Finding Europe’s Place in a 5G World

Finding Europe’s Place in a 5G World

All of a sudden, everyone had an iPhone. Apple had built a revolutionary device on top of a 4G infrastructure foundation, propelling itself to become the most valuable company in the world. Facebook and Google would seize on smartphones’ newfound ubiquity to dominate the app economy – and the tech landscape. As the telecommunications industry rolls out 5G, global powers are rushing to achieve supremacy in whatever is the next generation economy.  

The United States and East Asian countries such as South Korea and Japan are early adopters, leading the world in providing 5G coverage across their populations. China leads in many volume indicators, such as amount of spectrum available and number of 5G base stations. Despite pronouncements and plans, Europe tries to wrangle its 5G future, making steady progress but failing to hit its own benchmarks.

Europe’s sluggishness is not for lack of foresight or ambition. Accenture, a consultancy, reports that between 2021 and 2025, 5G could add €1 trillion to Europe’s GDP and produce 20 million jobs; Europe appears to grasp this immense potential. The European Commission has made developing a digital strategy one of its six priorities for the 2019-2024 legislative session. European Leaders have declared this as Europe’s Digital Decade and for the need to achieve digital sovereignty.

If Europe has not kept up in technology, it has proven itself a leader in ethics and regulation. Its focus has been ensuring the democratic rights of its citizens, through access to information with the Open Data Directive (2019), protecting personal data and privacy with the General Data Protection Regulation (2019), and by building an ethics guideline on trustworthy artificial intelligence (2019). In 2020, its Digital Markets Act and Digital Services Act sought to create a more competitive, fairer, and more accountable digital market. For liberal democratic countries looking to rein in a politically malignant and economically uncompetitive industry, Europe has set the standard.   

But in terms of establishing a leading position in next generation wireless technology, the EU is falling behind on its own plans. While 5G is commercially available in 25 of the EU-27 nations, its 5G Action Plan objective was that each nation would have all three 5G spectrum bands available in each country by the end of 2020. According to European Commission’s 5G Observatory latest quarterly report only six nations had reached that target by June, 2021.

The European telecoms industry has also criticized Europe for being a laggard. A January, 2021, report released by the European Telecommunications Network Operators’ Association (ETNO) called out the continent for its slow 5G roll-out compared to the USA and South Korea. It decried a lack of demand and a lack of public investment. In 2020, Ericsson, a Swedish telecom giant and leading 5G kit manufacturer, described “market outputs no longer meeting political ambitions” and “an investment and connectivity deficit.”

On the other hand, it’s slightly unfair to use the EU as a comparative, because despite all the supra-national coordination, planning, and attempted regulatory harmonisation, it is still a collection of 27 nation states. There is a huge disparity in 5G readiness across the EU-27 (see chart), with many small countries dragging down the average. (It should be noted that Europe’s progress continues apace; in August, 2021, A1 Telekom Austria Group contracted Nokia to provide spectrum in Bulgaria, Slovenia and, non-EU member, Serbia.) Nevertheless, among the major EU nations, it is a bad sign that while Germany stands at 100 per cent readiness, Italy and France are still short of 60 per cent.

The amount of spectrum assigned and ready for 5G use within the so-called 5G pioneer bands. These bands are 700 MHz (703-733 MHz and 758-788 MHz), 3.6 GHz (3400-3800 MHz) and 26 GHz (1000 MHz within 24250-27500 MHz). All three spectrum bands have an equal weight.

As far as the EU has come in harmonising telecommunications regulations across the continent, it has, for example, just recently made it possible to travel within the EU without incurring roaming charges. It represents the challenges of translating supranational focus into national action. Compare the EU’s situation to the United States, a larger territory with a roughly similar population, but only a small handful of telecommunications companies. Each European country has multiple telecom providers.

In addition to the fragmentation of operators, Kearney, a consultancy, reports that regular has failed to incentivise investment and spectrum costs are high. Indeed, though investment has increased, ETNO, the telecom industry group, commissioned a report that found European investment per capita was €94.8, compared to more than €200 in both Japan and the USA. A new study by the European Commission and the EU Investment Bank also finds a €4.4 – 6.6bn annual gap in 5G venture capital funding. In 2020, the Commission expected an overall gap of more than €40bn annually by 2025; private companies would be responsible for a third of that gap.

European telecoms, however, are dealing with weak demand, relatively low revenue, and high spectrum prices. Europeans pay less for their phone plans and use less data than customers in the USA. At the same time, Ericsson complains about complex auction and allocation systems that offer few frequencies in the 5G bands and for expensive prices.

As much as European leadership values succeeding in the digital age, it has also recognized a need to intensify its commitment to a digital future. In March, 2021, the Commission presented the Council and Parliament with the 2030 Digital Compass, which calls for an “intensification” of Europe’s work to build a fully functioning Digital Single Market. Most importantly, it sets out digital infrastructure as one of its four cardinal points and commits to investing minimum 20 per cent of pandemic recovery funds into the digital transition.

Europe is obviously intent on becoming a major power in the next digital era. Its ability to corral and harness the complexity and potential of its regulatory environment and telecom industry will go a long way in determining its success.


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