In Depth: China Races Early Into the 5G Era

Zeng Jianqiu has an early review of 5G internet. The Beijing University of Posts and Telecommunications professor has been using the next-generation mobile technology on his phone for more than a week, one of the first in China to do so.

“It feels great,” Zeng said. “The internet is really fast, and there’s no buffering at all with HD videos. When there’s no 5G signal, the switch to 4G is also very smooth.”

Although the Ministry of Industry and Information Technology (MIIT) originally planned for China to begin commercial licensing of 5G technology in 2020, the government advanced the rollout earlier this month. At a ceremony June 6, MIIT chief Miao Wei handed license documents to the heads of China Mobile, China Telecom, China Unicom and China Broadcasting Network Co. Ltd.

The moment was seen as a milestone marking China’s accelerated entry into the 5G era. The ministry decided to skip a temporary licensing stage and speed up the process by at least half a year. China is in an international race to build 5G networks amid worsening trade tensions with the U.S., including a Trump administration move to cut off leading Chinese 5G equipment maker Huawei from American suppliers.

At the same time, much remains uncertain about China’s 5G future, including how to make the transition, what applications the technology will have, and what roles different operators will play. The addition of China Broadcasting Network to the mix promises to alter a competitive landscape now dominated by the three mobile telecom giants. And infrastructure investment outlays will total at least 32 billion yuan ($4.6 billion) this year alone for China Mobile, China Telecom and China Unicom, with costs rising over the next three years.

Fork in the road

Chinese telecom operators now face choices that could determine their competitiveness for the next few years — such as whether to build stand-alone or nonstand-alone networks. Nonstand-alone 5G networks use existing 4G infrastructure, while stand-alone networks require new, more efficient infrastructure that isn’t available yet.

Two of China’s big three carriers, China Mobile and China Telecom, opted initially to prioritize the stand-alone model. Two weeks after the global mobile standards organization 3GPP published its first set of stand-alone 5G standards in June 2018, China Mobile issued a 5G Technology White Paper in which it set the construction of a stand-alone network as a major goal. At around the same time, China Mobile launched an initiative to develop 5G stand-alone technology with major device makers like Ericsson and Huawei.

Meanwhile, China Unicom decided to focus first on building a nonstand-alone network. As the smallest of the three big carriers, China Unicom saw the nonstand-alone model as a cheaper and easier way to make the transition to 5G.

One important aim was to retain users, according to a Huawei staffer.

“The main purpose of building a nonstand-alone network is that users won’t have to change SIM cards or numbers,” the Huawei employee told Caixin. Additionally, retaining the older network infrastructure would help cover initial holes in early 5G coverage.

Over the past year, the rollout of stand-alone infrastructure has been held back, partly because 5G standards for key technologies such as low-latency communication and 5G satellite connection won’t be finalized by 3GPP until March 2020.

By early 2019, China Mobile and China Telecom shifted strategies. The lag between the rollout of stand-alone and nonstand-alone technologies prompted China Mobile Vice President Li Zhengmao to push in February for the synchronized development of both nonstand-alone and stand-alone networks, an aim that has been echoed by China Telecom, according to people close to the company.

“Domestically, it’s important to seize the first-mover advantage,” another Huawei staffer said, adding that because of China Telecom and China Mobile’s initial focus on stand-alone networks, time was running out for them, and turning to the nonstand-alone model would be the only way for them to meet competition.

“Getting into 5G is like building roads for a race car — but you don’t know what the car will look like,” one Unicom staffer told Caixin.

A fourth player

China’s 5G environment, unlike 4G, will have a fourth player in addition to the major telecoms — China Broadcasting Network, a company formed in 2014 by combining a number of regional cable TV operators.

MIIT’s decision to issue a wireless communications license to the company, which doesn’t have a background in communications, is an unusual step that some analysts previously described to Caixin as “illogical.”

But many local cable TV networks see 5G as an important opportunity for development and transformation at a time when the industry is being squeezed by telecom operators and internet companies that bypass the traditional TV viewing experience through apps and mobile internet connections.

In 2018, the number of cable TV subscribers in China totaled 223 million households, down 8.7% from the previous year, according to China Broadcasting Network. At the same time, profits have plummeted for many listed regional networks. Guangxi Radio and Television, for example, reported a first-quarter profit decline of more than 75% year-on-year to only 11 million yuan.

Zeng Qingjun, vice president of China Broadcasting Network, said the company’s network will be aimed at giving users “smart” radio and TV services, internet of things-related services and even smart-city services. Few detailed plans have been announced, however.

The new technology is “almost the only chance for the radio and television industries to survive,” a staffer from Hubei Radio and Television told Caixin.

Internet-of-things applications

While 5G will bring significant change to online communications between people, 80% of its applications are likely to involve communications between smart objects rather than humans, Minister Miao said at the Boao Forum for Asia in April.

Autonomous driving will probably be one of the most important internet-of-things applications for 5G networks, Zhang Li, chief operating officer of Chinese self-driving startup WeRide, told Caixin.

“In the past, when they did remote-control tests in Silicon Valley using a 4G network, there was a delay of about 1 second, and the real-time situation of the vehicle shown on the screen of the operator in the office was seriously out of sync,” Zhang said. “The vehicle could only be controlled at slow speeds of 5, 10 kilometers per hour.”

Now, Zhang said, researchers in the southern Chinese city of Guangzhou have achieved speeds of 30 to 40 kilometers per hour using 5G connections.

Telemedicine could also change dramatically with the introduction of 5G. In December, a surgeon from the People’s Liberation Army General Hospital in Beijing successfully used 5G-connected robots to perform remote liver surgery on animals from a distance of 50 kilometers. In March, China Mobile said another physician from the same hospital successfully performed the country’s first remote human surgery, placing an implant in the brain of a Parkinson’s disease patient 3,000 kilometers away.

Cost

Along with seemingly limitless possibilities, 5G also brings with it the prospect of gargantuan costs.

In March, the three major carriers disclosed their intended 5G expenditures for this year. China Unicom said it plans to invest 6 billion to 8 billion yuan in the technology, while China Telecom divulged plans to invest 9 billion yuan and China Mobile, 17 billion yuan.

But 2019 will include only the first stage of 5G spending. Yang Jie, chairman of China Mobile, told shareholders in May that 5G investment is expected to peak between 2020 and 2022.

The cost of 5G is especially worrisome for Chinese carriers whose revenue has dropped significantly over the past decade as government policies pushed down mobile subscription fees for consumers.

Some have called for network operators to join forces in building networks to minimize costs. Sources close to MIIT told Caixin that, at a meeting of future 5G commercial license holders convened by the ministry June 5, China Mobile proposed a cooperation with China Broadcasting Network. China Unicom and China Telecom opposed the partnership, and the ministry rejected it.

“China Mobile is so rich, and its network is so large,” one of the sources said. “If it gains access to China Broadcasting Network’s signal frequency band and content, how will China Unicom and China Telecom be able to compete?”

Meanwhile, China Unicom Chairman Wang Xiaochu told Caixin June 12 that he expressed a strong intention to cooperate with China Telecom. The two smaller telecoms were “discussing how to share resources,” Wang said.

Contact reporter Teng Jing Xuan (jingxuanteng@caixin.com)

Wu Fan and Chen Boyuan contributed to this article.