A presentation on the regulatory and business challenges to promote 5G take-up at the 5G World event in London. The presentation looks at how expensive it might be to deploy a full wide-area 5G network and how spectrum auction fees relate to that. It also looks at what can be done to encourage mobile coverage in rural areas where there is no commercial incentive.

1. CREATING THE SPECTRUM AND
REGULATORY ENVIRONMENT TO
WIDEN 5G TAKE-UP AND THE ROLE OF
ENTERPRISE
ROBERTO ERCOLE
SPECTRUM & TELECOM CONSULTING LTD – CAMBRIDGE, UK
ROBERTO@SPECTRUMREG.ORG
WWW.LINKEDIN.COM/IN/ROBERTO-ERCOLE-1158771/

2. According to the World Economic Forum :
“Developing nations have rivalled or surpassed their industrialised counterparts in benefiting from the deployment of mobile technology, and there’s every reason
to think 5G will have an even bigger levelling effect than its predecessors.
Economists estimate the global economic impact of 5G in new goods and services will reach $12 trillion by 2035 as 5G moves mobile technology from
connecting people to people and information, towards connecting people to everything.”
https://www.weforum.org/agenda/2018/01/the-world-is-about-to-become-even-more-interconnected-here-s-how/
There are also more negative views about future mobile investments in broadband as being a “race to the bottom” to capture market share at ever lower prices.
There needs to be an economic case for investing the huge sums necessary to develop and deploy 5G, and the question will be what extra revenue will it give
me over 4G? Not all agree this is a given (for example see “The 5G Myth” by William Webb on Kindle).
https://www.strategyanalytics.com/strategy-analytics/news/strategy-analytics-press-releases/strategy-analytics-press-release/2015/01/23/global-trends-for-mobile-operators-show-stagnant-revenues-and-declining-
margins#.WFGoXoXXJpx
Even the UN/ITU has issued a “caution”, saying there is concern that 5G maybe “premature”, and that operators are “sceptical about the commercial case”. The
ITU report suggests that the business case for rural and suburban areas is “challenging”, which could potentially widen the digital divide.
https://www.itu.int/en/ITU-D/Documents/ITU_5G_REPORT-2018.pdf
WILL THE MARKET DELIVER 5G?

3. BUT WHAT WILL OPERATORS GET?
• Macro economic analysis won’t help if investors can’t make money – i.e. mobile;
• Current revenue squeeze from OTTs makes for uncertainty
• Much more scepticism from mobile opcos now than before;
• Spectrum fees high:
• UK C band (3.4-3.6 GHz) - £1.15 bn
• Italy 700 MHz - €2 bn and C band (3.6 – 3.8 GHz) €4.3 bn (EU calculated deployment cost)
• Germany (ongoing) C band (300 MHz) €4bn - currently
• around 50% to 100% of costs (using UK and assuming £3.3bn for 700 MHz and 3.6 GHz bands)

4. • But not clear on how to deploy 5G
with existing network of 4G?
• Run in parallel (stand alone or
Non-stand alone?
• Migration path will impact
incremental revenue.
• Some suggest 5 years pay-back
with @5% CAGR
• But this must depend on how you
deploy 5G. Islands of city centre
coverage cannot generate the
same incremental revenue (over
4G) as wide-area 5G deployment.
• The difference in costs for “Island”
vs “wide-area” deployment huge.
ISLANDS OR WIDE-AREA 5G DEPLOYMENT

5. FIXED COSTS – FOR 5G TO COVERAGETO APPROACH
CURRENT LEVELS - EXPENSIVE
country sites
cost (€200k
per base
station) €m
opcos
cost per
opco
subs (m) cost per sub
UK 42,500 €8,500 4 €2,125 92 €10,823.5
Germany 75,500 €15,100 3 €5,033 114 €7,549.7
France 52,300 €10,460 4 €2,615 75.5 €7,218.0
Italy 55,100 €11,020 4 €2,755 103 €9,346.6
Ireland 4,000 €800 3 €267 5.6 €7,000.0
Spain 49,500 €9,900 4 €2,475 53 €5,353.5
700 MHz Band key for rural coverage
1. 2 x 30 MHz + 20 MHz SDL
2. Larger bandwidth per opco can improve
coverage significantly (Shannon)
5G
investment
(€m) - EU
study
Austria €970
Estonia €150
Finland €600
France €7,030
Germany €9,280
Greece €1,220
Hungary €1,130
Ireland €490
Italy €6,830
Netherlands €1,870
Poland €4,350
Romania €2,270
Slovakia €620
Slovenia €240
Spain €5,190
Sweden €1,060
UK €7,040

6. EXAMPLE 5G COST UK: USING METHODOLOGY IN:
WWW.SLIDESHARE.NET/ROBERTOERCOLE/5G-DEPLOYMENT-COSTS-MENA-REGION
• Assume 18,000 sites per opco in UK (4 opcos);
• Upgrade existing sites = 18k x £15k = £270m
• Densification using small C-Band cells = 18k x £15.8k = £284.4m
• New microsites to improve coverage (10% more) = 1.8k x £58.9k = £106.02m
• Upgrade Back-haul to macro (25% more) = £270m x 25% = £67.5m
• Fibre to small cells (C band) 25% = £284.4m x 0.25% = £71.1m
• Total (excluding core network upgrade) = £800m
• Add 10% for CN upgrade = £880m per opco
• Total for UK 5G capital expenditure is £3520m (uncertainty on QOS provided)
• If UK 700 MHz and 3.4-3.8 GHz raises around £3bn implies auction fee nearly 90% of 5G
deployment costs.

7. 7
Are these costs too high?
Source EPSRC – Judge Business School etc. 2016
https://www.itrc.org.uk/wp-content/PDFs/Exploring-costs-of-5G.pdf
EU study gives @ €7bn for UK
DCMS Infrastructure Review suggests £7/8 bn

8. UK POPULATION DISTRIBUTIONVS LANDMASS
Source: PolicyTracker

9. MERGER ACTIVITY IN EU
Also:
UK, Netherlands, Italy (3/Wind)

10. HOW MUCH CAN RURAL SHARING SAVE?
• Depends on number of operators and demographics,Assume 50% sites are rural:
Number of
opcos
5G Capex saving
With rural single network
5 40%
4 37.5%
3 33%
Example – 10k sites per opco
5 opcos (50k total sites)
Non-rural sites = 5 x 5k= 25k
Singe rural network 5k
Total 25+5 = 30k sites
30/50 = 60%

11. CONCLUSIONS
• Market led coverage increases may be coming to an end;
• The ability of mobile opcos to invest billions in new tech cycles may be drawing to an end
– unless the new tech clearly generates large incremental revenues;
• The use of auction fees are a significant cost of deployment not likely to help;
• Investors much more sceptical on new mobile generations

12. BACKGROUND SLIDES

13. Tower definition – sites and structures for multi-tenants
rooftop but not microsites or small cells.

14. https://ec.europa.eu/digital-single-market/en/news/5g-deployment-could-bring-millions-jobs-and-billions-euros-benefits-study-finds
Source: EC Study 2016
The ten 5G capabilities identified in
previous research include:
• 5G goal is to deliver 50Mbps everywhere;
• 5G will allow you to create your own
network if you that is what you want to do;
• 5G will enable a working solution on planes,
trains and cars;
• 5G will deliver a single scalable solution for
sensor networks and the IoT;
• 5G will enable an ultra-reliable network for
mission critical applications;
EU Study - €113 bn annual benefit in 2025

15. SPECTRUM
ASSETS
Around 1100 MHz after 700 and C
band auction this year – of
around 1200 MHz possible (not
counting mm wave)
Upcoming UK auction
• 60 MHz of paired 700 MHz spectrum,
• 20 MHz of downlink-only 700 MHz spectrum, and
• 120 MHz of 3.6-3.8 GHz spectrum.

16. ▪ https://plumconsulting.co.uk/wpdm-package/plum-jun2015-use-of-c-band-for-mobile-broadband-in-hungary-italy-sweden-and-uk-pdf/
3 sector macro
€140k capex
+ €15k backhaul
Total €155k + opex
10 year lifespan,
20% capex
€310 + €155 = €465k

17. AREWE MOVING FROM MOBILE GROWTH TO
“COMMODITISATION” ?
This can have implications on how to regulate mobile networks. Especially
If we want to encourage coverage growth and investment in 5G.
“Mood music” has changed from markets with competition will solve all these problems.
Recognition in UK by Ofcom that market led coverage will only go so far (85% landmass?).

18. UK AUCTION 5G (3.4 GHZ) AND 2.3 GHZ SPECTRUM
18
Around £1.1 billion for 200 MHz at 3.4 GHz (aka C band)

19. CURRENT LEVELS OF SERVICE IN UK
The government wants mobile phone coverage to reach 95 per cent of the UK’s land mass by 2022. Ofcom, the telecoms regulator, said
in December that only 78 per cent of the country received an outdoor voice signal from all four networks, which was up from 69
per cent a year earlier. FT 15 Feb. 19

21. LARGE BULK OF LANDMASS IS “RURAL” – 85% +
Source: Plum Consulting C-Band Report

22. Free cash flow for an opco in UK – €628m