5G private network spectrum allocation controversy: not black and white, but efficiency first

Recently, the French government announced that in order to promote the development of 5G use cases in the industry, it will open spectrum access to the 2.6GHz band and the 3.8GHz-4.0GHz band to enterprises. In fact, there are precedents for issuing 5G spectrum specifically for vertical fields. For example, Germany has previously issued 3.5GHz 5G private network spectrum licenses for vertical industry enterprises, and Japan is also exploring 5G private network models based on 28GHz.

As 5G private networks have become the focus of industry attention, there are different opinions on their construction models. On the one hand, regulators can allocate separate 5G private network frequency bands for vertical fields, and enterprises can independently build and operate 5G private networks; on the other hand, telecom operators can provide private network-level services to enterprises based on the public network through slicing, sinking some core network elements, and providing virtual private networks such as dedicated wireless access networks.

In fact, the past 2021 was a key year for the development of 5G in vertical market applications. Since last year, 5G vertical industry applications have begun to be commercialized, 5G application scenarios have gradually become clear, and cross-industry scenario-based needs have begun to emerge. Industry insiders said that in 2021, the scale of 5G vertical industry applications began to set sail, marking that it has achieved initial success and is beginning to move towards mature development.

“Spectrum is one of the main obstacles to the development of the private network market”

Speaking to C114 about the industry discussion around wireless private networks for the enterprise market, Stefan Pongratz, vice president of market research firm Dell'Oro Group, said, "There are many challenges in wireless private networks. However, a key reason why cellular private networks have not been able to cross the enterprise market gap and occupy a significant share of the overall RAN market is the lack of dedicated spectrum."

Stefan Pongratz analyzed that the recent hype around wireless private networks is well-founded. There are five main reasons for this: First, more and more countries are exploring how to allocate spectrum for private network applications; at the same time, technological advances are improving business cases by lowering prices, introducing more flexibility, and simplifying private network deployment, operation and management; in addition, enterprises are becoming more aware of the benefits of using cellular private networks; and public cloud providers are more actively seeking to cooperate with telecom operators; in addition, new use cases that require cellular network quality of service (QoS) are emerging.

Pablto Tomasi, chief analyst for private networks at Omdia, another well-known telecommunications market research company, also told C114 that "spectrum is one of the main obstacles to the development of the private network market, so providing spectrum directly to enterprises or specific verticals is critical to promoting the development of the LTE and 5G private network markets." According to Omdia's "LTE and 5G Private Network Tracking Q4 2021" report, as a country that provides spectrum to the enterprise market (Citizen Radio Broadband Service-CBRS), the United States accounted for 38% of all private network-related announcements.

He talked about how different countries have adopted different strategies for spectrum liberalization, including LTE and 5G, with the United States and Germany offering some best practices in this regard.

Pablto Tomasi pointed out that the US CBRS spectrum initiative is an interesting example of finding a balance between enterprise and telecommunications needs. CBRS is a shared spectrum program that successfully provides some spectrum to enterprises almost for free, while enabling telecom operators or cable operators, etc. to purchase additional spectrum for their traditional businesses. In Germany, regulators have allocated spectrum specifically for the enterprise market, which has promoted the development of the industry ecosystem of enterprises and suppliers themselves. "Germany currently provides up to 100MHz of vertical industry-specific spectrum resources in the 3.7GHz band. This is crucial to attracting international companies to enter the German market and helping industrial companies (such as automotive OEMs) explore the opportunities provided by 5G private networks." He added.

“Spectrum policy should ensure maximum and optimal use of spectrum”

However, as an important industry organization in the mobile industry, GSMA has a different view on spectrum allocation in the private network market. "Issuing dedicated 5G spectrum to vertical industries will bring the risk of reducing spectrum utilization efficiency and affect the fairness of the entire spectrum allocation," said Si Han, president of GSMA Greater China, in an interview with C114.

"As a scarce resource, the policy focus of radio spectrum should be to maximize and optimize the efficiency of spectrum use. In the past decade, both the government and the industry have conducted extensive research on this. Industry-specific spectrum is an inefficient use of scarce spectrum resources in many scenarios. Therefore, this approach is likely to increase the problem of spectrum scarcity, including unreasonably pushing up spectrum prices, affecting the entire mobile industry's ability to provide broader and better services, as well as better digital inclusion."

Guan Zhou, General Manager of Public Policy for Greater China at GSMA, also said that the private network spectrum is something that the government needs to consider comprehensively and carefully, and maximizing the efficiency of spectrum resource use is the most critical. He pointed out that the most effective way to allocate the core spectrum that is critical to mobile networks is to allocate it to operators, who can provide solutions to industry users through network coordination and customization. At the same time, some better sharing methods can be explored on some industry chain sharing platforms.

In general, GSMA's basic view is that reserving spectrum in key frequency bands for vertical industries may affect the broader success of 5G, such as slower deployment, poorer performance, and smaller coverage. Policymakers need to carefully consider and consult with all relevant parties to ensure that the needs of vertical industries can be supported most effectively without harming other spectrum users.

Is 5G SA the answer to 5G applications in vertical industries?

At the same time, we have noticed that the pace of 5G SA deployment by global mobile operators is accelerating. As we all know, independent 5G networks will bring enhanced network capabilities, enabling them to achieve significant improvements in performance indicators.

US telecom operator T-Mobile US recently said that one of the company's main selling points among large enterprise customers is its 5G SA network. "We are the only company (in the US market) with a 5G SA core network, and customers really need a 5G SA core network to support use cases such as network slicing and creating private networks," said Peter Osvaldik, chief financial officer of T-Mobile US. "Enterprises are very happy to work with us because they know we have such network capabilities."

However, Pablto Tomasi, chief analyst for private networks at Omdia, said frankly that although 5G SA networks are being launched, this is only one of the elements required for 5G to expand in vertical industries. For example, many countries still do not have nationwide 5G coverage. In addition, one of the specific challenges facing the 5G private network field is the lack of a complete 5G equipment ecosystem suitable for industrial environments.

“Telecom operators have different strengths in providing private network solutions. These include a strong local market presence and understanding of national dynamics and specific regulatory environments, with some operators also having systems integration and consulting capabilities. Some telecom operators have also developed complementary expertise, such as network security, which can help them stand out in a very competitive market. Telecom operators also have the ability to provide hybrid private network solutions (private networks that share some infrastructure with the public network),” he said.

China leads in 5G vertical application practice and commercialization

Faced with the vertical enterprise market, which is expected to become the largest blue ocean market for 5G, how to maximize the capabilities of 5G technology and promote the digital transformation of enterprises and the upgrading and development of the entire industry may be the most important issue to be considered and discussed in the development of private networks.

In the "China 5G Vertical Industry Application Cases 2022" report just released by GSMA, we seem to have seen the answer to this question. The report provides a large number of 5G industry application excellent practices covering many fields such as 5G cities, smart manufacturing, and smart mines, focusing on the application scenarios, technical characteristics, and future development opportunities of the new generation of information technology in the industry market. Among them, in the 5G application practices carried out by China's three major telecom operators in cooperation with enterprises in different fields such as transportation, manufacturing, and medical care, private networks have almost become a basic standard condition.

"Many of our cases involve building a 5G private network. For example, scenarios such as coal mines, ports and factories are actually using 5G private networks extensively for corresponding business technologies. Our initial judgment is that some large enterprises will prefer to use physical private networks, while some small and medium-sized enterprises and enterprises that need to have more contact with the outside world will prefer to use virtual private networks." Liu Hong, general manager of technology for GSMA Greater China, analyzed.

Looking through the financial reports of the three major domestic telecom operators, it can be found that several companies have already provided relevant 5G private network products. Taking China Mobile as an example, the operator has previously released its 5G private network product system 2.0. Based on the 1.0 system, the 2.0 system focuses on 18 sub-industries such as factories and mines, and builds a 5G+ digital intelligence base. Customers can "build houses" based on the base, develop industry applications, and develop personalized products. It can realize data and connection templates and modular management, saving more than 70% of development costs. It is reported that China Mobile has worked with industry leaders to build more than 200 high-quality "model houses" in vertical industry applications, signed more than 5,000 5G commercial cases, and has built more than 1,500 5G private network commercial projects.