Will 5G really bring the UK £6bn in productivity savings?

Dave Millett, director of Equinox, argues that the optimism about the technology isn't well-founded

Will 5G really bring the UK £6bn in productivity savings?

The transition to 5G will bring £6bn in productivity savings, claims O2, the mobile operator. But is that really true? Personally, I don’t think so.

For a start the earliest the UK will see 5G is 2020 – years behind the USA and many Asian countries. These countries will see their GDP boosted while we lag behind desperately trying to play catch up. The UK ranks 54th in the world for 4G coverage. For new technologies like driverless cars and consistent access to the internet of things we need universal coverage across the UK, which we do not have.

The government is now claiming 4G coverage of 70% of landmass but that is combined across all the networks, which is irrelevant since we are not allowed free roaming in the UK. In other words, thousands of people and hundreds of businesses still don’t have access to 4G.

The government has consistently failed to get the operators to improve coverage and yet these same networks, Vodafone, EE, O2 and Three, all won part of the bandwidth needed for the 5G networks. So, what makes anyone think the 5G auction will be any different?

At least Ofcom, the communications regulator has recognised some of its past failures. Ahead of its next auction in 2019, it said: “To ensure widespread improvements in mobile coverage across the UK, we are proposing to attach coverage obligations to some of the licences we will award for the 700 MHz band. These obligations will require winning bidders to roll out improved mobile coverage in rural areas and the nations. This consultation seeks views on our proposals for these coverage obligations.”

But these obligations are not attached to the 5G auctions. Forcing networks to offer free roaming across the networks would dramatically improve the situation. You can roam free across Europe but not in the UK.

Whilst Europe hosts the biggest event in the mobile industry calendar, the mobile world congress in Barcelona, the continent is lagging behind. The EU has set a target for each member state to have one major city running a commercial 5G solution by 2020. In the USA 5G is expected to be available in some cities as early as Q4 of 2018.

South Korea trialled a 5G network during the recent Winter Olympics and Japan is planning to deploy it as a key part of the 2020 Summer Olympics.

The good news is that the UK has the opportunity move ahead faster as a result of Brexit. It doesn’t have to stick to the EU timeline. If we want we could leap ahead and capture the resultant economic benefits before many other European countries.

The UK government regularly talks about the strength of this country’s digital economy. But for that to succeed and for us to grow and attract inward investment, we need the right infrastructure. We need to be at the forefront, not lagging behind the rest of the world.

Who is going to pay for the investment in 5G? The network operators are facing revenue pressures from applications such as WhatsApp. The heritage mobile networks have seen text messages volumes fall by 40% over the last 4-5 years. Which means the costs will be passed to customers – plus we’ll all need to buy new 5G compatible phones.

£6bn in productivity savings? I think not. I am naturally suspicious of claims of this type.  Think of HS2; the savings were all based on reducing travel time by 20 minutes – but the calculations ignored the fact that many people work whilst travelling anyway. So how did O2 arrive at a figure of £6bn?

That’s not to say there aren’t benefits to rolling out 5G because there certainly are. And it’s important for businesses to have a clear understanding of these. But the savings and the advantages are dependent on the speed of roll out. And right now that’s not looking good.

5G represents a great opportunity for the UK to become genuine leaders in Europe.  But the government and Ofcom need to hold the operators accountable for failures to deliver and they need to be radical about releasing the capacity within the spectrum. In the same way the UK government encouraged the oil industry with tax breaks perhaps it should be looking to do something similar with companies hoping to exploit the capabilities of 5G.

Dave Millett
Dave Millett

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