5G Public Works Project

May 12, 2020 – 11:22 pm

I’ve seen a few people propose a big government project around 5G mobile technology. I couldn’t find more detail to any proposals, so I did my own research to inform my own opinions on what’s needed and what’s not. I wrote up where I landed so I won’t forget it, and I’m sharing in case it’s useful to you. If you have corrections, etc. please contact me on Twitter as @gnat or in email (nathan@torkington.com).

Abstract

In the runup to the 2017 general election, there was talk of government investment in 5G networks to get greater coverage in rural and remote areas. MBIE canvassed opinion as part of a consultation around spectrum auctions, but took no action. This idea has resurfaced as a Public Works project to “get New Zealand moving again”. This paper is a backgrounder for the issue and decision points.

Mobile Technology: A Primer

Spectrum

Mobile phones communicate with cell towers using radio waves (often referred to as “spectrum”). Radio waves are identified by their frequency, and different services use different groups of frequencies (“bands”). Lower frequencies travel further.

In New Zealand, spectrum is property. NZG owns rights to the whole spectrum and leases it to companies that want to use it. The commercial terms of the lease are determined at an auction. There are many uses and users of spectrum, not just the largest mobile operators.

Generations

Mobile technology evolves. Roughly every decade there’s a new generation of technology: 80s = 1G, 90s = 2G, 00s = 3G, 10s = 4G, 20s = 5G. This is partially because of R&D time but also because each generation represents massive capital investment by mobile operators. Each G brings faster downloads, lower power consumption, and more smarts to prevent dropouts, etc.

The technical standard for a generation says how to use spectrum to transfer data, make a call, etc. This standard could theoretically be used on any band of frequencies, but because commodity network technologies like mobile phones require interoperability, the International Telecommunication Union standardises some frequency ranges for each generation. Operators could deploy 5G over the same frequencies that 4G phones are using, but can’t because that band of frequencies is already heavily used.

5G

There are three relevant new-to-telephony bands of frequencies for 5G in NZ:

1. 600MHz, which gives strong signal over long distances. Vodafone indicates this will play a role in rural areas, Spark suggests low-power Internet-of-Things (IOT) networks might operate in this band: “Low-band spectrum such as 600 MHz are likely to be for IoT use cases where large numbers of devices with very wide coverage footprint are required, i.e. for logistics, asset tracking, and smart grid applications. It is only when we get to needing tens of millions of devices that existing LTE and LoRa technologies will have limitations.”
2. 3.5GHz, which has similar signal strength:distance properties as 4G users currently experience. This will be the workhorse in urban and town areas.
3. 26GHz, which travels short distances (<500m) but can carry vast amounts of data. This is foreseen to be useful in shopping centres, convention centres, campuses, stadia, and other high-density gatherings. It’s unclear whether anyone seriously proposes building a high-density network of towers for 26GHz delivery. It could also be used to provide fixed mobile substitution, aka Wireless Fibre, which would allow retail telcos like Spark & Vodafone to provide multi-gigabit home services without having to pay Chorus for fibre.

MBIE has released some 3.5GHz spectrum for operators to experiment with 5G, and there will be more substantial 3.5GHz auctions in the future. Different operators have different rollout priorities: Vodafone signalled 3.5GHz first, then 600MHz, then 26GHz; but Spark signalled 3.5GHz then 26GHz then 600MHz.

Existing towers can be refitted to provide 3.5GHz and 600MHz service. The high-density nature of 26GHz will require new towers or (more likely) deployment of micro-sites in the built infrastructure of the venues being serviced. 

There are 3.5GHz handsets on the market, and they’re used in the mobile operators’ trials of 5G. The 600Mhz frequency band hasn’t been blessed by the ITU yet (expected in 2023). There are no 26GHz handsets: only dongles and specialty hardware.

Current Structure of NZ’s Mobile Industry

There are three players: Spark (41%), Vodafone (36%), 2Degrees (23%). Spark is listed on the NZX. Vodafone is co-owned by Infratil and NYSE-listed Brookfield Asset Management (US PE). 2Degrees is 1% owned by the Hautaki Trust, 26% by Dutch holding company Tesbrit BV, and 73% by TSX-listed Trilogy International Partners (Companies Office). Vodafone and Spark have strong coverage around New Zealand. 2degrees has built most of their 3G/4G network around urban areas, and in many rural areas roams on Vodafone using 3G.

Each of the three mobile operators have an equal share in a joint venture, the Rural Communications Group. This is a mechanism for building and sharing the physical infrastructure of cell towers. The commercial terms of sharing infrastructure is set by the Commerce Commission. The RCG deploys shared 4G networks: 

In August 2017 the Rural Connectivity Group was appointed by the government to be the infrastructure provider to bring 4G mobile and wireless broadband coverage to rural New Zealand under the Rural Broadband Initiative 2 and the Mobile Black Spot fund. The Rural Connectivity Group is an independent entity established to build the infrastructure shared by New Zealand’s three mobile network operators and to operate and maintain the new open access network. In partnership with Crown Infrastructure Partners we will deliver new mobile and wireless broadband coverage to at least 30,000 rural homes and businesses, provide mobile coverage to a further 1000 kilometres of state highways and provide connectivity to at least 90 top New Zealand tourist destinations by December 2022. This critical infrastructure project is funded by the government’s Telecommunications Development Levy, and an additional $75M provided by the three mobile network operators. Crown Infrastructure Partners will manage the distribution of funds to the Rural Connectivity Group. This unique funding model is the only way these modern services can be delivered further into rural New Zealand. (Source: RCG website)

Ultrafast Broadband

Separate from the mobile networks, in 2009 the New Zealand Government set up Crown Fibre Holdings (a Crown Entity, now called Crown Infrastructure Partners) to contract with fibre companies to build a fibre network. The goal was fast broadband for most of New Zealand, hence the project name “Ultrafast Broadband”. Chorus won most of the business, with various council and lines company partnerships (“Local Fibre Companies”) accounting for the rest.

Chorus received $929M, 50% as interest-free loans and 50% as the purchase of non-voting shares. LFCs are 50% owned by Crown Fibre and 50% by the other partners.

Chorus operates the fibre infrastructure and has wholesale offerings to Retail Service Providers (RSPs), the companies that then sell Internet access to the public and to customers. The wholesale prices and Chorus ownership (it can’t be owned by an RSP) are the subject of Government regulation. This structure then creates a framework for retail competition resulting in low prices for fast and improving connectivity for customers. Indeed, NZ’s broadband speeds and penetration compare favourably internationally (especially given our population density distribution).

As part of Ultrafast Broadband project, the Rural Broadband Initiative was established. This funds the provision of connectivity (fibre or cellular) to very low-density areas. The RCG was established to implement the cellular portion.

Chorus has proposed it operate NZ’s mobile network infrastructure, by analogy with its fibre operation. Existing mobile operators (who presently own their own infrastructure) have resisted, pointing out that the initial driver of 5G uptake is likely to be replacing fixed-line broadband and this would place Chorus in the position of having to invest in mobile infrastructure that competes with its existing fibre infrastructure. Chorus also owns the legacy copper network, which situation requires large amounts of regulation to maintain consumer benefit.

Shared Infrastructure

By analogy with the success of Chorus, a Public Works project would seek to contract with an infrastructure operator to erect the cell-towers and backhaul (the connection to the rest of the mobile network, generally fibre).

Active infrastructure does the communicating: antenna (“Radio Access Network”), fibre, and possibly even spectrum. Passive infrastructure is everything else: the radio mast, cabinets, power supply, alarms, etc. There are two models for shared infrastructure, corresponding to what is shared: passive and active. Active sharing is what interests us here.

International Active Sharing Relationships

There are many examples of 3G, 4G, and 5G active sharing in networks around the world. It’s an old and well-established practice. See, for example, this GSM Alliance paper on Mobile Infrastructure Sharing (2012). (MNO = Mobile Network Operator)

[A]ll forms of infrastructure sharing are usually characterised by increased efficiency in the use of resources, where capacity exists. […] This will have benefits for the wider economy as land is available for other uses, in particular in densely populated areas where little space is available.

Similarly, all forms of infrastructure sharing generally reduce costs and prices to consumers as they reduce the investment lay-out and opex required to provide a given level of service. […] Regarding RAN sharing, the cost savings […] of up to 30% indicate that prices to consumers are likely to be affected positively through competition. 

However, there are very few instances where all the MNOs in a single market share the same infrastructure. New Zealand has broken new ground here with RCG. From the RCG website:

Government and industry collaboration will see New Zealand as the first country in the world where all three mobile network operators will share radio access network equipment and one set of antennae on each facility built by the Rural Connectivity Group.

Poland is considering a national 5G network (source). There is more work to be done in gathering international comparators.

Objectives of a Public Works Program

While not clearly articulated anywhere, I understand the goals of a 5G Public Works project to be:

1. NZ Government wants to put money into the New Zealand economy to stimulate recovery from the Covid-19 recession;
2. Citizens want to get better 5G coverage for that money;
3. The government wants to maintain/improve competition;
4. Government wants minimum waste (i.e., diversion to shareholder profits) from its investment.

Goal (b) implies citizens want the benefits of a 5G rollout, primarily the fast download speeds. Some commentators have also mentioned the intangible value of international visitors being able to use their phones without seeing [LTE] as a marker of previous-generation service.

There is no reason to suggest that commercial self-interest and competition would not drive a successful build-out of 5G in NZ’s urban areas. Existing towers can be repurposed.

There’s also no reason to suspect that operators would rush to deliver 5G to smaller towns and rural areas. Being less densely populated, the commercial return on that infrastructure investment is lower. (This tardiness is what drove the Rural Broadband Initiative). That said, this is an expectation not a guarantee: the UFB and RBI were solutions to problems that were already being felt, whereas a 5G Public Works project would be a pre-emptive action.

This means a Public Works project would be to bring faster mobile data to smaller towns and rural areas faster than competition alone would deliver.

Because 600MHz and 3.5GHz reuses existing 4G infrastructure, this Public Works project will not engage the construction industry during the Covid-19 recession. Instead, the immediate spend will be on equipment from suppliers such as Nokia and Alcatel-Lucent, and the contractors who install it. Building 26GHz would not trigger massive construction either, as it is for dense urban environments, which typically have radio masts on buildings rather than on standalone towers.

Implementation

The opportunity here is to accelerate 5G deployment in smaller towns and rural areas. This would mean 3.5GHz upgrades and 600MHz coverage (when it is standardised). The Rural Connectivity Group provides the model for Government-subsidized rural mobile connectivity. The Rural Broadband Initiative is a proven mechanism for influencing mobile deployment.

As with UFB, the implementation of the investment trades the amount of infrastructure built for control over how it is used. Grants maximise amount of infrastructure, whereas direct investment gives control. (Carter, 2012).

Implementation decisions:

1. The ownership of RCG: currently it’s a partnership of the mobile companies. How would RCG deal with new entrants to the market? What if one mobile company bought another, would that enable it to exploit RCG? It is important to maintain competitiveness in the mobile market.
2. The beneficiaries of the intervention. For which customers is commercial self-interest expected to fail to deliver timely 5G? It’s apparent that major cities will see the first roll-outs. Would this project cover large towns like New Plymouth? Small towns like Warkworth? Rural areas like Whangamomona? Highways between townships like SH38 through Te Urewera. What are the Treaty of Waitangi obligations of such an investment?

The first step should be a timeline model of expected 5G rollout from the operators. This would guide the beneficiaries decision. Next, a cost-benefit analysis of RBI-like subsidisation of those beneficiaries’ 5G access. The information from these two activities is needed to form a judgement on advisability and affordability.

Dependencies

Economic development and the mobile operators are not the only concerned parties here.

1. Māori for whom spectrum remains “an unresolved issue in the Māori-Crown relationship”. More specifically: “A Māori Spectrum Working Group (MSWG) has been formed representing key Māori stakeholders, including Treaty of Waitangi claimants. This group is working jointly with Ministers and officials to explore shared MāoriCrown interests in spectrum. […]  Four Waitangi Tribunal claims relating to spectrum have been lodged since 1984 centring on spectrum as a taonga of special value to Māori with the WAI 2224 claim (lodged in 2009) still outstanding.” (Cabinet paper, 2019).
2. The ITU is yet to designate the 600MHz band for 5G.
3. Mobile hardware manufacturers offer 3.5GHz connectivity, but not 600MHz or 26GHz yet. 600MHz would come after ITU designation. 26GHz may never arrive.

Acknowledgements

Thanks to Jon Brewer for technical insight, and James Ting-Edwards for review.