Policymakers need to focus on five critical success factors to ensure the US successfully builds out its emerging 5G economy, according to a recent report from Boston Consulting Group.
After Europe led the 2G network generation and Japan led 3G, the US held the global leadership position in the 4G economy. This was driven by important policy decisions that led to increased investment by telecom firms, such as expedited tower siting and tight timeframes for deployment review.
Based on its research of the 4G period, BCG identified five success factors needed for the US to maintain its primary position in the emerging 5G era.
1) Spectrum availability. Spectrum is the foundation of mobile communications, and providers need a mix of low-, mid-, and high-band frequencies for 5G. In the 4G era, the FCC rapidly auctioned off spectrum while regulations ensured spectrum holders had to make it available to others if they didn’t need it.
BCG notes the US has made significant amounts of low- and high-band spectrum available, but that they lag behind in mid-band availability.
2) Networks. Widespread network deployment is needed to lay the foundation of the 5G economy and achieve high levels of subscription. In the 4G era, government policy incentivized investment and promoted a competitive wireless market.
The BCG study found US telecoms have invested seven times more than Chinese firms, and that from 2020 to 2025 US operators are expected to spend $250 billion building 5G networks.
3) Innovation ecosystem. R&D investment and IP protection helps develop innovative new 5G services. Fortunately, the US already has a strong innovation ecosystem in place, and since the early days of 4G has awarded patents roughly two-and-a-half times faster than in Europe.
The US tax code also has an incentivizing tax credit for R&D costs. According to BCG, US wireless firms invest about five times as much on R&D as Chinese firms.
4) Business climate. Concentrated investment and business-friendly policy also help spur innovation and entrepreneurship in the market. In the 4G era, the government supported startups through legislation that increased access to funding and eased the regulatory burden on small businesses.
BCG related that the US is home to 12 of the world’s top 30 cities for startups and is a startup hub for 5G technologies like AI and cybersecurity.
5) Talent. A workforce with the right digital and technical skills will be needed to build networks and develop apps – with talent required across the value chain, from labor to install infrastructure to technical expertise to build augmented reality applications.
In the 4G era, the US attracted many immigrants with technical skills. The 5G era will also require training and retraining employees in tech-related certifications and degrees.
“A country’s 5G progress shouldn’t be based on misleading snapshots in time such as the number of 5G subscribers or the amount of 5G base stations deployed in a given quarter,” said Enrique Duarte Melo, a BCG managing director and senior partner and lead author of the report. “Policymakers should instead look at how these factors—network coverage, spectrum availability, the quality of the innovation ecosystem, business climate, and technology talent—will blend together to drive 5G penetration and make 5G use cases widely available throughout society.”