Tuesday, 21 January 2020

Restricting competition for 5G network equipment could increase investment costs by $1bn per year

by Harry Baldock, Total Telecom
Friday 10 January 20

A new study by Oxford Economics shows that denying major infrastructure providers will not only make deploying 5G more expensive, but also incur major delays

In what seems like a never-ending saga, the US–China trade war rages on, casting doubt over Huawei’s place in the upcoming 5G roll out. In the face of political pressure from the US, a host of countries – including France, Germany, India, Canada and the UK – are all on the fence about whether to permit Huawei to play a role in their 5G deployment strategies…

In what seems like a never-ending saga, the US–China trade war rages on, casting doubt over Huawei’s place in the upcoming 5G roll out.

In the face of political pressure from the US, a host of countries – including France, Germany, India, Canada and the UK – are all on the fence about whether to permit Huawei to play a role in their 5G deployment strategies. 
 
It is widely understood that restricting Huawei in this way would incur significant costs to both businesses and customers, but the question is: how much?
 
A new study by Oxford Economics, funded by Huawei, has modelled the impact that restricting competition would have on 8 national economies. 
 
The study measured three key metrics: 
 1.   Increase in average annual investment costs for 5G infrastructure over the next decade
 2.   Absolute number of people who will have delayed access to 5G by 2023
 3.   Estimated permanent loss in GDP due to delay in 5G rollout by 2035
 
As always with models like this, uncertainty is a major obstacle. To try and encapsulate potential economic benefits of 5G and market reactions to restriction, the study modelled three outcomes: a  ‘low cost’ outcome, assuming a 0.15% rise in GDP per year and low increase in investment costs; a ‘high cost’ outcome, assuming a 0.3% rise in GDP per year and high increase in investment; and a ‘central cost’ outcome, which assumes the GDP increase will rise from 0.15% to 0.3% over 5 years, with a median increase in investment costs.
 
Results of the study show a large range of outcomes across the three predicted outcomes. Banning a major competitor like Huawei could increase investment costs by anything from 8% (‘low cost’ scenario) to a whopping 29% (the ‘high cost’ scenario).
 
Similarly, delays caused by the restriction could leave additional millions of people without 5G. In the UK, for example, the ‘low cost’ scenario predicts an increase of 3.9 million people with delayed next generation connectivity, while the ‘high cost’ scenario would increase that number to 10.4 million.
 
Damage to GDP by 2035 would range from $2.8 billion (Australia) to $21.9 billion (USA).
 
Worrying figures for any government. But how will they fare when held up against the political might of the US and the persistent claim that Huawei technology presents an international security risk? Only time will tell.
 
To learn more about the economic impact of 5G in the UK and much more, book for place at the UK’s leading connectivity event, Connected Britain 2020
 
 
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