© Reuters. Engineers set up a 5G base station in Seoul, South Korea, on May 31, 2019, in this photo of the printout provided by SK Telecom. The photo was taken on May 31, 2019. SK Telecom / Distribution via REUTERS / Files
From Byungwook Kim
SEOUL (Reuters) – South Korea was the first country to launch a fifth-generation mobile network in 2019, heralding a technological transformation with a distorted speed towards self-driving cars and smart cities.
Three years later, dizzying promises have been broken.
About 45% of people in the country already use 5G, one of the highest rates in the world, after about $ 20 billion in network upgrades, which have increased connection speeds fivefold. But telecommunications companies are not ready to invest in more sophisticated technology that will increase speed by 20 times compared to 4G technology.
This is because demand is not yet available. Application developers have not brought to the mass market services such as autonomous driving, which requires more firepower. Customers can watch Netflix (NASDAQ 🙂 and surf the web well enough with existing 5G technology.
Telecoms have adapted through diversification. To make a quantum leap to the highest 5G speed, it will be necessary to introduce basic services that need such fast connections.
“When households start having robots in their homes, for example, telecommunications will begin to increase investment in infrastructure, so the highest-speed 5G will be partially available around 2025,” said Kim Hyun Yong, an analyst at Hyundai Motor Securities.
The lesson for other countries vying for 5G could be: limit your enthusiasm. The new technology holds great promise, but for now there will still be as much evolution as there is a revolution in the future of high-speed Internet.
In April 2019, South Korea’s three mobile operators – with a PR campaign featuring K-pop stars and an Olympic gold medalist – as well as Verizon Communications (NYSE 🙂 from the United States – rushed with their commercial 5G launches ahead of schedule, all eager to claim first place in high-profile wireless technology.
Asia’s fourth-largest economy pioneered 5G, but noise began to fade even before COVID-19 hit demand for 5G devices. The companies refused to invest approximately $ 370 billion needed to create the fastest 5G, and revenue growth stopped.
“Deploying 5G, which is 20 times faster, is almost impossible even in Seoul,” said Ku Hyun-mo, CEO of South Korea’s best telecommunications operator, KT (NYSE 🙂 Corp.
“Creating national coverage simply cannot be done,” Ku told Reuters. The fastest version of the millimeter wave spectrum (mmWave) “travels straight and can not bypass obstacles. It can’t deliver the same speed after a few hundred meters. “
The ultra-shortwave mmWave will require 15 to 20 base stations per square kilometer (40-50 per square mile), compared to just two to five for 4G, according to a McKinsey report.
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South Korean telecommunications has built 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 slower mid-range spectrum.
As of March, South Korea had 22.9 million 5G subscribers, just under half of its 4G users. In contrast, when 4G celebrated its third birthday, its users more than doubled those of its predecessor.
“When 4G was first introduced in 2011, data demand increased to watch YouTube and Netflix, and users aggressively switched to 4G,” said analyst Kim. But now telecoms do not currently have a killer service that could generate more data demand, which would justify paying for 5G, he said.
In the first two to three years of 4G, the average revenue of consumer operators (ARPUs) rose by 5% to 12% per year. In contrast, KT’s ARPU rose 3.7 percent in the first quarter from a year earlier, while SK Telecom Co.’s ARPU rose 0.6 percent and third-ranked LG Uplus Corp fell 4.2 percent.
“If telecommunications sticks to the current connectivity business, they will be on the plateau,” said KT’s Ku.
Mobile operators are increasingly turning their eyes to new businesses. KT is developing artificial intelligence to power call centers, hoping the business will double this year, while SK Telecom saw a jump in revenue for cloud services and data centers.
For now, diversification pays off with investors. Shares of SK Telecom and KT rose about 26% since the introduction of 5G, outpacing growth of 18% in the wider market, even as ARPU growth slowed.
“From 3G to 4G, data demand has increased exponentially. But at the moment, the demand for data is growing linearly, “said Kim from Hyundai. “5G in the middle lane will make it easier to promote 5G and serve as a bridge to the next step.”
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