The 5G network is the next generation of telecommunications. Currently, there is no standard for it, and several countries and companies are developing their prototypes.
At the moment, South Korea is the only country that has a 5G national network, which is deployed along with local operators KT, SK Telecom, and LG UPlus. In the United States, the network has begun to be used partially in some cities.
5G in LatAm faces several obstacles
In Latin America, the deployment of the 5G network faces several obstacles. At the EU-LAC 2019 Economic Forum, the Director of Public Policies of the Inter-American Association of Telecommunications Companies Juan Jung mentioned some of them:
- An average revenue per user (ARPU) with a negative trend “much lower than in the more developed countries, (for example, the United States, USD40) “.
- Obsolete regulatory frameworks,
- Restrictions for network deployments,
- High prices of the radio spectrum, and
- High tax burden
“Digitization is the key to productivity change,” said Juan Jung, but he wondered if the current context is helping to make this process go faster in the region.
For Juan Jung, the 5G network represents an excellent opportunity for IoT and Industry 4.0. The specialist emphasized that “the future of Latin America depends to a great extent on digitalization.” However, the region is lagging in digitization, which could mean a setback for Latin America. A study by McKinsey warns that if the region does not produce an increase in productivity, “the GDP growth for the next 15 years will be 40% to 50% of the previous 15 years” and this increase can only be carried out with technological innovation.
Digitization is the key to productivity change
Juan Jung, Executive of ASIET
Jung pointed out that “the operators continue to invest in 4G since they must first capitalize on these investments”. Despite this, operators in some Latin American countries are already testing to work with 5G, as Movistar and Ericsson did in Argentina.
5G needs radio spectrum
A pending task in the continent is the bidding of the radio spectrum of the 5G. In this area, Mexico leads. The frequencies in the 3.4 GHz and 600 MHz bands have already been tendered in this country. The GSMA, an organization that brings together more than 80 mobile telephony operators and 200 companies related to the sector, estimated that Mexico would be the first country to the region with 5G commercial services from Telcel and AT&T.
Brazil plans to tender the radio spectrum in March 2020. Chile announced that it has already begun the process to bid spectrum in the 700 MHz and 3.5 GHz bands, while in Peru this will be done by 2020.
Spectrum bidding is not the only problem for companies to offer the 5G service. Juan Jung believes that “For 5G to represent a success story, we need political and fiscal reforms.” The telecommunications sector is one of the most taxed in the region.
Juan Jung also stressed the need for a neutral fiscal policy, where all companies pay taxes under the same rules, according to their sales and the profits they earn. It also recommends avoiding specific or particular fees. Finally, Jung mentions that both the income tax and the value-added tax must be solved, so that these are paid in the country where the services are provided, separating the spectrum policy from the fiscal policy.
In addition to fiscal and telecommunications policies, it is necessary to deploy a wide infrastructure to cover the continent with 5G. José Otero, vice-president for Latin America at 5G Americas, emphasizes that more antennas will be needed: macro base stations (towers) as well as small cells that will require a series of spectrum frequencies that must be free of interference.
“Additionally, these antennas should be connected in turn with high-speed backbone networks, which will also require large fiber optic deployments. This reflects that the implementation of 5G will require a joint effort from the public and private sectors, and huge investments by network operators, “said the specialist.
When would 5G come in Latin America?
In 2018, the consulting firm Deloitte, together with the Center for Telecommunications Studies of Latin America, ranked the Latin American countries that are most advanced in the implementation of the 5G.
The Deloitte report considers Chile as the most prepared country, followed by Costa Rica, Uruguay, Brazil, Mexico, Argentina, Colombia, Jamaica, and Peru. In the research, different variables were evaluated such as infrastructure, adoption of technologies, regulation, innovation capacity, political and economic situation, and educational skills.
Experts believe that 5G could reach the region after 2021 or 2022 but in a limited way. According to the GSMA, it is anticipated that by 2025, there will be 1300 million 5G connections, but this will depend on operators having access to sufficient spectrum.
“In Latin America, although we can still expect significant growth in 4G connections over the next few years, the time to work to secure the spectrum for 5G is now”, is analyzed in the report presented by the entity in November 2018.
Mexico would be the country that would have the fastest adoption of 5G in Mexico. In this country, there could be 18 million connections (adoption of 14%) by 2025, followed by Brazil, with 26 million connections (11% adoption), and Peru, with 4 million connections (10% adoption)”, analyzes the GSMA in its report on the mobile economy in Latin America and the Caribbean.