1. 10 February 2017
Incentives to Invest in 5G
Frontier report for the NIC

2. 2frontier economics
Agenda
Yulia Kossykh
02070317123
yulia.kossykh@frontier-economics.com
1 Objectives of the study
2 Incentives to invest in mobile networks
3 Approaches to facilitate investment in 5G

3. 3frontier economics
1 Objectives of the study
2 Incentives to invest in mobile networks
3 Approaches to facilitate investment in 5G

4. 4frontier economics
Objectives of the study
“What does the UK need to do to
become a world leader in 5G
deployment?
George Osborne Lord Andrew Adonis
“What are the incentives to invest in
future mobile networks?
What are the options for incentivising
investment in 5G?
In our report, we have:
• Described the mobile ecosystem and the regulatory system in the UK
• Assessed drivers of investment in mobile networks
• Discussed approaches to facilitating investment in 5G networks

5. 5frontier economics
1 Objectives of the study
2 Incentives to invest in mobile networks
3 Approaches to facilitate investment in 5G

6. 6frontier economics
Investment in 3G: What can we learn from
the past?
Demand uncertainty
Typical investors’ response:
 Wait and see
Despite a £22.5b investment by
operators in the 3G auction in 2000, 3G
coverage remained relatively low until
2006-07
Low
3G
use
Low consumer
demand
Slow network
roll out
Poor range of
handsets
3G auction First 3G rollout
iPhone launch
Only 70% of
postcodes
have 75% 3G
coverage
87% of
postcodes
have 90%
3G coverage
3G subs per 100 pop

7. 7frontier economics
4G: late auction, but rapid investment
afterwards
81%
66%
65%
53%
0%
20%
40%
60%
80%
100%
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q2 2015
EE
O2
Vodafone
Three
4G mobile coverage by operator
UK 4G auction
Difference between 3G and 4G:
 More predictable demand
 Available handsets
 EE had a 1st mover advantage
 Incentives to invest early
 For the others, incentives to catch
up
Implications for 5G:
 rapid investment, if demand is predictable, eco-system is developed and one
operator has a 1st mover advantage
 ‘wait and see’, if demand is uncertain, eco-system underdeveloped and significant
investment is needed (e.g. thousands of small cells)

8. 8frontier economics
1 Objectives of the study
2 Incentives to invest in mobile networks
3 Approaches to facilitate investment in 5G

9. 9frontier economics
Spectrum policy
Making more
spectrum
available for
mobile
 More spectrum will be needed for mobile to support 5G
 FCC: plans to make 11 GHz of HFS to support 5G
 Ofcom is responding with more concrete steps
Flexible approach
to allocating
spectrum
 Approach to-date: exclusive licensing (except Wi-Fi)
 Approaches to explore:
 More unlicensed spectrum
 More shared spectrum (concurrent access,
authorised shared access …)
 Reserve a licence for a non-MNO

10. 10frontier economics
Lowering infrastructure costs
Planning
regulations
 Particularly important for small cell
deployment
 New GPDO goes a long way to addressing
the operators’ concerns
Regulation of
backhaul
 Backhaul requirements will increase:
 To allow duct access for the provision of
mobile backhaul
 Stricter regulation of Ethernet
Access to sites
 Access to sites and ability to upgrade was
a serious bottleneck for 4G deployment
 Operators’ concerns are largely addressed
in the revised ECC

11. 11frontier economics
Addressing market failures through direct
government interventions
Geographic
• Coverage
obligations had
a limited impact
• Alternative: to
tender for USP
(in tech-neutral
flexible way)
Rail
• Technical issues
• Coordination
issues
• Multiple
stakeholders
• Incentives are
not aligned
• Potential
solution:
obligation on
Network Rail to
facilitate
deployment
Motorways
• Improvement in
geographic
coverage
should improve
coverage on
motorways
• But if high
capacity is
needed, HA
should play a
coordinating
role
Coverage issues

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