What Does "5G Leadership" Mean?

In economic terms, 3G often is said to have been “lead by Europe,” and 4G often is said to have been “lead by the United States.”

So a new report commissioned by CTIA argues that “China, South Korea, and the United States are currently leading the race to 5G.”

That term most applies to the potential impact on firms supplying the market. “America’s 4G leadership resulted in economic and job growth that would have otherwise gone to other countries,” the report states. “Losing wireless leadership in 3G and 4G had significant, long-term, negative effects on the Japanese and European telecommunications industries.”

Though it is understandable that an industry trade group would say such things, the claim that “leadership” in 3G or 4G had direct benefits for industry suppliers has to be qualified.

Consider the matter of mobile phone suppliers. In the “mobile equipment industry, we had 80 percent of the market in 2008 and because we were not ready for 4G mass deployment, the EU industry lost almost its entire market share for mobile phones,” the report has an EU source saying.

Many would say that is a result of the fact that smartphone sales shifted to Apple (based in the United States) and away from Nokia (Finland-based).

Likewise, in the case of handset suppliers, the report states that “most Japanese corporations exited the handset business and their early lead in mobile internet services faltered.” Again, that is largely a function of market share leadership (and unprofitability for most handset suppliers) except for Apple and Samsung (Korea-based).

Most recently, Chinese suppliers have surged as suppliers of lower-cost handsets.

Then there is the area of applications, where, by all accounts, U.S. firms such as Google, Facebook, Amazon and Netflix have been big beneficiaries of the shift to mobile application use and business models, no comparable European firms have grown, and scale players rivaling U.S. firms have emerged mostly in China.

In other words, “winners” in 4G have come in the area of device suppliers and at-scale applications providers, at a time when network infrastructure “leadership” has been questionable. No U.S. or Canadian firms arguably “lead” global telecom network infrastructure markets, the remaining European suppliers are facing profitability concerns, while Chinese firms currently are taking market share.

In other words, “4G leadership” has been true for a few firms in the device and applications area, but has had less-clear advantages in the network infrastructure areas.

To be sure, government policies to release much more spectrum for 5G services does matter. Without such additional spectrum, 5G will not be easy, if possible at all. But service providers will have to discover and create new revenue streams in the 5G era, beyond simply shifting revenue from 4G to 5G, as service revenue likewise was shifted in the transition from 3G to 4G.

The point is that 5G leadership is probably going to be more complex than expected. In the network infrastructure area, a few Chinese firms are poised to win. The same likely holds in the device area and applications area.

Beyond that, it remains hard to see how firms in Europe, the United States or other areas will fare. As understandable as industrial policy preferences might be, what “5G leadership” means, and whether it is actually possible to create new winners--beyond the trends we already see--is open to debate.