The rollout and ongoing challenges of 5G in China

To date, China is considered to be the country with the fastest growing 5G network and the largest number of users in the world. The four major mobile operators in China, including China Telecom, China Mobile, China Unicom and China Broadnet, are important initiators in promoting the deployment and application of 5G services for consumers and enterprises nationwide.

5G growth at breakneck speed in China market

China is considered the leading country in the 5G field in terms of the number of deployed 5G base stations. By the end of 2022, China had a total of 10.8 million base stations, including 2.3 million 5G base stations, accounting for 60% of the world's total 5G base stations.

It is estimated that China has about four times as many 5G base stations per capita as the United States and 2.3 times as many as the European Union. In 2023, China plans to continue the construction pace of 2022 and deploy about 600,000 more 5G base stations.

As of April 2023, China had built or upgraded more than 2.7 million 5G base stations, accounting for 24.5% of the total number of mobile base stations nationwide. With this momentum, mobile operators are set to meet or even exceed the initial target of 2.9 million 5G base stations deployed by the end of 2023 set by China's Ministry of Industry and Information Technology (MIIT).

The rapid rollout of 5G networks by mobile operators has also seen a rise in 5G subscription adoption. As of the end of Q1 2023, the country's cumulative 5G subscriptions had increased to around 1.2 billion, up more than 40% from around 850 million 5G subscriptions as of March 2022. The 5G subscription penetration rate across all operators is above 60%.

In terms of revenue, China Mobile reported an 8.1% year-on-year increase in telecommunications service revenue, with average revenue per mobile user (ARPU) up 0.4% to $6.9. China Telecom also reported a 3.7% year-on-year increase in mobile communications service revenue, with mobile ARPU up 0.4% to $6.3, while China Unicom saw its mobile ARPU increase for the third consecutive year to $6.2.

In the enterprise sector, China's three largest mobile operators, China Mobile, China Telecom and China Unicom, have participated in more than 49,000 5G commercial projects by the end of 2022. MIIT figures show that these mobile operators have built more than 6,000 private 5G networks so far.

China's 5G investment policy

With extremely high data transmission speeds and extremely low latency, 5G technology is being embraced by businesses and governments around the world and is considered a game-changer in the global telecommunications industry.

However, building and maintaining a new mobile network requires a lot of money. In the UK, for example, studies show that even taking into account the possibility of infrastructure sharing, the total cost of building a nationwide 5G network is estimated to be as high as $47 billion. In addition, the uptake of premium 5G subscriptions by customers has stagnated, discouraging mobile operators from investing in expanding 5G coverage.

According to a 2022 survey, the majority of customers in the UK and US are not willing to pay more for access to 5G technology due to the lack of clear benefits of 5G networks. Hampered by high costs and unclear revenue, 5G deployment has been slower than expected in many countries around the world.

Although China's population accounts for about 20% of the world's population, its 5G base stations account for 60% of the world's total. So how did China achieve this deployment speed?

Clearly, building 5G infrastructure requires a significant amount of money and risk sharing among stakeholders. In 2022, Chinese telecom companies and China Tower, a tower construction company, built about 887,000 5G base stations, with infrastructure spending reaching $26 billion, accounting for 43% of fixed asset investment that year.

The Chinese government's consistent policies for the development of 5G technology are considered an important factor in promoting 5G deployment in the country.

Since 2013, China has considered 5G a core part of its science and technology policy. Accordingly, the Ministry of Industry and Information Technology, the National Development and Reform Commission, and the Ministry of Science and Technology established the 5G Promotion Group in 2013, which is a coalition of the government and the telecommunications industry, to promote 5G development.

In addition, 5G has been mentioned in all major government technology policies such as Made in China 2025 and the National Informatization Development Strategy. In response to these government calls, in 2019, mobile operators China Unicom and China Telecom signed a Framework Cooperation Agreement to jointly build and share 5G networks to share 5G infrastructure.

Most local governments have also issued subsidy policies for 5G deployment, typically ranging from $700 to $1,400 per approved 5G base station.

To date, Chinese mobile operators have cumulatively invested approximately US$181.7 billion in total capital expenditure (CAPEX) from 2019 to 2022, with over US$74.2 billion of that being 5G-related CAPEX. This has enabled the rapid deployment of 5G networks based on standalone architecture (5G SA) to support enhanced 5G experiences.

This is clearly shown by the Speedtest network speed test application of the US Internet performance testing company Ookla, which shows that the average 5G download speed reached more than 250 megabits per second on the mobile networks of China Mobile, China Telecom and China Unicom in the first quarter of 2023.

Despite the widespread deployment of 5G networks across the country, Chinese mobile carriers continue to plan to invest heavily in their networks in 2023. For example, China Mobile has announced plans to invest about $11.6 billion in CAPEX in 2023. As part of this CAPEX, China Mobile is looking to purchase more than 412,000 5G base stations between 2023 and 2024. China Telecom alone has announced plans to spend $4.4 billion to expand its mobile network, with the goal of deploying more than 1.2 million 5G base stations by the end of 2023.

New 5G business models and revenue streams

Chinese mobile operators have taken advantage of the various capabilities of 5G technology to explore new business models and revenue streams beyond traditional connectivity services.

For example, China Mobile has moved into the digital content market with its “Migu service”, which offers video content, cloud games and other premium Internet products, as well as moved into the Financial Technology (FinTech) segment.

Meanwhile, China Telecom has been investing in its cloud services portfolio, with revenue from China Telecom Cloud growing 107.5% year-on-year to reach $8.1 billion by 2022.

Cloud services and the Internet of Things (IoT) were big sources of growth for China Unicom, with revenue rising 121% to $5.1 billion and 42% to $1.2 billion year-on-year, respectively.

The annual financial reports of China's three major operators revealed that the cumulative number of 5G subscribers in China reached 1 billion by the end of 2022, accounting for more than 70% of the population. However, the number of users using 5G networks seems a little less impressive. Indeed, a report from China's Ministry of Industry and Information Technology put the number of 5G mobile network users at around 500 million, only half of the number of 5G package subscribers.

This is not surprising, as 5G plans often include more data than similarly priced 4G plans to boost sales. After purchasing 5G plans, many 5G subscribers stay on the 4G network because they are still using 4G phones and do not like the intermittent experience caused by frequent 4G/5G network switching.

Promoting 5G industry alliances

Shifting from consumers to enterprises, the focus of China's 5G commercial applications is on "5G + Industrial Internet", a concept strongly supported by the Chinese government. Since 2017, there have been more than 10 policy documents from the central government and more than 100 documents from 31 provincial governments to support the development of 5G and industrial Internet applications.

In particular, the new “Guidelines for Building 5G-Based Fully Connected Factories”, released by the Ministry of Industry and Information Technology in August 2022, aims to promote “10,000 enterprises to build 5G-based fully connected factories”.

Localities have also introduced policies to support industrial Internet development, such as Hefei, a city with a population of 7 million, which has allocated $13 million annually in recent years to support industrial Internet applications and is planning to allocate $29 million in 2023.

The four mobile operators have also worked closely with partners from various verticals such as mining, factories, logistics, manufacturing, healthcare, ports, communications, energy, agriculture, etc. as well as equipment suppliers to develop customized innovative 5G applications.

For example, in the logistics sector, China Mobile and a group of partners have collaborated with Ningbo-Zhoushan Port Operator Zhejiang Port Investment and Operation Group to deploy a 5G network solution that enables real-time asset inspection and tracking, remote operation of port loading and unloading cranes, and automation of container truck fleets through low-latency communications.

In the manufacturing sector, Baosteel Zhanjiang Iron and Steel Group has partnered with China Unicom to deploy a private 5G industrial network for real-time online operation monitoring, supporting Augmented Reality (AR) and 5G-connected inspection robots.

By the end of 2022, more than 4,000 5G-based industrial Internet applications are under construction, providing more than 20 typical application scenarios. Industry experts are calling on global players to continue exploring the combination of 5G and industries or factories to fully unlock the potential of 5G technology.

Continue upgrading to 5G-Advanced (5.5 G)

Investment in the next evolution of 5G technology in China is being made by telecom equipment manufacturers and mobile carriers. At the 2023 Mobile World Congress in Shanghai, Chinese telecom equipment maker Huawei set a goal of developing a 5.5G network that is 10 times faster than current 5G networks. 5.5G technology, which Huawei calls “5G Advanced,” is expected to further stimulate the potential of 5G networks and will become the premise for the development of brand-new 6G network technology.

China Mobile also announced the launch of the “Dual 10 Gigabit City” project in Hangzhou in June 2023, aiming to leverage 5G-Advanced technology to enable the city’s next-generation digital economy. As the first major use case, the project aims to provide live 3D streaming of the upcoming Asian Games, to be held in Hangzhou, to viewers.

Rising energy consumption is a challenge for 5G deployment

While the widespread deployment of 5G networks has paved the way for innovative applications, huge energy bills remain a challenge for sustainable operations of mobile operators.

Indeed, the rapid deployment of 5G networks has caused a significant increase in energy consumption and raised concerns about network sustainability and operating costs.

Operating at higher frequencies, each 5G base station only covers about one-third of the coverage area of ​​a 4G network, requiring a three-fold increase in 5G base station deployment density. With 5G base stations consuming about three times more power per base station unit, this means that 5G networks could result in a nine-fold increase in electricity costs and carbon emissions.

Faced with this challenge, many solutions are being tested and introduced to reduce 5G energy consumption, not just in China. For example, mobile operators are deploying smart software to power down base stations during off-peak periods. Another example can be found in Finland, where Nokia and Elisa have deployed liquid-cooled 5G base stations to convert and reuse waste heat, potentially reducing energy costs by 30%.

With concerns about costs and the environment, it is foreseeable that sustainable innovation will become a top priority for 5G operations, as telecom companies must find ways to optimize energy consumption if they want to successfully deploy sustainable 5G at scale.

Lessons for new 5G markets

China could show the world a blueprint for how to efficiently expand 5G networks with high commercial value. In the face of strong global economic headwinds, operators around the world need to consider how they can maximize the return on investment (ROI) from their 5G investments.

Global market research and analysis company ABI Research (USA) has summarized and given 2 main lessons for new 5G markets.

Firstly, to ensure that customers can fully enjoy the benefits and capabilities supported by 5G, operators will need to commit to moving to standalone 5G networks. In the initial phase, standalone 5G network deployment can be implemented in a phased approach, initially targeting major cities with high demand for 5G.

Second, beyond connectivity, operators need to consider how they can partner with industry players to deliver new consumer services, such as high-quality digital content and customized enterprise solutions that leverage the high data speeds and low latency offered by 5G.

Reference:

1.https://www.cartesian.com/chin...

2.https://www.rcrwireless.com/20...