Saturday, April 21, 2018

What Does "Winning 5G" Mean?

Winning the 5G race is a term we hear quite a lot. What it means, and whether it is feasible, are the big questions. In industrial policy terms, mobile platforms such as 4G or 5G are viewed as “zero sum” games, where a fixed amount of success (revenue, jobs) exist and winners take winnings from losers.

At one level, this is nonsense. Customers of mobile networks in India or Columbia do not directly affect subscriber counts in Canada. What policymakers and advocates of “winning the 5G race” refer to is something else, namely economic benefits in other parts of the mobile ecosystem.

At another level, scale does matter. A critical mass of users is necessary to create conditions where innovators have a pool of potential customers large enough to justify developing new features and functions. So, in that sense, getting quickly to critical mass (getting scale) does matter.

But most of the benefits of “winning a race” in the mobile platforms area are to be found elsewhere.

Most observers would agree that, in terms of device or network infrastructure supply, a few European firms (Nokia, Ericsson) were market share leaders in the 2G and then 3G eras. FCC Commissioner Brandon Carr says that is because “other parts of the world, including the U.S.,  to move quickly enough to modernize our regulatory frameworks. “

“For example, the FCC required that carriers continue to support their analog 1G networks long after Europe dropped that requirement,” Carr notes. “By requiring carriers to maintain essentially two networks, our outdated regulations drained capital and resulted in less efficient spectrum use.”

Regulation clearly matters. “In the 1990s, Europe tied spectrum bands to particular technologies, which delayed the repurposing of spectrum from 2G to 3G. Japan had no similar constraints, and the country launched three separate 3G networks by 2002,” Carr says. “It took years for the United States to come close to Japan’s 3G deployment.”

At least in principle, that means U.S. suppliers of apps and features requiring 3G could not move as quickly to market as in Japan. As a matter of fact, most observers would say that mobile app innovation in Japan was far higher than in the United States, in that era.

Most observers would likely agree with Carr that “the U.S. learned some lessons and bounced back to win the race to 4G.”

But here is where matters get a bit tricky. Was the “winning” based on ubiquitous access networks? Sure, because scale matters. But what arguably was decisive was a shift in the mobile device and service value proposition.

The 4G era was the first where mobile phones become computing devices (“smartphones”), and therefore were the beneficiaries of huge innovation in mobile apps, features and capabilities made possible because Silicon Valley, Silicon Rainforest, Silicon Hills, Silicon prairie emerged as global leaders in applications (Facebook, Google, Netflix, Amazon and others).

For many of us, thinking about on our preferences in phones, there was a point where keyboards became important because mobile email had become a killer app. But there also was a point where internet apps became paramount, and that was when device leadership shifted to the Apple iPhone and other touchscreen devices optimized for web, apps and related services. The killer app became the mobile internet.

That seems clear enough in CTIA’s new report on the race to 5G. Says Carr: “4G leadership increased our country’s GDP by $100 billion per year and cemented American preeminence in the tech sector more broadly.”

And that might be the real basis--application, device and infrastructure leadership-- for claiming “leadership” or “winning” in the 5G era. And there are probably few who believe the global winners can come from anyplace other than China or the United States.

If there is a race, it is a two-nation race.

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