Promote high-quality development of 5G digital "new infrastructure" through development model innovation

The CPC Central Committee and the State Council attach great importance to the development of 5G. The 14th Five-Year Plan outline proposes to "accelerate the large-scale deployment of 5G networks" and "build application scenarios and industrial ecology based on 5G". The Ministry of Industry and Information Technology has thoroughly implemented the decisions and deployments of the CPC Central Committee and the State Council, and has made every effort to promote the construction of 5G networks and the development of applications, forming a good development model for 5G, and has made great achievements in the development of 5G.

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As the second anniversary of 5G commercialization is approaching, the author takes stock of the development progress of 5G.

5G digital "new infrastructure" plays a positive role in stabilizing investment and growth

During the outbreak of the COVID-19 pandemic in 2020, the Political Bureau of the Central Committee repeatedly emphasized the need to accelerate the construction of "new infrastructure" such as 5G. This is an important strategy to stabilize investment and growth under the impact of the epidemic. It is also a key move to cultivate my country's digital economy technological advantages, drive the development of the industrial chain, and cultivate new growth points for my country's economy in the future.

Affected by the epidemic, the recovery of the domestic economy still faces uncertainty. On the one hand, the current endogenous growth momentum of my country's economy is still insufficient, and the uncertainty of sustained economic growth still exists. "New infrastructure" is an important means to stabilize investment and growth. Increasing investment in "new infrastructure" will certainly offset the impact of the epidemic on economic development. On the other hand, accelerating "new infrastructure" is also an inevitable requirement for the development of the digital economy. Digital "new infrastructure" represented by 5G is the new cornerstone of the development of the digital economy. Accelerating the development of "new infrastructure" such as 5G will promote the high-quality development of the digital economy, bring more new technologies, new models, new products and new formats, thereby enabling my country's real economy to gain an advantage in the new round of changes.

Since the outbreak of the COVID-19 epidemic, the digital "new infrastructure" represented by 5G has developed rapidly, showing strong vitality and huge market potential in supporting the fight against the epidemic. New digital formats and models such as 5G+ thermal imaging human body temperature measurement, 5G+ drones, 5G+ remote office, 5G+ online education, and 5G+ 4K/8K live broadcast have continued to emerge, providing strong support for the resumption of work and production in all walks of life, maintaining the stability of the industrial chain and supply chain, and playing an important role in stabilizing growth. The digital "new infrastructure" is the current investment focus and hot spot, with strong driving force for the upstream and downstream industrial chains, and has played an important role in reducing the risk of epidemic transmission, meeting people's production and living needs, and stabilizing economic growth. The rapid development of the digital "new infrastructure" represented by 5G has effectively promoted the healthy development of my country's digital economy. In 2020, the scale of my country's digital economy reached 39.2 trillion yuan, accounting for 38.6% of GDP, maintaining a growth rate of 9.7%, becoming an important driving force for stable economic growth.

my country's 5G digital "new infrastructure" has developed rapidly and achieved remarkable results

In recent years, my country has vigorously promoted the construction of digital "new infrastructure", and the development of digital "new infrastructure" represented by 5G has achieved remarkable results, making positive contributions to promoting the construction of a strong manufacturing country, a strong network country, and a digital China. This is mainly reflected in the following aspects.

First, my country's 5G has developed vigorously and made breakthrough progress. my country has built the world's largest 5G independent networking network. As of August 2021, my country has a total of 1.037 million 5G base stations, covering all prefecture-level cities, more than 95% of county towns and 35% of townships and towns. The number of 5G package users has reached 575 million, and the number of 5G terminal connections has reached 419 million. More than 10,000 5G industry application innovation cases have been created, and a number of typical applications such as 5G+4K/8K high-definition video, 5G+smart medical care, 5G+Internet of Vehicles, and 5G+distance education have been formed in the media, medical, transportation, education and other industries. The pace of 5G integration and application in various industries is accelerating, forming a good 5G industry ecology.

Second, the development of 5G+ industrial Internet in my country is the most active, with gratifying results. At present, there are 1,600 5G+ industrial Internet projects in my country, covering 22 important industries of the national economy, forming typical application scenarios such as 5G+ quality inspection, remote operation and maintenance, multi-machine collaborative operation, collaborative R&D design, flexible production and manufacturing, on-site auxiliary assembly, factory intelligent logistics, and unmanned intelligent inspection. At present, 138 steel companies, 194 power companies, 175 mines, and 89 ports have realized the commercialization of 5G applications; there are more than 100 large-scale industrial Internet platforms with a certain influence, and the total number of access devices exceeds 76 million units (sets), which effectively promotes industrial intelligent manufacturing, networked collaboration, personalized customization, service extension, and digital management, and helps industrial enterprises to transform into digital, networked, and intelligent ones.

Third, computing infrastructure is developing rapidly. my country's data center construction has ushered in unprecedented development opportunities, and the computing industry has developed rapidly, with an average annual growth rate of more than 30%. The scale of my country's cloud computing market has expanded rapidly, with a year-on-year growth of more than 33% in 2020. Cloud computing applications are expanding to enterprise-level markets such as manufacturing, government affairs, finance, medical care, and education, and the rate of enterprises going to the cloud is constantly increasing; edge computing has also become a hot topic in the industry, moving from exploration to commercial use, and gradually becoming a rigid demand for the digital transformation and development of vertical industries. In 2020, the market size of edge computing services reached US$2.655 billion, a year-on-year increase of 16.3%.

Fourth, the application of artificial intelligence has made significant progress. During the epidemic, artificial intelligence technology was widely used in epidemic monitoring and analysis, medical rescue, resumption of work and production, etc., providing effective support for epidemic prevention and control. Today, the integration of artificial intelligence and industry is accelerating, deeply empowering the real economy, and significant progress has been made in the fields of medical care, autonomous driving, industrial intelligence, etc., giving birth to a large number of new products, new applications, and new models, and the artificial intelligence industry is developing healthily. In 2020, the scale of my country's artificial intelligence industry reached 303.1 billion yuan, a year-on-year increase of 15%, slightly higher than the global growth rate. In 2020, the number of artificial intelligence companies in my country reached 6,425, accounting for 24.66% of the world. It is estimated that by the end of 2021, driven by artificial intelligence, the market size of comprehensive solutions for industry applications will reach 1.28 trillion yuan.

5G has become an important driving force for operators' continued growth

In August 2021, my country's three major telecom operators successively announced their first-half performance reports. In the first half of 2021, China Telecom achieved operating revenue of 219.2 billion yuan, a year-on-year increase of 13.1%, of which communication service revenue reached 203.5 billion yuan, a year-on-year increase of 8.8%; China Mobile's operating revenue reached 443.6 billion yuan, a year-on-year increase of 13.8%, of which communication service revenue reached 393.2 billion yuan, a year-on-year increase of 9.8%; China Unicom achieved operating revenue of 164.2 billion yuan, a year-on-year increase of 9.2%, of which communication service revenue reached 148.7 billion yuan, a year-on-year increase of 7.5%. As can be seen from Figure 1, the revenue of the three major operators has bottomed out and rebounded in recent years, showing a trend of sustained growth.

Figure 1 Changes in revenue growth rates of the three major operators in recent years

One of the important reasons why the three major operators have been able to get out of the trough and continue to grow their operating income is that the rapid development of 5G has effectively driven the growth of performance. 5G is becoming an important force in promoting the sustainable development of operators, which is mainly reflected in the following three aspects.

First, the rapid growth of 5G to C users has effectively driven the value of mobile users. In recent years, while accelerating the construction of 5G networks, the three major operators have increased the migration of 3G/4G users to 5G. The rapid growth of 5G package users has driven the steady growth of mobile user ARPU.

In the first half of 2021, China Telecom's 5G package users reached 131 million, with a penetration rate of 36.2%. The number of users of 5G featured applications grew rapidly, and users who upgraded to 5G maintained good value growth. Mobile user ARPU stopped falling and continued to rise, reaching 45.7 yuan, a year-on-year increase of 2.9%.

In the first half of 2021, China Mobile's 5G package users reached 251 million, and the DOU of 5G users reached 20.7GB, 73.9% higher than the average DOU of mobile Internet access. The rapid growth of 5G package users has driven the increase in mobile customer value. As of June 2021, mobile ARPU reached 52.2 yuan, a year-on-year increase of 3.8%, reversing the downward trend since 2018.

In the first half of 2021, China Unicom's 5G package users reached 113 million, and the penetration rate of 5G package users reached 36.5%, maintaining its industry-leading position. The rapid growth of 5G package users has driven the continuous improvement of mobile Internet traffic and user value. As of June 2021, China Unicom's total mobile Internet traffic increased by 27.5% year-on-year, mobile user DOU reached 12.2GB, and mobile user ARPU reached 44.4 yuan, an increase of 8.5% year-on-year.

Second, the vigorous development of 5G to B has promoted the rapid growth of industrial digitalization. In the first half of 2012, China Telecom's industrial digitalization accelerated, and its industrial digitalization revenue reached 50.1 billion yuan, a year-on-year increase of 16.8%; China Mobile's DICT revenue reached 33.4 billion yuan, a year-on-year increase of 59.8%, contributing 3.5 percentage points to the growth of communication service revenue; China Unicom's industrial Internet business revenue reached 28.03 billion yuan, a year-on-year increase of 23.6%, and its revenue share reached 18.9%, a net increase of 2.5 percentage points year-on-year. It can be seen that the industrial digitalization revenue of the three major operators has grown rapidly, effectively driving the sustained growth of corporate revenue. Among them, the vigorous development of 5G to B is an important driving force for the rapid growth of industrial digitalization. According to the performance report of the three major operators in the first half of 2021, the development of 5G to B of the three major operators has accelerated, and the value of 5G in enabling the digital transformation of the economy and society has emerged.

Based on a deep understanding of the digital transformation needs of the industry, China Telecom insists on the coordinated development of "5G+DICT", focuses on key industries such as industrial manufacturing and telemedicine, and vigorously promotes the development of 5G customized networks. The three 5G customized network service models of "Zhiyuan", "Bilin" and "Ruyi" have been widely implemented in government affairs, finance, industry, social livelihood and other fields. The number of 5G application scenarios has nearly doubled compared to the end of 2020. As of June 2021, China Telecom's 5G customized network has provided 5G customization capabilities to more than 4,500 government and enterprise users, and has landed more than 360 customized network commercial projects.

China Mobile has implemented the "5G+" plan in depth, continued to play the traction and driving effect of the "model house", vigorously promoted 5G integration and innovation, and worked with leading industry users to create more than 200 group-level leading demonstration projects, and created more than 4,400 commercial cases for more than 100 key industry scenarios; actively promoted the expansion of 5G scale and value realization, and relied on benchmark projects to actively create high-quality "commercial housing" with a healthy business model. A total of 900 provincial regional characteristic projects were signed across the network, 452 5G private network projects were expanded, and 122 DICT large orders with contract amounts exceeding 10 million were signed, driving DICT's incremental revenue to exceed 6 billion yuan.

China Unicom seizes the opportunity of digital transformation of the whole society and the industry, and actively promotes the innovative development of 5G+ vertical industry application integration; takes 5G private network as the entry point, integrates its own capabilities, expands ecological cooperation, and forms differentiated advantages of digital services; innovates the 5G application product system, relying on the five major components of 5G industry private network, MEC, industry platform, customized services, and terminals, supports more than 15 industry applications, and comprehensively promotes the scale development of 5G applications; actively explores business models, flexibly meets the needs of 5G industry customers, and successfully creates more than 300 influential 5G "lighthouse" projects and more than 3,000 key projects such as the world's first 5G fully connected factory and the world's first underground 5G private network in key areas such as industrial Internet, smart mines, smart medical care, and smart cities, realizing the commercialization of 5G.

my country has formed a new model for the development of 5G digital "new infrastructure"

The construction of my country's digital "new infrastructure" follows the development path of "moderately advancing", "construction to promote use", and "use to promote construction". It comprehensively promotes the construction of 5G networks, forms a good development model for my country's digital "new infrastructure", and creates conditions for my country's 5G large-scale development, integrated application innovation, and empowering social digital transformation.

The "moderate" in "moderately ahead" means that we should increase investment in digital "new infrastructure" and promote the construction of digital infrastructure in an orderly manner, taking into account the current economic development. There are uncertainties in the development path and business model of digital technology, and it is necessary to go through a certain trial and error stage. "Trial and error" means that the construction of new infrastructure needs to be explored ahead of time, but it cannot be developed too fast, and it cannot be rushed into and over-invested. The "advance" in "moderately ahead" means that the construction of digital "new infrastructure" is ahead of the industry, so that subsequent applications can keep up. But we must also grasp that it should not be too advanced, otherwise the application may not keep up. The "advance" that the application cannot keep up with will eventually cause a waste of social resources and is not conducive to the healthy development of digital "new infrastructure". With the increase in the proportion and accelerated construction of "new infrastructure" such as 5G, industrial Internet, big data centers, and artificial intelligence, it should be noted that industry applications are showing a trend of vigorous development, but the large-scale development and popularization of industry applications is still a gradual process.

In the past two years since 5G was put into commercial use, my country's 5G to B has shown a healthy development momentum, but we should be aware that my country's 5G to B development is still in the introduction stage and needs to be driven by policies. my country's 5G to B development is still in the stage of building industry application benchmarks. This determines that when my country vigorously develops digital "new infrastructure", it must follow the principle of "moderate advancement", not over-invest, and not blindly expand "all at once". It requires all parties in the industry chain to work together, promote each other, form a joint force, and jointly promote the healthy development of "new infrastructure" and share the dividends brought by the development of the digital economy.

Undoubtedly, my country's three major telecom operators have played an active role in promoting the development of digital "new infrastructure". Table 1 shows the scale of 5G investment by the three major operators in the past three years. It is not difficult to see that the average proportion of 5G investment in capital expenditure of the three major telecom operators reached 54.2%, and China Mobile's was as high as nearly 60%. Obviously, 5G is the focus of current telecom operators' investment.

From the perspective of 5G investment scale, China Mobile's 5G investment is expected to reach 110 billion yuan in 2021, but the growth rate of 5G investment in 2021 has slowed down significantly compared with 2020, which is also a direct reflection of the "moderately advanced" development of 5G. However, for telecom operators, on the one hand, they should not over-invest in 5G development, otherwise it will inevitably bring pressure to corporate profit growth and market value increase, but should implement precise investment according to user needs, achieve deep network coverage in hot spots, actively extend network coverage to towns, maintain moderate growth of 5G investment, actively promote innovation in investment and financing models, maintain moderate leverage and appropriate debt ratio, so as to solve the construction funding problem of 5G digital "new infrastructure"; on the other hand, the most important thing is that telecom operators should adhere to the user-oriented, application innovation as the guide, strengthen industrial cooperation, promote 5G technology innovation, integrated application innovation, business model innovation, accelerate the replication and promotion of industry application benchmark cases, and accelerate the promotion of 5G scale development in key industries such as industrial Internet, medical care, steel, energy, ports, etc., so as to promote the continuous growth of telecom operators' revenue with 5G scale development.

Looking ahead to the "14th Five-Year Plan", the industry also needs to build a solid digital infrastructure represented by 5G, assist in building a strong manufacturing country, a strong network country, and a digital China, better empower thousands of industries in society, and help take greater steps in high-quality economic and social development.