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Excitement around open RAN and private networks can’t offset the drag from geopolitics and COVID-19
Our journey so far
Looking back over the last five months since we first launched the 5G-aliser in March 2020, development of 5G has been a battle of opposing forces. While the wildcard factors of COVID-19, the US-China trade war and wider geopolitics, and the rise of 5G conspiracies have all had varying negative impact on 5G, growing awareness and commitment from operators and enterprises in key secondary factors, such as open RAN and private networks, are having a steadily positive impact.
However, the time-frames of these opposing factors to take affect on overall demand are very different. The impact of the negative factors weighing 5G down are immediate, while growing investment into gigabit fibre, open RAN, and private networks will take anywhere from one to three years to truly accelerate 5G growth. As a result, the real impact for our July 2020 update to the 5G-aliser is a slowing down of both supply and demand.
5G-aliser – July 2020
Source: STL Partners, Total Telecom
(Note the previous month’s supply and demand levels indicated by the light grey needles)
Jio’s game-changing homegrown 5G
While industry zeal for Wi-Fi, open RAN, and private networks has stayed strong throughout the pandemic, with frequent announcements of new roll-outs and trials, the big positive topic for July is Reliance Jio’s announcement of its internally developed 5G platform. This came alongside the news of Google’s US$4.5 billion investment for a 7.7% stake in Jio Platforms, following on from Facebook and Qualcomm’s investments earlier this year.
While full details of 5G platform have yet to be released, Jio stated that it is a complete end-to-end solution that, once proven in India, the operator plans to resell to other telcos globally. This is another step in the direction of greenfield operators disrupting the economics of the telecoms industry. Potentially, with the right mindset and support from Google and Facebook, this could drive the development of an ecosystem of app developers and tools for the 5G era.
Geopolitics continues to darken
In our update this month we have dropped the relative level for 5G infrastructure costs and skills to reflect slowdown in investment, a rise in reported delays in network roll outs, as well as the impact of the escalating US–China trade war.
The tensions between the US and China are rapidly escalating into a global issue, demonstrated by UK’s latest decision to remove all Huawei equipment from telecoms networks by 2027, which will both drive up the cost and delay 5G rollouts. Germany has a similar decision to make in the coming weeks, while the US is actively offering financial support for 5G to countries like Brazil if they choose to exclude Huawei.
Meanwhile, the chances of quick resolution if Trump is voted out in November are slimming, as China’s stance on Hong Kong and human rights among its Uighur population are deepening the tensions far beyond trade and technology discussions.
COVID-19 takes a financial toll
This month we have again increased the negative impact of COVID-19, as operators including Rogers, Orange and Telefónica all report a squeeze in their Q2 2020 earnings. This plays into STL Partners’ expectation that there could be some bigger than anticipated financial risks to telcos from the pandemic. In a May 2020 survey STL Partners ran on expected changes in telco investment priorities, few expected there to be significant decline in investment in any areas. The industry is still hopeful of recovery, with Orange maintaining its annual guidance despite the drop in Q2, but any sustained financial contraction would exacerbate the impact of rising 5G deployment costs due to Huawei’s increasing exclusion.
There is also some slowdown on terms of device releases. Apple usually announces its new iPhone updates in September every year, but there is widespread speculation that the announcement of the iPhone 12, which is expected to include 5G capabilities, will be delayed. Comments from partners such as Qualcomm suggest that the iPhone 12 release is likely to be delayed by at least one to two months owing to supply chain disruption during the pandemic.
Meanwhile, although China continues to report growth in 5G device sales, with the CAICT reporting 64 million 5G smartphone shipped by June 2020, COVID-19 has nevertheless had an impact on buying patterns, with smartphone sales in China down 17% y-o-y in Q220.
The ‘Year of 5G’ or not to be?
Prior to the onset of the coronavirus, many were extolling 2020 as the so-called ‘Year of 5G’, with optimistic outlooks of widespread coverage and adoption by the end of the year. Despite strong progress in many areas, the global reality for the 5G is not yet the worldwide revolution promised by the technology’s strongest advocates. Suppressed by the ongoing pressures of politics and the pandemic, so far this year’s supply and demand for 5G has been significant suppressed, as seen in the graph below.
To a certain extent, however, this was to be expected. 5G is still in its infancy as a technology, with operators and enterprises still finding their feet, especially with the myriad of new verticals the technology is making available. In spite of its ardent celebrators, slow growth was somewhat unavoidable.
But now, with many governments around the world positioning 5G as a key driver for economic recovery, we could be on the brink of seeing renewed focus and investment. The effects of the pandemic and the geopolitical situation are not going away any time soon, but operators must find a way to work around them to really deliver on the 5G hype.
Can 2020 still be the ‘Year of 5G’?
What role will 5G play in the UK’s economic recovery post-COVID-19? Find out from the operators at this year’s Connected Britain
Also in the news:
Etisalat’s CODERS strategy highlights the value of openness
Global digital transformation is proving AI a must-have for CSPs
Community Fibre earmarks £400m for London FTTP
