The importance of midband 5G for European economic growth
As Europe seeks to emerge from the uncertain environment of the pandemic, mobile continues to have a role to play in connecting a better future. Productivity gains made in the 2010s, thanks to the development of 4G, have helped the world teach, talk, transact and do business more efficiently.
Today, these advantages are closely linked to the European economy, and a new phase of development can now come from the deep integration of 5G into the lives of individuals, societies and businesses.
There is strong evidence that shows how spectrum allocation could be a powerful driver of industrial development and economic growth over the next decade. The latest data from the GSMA – an analysis of the direct monetary impact of 5G mid-band – shows the potential socio-economic benefits at stake of mid-band spectrum at 1-7 GHz. Disturbingly, governments and regulators are still grappling with how much midband spectrum mobile operators need.
With the right regulatory tools, 5G can become a central pillar of European economic development strategies. Its benefits for sectors such as manufacturing, services (including health and education) and public administration (including smart cities) can catalyze a new wave of economic growth.
A new phase of development
5G networks offer substantial improvements over 4G, including faster connection speeds, greater capacity, and lower latency. This increased performance allows 5G networks to support new use cases and applications, which have the potential to benefit a wide range of industrial sectors. 5G’s promise of consistent user access to these speed, capacity and latency improvements will make this possible, but will rely on a natural resource: spectrum.
Europe stands to benefit significantly and quickly from midband 5G. GSMA data predicts a $67 billion increase in European GDP produced by mid-band 5G in 2025, reaching a $121 billion increase in GDP in 2030. This will represent approximately 0.4% of regional GDP by the end of the decade.
Due to their size, the economies of Germany, the UK and France are expected to generate the greatest benefits from 5G midband in the region. However, the relatively high level of 5G penetration expected by 2030 across Europe will translate into significant benefits as a percentage of GDP across the continent.
Mid-band spectrum is needed for the bandwidth and capacity increases required by 5G applications. It will play a key role in meeting demand for mobile data services and new mobile broadband use cases, such as enhanced fixed wireless access, mobile broadband, as well as the Internet of Things ( IoT) and Industry 4.0. These applications will increase the impact that mobile services can have on social and economic growth.
The Economic Benefits of Midrange Spectrum: $610 Billion to Global GDP in 2030
The GSMA Intelligence study, The socio-economic benefits of midband 5G servicesfound that globally, mid-range 5G could generate $610 billion in GDP growth in 2030, or 65% of total 5G benefits.
5G in its entirety is expected to bring an additional $960 billion in added value to GDP for the global economy, or approximately 0.70% of projected global GDP in 2030. Although previous research has considered the potential economic impact of 5G, the specific contribution of the 5G band spectrum is less well understood.
Expected economic growth by tranche:
- Mid-band 5G will be worth more than $610 billion (about 65% of total 5G profit).
- Low-band 5G is expected to account for $130 billion (14% of total 5G profit).
- 5G broadband adds an additional $220 billion to GDP growth (23% of total 5G benefit).
Global Economic Impact of Spectrum Constraints: Up to 40% Loss of 5G Benefits
In addition to investigating the overall benefits that 5G mid-band spectrum can deliver with sufficient spectrum allocation in the midbands, the survey also considered a scenario where mid-band spectrum is constrained to current levels. .
As 5G relies on midband spectrum to realize its full potential, the global economy could lose up to 40% of the expected benefits of 5G if no additional midband spectrum is allocated. to mobile services. The global benefits of 5G in 2030 could increase from 0.68% of GDP to 0.42% of GDP (less than $600 billion) if spectrum is limited.
Spectrum increases mobile network capacity – for a given number of users, more spectrum means faster speeds. Whenever mobile traffic demand exceeds capacity and spectrum availability is limited, mobile operators are typically faced with two choices. They must either increase the density of their network to meet traffic demand and/or accept some degradation in the quality of performance felt by users:
- Network densification leads to higher deployment costs for mobile networks and therefore affects both operators and consumers (cost increases being passed on to consumers in the form of higher prices).
- The quality degradation affects subscribers who would experience poorer network performance and slower speeds. Higher densification can also cause interference between high-density transmitters and reduce quality of service.
The actual result will likely be a combination of the two, creating a vicious circle where 5G becomes both lower quality and more expensive. This will lead to slower adoption of 5G and less economic impact.
Beyond the potential economic benefits, the GSMA Intelligence Report also analyzed the impact if the capacity needs of 2 GHz of mid-band spectrum are not met. The assessment shows that in a situation where spectrum is limited to today’s assignments, up to 40% of the economic impact could be lost.
Simply put, if spectrum is constrained at current levels as demand for services grows, rising network congestion and deployment costs will stifle 5G. Network quality and speed will suffer, limiting 5G adoption and its economic impact.
Manufacturing delivers on the promise of 5G
5G mid-band applications will primarily be used to benefit the manufacturing, government/utility, ICT and retail sectors across Europe. The fact that 5G will bring the strongest growth in this economic zone is not surprising.
Manufacturing continually seeks to improve its process productivity, reduce costs and remain competitive on the global stage. It is well positioned to take advantage of the growing deployment of 5G and the services and opportunities that will arise from ubiquitous and ubiquitous connectivity. Predictive maintenance, machine vision and XR are all part of a wide range of 5G applications that manufacturing can leverage.
The coming years will decide how well 5G can deliver on its promise. Spectrum is necessary to provide fast and affordable services. Governments and industry must work together on this – through WRC-23 and in national processes – to ensure that 5G can fuel a new phase of economic growth.
The manufacturing sector, as well as the public administration and service sectors, are expected to generate most of the benefits associated with midband 5G spectrum. However, 5G will also drive innovation in other sectors, including retail, agriculture and transportation.
Forward-thinking on the spectrum
Governmental and regulatory measures are necessary. In 2021, the GSMA presented its vision of how much midband spectrum mobile operators will need between 2025 and 2030. It found that an average of 2 GHz of midband spectrum per market is needed to get the job done.
In Europe, this goal leaves a deficit of about 0.95 GHz compared to current allocations in most markets. The region has always been proactive when it comes to spectrum – the 800 MHz band and the early allocation of 3.6-3.8 GHz are two examples – but the capacity for 5G expansion requires attention; 3.8-4.2 GHz is an opportunity currently under discussion.
However, with 4.8-4.99 GHz unlikely to be available in Europe, using the higher 6 GHz for licensed 5G becomes essential to avoid unsustainable small cell densification and to keep pace with emerging leaders. connectivity in East Asia, the Middle East and elsewhere. While countries like Finland are leading the way in managing vertical market spectrum demand without using reserves, other countries have yet to ensure that core 5G bands are made available to all.
The GSMA recommends that at least 6425-7125 MHz be made available for licensed 5G, especially in markets that do not use the 3.8-4.2 GHz macro cell. Carrying out a cost-benefit analysis of these ranges will benefit all consumers. This requires a detailed study of the impact of 5G’s reduced performance and penetration versus the perceived benefits of greater Wi-Fi access spectrum or other legacy users.
Connectivity is intimately linked to the economic agility of each country. 5G can propel Europe into a new decade of digital development, but it needs tools to get the job done.