Deloitte: China Winning Race to 5G; Has Outspent U.S. by $24 Billion in 5G Infrastructure

China is pulling ahead of the US in the race to build infrastructure for 5G wireless, according to a new report from Deloitte Consulting.   The report titled “5G – The chance to lead for a decade” illustrates how China and other countries are outpacing the U.S. in terms of wireless communication infrastructure spend, tower density and efficiency of execution. Together, these practices are distinguishing China’s lead in the early stages of 5G deployment. This report explores the sense of urgency for wireless carriers and policy makers to work together in an effort to increase investment in the country’s communications infrastructure and offers potential solutions to help improve economic efficiency.

China has outspent the U.S. by $24 billion since 2015 and built out ten times more sites than the U.S. to support 5G communications, according to the report.  In just three months of 2017, Chinese cell phone tower companies and carriers added more sites than the U.S had done in the previous three years, the Deloitte Consulting report found.  The country has built 350,000 new cell phone tower sites, while the U.S. built less than 30,000.  Even with this estimate normalized to account for the population to wireless subscriber ratio, the study concludes that the U.S. has under spent China in wireless infrastructure by $8 to $10 billion per year since 2015.

In 2017, U.S. tower companies and carriers added fewer sites in the last three years than China added in three months. China now has 1.9 million sites, 10 times more than the U.S., which yields almost 40 times the tower density per square mile, and three times the density on a per-capita basis.

Furthermore, the report notes China’s five-year economic investment plan projects a total of $400 billion in 5G related investment. In addition, Deloitte estimates that the equipment necessary to add a carrier in China is about 35 percent less than the U.S., suggesting the U.S would need to spend 2.67 times the amount that China spends to generate an equivalent amount of wireless network capacity.

“We predict that 5G will expand the network effect dramatically by extending the reach of the internet to almost any kind of connection, by almost any kind of device, anywhere a wireless signal can reach,” said Dan Littmann, principal, Deloitte Consulting LLP. “The potential economic benefits of 5G will soon become a key differentiator for cities looking to attract both businesses and residents. For the U.S. to remain competitive and eventually emerge as a leader, the race to 5G should be carefully evaluated and swift actions should be taken.”

In an effort to prevent deployment challenges and enable rapid and extensive 5G deployment, Deloitte examined a range of potential actions:
  • Establishing lighter touch policy frameworks that are able to deliver higher scale and efficiency and help reduce deployment cycle times.
  • Encourage collaboration among carriers and other ecosystem organizations so that the demonstrated benefits from network effects are equitably shared.
  • Implementing a national communications infrastructure database to provide deployment statistics, leading practices, and visibility into small cell approval and denial rates.

The report concludes that as another era of untapped economic potential emerges with the adoption of 5G technology, investment in upgrading the underlying communications infrastructure has become increasingly critical. Unless tangible steps are taken to help rebalance the private investment case for the upgrade, the U.S. may risk losing the macro-economic leadership it gained in the previous wireless investment era.

“Maintaining U.S. leadership in mobile communications requires that carriers, technology vendors, OTT innovators, municipalities and policy makers collaborate to build a strong business case for 5G.  Deployment costs and cycle times for a densified network infrastructure is are critical for the U.S. to gain equal footing with other countries striving to be first to 5G,” Littmann added.

While China is streaking ahead of the US in terms of network rollout, it looks like there are also several other nations who are in a more comfortable position also. In terms of the number of sites per 10,000 citizens, Deloitte estimates this number at 4.7 in the US, though this is eclipsed by China (14.1), Germany (8.7) and Japan (17.4). Looking at the average number of sites per ten square miles, US stands at 0.4, while China has 5.3, Germany has 5.1 and Japan has 15.2.

Jamie Davis of telecoms.com writes:

The US telcos might be bragging about getting to launch commercial 5G services first, but this means very little. Having several pockets of 5G coverage scattered over the US, focused around the cities which house telco HQs is not the same as taking a leadership position in the 5G economy. When it comes to network densification investments, a key factor for the success of the technology, China does seem to be taking the lead.

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Addendum:   

ITU Report on 5G:
https://www.itu.int/en/ITU-D/Documents/ITU_5G_REPORT-2018.pdf

6 thoughts on “Deloitte: China Winning Race to 5G; Has Outspent U.S. by $24 Billion in 5G Infrastructure

  1. The shift to 5G by Deloitte:
    First-adopter countries embracing 5G could sustain more than a decade of competitive advantage. Unfortunately, an examination of how the United States compares internationally on investments critical to 5G deployment surfaces a concerning trend. It’s critical that this trend is immediately reversed to help promote US economic competitiveness.

    In this paper, we examine how the United States compares to other countries, revealing dramatic
    examples where it is losing ground in the race to be first to 5G. We also consider a range of actions
    and policies that may help overcome deployment challenges and enable rapid and extensive 5G
    deployment, including a light-touch policy framework that urges carriers and their ecosystem
    partners to negotiate solutions without government intervention and encourages carriers to operate
    at greater scale and economic efficiency.

    https://www2.deloitte.com/content/dam/Deloitte/us/Documents/technology-media-telecommunications/us-tmt-5g-deployment-imperative.pdf

  2. US ‘ahead of the pack’ on 5G says Ericsson

    American carriers are ahead of the race on 5G due to the availability of high-band millimetre-wave (mmWave) spectrum, Ericsson VP and head of 5G Commercialisation Thomas Noren has said.

    During an interview with ZDNet during Mobile World Congress Americas (MWCA) in Los Angeles, Noren said the US has already been able to iron out the technical challenges and found use cases across mmWave sites.

    “I think in general, you could say that the United States is ahead of the pack,” he said.

    Noren said South Korea is also pushing ahead, having showcased its 5G capabilities during the Winter Olympic Games and already auctioned off both its 3.5GHz mid-band and 28GHz mmWave spectrum bands.

    “They have a long tradition of pushing technology, they have very demanding consumers, and they build very dense networks … [but] they don’t have the scale that US operators have, so they can’t drive the ecosystem in the same way,” he argued.

    https://www.zdnet.com/article/us-ahead-of-the-pack-on-5g-ericsson/

  3. WSJ 9/2018: The 5G Race: China and U.S. Battle to Control World’s Fastest Wireless Internet

    The early waves of mobile communications were largely driven by American and European companies. As the next era of 5G approaches, promising to again transform the way people use the internet, a battle is on to determine whether the U.S. or China will dominate.

    Equipment makers and telecom operators in both countries are rushing to test and roll out the next generation of wireless networks, which will be as much as 100 times faster than the current 4G standard. Governments are involved as well—with China making the bigger push.

    The new networks are expected to enable the steering of driverless cars and doctors to perform complex surgeries remotely. They could power connected appliances in the so-called Internet of Things, and virtual and augmented reality. Towers would beam high-speed internet to devices, reducing reliance on cables and Wi-Fi.

    At the Shenzhen headquarters of Huawei Technologies Co., executives and researchers gathered in July to celebrate one of its technologies being named a critical part of 5G. The man who invented it, Turkish scientist Erdal Arikan, was greeted with thunderous applause. The win meant a stream of future royalties and leverage for the company—and it marked a milestone in China’s quest to dominate the technology.

    At a Verizon Communications Inc. lab in Bedminster, N.J., recently, computer screens showed engineers how glare-resistant window coatings can interfere with delivering 5G’s superfast internet into homes. A model of a head known as Mrs. Head tested the audio quality of new wireless devices. Verizon began experimenting with 5G in 11 markets last year.

    Nearby, in Murray Hill, N.J., Nokia Corp. engineers are testing a 5G-compatible sleeve that factory workers could wear like an arm brace during their shifts to steer drones or monitor their vital signs. The company began its 5G-related research in 2007.

    While the economics of 5G are still being worked out, boosters say the potential payoffs are immense. Companies that own patents stand to make billions of dollars in royalties. Countries with the largest and most reliable networks will have a head start in developing the technologies enabled by faster speeds. The dominant equipment suppliers could give national intelligence agencies and militaries an advantage in spying on or disrupting rival countries’ networks.

    “As we face the future, we know deep down that the birth of 5G standards represents a new beginning,” Huawei’s chairman, Eric Xu, told the audience at the company event.

    Hans Vestberg, Verizon’s chief executive officer, speaks of the technology in equally dramatic terms. “We are strong believers that 5G [will have] a very transformative effect on many things in our society,” he said. “Consumer, media, entertainment…whole industries.”

    By some measures, China is ahead. Since 2013, a government-led committee has worked with China’s mobile carriers and gear-makers on testing and development. The state-led approach, combined with an enormous domestic market, ensures that Chinese companies such as Huawei will sell large quantities of 5G equipment and gain valuable experience in the process.

    In the U.S., where the government typically avoids mandating and coordinating efforts by the private sector, much of the experimentation has been led by companies such as AT&T Inc., Verizon, Samsung Electronics Co. and Nokia. Last week, tech companies including Intel Corp. and Cisco Systems Inc. argued in comments filed to the U.S. Trade Representative that proposed tariffs would raise the cost of routers, switches and other goods, slowing development of 5G.

    Three of the major carriers plan to roll out 5G service in select cities later this year, though most mobile devices compatible with the new network won’t be ready until early 2019.

    The race to 5G has come with tit-for-tat regulatory moves aimed at securing each country’s advantage. In March, the Trump administration blocked Singapore-based Broadcom’s acquisition of U.S. chip giant and 5G leader Qualcomm Inc., citing concerns that Broadcom would cut the company’s research and development funds and allow Chinese companies to pull ahead in 5G.

    In July, China squelched Qualcomm’s planned acquisition of Dutch chip maker NXP Semiconductors NV, a deal that would have helped Qualcomm profit from 5G investments in new markets such as connected cars.

    Much of the U.S. unease stems from the rising clout of Huawei, which was labeled a national-security threat, along with ZTE Corp. , by a Congressional panel in 2012 that said those firms’ equipment could be used for spying on Americans. In August, aligning itself with the U.S., Australia said it was banning Huawei and ZTE equipment from its 5G network. Other U.S. allies are studying similar bans.

    Huawei and ZTE have consistently denied providing government agencies with backdoor access to their products. Beijing has likewise pushed to replace or sideline U.S. high-tech firms within China’s networks on fears of espionage.

    China has made 5G a priority after failing to keep pace with Western countries in developing previous generations of mobile networks. The U.S. dominated 4G, built in the late 2000s, much in the same way Europeans controlled 3G standards. The American lead in 4G has been a boon to companies such as Apple Inc. and Qualcomm, and helped give rise to a host of consumer smartphone applications from the U.S.

    Since 2015, China has built about 350,000 cell sites, compared with fewer than 30,000 in the U.S., according to an August study by consulting firm Deloitte. It also noted China has 14.1 sites for every 10,000 people, compared with 4.7 in the U.S. That matters for 5G, because the new networks will require much larger numbers of cell sites than 4G.

    The physical manifestation of China’s push is a government-run 5G lab near the Great Wall north of Beijing. The sprawling facility is festooned with base stations and prototype mobile devices, with indoor and outdoor facilities for each of the major Chinese carriers and equipment makers, according to engineers and executives who have visited the site.

    Trials are coordinated by a consortium of tech firms, universities and research institutes that operate under China’s Ministry of Industry and Information Technology. The group aims to wrap up tests by the end of the year.

    After those trials conclude, state-run carrier China Mobile , the world’s largest mobile operator by subscribers, will follow up with its own tests in 17 cities, according to Chih-Lin I, a former Bell Labs researcher and the company’s chief scientist of mobile technologies. China’s 5G service is expected to be ready for commercial use by 2020.

    The faster generation of networks relies on sophisticated technology that allows wireless airwaves to be used more efficiently. Plans call for it to run on high-frequency millimeter waves, which can handle more data but can’t travel as far as lower-frequency waves used by older networks. That means 5G will rely on clusters of antennae as well as decentralized data centers close to consumers and businesses—requiring big investments in infrastructure. The networks are expected to have the speed and responsiveness needed for advances such as driverless cars, which must instantaneously communicate with traffic signals, other cars and their surroundings.

    China’s bid to steer the 5G future depends heavily on setting technical standards the rest of the world will have to follow—and pay royalties and licensing fees to use. It has played an aggressive role in the international telecom industry collective that sets global standards.

    Experts inside and outside China expect Qualcomm and other Western firms to end up with a majority of the essential patents once the standards are fully determined, but China is making progress.

    In 2009, as Huawei’s 5G push began, it recruited Tong Wen, a former senior researcher at now-defunct equipment maker Nortel Networks Corp., to set up a research lab in Ottawa. While flipping through an academic journal, Mr. Tong had stumbled on “polar coding,” a novel method for correcting errors in data transmission invented by Mr. Arikan, the Turkish scientist.

    Huawei poured resources into developing it, and the government leaned on Chinese companies to vote for it en masse at a key standard-setting meeting at the Peppermill Resort in Reno, Nev., in 2016. The result was a tense fight that lasted past midnight with proponents of a rival technology favored by most Western firms, according to one standards expert who was there.

    “The Chinese decided this was important,” the expert said. “This was one of the biggest political battles we’ve ever seen.”

    The meeting ended with a compromise: Polar codes will be adopted for part of the standard, giving Huawei ownership of a critical patent. The company has spent more than $1 billion on 5G research and development so far.

    The U.S. government has stopped short of mandating efforts by the private sector, opening the door to more diffuse outcomes determined by the work of individual companies. In January, a senior National Security Council official floated the idea of rivaling Beijing with a government-led effort to build a nationalized wireless network, but regulators and officials said it was too expensive and unrealistic.

    Earlier this month, the Federal Communications Commission announced a plan to speed up the build-out of 5G networks by overriding some local rules and fees governing the deployment of small cellular transmitters, an important component of the infrastructure. The plan is expected to win approval in late September.

    The government has funded some academic research that has paved the way for commercial technologies. One agency, the National Science Foundation, is coordinating an effort to build test beds for 5G and future generations of wireless networks.

    “The United States is very much behind in this space” relative to Europe, South Korea, Japan and China, said a 2015 internal NSF report on 5G network development.

    Thyaga Nandagopal—a former researcher at Bell Labs who is a director at the foundation—is leading the test bed project, in which companies, academics and government agencies will be able to test 5G and other wireless network applications in tandem. Nearly 30 U.S., European and Asian companies have committed $50 million of capital and equipment over the next seven years, while the U.S. government has pledged to invest another $50 million. In New York, an NSF-funded site run by academic institutions including Columbia University aims to launch a small pilot phase by the beginning of January.

    Mr. Nandagopal said that China’s coordinated investments have put it in a “pretty good pole position” but that the NSF’s efforts are focused on wireless developments after 2020, rather than the early years of 5G deployment.

    “We can invest our money strategically and still get better results than anyone else,” he said.

    Some American telecom companies are staking claims to rooftops and light poles where they can position small cells that enable the faster networks, and pressing equipment and device makers to create 5G-compatible products.

    Verizon’s Hans Vestberg at the Consumer Electronics Show on Jan. 10 in Las Vegas.
    Verizon’s Hans Vestberg at the Consumer Electronics Show on Jan. 10 in Las Vegas. PHOTO: STEVE MARCUS/REUTERS
    For all the investment, industry experts note the standards for 5G aren’t fully written and wireless carriers are still figuring out how they can best profit from the service.

    At a 5G forum in Santa Clara, Calif., in July, Henning Schulzrinne, a former chief technology officer at the FCC, said operators would also have to find a way to drastically reduce the cost of data to make applications such as augmented or virtual reality affordable enough to sell to consumers over 5G. Some of those applications could work using 4G or Wi-Fi instead.

    “Who’s going to stream AR or VR if it’s going to cost them $10 per minute?” he said.

    John Donovan, chief executive of AT&T’s communications business, said the company’s researchers have been among the most prolific writers of 5G standards, but it is being cautious as it puts the technology in the field.

    “To deploy technology in advance of need, before the use cases are there—you’re wasting money,” he said.

    Executives at Huawei have also sought to temper 5G expectations. Before an audience of analysts at an annual meeting at the Shenzhen headquarters in April, Mr. Xu, Huawei’s chairman, said that “the entire industry and also governments around the world have regarded 5G too high, to the extent that it’s going to be the digital infrastructure for everything.”

    Huawei and China Mobile will push ahead with 5G on a large scale regardless, according to executives from both companies.

    “5G is such an important strategic project for China—kitchen sink, all the resources,” said Edison Lee, a telecom analyst at investment bank Jefferies in Hong Kong. “Because if they get their foot in the door for 5G, they get their foot in the door of 6G, 7G, 8G.”

    https://www.wsj.com/articles/the-5g-race-china-and-u-s-battle-to-control-worlds-fastest-wireless-internet-1536516373

  4. Qualcomm to establish 5G R&D center in Taiwan

    Qualcomm has revealed plans to establish three technology and testing centers in Taiwan as part of efforts to collaborate with the Taiwanese government and businesses on the commercial development of 5G and other advanced technologies.

    The company has revealed plans to establish a 5G module research and design center in Hsinchu in the north of the nation in 2019, Digitimes reported.

    The center will seek to develop plug-and-play solutions to help small and medium sized enterprises enter the 5G market without a huge capital outlay.

    Qualcomm plans to work with Taiwanese companies to develop 5G related technologies and accelerate time to market for the solutions, the report states.

    According to the report, this facility will be accompanied by a millimeter wave testing center and a biometric sensor facility, also in Hsinchu.

    Together, the three facilities will form part of the Center for Operations, Manufacturing Engineering and Testing (COMET), which will also be Qualcomm’s new operations hub in the region. Qualcomm has already announced plans to establish multimedia and AI centers in Taiwan next year.

    In August, Qualcomm agreed to make investments in Taiwan as part of a settlement agreement reversing nearly 90% of a TW$23.4 billion fine imposed on the company by Taiwan’s Fair Trade Commission.

    The original fine had been imposed in 2017 after the regulator accused Qualcomm of abusing its monopoly over key mobile device standards and violating local laws by refusing to supply products to clients disagreeing with its licensing conditions.

    https://www.telecomasia.net/content/qualcomm-establish-5g-rd-center-taiwan

  5. What is Huawei, and why the arrest of its CFO matters, By Julia Horowitz, CNN Business

    The arrest of a top Huawei executive has roiled the business world and threatens to derail the tenuous trade truce between the United States and China. Experts are warning that what happens with Weng’s case could have huge implications for the broader US-China relationship.

    https://www.cnn.com/2018/12/06/tech/what-is-huawei/index.html

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