5G private networks, a European divide


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The German telecommunication regulator, BundesNetzAgentur has already awarded 5G spectrum for private 5G networks to 88 entities, and more are about to join. This shows an incredible attraction for the reserved spectrum not allocated to MNOs , but instead to corporate entities for private local 5G networks.

A first list of 51 companies, which agreed to go public with their license, includes many industrial companies in the automotive field for example with Audi and  Daimler’s Mercedes-Benz. The operational implementation model may vary, from corporates fully mastering by themselves to subcontracting part of the operations to MNOs or third party service providers. However, like Daimler clearly stated, we can expect companies in highly competitive markets to fully control those services especially for industry 4.0 applications, as manufacturing processes and other specific business processes should be kept entirely secret: fully operating a dedicated 5G network means no risk that internal sensitive data exits from the company.

In contrast, France has not dedicated any 5G spectrum to corporates. The French MNO 5G licenses state that MNOs can “subcontract” locally to a corporate the operation of its spectrum (within a factory for example). This clearly means it is fully up to the will of the MNO, and implementations, if any, would probably involve a prominent role for the MNO.

If corporate wish to implement truly independent cellular mobile network in France, they should request private 4G LTE spectrum from the French regulator ARCEP. However, since last year, only 6 entities expressed their interests and only 3 were awarded 4G spectrum. And anyway 5G has been designed to far better address industry 4.0.

This European disconnect may lead to a competitive disconnect, especially for the implementation of industry 4.0, with a clear leadership in Germany.

Moreover, the fact that corporate could fully control their cellular private network means they own the mobile core network and the base stations and fully operate with their own dedicated team. If you think a bit wider, it means that corporates fully control the core mobile functions such as HLR/HSS ( or UDM/AUCF in a 5G stand alone network); you can ask yourself why then corporate could not leverage those assets and skills to use those core network functions to become themselves MVNOs. That would enable them to access nationwide MNOs networks to provide their own services outside their premises for other purposes or for small sites that would not justify dedicated base stations.

With the digital transformation across the industry enhanced by the even quicker roll out of the IoT solutions in factories and outside (for supply, maintenance etc.), the connectivity has become a key element allowing corporates to better master and strengthen their position on the value chain. When extending their private cellular connectivity, so they become full MVNO, thus putting in place an hybrid private/MVNO network, corporate then fully master their future connectivity, both in terms of strategy (mastering key mobile resources / assets and key telecom skills on the long term) and in terms of costing on the long term (control of part of the cellular service production and negotiation leverage with MNOs for the cellular access).

We can illustrate this with the example of the automotive sector. As already stated, car manufacturers play in a highly competitive environment that lead them to control their factory private cellular network for secrecy reasons. But the core network could then be used to build an automotive MVNO that could deliver cellular services for the Connected Car on a global basis. Up to now systematically car manufacturers have subcontracted their telecommunications services to MNOs or third party providers. The main hurdle in the last decade for car OEMs to set this kind of automotive own telecom operation was their lack of internal telecom skills and their organizations in silos not allowing such telecom operation. Now with the development of private cellular networks for factories, car OEMs need to develop their own in house telecom skills, both for strategic and operational purposes. And the digital transformation across all industries leads to a mandatory rethinking of the organization. Such maturity should allow car OEM to review their organization, including an in house telecom operator for hybrid private/MVNO operator.

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