£16 million might seem like a drop in the ocean, but it could create a significant ripple effect.
Telecoms is an industry that is used to dealing in the hundreds of millions, if not billions of euros when it comes to the sums of money ploughed into networks and new technologies.
So, when the U.K. Chancellor of the Exchequer Philip Hammond on Wednesday announced as part of his Spring Budget that £16 million (€18.3 million) of public funds would be spent on a 5G facility, it seemed like a fairly unambitious sum of money.
To put that into some kind of context, Deutsche Telekom CEO Tim Höttges said at Mobile World Congress last week that €300 billion-€500 billion (£262 billion-£436 billion) of investment will be needed in Europe alone to realise the dream of 5G.
5G "is not a new antenna that you put on the roof. This is really a new kind of technology," he said.
And when we talk about a 5G research facility, your mind’s eye might summon images of monolithic structures of shimmering glass, spread across a huge, leafy campus, where the brightest minds in the industry gather to contemplate massive MIMO and network slicing.
£16 million doesn’t build you one of those. Not from scratch, anyway. This is an extreme comparison, but Apple originally budgeted $500 million (€471 million) to build its new, ring-shaped campus, but costs later ballooned to $5 billion.
The U.K. government doesn’t have that kind of money to devote to building a 5G research campus, but what its newly-announced 5G facility will do, is support the broader industry effort to develop new next-generation network technologies.
"A small investment now can go a long way to positioning the U.K. at the very centre of global 5G investment," said Dan Adams, lead U.K. partner for telecommunications at Deloitte, in a research note.
As set out by the Department of Culture, Media and Sport (DCMS) in its 5G strategy paper, published this week, the government will adopt a ‘hub and spoke’ model.
Government-funded facilities will act as hubs that support multiple spokes of research into specific use cases for different industries, such as manufacturing, healthcare, and automotive, for example.
Each spoke of research could be carried out in partnership with local authorities, the private sector, academic institutions, and public bodies etc., DCMS said.
"For 5G to be a real success, key players from across the industry will need to collaborate closely together," said Stuart Orr, advisory partner at EY.
There is also the not-so-small matter of fibre network availability, which needs to be widespread if 5G networks are ever going to support the kind of services that demand high bandwidth and low latency.
This represents a significant challenge for the U.K.
In February, the Fibre-to-the-Home (FTTH) Council Europe published its latest ranking of countries with household FTTH penetration of at least 1%. For all the U.K. government’s proclamations about above-average connection speed and data consumption compared to its major European peers, the U.K. still does not make it onto that list.
Forget things like vectored VDSL, G.fast and XG.Fast, FTTH is the broadband technology that will usher in the future we’re all dreaming about.
The government finally seems to be wise to this. In Wednesday’s Budget, Hammond allocated £200 million to fund a programme of local projects aimed at testing ways to accelerate the deployment of full-fibre broadband networks.
On top of that, £400 million – matched by the private sector – will be contributed to the government’s new Digital Infrastructure Investment Fund. Due to launch in the spring, its aim is to drive full-fibre network deployment by providing developers with greater access to commercial finance.
While the sums bandied about this week might seem modest, especially compared to the hundreds of billions of euros that Höttges mentioned last week, small steps taken now could result in some giant leaps further down the line.
"With full-fibre broadband and 5G mobile rollout, we can expect to increase national Gross Value Added (GVA) by around £10 billion, and to safeguard or create tens of thousands of jobs," claimed Andrew Ellis, professor of optical communications at Aston University.
"5G technology will cost billions of pounds to develop, and will create tens of billions of pounds for the U.K. economy," said Deloitte’s Adams. "With each wave of technology, new and immediately essential services for productivity and entertainment are created."
To learn more about developing public policy that stimulates broadband investment, join us in London on 14-15 June for Total Telecom’s third-annual Connected Britain. Click here to learn more.