The Swiss operator Swisscom and Ericsson jointly announced that Swisscom’s commercial 5G network has gone live. The 5G service is available in 54 towns and cities in Switzerland, and Swisscom plans to cover 90% of the Swiss population with 5G by the end of 2019. Earlier in April another Swiss mobile operator, Sunrise, announced the launch of its 5G home broadband service, using network equipment and routers from Huawei. Sunrise plans to offer the services in 60 Swiss towns and cities by the end of 2019.
5G in Europe
Received wisdom in the mobile industry has it that the US and Asia are leading the way with commercial 5G deployments, while Europe lags behind. But the facts indicate otherwise. We are seeing Europe’s first commercial 5G mobile services follow mere weeks behind the ones launched earlier this year in the US and in South Korea.
Given the prospect of concurrently available 5G equipment, spectrum and smartphones, the Swiss operators are showing that they are as keen as those in other parts of the world to bring the next generation of mobile to their networks. And they are not alone in Europe. Vodafone, for example, has announced that it intends to launch 5G commercially in 2019 in European operating countries where licences for spectrum in the 3.4–3.8GHz range have been awarded, such as Italy and the UK.
Swisscom Strategy for 5G
Swisscom has been planning its strategy for 5G rollout for a very long time — as I can personally attest, having been invited to run my first workshop session about 5G strategy for Swisscom executives over four years ago. What is making European operators so keen to launch 5G so early? Partly, of course, the motive is to offer customers something new, for which they will pay extra money. But for the first year or two of 5G, the prospects there are modest, at best. Early 5G services will deliver a faster access data rate than 4G, but it is not clear that customers will be willing to pay very much more — or even anything more — for a faster data rate.
Additionally, there is the prospect of distinctive new services enabled by 5G, such as mobile VR in the consumer market and remote command-and-control in enterprise verticals. But demand for such services is speculative, and they rely on capabilities that 5G will not deliver during the first couple of years of operation, such as ultra-low latency and guaranteed performance levels.
What are the Main Drivers for Operators?
Rather than new streams of customer revenue, we believe that the main forces driving early rollout of 5G are more internally facing. The majority of operators’ service revenue now comes from data, rather than voice and messaging, and the network traffic generated by their data customers is typically growing at 40%–60% per year.
If that growth is sustained — and it probably will be — then by the early-to-mid 2020s, operators will be struggling to cope with demand using only their current resources. They need new spectrum and they need a way to use their existing spectrum more efficiently. 5G gives operators a way to achieve both of these objectives. And this, we believe, is what is mainly driving the early rollout of 5G in Europe.
This also indicates why the Swiss operators are among the first in Europe with 5G. European operators are now running four separate generations of mobile technology in their networks: 2G (GSM), 3G, 4G (LTE) and now 5G. This involves a costly operational and management overhead, and it also ties up spectrum in older generations of radio access that could be utilised more efficiently by the newer generations.
It is clearly in operators’ interest to move their customers onto 4G and 5G, so that they can retire their legacy 2G and 3G networks. Swisscom was one of the first operators in Europe to make its intentions clear in that regard, announcing in October 2015 that it intends to shut down its 2G network by the end of 2020. That remains the operator’s plan, and it has started to contact its customers to inform them about what the 2G shutdown means for them.
Mobile operators are now predominantly data connectivity providers. In the absence of definite prospects for high revenue growth in the data connectivity business during the 2020s, operators need mobile data networks that can support it much more efficiently than earlier generations can. In that context, it becomes clear why the Swiss operators, and European operators more generally, are every bit as interested as those in other regions in bringing 5G to market as quickly as they can.