by 5G network technology, these applications should spur both increasing demand and better network security.
5G has the potential to contribute some $2.2 trillion to the global economy in the next decade and a half, with the bulk of that registering in the manufacturing & utilities and professional & financial services sectors, according to GSMA (a trade organization for mobile operators). However, 5G rollouts will require intensive capital investment reaching as high as $1 trillion worldwide by 2025. Rolling out the technology worldwide will require trillions of dollars in infrastructure spending.
The practical impact of 5G has to be enormously significant in order to justify the building of ubiquitous and high-performing 5G network infrastructure (including base stations, mobile backhaul that connects different parts of a network, cloud-computing resources, the core networks themselves, and “end devices” that can include anything from phones and tablets to internet-connected cars).
Key challenges for the further development of 5G infrastructure include the limited capacity and availability of fibre backhaul, the cost of deploying fibre across long distances, tapping new funding models for this deployment (and new ownership models), obtaining local permits, and dealing with the fallout of studies on the health impacts of 5G - in Switzerland, for example, the government has sought to assuage public concerns about the health impact of 5G emissions.
National authorities can limit the ability of cities to regulate local 5G infrastructure, establish tight deadlines for the approval of equipment installation, or cap the fees for rights of way to access areas to build infrastructure. One approach designed to ensure maximum return on investment is infrastructure sharing. For example, South Korea’s mobile operators have implemented the sharing of 5G infrastructure, in the interest of saving hundreds of millions of dollars in capital expenditures, accelerating rollouts, and incentivizing the involvement of more industries. However, infrastructure sharing is not the preferred solution in everywhere; for many players, a first-mover advantage is seen as necessary to ensure a sufficient return on investment.
In terms of hardware, the range of potential 5G devices goes well beyond the smartphones, tablets and modems that underpinned previous generations of mobile networks. 5G devices will not only need to support higher performance levels, but will also have to come in a wider variety of form factors to support different uses - such as the “massive machine-type communication” necessary to power the Internet of Things.
The Regulatory Environment for 5G
5G Spectrum and Network Needs
A number of countries are trying to influence the regulatory environment for 5G in their respective regions of the world. Japan and China, for example, have focused their efforts on spectrum bands that can potentially ensure compatibility with the US and South Korea, while the European Union has decided to pursue frequencies between 24.25 GHz and 27.5 GHz as a pioneer 5G band. Operators are wary of regulatory roadblocks related to spectrum auctions and rollout.
Regulators and governments may want 5G to succeed, but their interpretations of what constitutes network neutrality vary, according to a report published by PwC in 2019; governments in general will have to appreciate that 5G requires a novel regulatory approach. Operators should engage with regulators by putting forward real-world use cases and pressing for incentives that will justify their 5G-related investments, according to the report.
According to the results of a survey published by McKinsey & Company in 2019, nearly a quarter of participating telecom operators flagged regulation as a key stumbling block for 5G rollouts. High on their lists of concerns: spectrum auctions and rollout obligations (Europe, for example, has taken a relatively slow approach to auctioning the millimetre-wave spectrum deemed necessary for very high data rates).
The use of 5G for things like autonomous mobility, and flying drones in particular, will require dealing with national authorities including federal ministries on matters like air traffic control and road safety department, and with international agencies like the International Telecommunication Union on issues like harmonizing frequencies. With the advent of 5G rollouts around the world, there is an urgent need to strengthen laws related to the testing of new 5G use cases, to closely assess potential social impacts including those related to health and equal access, to bolster related consumer and personal data protection, and to clarify rules for cross-border data monetization and taxation.
The commercial introduction of autonomous vehicles will require timely software upgrades, for example, in order to ensure error-free operations in tandem with changing infrastructure. National regulators and policy-makers have a critical role to play in fostering potential 5G-related benefits for their economies, by focusing on prompt and adequate spectrum allocation for testbeds, the proper incentives for investing in strong networks, and the crafting of helpful data and monetization policies.
In order for 5G to realize its potential, a wide variety of airwaves will have to be put to work. Spectrum is the necessary oil for 5G networks, and a swift rollout will require that this oil is allocated efficiently to network operators. As private companies bulk up on necessary licensed and unlicensed spectrum, there is a need for regulators to zero in on the best ways to put it all to work.
5G requires relatively dense networks in order to meet coverage and capacity objectives; that means that most operators are taking a phased approach to network deployment, beginning with “non-standalone” architecture (using 5G cells with legacy equipment) before transitioning to a standalone model. While automation could make 5G networks more efficient and agile, the mobile industry has made clear that a significant amount of new, harmonized mobile spectrum across key frequency ranges is needed - in order to avoid interference, and deliver faster speeds and broader coverage.
Some of the potential scenarios for widescale use include public 5G networks, private and unlicensed 5G spectrum, network slicing of 5G spectrum, and privately-licensed 5G spectrum. Future networks will rely on a combination of mainstream and alternative technologies in order to make the best use of both licensed and unlicensed spectrum, across different bands.
GSMA, a trade organization for mobile operators, has said the success of 5G is dependent on harmonizing mobile spectrum across three different frequency bands: both sub-1 GHz and between 1 and 6 GHz for coverage and capacity, and above 6GHz for very high data rates. These different bands will be necessary to address challenges related to dense urban areas and larger, more sparse regions.
Clearly, more reinforcement is needed to support the race to 5G, which is already pushing existing 4G networks to new limits by integrating new technologies - including those related to millimetre wave spectrum - according to the IEEE.
This will require 5G devices that support the different bands - initially sub-6GHz, and later on so-called millimetre wave spectrum found on the highest bands (which will be necessary to realize 5G’s true bandwidth potential).
5G fibre optic networks can complement wireless networks in way that provides a better internet experience than either could muster on its own. In addition to spectrum, fibre optic networks may play a significant role in the transition to 5G. However, it is expected that $150 billion will have to be invested in necessary fibre infrastructure in the US alone.
The fast, intelligent internet connectivity enabled by 5G technology is expected to create about $12 trillion in global economic value within the next two decades. One study indicated that it will support hundreds of thousands of jobs in Switzerland (population 8.5 million) alone. While several countries have initiated roadmaps for 5G rollout, others are falling behind - partly due to the lack of alignment among policy-makers, regulators and the private sector.
In order to make that happen, however, trillions will first have to be invested in the rollout of global 5G networks (which may be delayed in some cases due to COVID-19). Greater cooperation is needed to foster deployment; when used to power the Internet of Things, artificial intelligence, and big data, 5G can deliver significant social value.