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10 November 20226 minute read

Tech Index 2022: 5G

National security concerns dominate

Despite all the benefits promised by more capable 5G networks, the headlines around this technology have, in the last few years, been dominated by another issue – national security.

Security concerns around telecoms infrastructure are nothing new in the international arena, but these have escalated surprisingly quickly, becoming a major issue in many markets.

Proactively limiting investment from some foreign economies was by no means a new mechanism in the US when the Trump administration intervened in 5G equipment supply from China, a policy that has continued, so far, into the Biden administration’s tenure.

“Security concerns around telecoms infrastructure are nothing new in the international arena, but these have escalated surprisingly quickly.”

Severe restrictions remain in place and a federally funded programme to remove Chinese technology from existing networks and replace it with “approved” technology continues apace.

In Europe, some countries, like the UK, have also opted for outright bans and are pursuing “rip and replace” programmes too. Such programmes reimburse service providers for the cost of replacing equipment and services that pose a national security threat. Others are using broader national security provisions to effectively close off their 5G networks to Chinese vendors.

Market impact

It’s not surprising that in our survey some 80% of respondents felt that current restrictions were sufficient to protect national security, up from 77% in our last survey in 2020, given the severity of some countries’ current restrictions.


Security implications of 5G

Of the 20% that thought further restrictions were needed, most called for even tighter regulatory controls and more effective monitoring of supplier risk profiles. Over half argued for increased state funding of domestic equipment makers and software providers.

Some non-Chinese vendors see a competitive advantage now that capable and often less costly Chinese equipment is being squeezed out of many markets.

We see no evidence that controls have slowed down the roll-out of 5G, although other supply chain issues have caused delays. The US “rip and replace” programme has tended to affect smaller regional and local operators rather than the major telcos and Dish who are leading the 5G charge. But the controls have undoubtedly made the transition to 5G more expensive.


Developing credible use cases

Respondents to our survey continue to see real benefits from adopting 5G technology, including faster processing power, increased connectivity, reduced latency and the ability to develop more efficient business models.

The financial services market is increasingly seen as fertile ground for 5G, with 14% seeing this as a growth area in 2022 compared with just 8% in 2020. That’s not surprising given how quickly consumers adapted to using smart phones for payments and online banking during the pandemic.

By contrast, fewer now see smart cities as a key use case (18% in 2022 against 22% two years ago), but 5G does continue to be seen as a key enabler of Internet of Things devices and networks.

Cases where 5G offers most growth potential

One 5G capability where we see most potential and progress is so-called “network slicing,” allowing companies to set up specific, stand-alone enterprise networks. Deployed in a port or factory, such networks allow an operator to run a fleet of automated vehicles and processes via a reliable, centrally supervized network, with obvious efficiency gains.

5G is also having a significant impact in replacing fixed broadband networks, serving remote homes and businesses that couldn’t previously be served economically by wired connections. In the US, both T-Mobile and Verizon have introduced services to compete with traditional broadband connections.

But some of the use cases being developed for 5G seem less credible. Some doubt that 5G genuinely has many value-enhancing applications in the driverless car field because of the need to keep key technology within the vehicle itself.

Similarly, while the case for automating agriculture is strong, many of the systems that would be useful on farms might just as easily be run on 4G networks.


Spelling out the benefits

Consumers are often eager to adopt technology offering them faster, bigger, better services but only if the benefits are obvious.

One reason why the transition from 3G to 4G was so quick was the fact that operators produced clear rate plans allowing users to see what they were getting for their money.

That hasn’t happened yet with 5G and it is interesting that our survey reveals a continuing concern that customer expectations are at odds with the actual solution delivered.

More widely the biggest challenges identified are around infrastructure investment and connectivity costs – consistently the overriding concerns in 2022 and 2020. Nevertheless, the impetus to roll out 5G networks has not diminished.

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