Connectivity Is Germany actually ahead of the game on 5G?

While politicians are wringing their hands about 5G, the telecoms industry is raring to get started. Germany's spectrum auction may bring in up to €5 billion next year.
Quelle: dpa
All lit up with somewhere to go.
(Source: dpa)

Germany’s broadcasting authority is set to release details next month about the 5G spectrum license auctions slated for spring 2019. Germany often falls behind the curve technologically, but it seems ahead of the game this time.

Germany was ranked fifth in 5G readiness, after China, South Korea, the US and Japan in a study conducted by Analysys Mason on behalf of CTIA. In 2017, Germany’s government dedicated €100 billion to building out 5G and fiber-optic capacity by 2025. By comparison, China dedicated €400 billion to 5G development in the five-year plan ending in 2020.

Governments around the globe are preparing for the new 5G mobile standard, which will be exponentially faster than 4G. Downloading an HD movie on a 4G connection now takes about an hour — on 5G it could take just seconds.

And more importantly, 5G could do for the Internet of Things what 4G did for the app economy: Make it possible. IHS Markit predicts that the primary driver of 5G adoption will be industry, not consumers, through compelling business use cases.

The 5G network will have to be extremely reliable and incredibly fast. Autonomous vehicles, for example, require high-speed, low-latency networks everywhere they go. Hit a dead spot in the network? Congratulations, you’re now driving a brick. Coverage goes down around your entirely networked smart home? Congratulations, you’re now living in a horror movie.

All about spectrum auctions

The parts of the spectrum likely to be allocated for 5G services — under 1 GHz, and within 1 to 6 GHz, and 20 to 30 GHz — aren’t unused, so governments are having to clear paths to auction the spectrum off to network providers. And the same chunks of spectrum aren’t available everywhere, so telecom providers will have to figure out how to deal with regional and national differences.

Finance Minister Olaf Scholz expects Germany’s 5G spectrum auctions to raise €4 billion to €5 billion, Handelsblatt learned. Italy’s recent spectrum auctions brought almost three times what analysts anticipated: €6.5 billion. But in Finland, the 5G spectrum was sold to three telecoms for €77 million. Next month, the Federal Communications Commission plans to hold the first major US auction for 5G frequencies.

Luca Schiavoni, a senior analyst at Assembly in London, points out that big proceeds from spectrum auctions can be a short-term win for government finances but the costs can hinder the telecoms’ ability to deploy the new networks. Mr. Schiavoni said Germany has been timely in starting the auction process and reasonable in its packaging of spectrum blocks to auction off.

Kester Mann, the principal analyst at CCS Insight in Birmingham, agreed that Germany is fairly advanced in its 5G preparations, though other European countries such as Sweden are likely to launch the new networks first. “The ambitions in Germany seem pretty bullish,” he said.

Telekom CEO Timotheus Höttges recently said that politics and industry need to come together to build the world’s best 5G infrastructure, which he added could have a commercial release in 2020. His company is investing about €5.5 billion per year to build out 5G.

Calling for competition

One unresolved question is whether Germany will allow a fourth mobile provider — like United Internet — to join the 5G spectrum auction. The last auction in 2015 raised €5.1 billion from the only three bidders: Deutsche Telekom, Vodafone und Telefónica. Mr. Mann thinks it’s likely a fourth bidder will join Germany’s auction next year. Germany’s cartel office said it’s in favor of increased competition as well.

The other question is whether those providers will each develop independent 5G networks or band together to share one common network. “German regulators should be supportive of infrastructure sharing solutions,” Mr. Schiavoni said. “They recognize it’s more cost-effective in deploying the network and reduces the risk that higher costs can be passed on to consumers in the end.” The big three mobile network providers say achieving blanket 5G coverage in the country could cost a combined €60 billion. Telekom and Telefónica have already agreed to partner on upgrading base stations for 5G.

Mr. Mann points out that telecom operators in South Korea banded together with encouragement from the government with the goal to launch 5G by March of next year, a move that will put it at the forefront of the technology. “It’s a model to keep an eye on,” he says.

Germany is also keeping an eye on China’s Huawei, the world’s largest network builder, after allegations of spying capabilities arose this month. Australia and the US have banned Huawei from its mobile networks, but Germany is instead instituting inspections of all equipment. Huawei offered the federal IT ministry a look at its source codes to build trust. But data security experts say that’s reckless and that the BSI is unlikely to be able to detect whether data is being siphoned back to China.

“The question is how much you want to pay for a cheap, fast rollout of 5G,” said Sandro Gaycken, director of ESMT’s Digital Society Institute in Berlin. “It’s a decision that will have repercussions for years.”

Final plans for 5G

Technically, nobody knows exactly what 5G looks like yet. The ITU is only releasing preliminary tech specifications for the new mobile standard in March 2019; the full 5G specs are coming in March 2020.

The Federal Network Agency will present its final plan for Germany’s spectrum auctions in November. It’s likely the requirements for Telekom, Vodafone and Telefonica will remain as they were, not stricter. Mr. Schiavoni has seen penalties imposed by governments when telecoms don’t fulfill their coverage obligations, but he notes if the goal was unrealistic, the penalty won’t change that.

As anticipation for 5G grows, telecoms are still unfurling their 4G capacity. Germany hopes 4G will be available across all of its most important railways by 2022. The GSMA estimates that 4G usage in Europe will peak in 2023 and that 5G will be available to about three-quarters of Europeans by 2025.

Handelsblatt staff contributed to this report. Grace Dobush is an editor with Handelsblatt Global in Berlin. To contact the author: [email protected]