Deloitte: China Outspent US by $24 Billion in 5G Infrastructure, New Report Outlines Potential Economic Implications in the Race to 5G

- Deloitte predicts countries that adopt 5G first are likely to experience disproportionate gains in macro-economic impact.

- Speed of infrastructure deployment and tower density distinguish China's lead during these early stages.

- To remain competitive, Deloitte describes new approaches to help build the country's underlying communication infrastructure.

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Deloitte

Aug 07, 2018, 07:30 ET

NEW YORK, Aug. 7, 2018 /PRNewswire/ -- The world's economy is at a pivotal moment, and a new wireless communication called fifth generation networks (5G) is at the axis. Countries who are first to adopt 5G will likely see greater and more sustained macro-economic benefits, given the network effects associated with adding billions of devices to the 5G network. However, a Deloitte report released today notes that other countries are outspending the United States in both relative and absolute terms, with China being a clear early mover. The report notes the U.S. risks losing its technology leadership position unless swift action is taken to help unlock industrywide investment in the country's underlying communications infrastructure.

The report titled "5G – The chance to lead for a decade" illustrates how China and other countries are outpacing the U.S. in terms of wireless communication infrastructure spend, tower density and efficiency of execution. Together, these practices are distinguishing China's lead in the early stages of 5G deployment. This report explores the sense of urgency for wireless carriers and policy makers to work together in an effort to increase investment in the country's communications infrastructure and offers potential solutions to help improve economic efficiency.

"We predict that 5G will expand the network effect dramatically by extending the reach of the internet to almost any kind of connection, by almost any kind of device, anywhere a wireless signal can reach," said Dan Littmann, principal, Deloitte Consulting LLP. "The potential economic benefits of 5G will soon become a key differentiator for cities looking to attract both businesses and residents. For the U.S. to remain competitive and eventually emerge as a leader, the race to 5G should be carefully evaluated and swift actions should be taken."

Economic investments compared
While the U.S., Japan and South Korea have all made significant strides toward 5G readiness, the study found that since 2015 China has outspent the U.S. by $24 billion in wireless communications infrastructure and built 350,000 new cell sites, while the U.S. has built fewer than 30,000 in the same timeframe. Even with this estimate normalized to account for the population to wireless subscriber ratio, the study concludes that the U.S. has underspent China in wireless infrastructure by $8 to $10 billion per year since 2015.

Furthermore, the report notes China's five-year economic investment plan projects a total of $400 billion in 5G related investment. In addition, Deloitte estimates that the equipment necessary to add a carrier in China is about 35 percent less than the U.S., suggesting the U.S would need to spend 2.67 times the amount that China spends to generate an equivalent amount of wireless network capacity.

Growing rate of network site density
In 2017, U.S. tower companies and carriers added fewer sites in the last three years than China added in three months. China now has 1.9 million sites, 10 times more than the U.S., which yields almost 40 times the tower density per square mile, and three times the density on a per capita basis.

Winning the 5G race takes a nation
The report notes that 5G will expand the network effect dramatically and that the countries that adopt 5G first will likely experience disproportionate gains in macro-economic impact compared to those who lag.

In an effort to prevent deployment challenges and enable rapid and extensive 5G deployment, Deloitte examined a range of potential actions:

Establishing lighter touch policy frameworks that are able to deliver higher scale and efficiency and help reduce deployment cycle times.
Encourage collaboration among carriers and other ecosystem organizations so that the demonstrated benefits from network effects are equitably shared.
Implementing a national communications infrastructure database to provide deployment statistics, leading practices, and visibility into small cell approval and denial rates.

The report concludes that as another era of untapped economic potential emerges with the adoption of 5G technology, investment in upgrading the underlying communications infrastructure has become increasingly critical. Unless tangible steps are taken to help rebalance the private investment case for the upgrade, the U.S. may risk losing the macro-economic leadership it gained in the previous wireless investment era.

To download a copy of the full report, go to www.deloitte.com/us/5g-deployment.

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SOURCE Deloitte