The EU this week approved its proposed Covid-19 recovery plan, a €750bn investment package designed to revive the European economy in the wake of the pandemic. Ensuring that recovery is ‘digital and green’ is one of the EU’s strategic objectives, and €150bn is earmarked for digital investments. One aim of this investment is to develop Europe’s 5G infrastructure: the continent currently trails both North America and Asia-Pacific for 5G penetration. But will it be enough?
In its Digital Decade strategy document, unveiled earlier this year, the European Commission set out the target of making sure “all populated areas” of the bloc are covered by 5G by 2030. It has allocated “a significant share” of its €150bn digital budget to finance 5G network infrastructure.
The European Investment Bank (EIB), investment arm of the EU, has already funded numerous 5G infrastructure projects across Europe. This week, for example, it announced a further €120m investment in Italian telecoms company TIM to support its 5G infrastructure roll-out, part of a €350m total investment package.
Thanks in part to this investment, Europe saw a growing number of commercial 5G launches in 2020. Although it ranks a distant second in 5G subscriptions behind Asia-Pacific, it is expected to surpass the 400,000 subscriptions by 2025, according to a forecast by business intelligence provider GlobalData.
However, a Boston Consulting Group report commissioned by telecoms lobbying group ETNO said earlier in the year that if the EU wants to roll out ‘super-fast’ 5G by 2025, it will need to invest €300bn ($355bn) on its telecoms infrastructure. Half of that money would be necessary to achieve full 5G across the bloc, while the other half would be required to upgrade fixed infrastructure to gigabit speeds.
And a report from the EIB itself identified a funding gap of €4.6–€6.6bn between Europe and the US, where 5G penetration was 5% of the population in 2020, compared with Europe’s 2%.
5G investment in the EU
Operators will need to fill this funding gap themselves, says John Byrne, global telecom technology service director at GlobalData. “If the government funding is not there, the operators need to do it themselves, and that’s the typical way it gets done,” Byrne told Tech Monitor.
5G has become a geopolitical battlefront between the US and China, and an area where Europe is eager not to fall behind. Some operators have played on these fears in their appeals for investment, says Byrne. “I think many European operators are playing that lever right now."
But their own investment has been hampered by a lack of returns, he adds. “We’re not seeing a lot of operators who are [getting something back from their investment],” says Byrne. “And so I think they are looking for that push to help drive 5G development.”
This is due in part to a lack of clear use cases for businesses, which in turn reflects a lack of investment in innovation. “Part of that is not just driving the funding for the networks, but also helping to fund innovation, which brings in the enterprises and brings in 5G use cases that right now don’t exist as much as the operators wish they did,” says Byrne. “If they did, they'd have an easier time making money off of 5G.”
Ironically, 5G innovation has been hindered by moves to exclude Huawei from the 5G telecommunications supply chain on security grounds, Byrne argues. “Certainly, we’ve seen in other countries that have essentially excluded Huawei, and one of the things they’re doing is excluding additional innovation.”