COVID-19 and 5G: Short-term Pain for Long-term Gain

Published: April 13, 2020

Introduction

The COVID-19 outbreak is causing unprecedented disruption in every corner of our lives. It has become clear that no one is beyond the pandemic's impact as we wrestle with social distancing requirements to flatten the curve. Many of the measures we have taken, such as work-from-home, distance learning and transitioning commerce exclusively to digital channels, depend on the availability of a robust broadband connection. In this way, the coronavirus has further cemented broadband as an absolute necessity and, during a crisis like this, our greatest lifeline. For this reason, the broadband service sector should hold up as well as any with broad exposure to the consumer market, but what does it do to 5G? We expect a mixed bag that generally sets up well in the long term after a prolonged period of disruption.

  

The COVID-19 impact on global 5G deployment is a moving target. Subject to many variables that are in a state of flux, we find ourselves recasting the impact often. It's useful to remember that 5G occurring at scale is more than just Apple releasing a 5G phone – it requires the network side, too, which in turn depends on governments making spectrum available and buildouts of new tower sites feasible. The following conspire to slow 5G rollouts down by at least two quarters.

• 3GPP delays. 3GPP recently announced a three-month delay for the completion of Releases 16 and 17, which we have previously identified as the 'showstopping' bits of 5G. This news does not surprise us, given the group's inability to conduct face-to-face meetings until at least June. This is a major disruption that affects all 5G stakeholders globally; it should be noted, however, that this should not delay Release 15 networks because the standard is already commercialized. This impacts Phase 2 and Phase 3 of 5G rollouts.
• Delay characterization: Moderate
• Network and device-level supply chain disruption. COVID-19 has created some supply chain disruptions, but thus far they appear to be well managed by TEMs such as Nokia, Ericsson and Huawei. On the device side, Apple may be facing a short delay on the release of its 5G iPhone (at least partially) due to supply chain disruption. Apple is also weighing uncertainty around demand for its newest, most expensive phone. Prior to the COVID-19 outbreak, consumers indicated that they were wary of spending more money on 5G network services. According to our VoCUL: Communications, Streaming Media and 5G survey conducted in Q4 2019, 43.1% of respondents would not be willing to pay anything extra per month for 5G coverage.
• Impact: Minor
• Site licensing/administration. This is an under-the-radar but important area that sits in the critical path of 5G deployment. 5G networks are different in that they take advantage of low-, mid-, and high-band spectrum for coverage and performance. The use of high-band spectrum will require deployment of small cells, which will require cooperation from the municipal government agencies responsible for issuing such siting permitting and licenses. Operators often complain about this process being challenging in normal conditions; with COVID-19 restrictions we can expect even more delays. Many city halls are closed, and a large percentage of municipalities consider site infrastructure licensing a nonessential service, which means it's closed.
• Impact: Moderate
• Delays in spectrum auctions. This is the most impactful blow that can be dealt to a country's ability to roll out 5G services at scale. Spain, France and Austria have all made the decision to delay 5G spectrum auctions due to COVID-19. We expect that countries with spectrum delays will impact 5G rollout plans by at least two quarters.
• Delay characterization: Major.
• Lowered demand for 5G services. The unprecedented disruption to the global economy is putting people out of work and causing them to reprioritize their spending. 5G was already going to be a difficult selling job for network operators and device builders. The COVID-19 pandemic will drive down demand for anything considered nonessential. While it's true that home broadband and mobile services will hold up well, those are the existing LTE services people pay for, not 5G.
• Delay characterization: Major.