5G and Infrastructure investment

In conjunction with Lexis Nexis, Anakiya examines the key aspects of the Autumn Budget relating to 5G infrastucture and telecoms investment.

What has been announced?

In the Spring 2017 Budget Chancellor Phillip Hammond announced the Government’s strategy to make the UK a world leader in 5G infrastructure, the next generation of mobile services and fibre broadband. The telecoms market was therefore waiting with much anticipation what the Autumn November 2017 budget would hold and whether the UK government would remained financially committed to support 5G and full fibre broadband.

Three specific areas were announced by the Chancellor on 22 November 2017:

(a) Specific to 5G the Government committed millions to 5G testbeds and trials with the investment of a further £160 million from the national productivity investment fund for new 5G infrastructure. The NPIF was launched last year to provide additional investment in housing, infrastructure, and research and development. The NPIF was set up with £23 billion of investment over five years to upgrade Britain’s economic infrastructure for the 21st Century. This was extended for a further year and expanded to some £31 billion.

(b) For fibre broadband, the Government reaffirmed that full fibre was its priority (recognising this as the “gold standard” for fast and reliable broadband) and as such launched a new £190 million Challenge Fund that local areas around the country will bid for to encourage faster rollout of full fibre networks by industry.

(c) The Government also announced its intention to consult on commercial options to improve mobile communications for rail passengers and will invest up to £35 million to enable trials.

Note that whilst the Autumn budget was indeed focussed on making Britain “fit for the future”, this was not specific to telecoms (digital communication) services. Technology played an important role with the government announcing its intention for the UK to lead in developing standards and ethics for the use of data and Artificial intelligence, and create the most advanced regulatory framework for driverless cars in the world. More than £75 million was dedicated to AI, including through the establishment of a new Centre for Data Ethics and Innovation to ensure “safe, ethical and ground-breaking” innovation in AI and data-driven technologies and £10 million allocated to a new Regulators’ Pioneer Fund set up to unlock the potential of emerging technologies and help regulators develop innovative approaches to get new products and services to market. £1.7 billion was also allocated to a new “transforming cities fund” intended to both improve connectivity and support jobs across England’s great city regions.

Who will be the beneficiaries of the funds?

Taking each key area in turn:
(a) 5G: The first projects to benefit from the 5G funding were announced including the allocation of £10 million to create facilities where the security of 5G networks can be tested and proven, working with the National Cyber Security Centre and £5 million for an initial trial, starting in 2018, to test 5G applications and deployment on roads. This included helping to test how future productivity benefits can be maximised from self-driving cars, building on the work already progressing on connected and autonomous vehicle trials in the West Midlands.

(b) Full fibre broadband: Children in 100 schools around the country were stated as being the first to benefit, starting with a pilot in the East Midlands in early 2018. This follows the launch of six local pilots to support fibre roll-out which kicked off on 3 September 2017 and included:
a. Aggregating public sector demand to lower the risk of deploying full fibre networks (kicking off with a trial with West Sussex);
b. Incentivising new fibre with upgrades to public sector buildings (work ongoing with the Department for Education);
c. Reusing public sector assets such as ducts (trial with Tameside Metropolitan Council);
d. A new Gigabit voucher scheme which businesses can access (testing with Aberdeen and Aberdeenshire, Bristol and Bath & North East Somerset, Coventry and Warwickshire, Leeds/West Yorkshire, and West Sussex).

(c) Rail: For rail passenger communications the money is intended to first be used to upgrade the Network Rail test track in Melton Mowbray and install trackside infrastructure along the Trans-Pennine route between Manchester, Leeds and York.

Why is the government placing such emphasis on 5G and superfast broadband?

5G and superfast broadband are key to create a digital economy for the future. Both enable more complex mobile internet applications to be run, therefore allowing for higher productivity across smartphone, tablets and similar devices. Further 5G is significantly faster than 4G with a theoretical download speed of up to 1 gigabit per second. All of this is necessary as we move into a world increasingly focussed on digital consumer services, digitisation and big data and as such it is something that the UK Government is very aware of. Indeed Mobile operator O2 commissioned a survey in February this year that revealed that national 5G infrastructure will directly contribute an additional £7 billion a year to the UK economy as well as introducing entirely new industries, platforms and services such as 3D video calls to smart home and health applications.

The UK also has to be mindful that Europe as a whole has been criticised for taking a soft approach to 5G. In a joint statement issued in June 2017, six operator and technology associations criticized European Union lawmakers for a “timid approach that will do little to improve Europe’s chances of success” and demanded a new regulatory environment with 5G investment and innovation at its heart. These included ETNO – (European Telecommunications Network Operators Association) and GSMA Europe. With Brexit on the horizon it is even more important for the UK to be seen to taking its own strong and proactive steps to 5G and full fibre roll-out.

What barriers stand in the way of realising the government’s ambitions?

There are still practical and technical barriers with 5G which the industry is working through; for example although lots of companies have started testing and developing 5G products, 5G itself is still in development stage and is not likely to be released until 2020. It will be costly to implement as many older handsets will not be 5G compatible. There is the potential issue of overcrowding the 5G frequency range, particularly as we move to a world where a number of devices are connected to one frequency channel. Further, 5G could also require a more dense deployment of mobile masts, which many people and local communities often oppose.

Fibre roll-out also has its own challenges, not least that full fibre roll-out is still hugely expensive. Regulation also creates its own barriers, largely due to the variety of approaches to planning regulations by local authorities and as such the unpredictability of timing and outcomes.

All of these issues will require working through which in turn will require significant investment and cost. The government will need to stand by and consistently monitor its commitments to ensure that they are working and remain fit for purpose. It will need to take and enforce steps to create a uniform approach to planning and roll-out for the deployment of future full-fibre and 5G infrastructure across the UK. Crucially it may well need to dig deeper to support 5G and fibre implementation if it really wants the UK to be fit for the future.

This article was first published at LexisNexis@PSL TMT on 28 November 2017