Countdown to frequency clearance and network withdrawal: 2G/3G existing users face new problems

According to various sources, the conditions for 2G/3G network withdrawal are gradually maturing. This also means that operators will accelerate the deployment of 5G networks. As 2G/3G networks are gradually withdrawn, what new opportunities will the communications market have, and what challenges still need to be solved?

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Conditions for 2G/3G frequency clearance and network withdrawal are gradually maturing

From a technical perspective, compared to the old 2G/3G technology standards that have served the world for 20 to 30 years, 4G/5G has higher spectrum efficiency, lower unit bit cost, faster network speed, better user experience, and more business innovation possibilities. 3GPP recently announced that the RAN6 working group responsible for GERAN and UTRAN wireless and protocol work has been officially closed. The RAN6 working group has previously been responsible for studying 2G and 3G wireless functions. This also means that 2G and 3G technologies will no longer be developed, and the industry has called for the withdrawal of 2G/3G networks for many years, which will no longer have a way out at the standard development level.

From the application point of view, the latest report of GSMA (Global System for Mobile Communications Association) stated that globally, the number of 4G connections exceeded 2G or 3G in 2017, and the number of 4G connections in the Asia-Pacific region exceeded the sum of 2G and 3G in 2019; at the same time, the proportion of 2G connections has dropped significantly, and as of 2019, the proportion of 2G connections is 23%. In view of the continuous decline in connections and traffic, the gap between 2G revenue and expenditure is increasing. Operators around the world are exploring ways to reduce costs by shutting down old technology networks, or re-cultivating 2G/3G spectrum to deploy more efficient 4G/5G technologies. So far, 28 2G networks and 10 3G networks have been shut down worldwide, and other operators are also actively planning.

In my country, the conditions for the withdrawal of 2G and 3G networks have gradually matured. The Ministry of Industry and Information Technology has previously clearly encouraged operators to actively guide users to migrate and switch networks, and to use limited frequency and network resources in the development of 5G and 4G mobile communication networks, thereby reducing overall costs.

It is reported that by the end of 2019, China Telecom's 4G user penetration rate reached nearly 84%. China Telecom is promoting the withdrawal of CDMA from the network, gradually migrating 2G voice services to VoLTE, and requiring 5G terminals to no longer support CDMA.

It is reported that China Mobile has decided to stop adding new 2G IoT users before 2020. At the same time, in order to accelerate NB-IoT network coverage, speed up the migration of 2G IoT services to NB-IoT networks, and vigorously promote the withdrawal of 2G frequencies and networks and the re-cultivation of 900MHz frequencies, China Mobile will build 118,000 new NB-IoT base stations across the country in 2020, reaching a total of 350,000 base stations.

As of the end of May 2020, the number of China Unicom's 2G users was approximately 51.5 million. China Unicom is promoting the withdrawal of 2G networks in some areas, encouraging 2G users to upgrade to 4G, and re-cultivating 2G spectrum for 4G/5G development.

Operators will deploy 5G with “light load”

The GSMA report analyzed that spectrum refarming will help operators obtain prime spectrum to improve 4G/5G coverage. 2G/3G occupies the 850/900/1800/1900/2100MHz frequency bands, especially the Sub-1GHz frequency band. Since low frequencies have great advantages in indoor coverage and penetration, using these scarce low frequencies for 4G/5G has become an important motivation for operators to withdraw from the network.

At the same time, operators also need to "lighten their load". Shutting down 2G/3G networks can reduce operating and maintenance costs, for example, simplifying network operation and maintenance, reducing the cost of repairing spare parts for old equipment, reducing the risk of missing spare parts and maintenance personnel, reducing licensing fees, reducing tower space rental costs, and reducing network energy consumption.

The withdrawal of 2G/3G networks will also involve the application field of the Internet of Things. In May this year, the Ministry of Industry and Information Technology issued the "Notice on Deeply Promoting the Comprehensive Development of Mobile Internet of Things", which pointed out that it is necessary to promote the migration and transfer of 2G/3G Internet of Things services, establish a comprehensive mobile Internet of Things ecosystem with the coordinated development of NB-IoT (narrowband Internet of Things), 4G (including LTE-Cat1, i.e. 4G network with rate category 1) and 5G; promote the price of NB-IoT modules to converge with that of 2G modules, and guide new Internet of Things terminals to migrate to NB-IoT and Cat1. The notice proposes that while ensuring the network service level of existing Internet of Things terminals, it is necessary to guide new Internet of Things terminals to stop using 2G/3G networks and promote the migration of existing 2G/3G Internet of Things services to NB-IoT/4G (Cat1)/5G networks.

At the ITU-R WP5D #35 remote conference held by the International Telecommunication Union not long ago, the NB-IoT (narrowband Internet of Things) technology submitted by China was officially accepted as the 5G technology standard.

According to the Pacific Securities report, my country's current IoT applications are still mainly concentrated in the fields of smart water and electricity meters, smart homes, sharing economy, smart security, etc. There is a large demand for wide-area low-power products. NB-IoT, as the IoT solution promoted by my country's three major operators, is expected to take over a large number of 2G and 3G IoT connections.

The challenges of clearing frequencies and delisting networks remain

Industry analysts believe that operators need to consider the cost of migrating existing 2G/3G users to 4G/5G networks: data shows that as of the end of May, there were 273 million 2G users in the country, accounting for about 17.15% of all mobile phone users. If existing 2G and 3G users are migrated to the new 4G/5G network, replacing mobile terminals and tariff packages will inevitably increase costs. Therefore, operators need to explore optimization solutions to reduce the cost of users replacing mobile phones and packages and protect the interests of users.

The 45th "Statistical Report on the Development of Internet in China" shows that as of March this year, the number of Internet users in my country reached 904 million, and the Internet penetration rate reached 64.5%. The Internet continues to penetrate the middle-aged and elderly population. However, it is worth noting that there are still a considerable number of 2G/3G users who are middle-aged and elderly consumers, who mainly use feature phones rather than smartphones. How to protect the rights and interests of elderly consumers, develop smartphones suitable for the elderly, and seize this part of the market is worth exploring by operators and related manufacturers.

In addition, in a small number of remote areas that are not yet covered by 4G/5G networks, it is also critical to ensure users' basic communication experience before 2G/3G frequencies are cleared and the network is withdrawn. This is also a requirement for universal telecommunications services.

Therefore, during the 2G/3G frequency clearance and network withdrawal process, operators may face risks such as customer loss and brand damage due to insufficient coverage of alternative technologies.

Industry analysis shows that 2G/3G frequency clearance and network withdrawal cannot be a one-size-fits-all approach, but must be carried out gradually in different regions and stages.

The GSMA report recommends that during the frequency clearance and network withdrawal process, operators need to align new technology networks with old standard coverage, and the withdrawal transition period needs to be long enough to allow for continuous optimization of alternative networks; carefully plan marketing activities for user migration; introduce attractive switching plans to incentivize users; retaining a thin 2G network to take over roaming and other services is also an optional measure; assistance from regulators will help smooth the withdrawal of 2G/3G networks.

At the market level, operators should convey the time of network withdrawal through various media and channels, and carry out intensive marketing for new technology replacement packages and smartphones; targeted communication plans need to be adopted for specific groups, such as elderly consumers, who even need to be provided with skill training on how to use smartphones; targeted communication is also needed for commercial customers.