5G Spectrum for Private Networks: The Barbarians at the Gates?
5G spectrum is no longer the sole preserve of mobile operators in Europe. Earlier this week, the German industrial giant Siemens announced its intention to apply for a spectrum license in the 3.4–3.8GHz band that has been allocated to 5G mobile networks. This follows a similar announcement in November from another German industrial giant, Bosch. We expect more to follow.
The development marks a watershed in European telecoms policy. Previously, licenses for spectrum in the bands allocated to mobile networks have been reserved for operators of public networks, on the principle that this is the best way to maximize utilization of a scarce national resource.
However, industry has been increasingly vocal in arguing that a country can enhance its long-term economic development by licensing some spectrum to enterprises for use in their private networks.
Germany Sees Green Light for Private Licensing
The German telecoms regulator, BNetzA, has accepted this argument. In the round of mobile spectrum auctions that concluded in June 2019, BNetzA set aside 100MHz of spectrum in the prime 5G band for licensing to private companies, rather than public operators.
Bosch and Siemens have applied for private licenses. Volkswagen and BASF have also announced their intention to do so, and more German manufacturers look likely to join them. There are certainly plenty of potential licensees: around one-third of the European manufacturing sector (by value) is located in Germany.
As momentum starts to build in Germany, we may see other European countries break with precedent by setting aside mobile spectrum for private licensing.
In The Netherlands, for example, the government and regulator have expressed interest in including some private licensing in their 5G auction (although that now looks unlikely to take place before 2022).
In the U.K., regulator Ofcom announced in July that it intends to introduce “spectrum sharing,” whereby spectrum that is licensed to a mobile operator, but is not being used in a given area, can be licensed for private companies to use for a three-year period. It will also introduce local licensing in some bands, although not in the prime 5G band of 3.4–3.8GHz.
What’s the Impact for Public Networks?
Perhaps unsurprisingly, the mobile network operators have been unenthusiastic about the idea of setting aside spectrum for private licensing. They argue that restriction of licenses to public network operators remains the most efficient way for a country to maximize the utilization of its mobile spectrum resources.
Operators are understandably concerned that the more spectrum is set aside for private companies, the less is available to increase capacity in public mobile networks as demand continues to grow. Less explicitly, but also understandably, operators are also concerned that if companies deploy their own private 5G networks, it will erode future opportunities to provide enterprise site connectivity through applying network slicing to the operators’ 5G networks.
Will Operators Embrace this Proposal?
It makes sense for operators to lobby against spectrum set-aside, while the question is still open. However, we advise operators not to take an excessively hostile position on the idea, especially now that the tide seems to be turning in the direction of private 5G spectrum usage.
Deutsche Telekom’s CEO Tim Hoettges, for example, was very outspoken in his opposition to BNetzA’s proposals at the February 2019 Mobile World Congress. Now that the proposals have been put into action, Deutsche Telekom has work to do to convince enterprises that it can be a willing partner in the development of private 5G.
And there will still be a lot of business for mobile operators to go after. Building and operating a network that uses the 3GPP family of technology standards is far from easy. Companies that want to build a private 5G network will need a lot of help: and with their decades of experience in building 3GPP networks, mobile operators are prime candidates to provide that help.
Moreover, these companies’ core business is manufacturing, not network operation. Some of them may well be attracted to the idea of outsourcing the ongoing operation and management of their private 5G networks once they have been built.
Again, mobile operators will be in pole position to bid for that business. And they will find it easier to go after such private network service opportunities if they have not previously taken a public stance as the enemy of private spectrum licensing.
If you want to learn more about this topic or have any questions, please head over to https://www.idc.com/eu and drop your details in the form on the top right.
What the Challenges of Autonomous Vehicles Tell Us About AI's Value
One of the most common questions people ask about autonomous vehicles (also known as AVs or self-driving cars) is how they will impact our lives in the short to medium term. The short answer, based on our research, is that we feel the hype around AVs is tapering off.
Automotive and transportation executives agree that levels 4 and 5 of the SAE driving automation scale (see below) won’t be reached before 2030 — and regulators will mandate human-operated backup before that level of autonomy is reached.
But the timeline to achieving true autonomous driving is only part of the equation. Technology suppliers and enterprises that need to decide on their autonomy road map must consider two other areas before they make their decisions:
- The business value of AV. Early adopters of autonomous vehicles are unlikely to be consumers — they’re more likely to be transportation operators, logistics companies, or fleet managers.
They must analyze the business value of AV from three perspectives: economic/financial, ecosystem (co-creation and co-opetition), and purpose for society (environmental sustainability and social inclusion).
Take, for instance, a logistics company. As AVs do not require rest periods, their utilization rate will increase, at the same time as their profitability. Insurance costs are also likely to go down, while the life cycle of the vehicle may become shorter due to greater utilization.
The ecosystem value will be generated by the logistics company’s ability to partner with retailers, wholesalers, manufacturers, and e-commerce platform companies to develop new services and business models, leveraging the 24/7 availability of AV delivery vehicles.
The logistics company will also be able to contribute to societal improvement because the AVs will be increasingly safe. AV supplier product and sales executives should consider the business value when articulating their messaging for these enterprises.
- The challenges of AVs. Stakeholders also need to address the technical (algorithms, data, hardware, skills), scientific (advances in understanding human intelligence), organizational (AI literacy, process change, labor relations), regulatory (data protection, legal explainability and safety), and societal (AI ethics and acceptance) challenges of AI.
The vehicles’ ability to drive in snow and rain or to detect human behavior are among the main technical and scientific challenges.
There is a lot of “road etiquette” when it comes to pedestrians and other vehicles. Much of it is subtle and not very scientific — hand gestures, facial expressions, mouthed words, small movements by the car itself, for example — and it varies by geography or urban and rural environments (with there being more pedestrians and cyclists in cities, for example). Being able to make decisions based on these types of signals requires some level of logical interpretation and reasoning by the vehicle’s software — something that present-day AI techniques aren’t very good at.
Regarding the organizational challenges, logistics companies need to think of the potential replacement of professional drivers by robot cars in the long term, as well as business process changes driven by the elimination of rest periods.
The regulatory challenges refer to those areas where policymakers will need to decide if or when it is safe for autonomous vehicles to drive — in city centers or suburban highways, for example, or in more controlled environments such as dedicated lanes or office campuses.
Societal challenges include addressing questions such as, Are we to assume that a self-driving car will never break the speed limit, even to avoid a collision? Are we to assume that it will always wait for the safest point to enter a line of traffic? Can you imagine being late for work because your car is not “pushy” enough?
Given all the hype, AVs are a perfect example of how tech suppliers and enterprises should take a strategic approach to decide how to prioritize their investments in AI systems such as conversational AI, computer vision, affective computing, intelligent automation, and recommendation engines. Decision makers should take a holistic approach to analyzing the business value of AI and the challenges that need to be addressed before the value of full autonomy can be realized.
If you want to learn more about this topic or have any questions, please contact Jack Vernon, or Massimiliano Claps, or head over to https://www.idc.com/eu and drop your details in the form on the top right.
The recipe for turning Smart Cities dreams into reality: inclusiveness, scalability, platform(s)
Last week I attended my fourth Smart Cities Expo World Congress (SCEWC). This year conference had a bold theme: “Cities Made of Dreams”. But for the first time, the conference was less about the art-of-the-possible from a technology standpoint and more about achieving better outcomes in terms of safety and security, mobility, environmental sustainability, health and social care and other services at scale.
In fact, cities around the globe have been dipping their toes into smart cities initiatives and trying new technologies for almost ten years, but outcomes were underwhelming. The result was often a plethora of fragmented pilot projects that earned an award at SCEWC or at some other event but did not scale. These pilots did not scale from a corridor or neighborhood to the entire city. They excluded segments of the resident population from the intended benefits. They did not allow tech suppliers to easily re-sell the same capabilities to other cities, thus generate the solid basis of revenues that can be re-invested in further innovation. In fact, IDC predicts that still “In 2020, 10–30% of Smart City IoT projects will fail to launch or scale due to ill-defined outcomes or KPIs, poor understanding of vendor offerings, and/or inadequate funding and stakeholder engagement.”
But, the conversations I had at SCEWC 2019 are encouraging. They indicate that both tech suppliers and cities start to understand how to cross the chasm between early pilots and a more mature implementations that realize the benefits of digital as an accelerator for city transformation. Key inflection points that came out in many conversations include:
- The need to make inclusiveness a top priority of smart cities programs.
- The need to move from whole-of-city vision to use case centric, outcome-oriented strategic action plans and execution.
- The end of an all-encompassing platform as the silver bullet.
Social inclusion
Cities have come to the realization that digital transformation is a great opportunity to improve quality of service but is also a risk in terms of excluding certain segments of the population. It is a risk because parts of the population are not digitally literate, so they need an alternative to digital channels. And they do not fully understand the ramifications of their personal data being collected by the city government and other ecosystem players, such as utilities, telcos and transportation companies. So, forward-thinking city leaders are not pursuing “an app for everything” or “digital-only” strategy anymore, but rather a more holistic omni-channel approach that makes customer convenience the number one priority. And they are working to get data collection consent transparently, including for secondary use of personal data; and to apply the data minimization principle more rigorously.
Digital is also a risk, because smart technologies could benefit only certain groups. For example, micromobility service apps may not help low density suburbs that are not profitable for scooter and bike sharing companies. In a conversation with a European city, we discussed how the integration of health and social care services require using multiple avenues to reach the most vulnerable residents, such as elderly living alone. Also, the collection of massive amounts of data and application of machine learning algorithms creates the ability for the city ecosystem to infringe on individuals’ freedom to choose what services to use and how, because service providers can now proactively offer a pre-selected set of “personalized” options. The same data management and advanced analytics tools create the risk of introducing an unknown bias, because the data set does not accurately reflect the context of everyone or cannot explain why the machine made a certain prediction or recommendation.
Tech suppliers are responding to the cities’ need by embracing the concept of the social impact of their digital solutions, because it helps them build a more human brand and creates a sense of purpose for employees.
Use case-centric, outcome-oriented program execution
Cities have also matured in terms of strategic goals that they set for themselves. Taking a whole-of-city approach may be viable in terms of long-term smart cities vision, but it is too big to handle when it comes to designing a strategic implementation plan and executing the programs that such a plan includes. Programs must be divided into projects that deliver quick wins and capabilities must be continuously fine-tuned, so that the business case for scaling for the whole-of-city is sustainable from the resource perspective. The way to balance the long-term vision with the short-term benefit realization is to focus on specific use cases and bring the ecosystem together by outlining the value for all participants. For example, by projecting the value of a new transport route to serve a low-density neighborhood in terms of tickets/fees for the operator, licensing and permitting for the city if the route is contracted out to a demand-based transit provider, safer pedestrian and cycling traffic that may drive business for local retailers, the conversation about how to fund the project becomes less controversial. A use-case centric, outcome-oriented approach is vital for brownfield cities that need to lift legacy processes, tools and behaviors into the digital era. But it is also viable for greenfield cities that need anchor use cases to start from.
Tech suppliers are also embracing a more holistic definition of value, including financial return, but also ecosystem engagement that drives longer term innovation, and social outcomes of specific use cases.
The platform is dead… or is it?
Finally, this year SCEWC started to clear some of the hype about the platform. What cities need is a technology architecture strategy and governance that help them increase the return on innovation by understanding which IoT sensor, platform capability and user application is best suited for a given use case, if and how some of the same capabilities can be leveraged across multiple use cases and where there are white spaces that can be filled with open-source tools and in-house development. For example, video cameras may be installed for speed or red-light violation enforcement, but the device itself and the platform and application capabilities underpinning it – including device provisioning and management, data ingestion and pipelining, encryption, containerization for edge applications, anomaly detection and visual analytics – can be reused for traffic monitoring, or, in combination with noise sensors, for crowd monitoring use cases. In a conversation with a city from the Middle East, we discussed how they could cluster city departments and services around three or four city platforms, for example, one for transportation, one for public safety, one for health and social care. Each of these will be tightly knit within their boundaries, but also open to lightweight data integration through API when cross-departmental use cases emerge. Cities that keep searching for the silver bullet platform that can address all existing and future use cases will end up with both shelfware and the need to custom develop solutions for use cases that are very specific to their context.
Tech suppliers are starting to realize that this is an important inflection point, but they need to do a better job at marketing their platforms and identifying the priority use cases. I still sat in too many conversations at SCEWC, where I could not tell the difference between one platform and the other. Platforms have multiple layers, from edge device management and applications, to edge data ingestion and management, from analytics and AI, to visual dashboards, from intelligence embedded in city worker applications to SDKs used to develop citizen apps. Platforms have different anchor points in terms of key data entities, some of them are more focused around events to trigger operational tasks, others are more centered around building a 360° view of the citizen, others still are more geared towards mapping and optimizing resource allocation to deliver services. Platforms have different flavors in terms of the city missions and use cases that they support out of the box, such as mobility, public works, public safety and security, health and social care. With all those attributes, there is plenty of opportunities for vendors to make clear what is the combination of capabilities that make their platform unique.
The quicker cities and tech suppliers embrace these three inflection points, the quicker smart cities solutions will be scaled and deliver positive outcomes for citizens.
To learn more, please contact Max Claps or head over to https://www.idc.com/eu and drop your details in the form on the top right.
China's 5G Challenge: Mid-Priced Phones
China launched 5G services at the beginning of November. To establish a mass market, Chinese Android vendors need to bring prices down fast; to achieve that, prices will need to fall to less than half that of the first 5G models in South Korea, the early 5G market leader.
Initial services in China unsurprisingly focused on the capital, Beijing, and the richer cities of the East, including Shanghai, Guangzhou, and Hangzhou.
Chinese news agency Xinhua reported more than 80,000 5G base stations in use, and the three main operators — China Telecom, China Unicom and China Mobile — all unveiled 5G tariffs, the lowest of which start at around 128 yuan or $18 per month.
The launch is seven months behind the start of service in South Korea and the US, which happened at the same time.
What is not surprising, however, is why China should be behind, but to the contrary, why it has decided to be so close following on. The reason lies in the nature of the smartphone market, as data from IDC’s Worldwide Quarterly Mobile Phone Tracker shows.
Prices Need to Come Down to Below $400 Before Big Sales
The price of 5G smartphones in China will have to come down to below $400 before volume sales can really be expected. At current baseline prices of around $500, less than 10% of the Android market is in reach.
The top of the smartphone market in China is heavily skewed towards Apple, which has more than 9 in 10 sales over $400. That has a lot to do, one way round or the other, with the small China share of Samsung, which dominates premium Android globally.
A wave of nationalism may push more consumers to ditch iPhones for Chinese 5G devices, but any such shift is unlikely to produce big volumes. And with this year’s iPhone launches already done it looks as if it will be September next year before Apple has 5G models on the market.
And to become really mass market in China, Android phones will need to see prices of no more than $250.
Korea Is a Top-End Phone Market — China Is Not
5G has taken off fast in Korea; in the third quarter 5G devices represented almost half of the Korean market after reaching nearly 30% in 2Q. But in a completely different environment — the ASP dipped only marginally below a thousand dollars. Half of the Korean Android market lies above $700 retail before tax. In China it is 4% of Android.
With such a challenging price drop facing them to cope with, it is no surprise then that Chinese brands are showing a clear preference to focus on cheaper 5G models that will be sub-6GHz only.
Back With 4G, Within Two Years There Was a China Boom
When 4G got going in China seven years ago, there was also a price differential with the new technology. There weren’t a lot of smartphones sold in China above $275, while many of the 4G phones of the day cost $700 or more. 4G prices only dropped moderately the next year, but in 2014 they dropped fast.
It took a full two years before the Chinese 4G market began to blossom, but as prices began to really fall in 2015 it was a massive 419 million phones, or 43% of global 4G smartphone shipments (now it is 29%).
Xiaomi Puts Down a Low Price Marker
There is a strong dynamic to a big Chinese push in 5G. Huawei needs to keep its 5G momentum going against the headwinds in export markets caused by President Trump’s accusation that it represents a security risk to countries allied with the US.
If it continues to be frustrated abroad, Huawei will push more for a big new 5G replacement cycle at home, both in infrastructure and in smartphones.
The new wave Chinese players, Xiaomi, vivo and OPPO and One Plus, increasingly squeezed at home by Huawei, which as a state company has easy access to funds, will need to compete hard. Xiaomi has said it will launch 10 5G phones next year, and in mid-November put down a trademark low price marker, stating that all models above 2,000 yuan ($285) next year would be 5G.
5G Is a Tougher Sell
Nobody is expecting a boom like that this time round, and 5G in China faces the challenges it faces everywhere. The Chinese economy may be more than one half as big again than it was in 2012, but that growth is now slowing.
No one does deployment at scale like the Chinese. But that deployment nearly always comes with the push of the state. The three main mobile operators are state-controlled companies, meaning their executives are chosen by the state. Just in 2015 the state abruptly swapped the heads of China Unicom and China Telecom. The government might yet lean on them more in 5G.
Chinese Operators Don’t Seem Too Keen, but the State Will Decide
First indications are mixed. The Chinese operators are not keen on subsidising 5G smartphones, and they haven’t launched much in the way of promotions at the 5G kick-off. My Chinese colleagues researching the local market believe that they will focus on attracting 5G users with tariff plans that do not raise the cost of data over 4G.
On the other hand, China Daily said in mid-November that China Mobile, the biggest operator, aims to sell 100 million 5G smartphones next year – which alone would be a quarter of the domestic smartphone market.
Leveraging Home Advantage
The first phase this year of 5G development, in rich countries, has shown 5G can take off straightaway if the government and operators are behind it, and if the smartphone market is mainly premium. That has all come together in South Korea this year, but less so in the US and in Australia.
This second stage in 5G will be quite different in scale from the first, in the world’s largest smartphone market.
Rapid growth in China would have an impact in numerous other countries within a couple of years. When 4G took off in China the country was much more dependent on foreign brands. The boom changed the vendor landscape within the country; earlier popular domestic brands such as Coolpad fell, as did outsiders including Samsung and Sony.
Chinese new entrants steadily came to the fore, notably Xiaomi, OPPO and vivo, and these have now become the global brands we recognise today.
Moving fast down the 5G price curve at home will put them in a good position to carve out a new space with cheaper models in 5G in other countries, where the main competition will be Samsung and LG offering far higher price points — until they are forced to respond.
As 5G enters its second phase — a move into the middle income market — a lot depends on the kick start the Chinese state decides to apply.
If you want to learn more about this topic or have any questions, please contact Simon Baker or head over to https://www.idc.com/eu and drop your details in the form on the top right.