October 8, 2020
The Right Framework for 5G Progress .
Thanks to $100+ billion in wireless investment in the past few years alone, the U.S. is poised to have three nationwide 5G networks and the fastest 5G. Initial 5G networks already cover 67% of Americans. With 5G networks now popping up in other countries across the world, there is a lot of discussion about measuring 5G progress. Are initial 5G speeds fast enough? Have enough cell sites been built? How many small cells were built in the last three months?
The answers to these questions however are just snapshots of a moment of time and don’t actually give a determinative picture of how a country’s 5G rollout is proceeding. To give us the framework to better understand a country’s progress, Boston Consulting Group studied the key factors that impact a country’s 5G success and ability to realize the potential of a 5G-driven economy.
Defining the 5G economy.
To start, let’s define what we’re talking about. Just like 4G networks created a platform for innovation and economic growth, 5G will influence and enable the jobs and technologies of the next decade, from telehealth and remote surgery to efficient smart energy grids and from immersive, virtual reality learning experiences to connected cars that reduce congestion and increase safety.
Measuring a country’s 5G progress.
BCG’s work finds that subscriber penetration is a key indicator of a country’s 5G progress. As the lead author of the BCG report noted, “A country’s 5G progress shouldn’t be based on … the number of 5G subscribers or the amount of 5G base stations deployed in a given quarter. Policymakers should instead look at how [key] factors … will blend together to drive 5G penetration and make 5G use cases widely available throughout society.”
Looking back at previous generations of wireless, the importance of subscriber penetration is clear. Japan—widely thought to be the global leader in 3G—had 50% 3G subscriber penetration in 2007. The U.S. had 3.5% and Europe was in the middle. By 2011, when 3G was mature, Japan had 99% penetration.
Thankfully, the U.S. moved quickly on 4G, launching initial networks in 2010. By 2014, the U.S. had 40% 4G subscriber penetration. By the end of 2017, LTE subscriber penetration as a percent of the U.S. population was 100%. It was our rapid success at reaching deep adoption and broad deployment that helped make the U.S. the global 4G leader.
Ericsson already predicts that by 2025, around 74% of U.S. mobile subscriptions will be 5G—while China and South Korea’s will be at just 60%.
Fostering 5G subscriber penetration and a successful 5G economy.
BCG identified five factors for unlocking the full potential of 5G as the primary engine of America’s economic recovery and securing U.S. leadership in this decade-long wave of wireless-driven innovation and job creation:
- Spectrum availability. Looking back at 4G, a generation of wireless marked by U.S. dominance, our 4G success was built on three major spectrum auctions—AWS-1, 700 MHz, AWS-3. With 2019’s high-band auctions, the 3.5 GHz and C-Band auctions being held this year, and the recent announcement on Lower 3 GHz, the U.S. is off to a good start on making more spectrum available. But, as BCG notes, we need to expand our 5G spectrum pipeline in order to keep pace with other countries that are moving aggressively to auction spectrum—especially mid-band—for 5G networks.
- Network build and investment. CTIA’s most recent Annual Survey found that the wireless industry has invested over $286 billion since the start of the 4G era. In 2019 alone, the industry’s investment totaled $29B—that’s 18% of the world’s total mobile capex, while the U.S. has just 4.5% of the world’s population and 5.6% of mobile connections. BCG reports that the U.S. is expected to invest over $250B over the next five years in 5G networks, more than any other country.
- Innovation-friendly ecosystem. Using 4G as a guide, we see how it created new experiences and new industries over the past ten years, including the on-demand economy, which was realized thanks to billions of dollars in private funding, and today supports the work of 7 million people in the U.S. alone. 5G will be no different and BCG points to U.S. tech and telecom companies spending more on R&D as a percent of sales (7.2%) than other nations (1.7% – Japan, 2.6% – China, 3.6% – Germany, 5.6% – South Korea) as a leading indicator of the U.S.’s innovation-readiness.
- Strong business climate. The investment-friendly environment in the U.S. during the 4G decade helped create a startup ecosystem that dominates globally, with 12 of the top 30 cities for startups. BCG also points to the U.S.’s rank as the global leader for entrepreneurship and the fact that many of our leading areas of innovation expertise are in key 5G industries like AI and cybersecurity.
- Tech talent. Wireless jobs are high-value, paying over fifty percent more than the average American job—and many, like those surrounding the on-demand economy, are at the forefront of U.S. innovation and startup culture.
While the U.S. is also home to world-leading universities, BCG does identify attracting and retaining global tech and telecom talent as an area where the U.S. could improve going forward. This is a great opportunity for the dynamic wireless sector to help drive our nation’s economic recovery.
The U.S. is off to a great start with our 5G rollout, and with it, the beginnings of the 5G economy. Continued policymaker focus on the five factors BCG identified will ensure that the U.S. continues to build world-class 5G networks and create a platform that attracts innovation and investment in the technologies of tomorrow.