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The importance of mid-band 5G for European economic growth

The roll-out of 5G networks promises to revolutionise the role of high bandwidth wireless connectivity, but underestimating the role of mid-band spectrum could needlessly restrict its benefits

As Europe seeks to emerge from the uncertain environment of the pandemic, mobile continues to have a role to play in connecting a brighter future. Productivity gains made in the 2010s, through the development of 4G, helped the world to teach, talk, carry out transactions and do business more efficiently.

Today, these benefits are bound tightly into 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’s strong evidence that shows how spectrum allocation could be a powerful driver of industrial development and economic growth over the next decade. The GSMA’s latest data – an analysis of the direct monetary impact of mid-band 5G – shows the potential socio-economic benefits at stake from mid-band spectrum at 1-7 GHz. Troublingly, governments and regulators are still grappling with how much mid-band spectrum mobile operators need.

With the right regulatory tools, 5G can become a central pillar of European economic development strategies. Its benefit to sectors such as manufacturing, services (including healthcare and education) and public administration (including smart cities) can catalyse a new wave of economic growth.

A new phase of development

5G networks deliver substantial improvements over 4G, including higher connection speeds, greater capacity and lower latency. This increased performance enables 5G networks to support new use cases and applications, which have the potential to benefit a wide range of industry sectors. 5G’s promise of consistent user access to these improvements in speed, capacity and latency will make this possible, but will rely on one natural resource – spectrum.  

Europe is expected to benefit significantly and quickly from mid-band 5G. GSMA’s data forecasts a $67bn increase in Europe’s GDP produced by mid-band 5G in 2025, growing to a $121bn GDP uplift in 2030. This will be around 0.4% of regional GDP by the end of the decade.

Because of their size, the economies of Germany, the UK and France are projected to drive the largest 5G mid-band benefits across the region. However, the relatively high level of 5G penetration forecast by 2030 across the whole of Europe will result in significant benefits as a percentage of GDP throughout the continent.

Mid-band spectrum is necessary for the increases in bandwidth and capacity that 5G applications will require. It will play a key role in meeting the 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 mid-band spectrum: $610bn to global GDP in 2030

The GSMA Intelligence study, The socio-economic benefits of mid-band 5G services, found that globally, mid-band 5G could deliver $610bn GDP growth in 2030 – or 65% of total 5G benefits.

5G in its entirety is expected to yield $960bn in additional GDP value add to the global economy, which is approximately 0.70% of forecast global GDP in 2030. Although previous research has considered the potential economic impact of 5G, the specific contribution of mid-band 5G spectrum is less well understood.  

Expected economic growth by band:

  • Mid-band 5G will account for more than $610bn (approximately 65% of the total 5G benefit).
  • Low-band 5G is expected to account for $130bn (14% of the total 5G benefit).
  • High-band 5G adds another $220bn of GDP uplift (23% of the total 5G benefit).

Global economic impact of spectrum constraints: a loss of up to 40% of 5G benefits

As well as studying the overall benefits that mid-band 5G spectrum can provide with sufficient spectrum assignment in mid-bands, the survey also looked at a scenario where mid-band spectrum is constrained to current levels.

Since 5G relies on mid-band spectrum to realise its full potential, the global economy could lose up to 40% of the expected 5G benefits if no additional mid-band spectrum is allocated to mobile services. Global 5G benefits in 2030 could decrease from 0.68% of GDP to 0.42% of GDP (less than $600bn) if spectrum is constrained.

Spectrum adds to mobile network capacity – for a given number of users, more spectrum means faster speeds. Whenever mobile traffic demand exceeds capacity and spectrum availability is constrained, mobile operators generally face two choices. They must either increase their network density to meet traffic demand and/or accept a degree of quality degradation in the performance experienced by users:

  • Network densification entails higher roll-out costs for mobile networks and therefore affects both operators and consumers (as cost increases are passed on to consumers in the form of higher prices).
  • Quality degradation affects subscribers who would experience poorer network performance and lower speeds. Higher densification can also lead to interference between densely packed transmitters and reduce the quality of service.

The actual outcome is likely to 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 lower economic impact.

Beyond the potential economic benefits, the GSMA Intelligence report also analysed the impact if the capacity needs of 2 GHz of mid-band spectrum are not met. The evaluation shows that in a situation where spectrum is constrained to today’s assignments, up to 40% of the economic impact could be lost.

Put simply, if spectrum is limited to current levels as demand for services grows, increased network congestion and deployment costs will stifle 5G. Network quality and speed will suffer, limiting 5G adoption and its economic impact.

Manufacturing delivers 5G promise

5G mid-band applications will mostly be used to benefit the manufacturing, public administration/services, ICT and retail sectors across Europe. The fact that 5G will deliver the strongest growth in this economic area is not surprising.

Manufacturing is continually looking to improve the productivity of its processes, reduce costs and remain competitive on the global stage. It is well-placed to take advantage of the expanding deployment of 5G and the services and opportunities that will arise from pervasive and ubiquitous connectivity. Predictive maintenance, machine vision and XR are all elements of a wide range of 5G applications that manufacturing can exploit.

The coming years will decide the extent to which 5G can deliver on its promise. Spectrum is required to provide fast, affordable services. Governments and industry need to work together on this – through WRC-23 and in national processes – to ensure that 5G can power a new phase of economic growth.

The manufacturing sector, together with the public administration and services sectors, is expected to drive most of the benefits associated with mid-band 5G spectrum. However, 5G will also drive innovation across other sectors, including retail, agriculture and transportation.

Forward-thinking on spectrum

Government and regulatory action are required. In 2021, the GSMA presented its vision of how much mid-band spectrum mobile operators will be required between 2025 and 2030. It found that an average of 2 GHz of mid-band spectrum per market is required to get the job done.

In Europe, that goal leaves a shortfall of around 0.95 GHz compared with today’s assignments in most markets. The region has historically shown forward-thinking on spectrum – the 800 MHz band and the early assignment of 3.6-3.8 GHz are two examples – but 5G expansion capacity needs attention; 3.8-4.2 GHz is one opportunity currently under discussion.

However, with 4.8-4.99 GHz unlikely to be made available in Europe, the use of the upper 6 GHz for licensed 5G becomes critical to avoid untenable small cell densification and to keep pace with the new connectivity leaders in East Asia, the Middle East and elsewhere. While countries such as Finland are showing the way when it comes to managing spectrum demand from verticals without using set-asides, other countries still need to ensure that prime 5G bands are made available for everyone to benefit from.

The GSMA recommends that at least 6425-7125 MHz is made available for licensed 5G, especially in markets that do not make use of macro-cell 3.8-4.2 GHz. Carrying out a cost-benefit analysis of these ranges will benefit all consumers. This requires a detailed study of the impact of reduced 5G performance and penetration against any perceived benefits of more Wi-Fi access spectrum or other legacy users.

Connectivity is indelibly intwined with each country’s economic agility. 5G can push Europe into a new decade of digital development, but it needs the tools to do the job.

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