SEOUL (Reuters) – South Korea was the first country to launch a fifth-generation mobile network in 2019, heralding a warp-speed technological transformation for self-driving cars and smart cities.
Three years on, the giddy promises are unfulfilled.
Some 45% of the closest people are now on 5G, one of the highest rates globally, after spending $ 20 billion in network upgrades that have boosted connection speeds of five-fold. But telecommunications companies have not been willing to invest in fancier technology that will speed speeds by 20 times over 4G technology.
That is because the demand is not there yet. App makers haven’t brought mass market services like autonomous driving that would require more firepower. Customers can watch Netflix and surf the net well enough with existing 5G technology.
Telcos have adapted by diversifying. To make the quantum leap to the highest-speed 5G will require the roll-out of essential services that require such fast connections.
“When households begin to have robots for their homes, for example, telcos would then start ramping up infrastructure investments, so the highest-speed 5G would be partially available around 2025,” said Kim Hyun-yong, an analyst at Hyundai Motor Securities.
The lesson for racing in other countries may be 5G: curb your enthusiasm. The new technology holds great promise, but for now there will still be much evolution as revolution in the high-speed internet future.
In April 2019, South Korea’s three mobile carriers – along with a PR campaign featuring K-pop stars and an Olympic gold medallist – as well as Verizon Communications of the United States – rushed their commercial 5G launches ahead of schedule, all keen to claim first spot. in the high-profile wireless technology.
Asia’s fourth-largest economy remains the 5G pioneer, but the hype has begun to fade even before the COVID-19 slammed demand for 5G devices. Companies have baulked at investing the estimated $ 370 billion needed to set up the fastest 5G, and revenue growth has stalled.
“Rolling out 5G is 20 times faster than is impossible, even in Seoul,” said Ku Hyun-mo, CEO of South Korea’s top telecoms operator, KT Corp.
“Establishing nationwide coverage just can’t be done – 5G frequency travels straight and it can’t go around obstacles,” Ku told Reuters. “It can’t deliver the same speed once it travels a few hundred meters.”
The fastest version, using ultra-shortwave in a high-band spectrum called millimeter wave (mmWave), would require 15 to 20 base stations per square kilometer (40-50 per square mile), compared with just two to five for 4G. to a McKinsey report.
South Korean telcos have about 215,000 5G base stations, but only 2% of them can handle mmWave. Other countries that have introduced 5G, such as the United States and China, also rely heavily on the slower mid-band spectrum.
As of March, South Korea had 22.9 million 5G subscribers, just under half the number of its 4G users. By contrast, when 4G celebrated its third birthday, its users had more than doubled those of its predecessor.
“When 4G was first rolled out in 2011, data demand exploded to watch YouTube and Netflix, and users were aggressively switched to 4G,” said analyst Kim. Now, though, “telcos currently lack a killer service that can generate heavy data demand” that would justify paying up for 5G, he said.
In the first two to three years of 4G, carriers’ average revenue per user (ARPU) climbed 5% to 12% annually. By contrast, KT’s ARPU rose 3.7% in the first quarter from a year ago, while SK Telecom Co edged up 0.6% and third-ranked LG Uplus Corp saw a 4.2 decline.
“If telcos stick with the current connectivity business, they will plateau,” said KT’s Ku.
Mobile carriers are constantly turning their eyes to new businesses. KT is developing artificial intelligence to power call centers, hoping that business will double this year, while SK Telecom has seen a jump in revenues for cloud services and data centers.
Diversification is paying off with investors so far. SK Telecom and KT shares have risen some 26% since 5G rolled out, beating the broader market’s 18% growth even as ARPU growth slows.
“From 3G to 4G, data demand is increasing exponentially. But at the moment, data demand is growing linearly,” said Hyundai’s Kim. “Mid-band 5G would facilitate the popularisation of 5G and serve as a bridge to the next step.”
(Reporting by Byungwook Kim and Joyce Lee; Editing by Miyoung Kim and William Mallard)
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