Europe's Quest for 5G: Policy and Opportunities

The fifth generation (5G) of mobile networks is widely expected to revolutionise the digital economy and society by enabling high levels of connectivity, speed, and reliability. However, 5G also poses significant technical and regulatory challenges that policymakers in Europe struggle to grapple with. This article explores two of the main dimensions shaping EU public policies around 5G, notably network rollout and geopolitical leadership.

One of the distinctive aspects of 5G is that it operates on millimetre wave bands, which are much higher than the frequencies used by previous generations (3G, 4G) of mobile networks. This allows 5G to achieve higher data rates and lower latency, but also reduces the coverage area and the penetration of signals through obstacles. Therefore, 5G requires a more dense and modular network architecture, composed of small cells that can be deployed and configured according to the demand and the environment.

5G assumes a key role in public policy as its potential goes beyond improving the performance of mobile communications. 5G is also a key enabling technology for the development and integration of other technologies, such as the Internet of Things (IoT) and artificial intelligence (AI). High-speed 5G networks can indeed support a wide range of applications in smart cities, smart manufacturing, telemedicine, precision farming in agriculture and autonomous and connected driving.

Slow 5G rollout in the EU

Despite the high expectations and promises of 5G, its deployment and adoption in Europe has been relatively slow and uneven, compared to other regions such as the US, China, and South Korea. The European Commission recently reported that 5G coverage in key frequency ranges for its most commercial applications is only at 41% across the EU 27 states.

Several factors can explain the slow and fragmented rollout of 5G in Europe; the most relevant from a public policy standpoint can be grouped into two main categories: regulatory fragmentation and market consolidation of players. These factors are likely interrelated and mutually reinforcing, creating a circle that slows down the development of a 5G ecosystem in Europe.

Fragmentation is a key driver in slow network rollout as it regards both the regulatory framework in which 5G is rolled out, and the demand for 5G coverage. Difficulties for operators indeed may arise, inter alia, from:

1. different network coverage obligations among EU states – in the EU, Germany, Italy and the Netherlands alone have all different LTE and 5G extension obligations as shown by Bauer and Bohlin;
2. very high prices for the auctioning of available radio spectrum frequencies to telecoms operators, over which to run 5G.

The latter, whereby radio spectrum is considered to be a public good, of finite availability, and is thus auctioned by national public bodies, highlights how governments seek to maximise revenues out of frequencies allocation – with small consideration for the impact of these choices on overall deployment strategies and potential societal benefits coming from them. Exclusive Member States competence over frequency auctions also contributes to a scattered EU framework, as different states might have different auctioning procedures and administrative requirements.

On the market consolidation side, it is common opinion that the presence of, on average, 4 mobile networks operators in each of the EU 27 countries, might prevent them from exploiting economies of scale that the 5G market offers. By way of comparison, both the US and China have a smaller number of operators, weighted on the size of their respective market, who significantly benefit from scale economies in terms of return on costly investments for infrastructure deployment.

While cross-border consolidation between mobile 5G operators in different Member States would achieve the scale effect, fragmentation in regulatory requirements, as discussed above, likely discourages telecoms firms from embarking in these types of costly and uncertain mergers. This is especially true when it comes to fragmentation in spectrum policies among EU countries – with spectrum being key to 5G deployment, as the network needs to run on different spectrum bands for different use cases.

The next European Commission, that will be sworn in following EU elections in June 2024, will eventually have the chance of addressing part of these issues: while market consolidation requires careful competition and merger policy considerations, national spectrum policies can be harmonised at the EU level in order to provide legal and economic certainty to mobile operators and favour a wider deployment of 5G networks.

Geopolitical leadership

The same feature of 5G that makes the technology a key factor in public policy, also puts it at the centre of security and national defence considerations: 5G underpins the functioning and development of many sectors and services that are essential for the economy and society, such as critical transport application (e.g. automated driving) and energy infrastructure (e.g. smart grids).

Moreover, from a technical standpoint, the dense architecture of 5G infrastructure might make it generally more vulnerable to cyberattacks, as it provides a single point of entry for malicious attacks.

This implies that 5G security is not only a matter of technology, but also of politics and geopolitics, as it involves the question of who controls and influences the design, development, and deployment of 5G equipment and standards.

In this regard, the global competition and rivalry between the US and China, which are the two leading players in the 5G market, has significant implications and repercussions for Europe.

On the one hand, the US has adopted a confrontational and restrictive approach towards China, accusing it of posing a threat to its national security and interests, and imposing sanctions and export bans on key 5G technology suppliers from China.

On the other hand, China has pursued an ambitious and aggressive strategy to gain a competitive edge and a dominant position in the 5G market, mostly by investing heavily in research and development, and subsidising its domestic companies.

The EU – finding itself with no direct competences on matters of national security – is trailing behind both countries in terms of 5G leadership, so its policy can only be bi-dimensional: cooperating with the like-minded country, the US, while replicating some of its actions.

EU members have indeed recently taken aim at the main Chinese 5G vendors by implementing full or partial bans on the use of their equipment within their territories, as is the case for Germany, following the Commission’s recommendations stemming from the 5G security toolbox strategy. On the other side, the EU has strengthened collaboration with the US by delivering a 6G outlook roadmap in the context of the EU-US Trade and Technology Council (TTC) – a newly-launched transatlantic forum for policy coordination.

While specific aspects of 5G geopolitics have recently been dealt with via internal market cybersecurity, it’s clear that this does not suffice in granting the EU a good level of global leadership in this field. Arguably, the only driver that could place the Union at the front of the 5G quest is the development of a proper internal market for telecommunications.