Private networks are the key driver for 5G growth – Developing Telecoms

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The ability of 5G to enable wide-scale industrial applications has long been billed as a major differentiator for the standard compared to 4G.

Commercial 5G deployments are hitting something of a plateau, with consumers refusing to pay more for the standard – and private networks within the enterprise sector are emerging as a key growth area for 5G, particularly within developing countries.

To learn more about the factors driving this, we spoke to Asad Khan, Research Director for 5G & Wireless Networks at SNS Telecom Research.

Could you explain the key advances in functionality that private 5G networks offer over private LTE networks?

Compared to LTE technology, private 5G networks can address far more demanding performance requirements in terms of throughput, latency, reliability, availability and connection density. Private 5G networks in real-world settings have been shown to demonstrate multi-Gbps data rates and latencies in single-digit milliseconds, to support more demanding application scenarios – for instance, the UHD (Ultra-High Definition) video transmission, coordination of large fleets of AMRs (Autonomous Mobile Robots) without predetermined paths, remote-controlled operation of heavy machinery, and even the replacement of physically wired connections for rapidly reconfigurable production lines.

The current use cases for private 5G networks are largely wide-scale enterprise applications – do you expect new use cases to emerge as adoption increases? Are they more suited to larger enterprises than SMEs? Which are the most promising vertical sectors?

We definitely expect to see more use cases emerge as adoption increases. Although initial production-grade private 5G installations are dominated by larger enterprises, we’re seeing significant interest from SMEs in many national markets. The most promising vertical sectors where the benefits of private 5G networks have already been demonstrated include manufacturing, warehousing, transportation (including ports), mining, oil and gas, utilities and healthcare. Some examples are summarized below:

  • Manufacturing: Baosteel – a business unit of the world’s largest steelmaker China Baowu Steel Group – credits its 43-site private 5G deployment at two neighboring factories with reducing manual quality inspections by 50 percent and achieving a steel defect detection rate of more than 90 percent, which equates to $7 million in annual cost savings by reducing lost production capacity from 9,000 tons to 700 tons.
  • Warehousing: JD Logistics – the supply chain and logistics arm of Chinese online retailer JD.com – has achieved near-zero packet loss and reduced the likelihood of connection timeouts by an impressive 70 percent since migrating AGV (Automated Guided Vehicle) communications from unlicensed Wi-Fi systems to private 5G networks at its logistics parks.
  • Transportation: The EWG (East-West Gate) Intermodal Terminal’s private 5G network has increased productivity from 23-25 containers per hour to 32-35 per hour and reduced the facility’s personnel-related operating expenses by 40 percent while eliminating the possibility of crane operator injury due to remote-controlled operation with a latency of less than 20 milliseconds. Since adopting a hybrid public-private 5G network to enhance the safety and efficiency of urban rail transit operations, the Guangzhou Metro rapid transit system has reduced its maintenance costs by approximately 20 percent using 5G-enabled digital perception applications for the real-time identification of water logging and other hazards along railway tracks.
  • Mining: Dongyi Group Coal Gasification Company ascribes a 50 percent reduction in manpower requirements and a 10 percent increase in production efficiency – which translates to more than $1 million in annual cost savings – at its Xinyan coal mine to private 5G-enabled digitization and automation of underground mining operations. Shanxi Coking Coal Group’s Yanjiahe coal mine has reduced the number of workers in a single shift from 30 to fewer than 10 through the application of private 5G-enabled smart mining applications, including remote control of vehicles and unmanned inspections of underground mining machinery.
  • Oil & Gas: Sinopec’s (China Petroleum & Chemical Corporation) explosion-proof 5G network at its Guangzhou oil refinery in Guangdong has reduced accidents and harmful gas emissions by 20% and 30% respectively, resulting in an annual economic benefit of more than $4 million. The solution is being replicated across more than 30 refineries of the energy giant. 
  • Utilities: SGCC (State Grid Corporation of China) is leveraging a private 5G NR-U (NR in Unlicensed Spectrum) network – operating in license-exempt Band n46 (5.8 GHz) spectrum – to facilitate the operation of mobile inspection robots at its Lanzhou East and Mogao substations in China’s Gansu province.
  • Healthcare: West China Second University Hospital’s private 5G network has enabled virtual visits for parents to see their infants in the NICU (Neonatal Intensive Care Unit).

There is also growing interest in small-scale rapidly deployable 5G networks for temporary coverage in construction and broadcasting.

In particular, how are private 5G networks currently being deployed in emerging markets, and what issues could they help to address in these regions going forward?

China accounts for a vast majority of all private 5G networks in emerging markets, making the vertical breakdown highly reflective of the national market there. Although most deployments are driven by the need to improve efficiency, cost savings, and worker safety in industrial sectors such as manufacturing, warehousing, transportation, and mining, private 5G networks are also being used to enhance government services, particularly public safety communications. For example, the Lishui Municipal Emergency Management Bureau is using private 5G slicing over China Mobile’s network, portable cell sites and rapidly deployable communications vehicles as part of a disaster management and visualization system. In retail, private 5G use cases will likely be limited to warehousing and logistics operations as most other retail functions can be sufficiently addressed by Wi-Fi and public mobile networks.

China has seen widespread adoption but it has a highly developed industrial sector. Are any developing markets similarly positioned?

Although we do not expect to see the same accelerated level of widespread adoption as in China, several developing markets – including Brazil, India and South Africa – are well-positioned for progressive growth in the coming years. In particular, Brazil’s national telecommunications regulator Anatel’s SLP (Private Limited Service) framework is one of the most forward-looking spectrum licensing schemes for private networks, with local area and regional licenses across multiple low-band, mid-band and high-band frequency ranges.

Although the vast majority of existing private cellular deployments in Brazil are based on LTE technology, early implementations of private 5G networks are starting to appear. Notable examples include but are not limited to private 5G installations at Gerdau’s Ouro Branco steel production plant, Jacto’s Paulópolis plant, John Deere’s Horizontina plant, Siemens’ Jundiaí plant, Nestlé’s Caçapava factory, Suape Port and São Martinho’s Pradópolis industrial processing facility, as well as Petrobras’ (Petróleo Brasileiro) planned transition from LTE and 5G NR technology at its offshore and onshore sites. Largely led by Brazil, SNS Telecom & IT estimates that private 5G network infrastructure investments in Latin America will grow at a CAGR of more than 45% between 2024 and 2027, eventually accounting for $360 million in annual spending by the end of 2027.

India is a relatively nascent market, where private 5G networks are likely to be dominated by MNO-leased spectrum. A noteworthy example is the private 5G network at automaker Mahindra & Mahindra’s Chakan manufacturing facility in Maharashtra. Operating in Airtel’s 3.5 GHz spectrum, the purpose-built network supports the simultaneous ECU (Electronic Control Unit) flashing of up to 1,000 vehicles and computer vision-based quality inspection applications.

In South Africa, the mining sector is driving the vast majority of early private 5G installations to support operational efficiency and safety-related applications. For example, Canyon Coal’s Phalanndwa colliery in Delmas (Mpumalanga) relies on a private 5G network to provide wireless connectivity for high-definition video surveillance and a proximity detection system that prevents vehicle-to-person and vehicle-to-vehicle collisions.

The cost of ownership is relatively high – will this need to be reduced before the technology becomes more widespread? How complex are they to deploy? Do they require in-house expertise?

The ASP (Average Selling Price) for 5G IoT modules and industrial-grade end-user terminals is likely to decrease over the coming years with larger shipment volumes – particularly when RedCap (Reduced Capability) devices become widely adopted. Due to the relatively high cost of network infrastructure compared to Wi-Fi and other wireless alternatives, there will always be an initial increase in the cost of ownership for end user organizations before benefits are realized. Depending on the equipment supplier and specific features in 5G network infrastructure, there may also be significant recurring license fees. Although it comes down to the preferences of the individual end user organization, developing in-house expertise in network operations will pay long-term dividends by reducing reliance on managed services. 

Which approach is proving most prevalent – PCNs on the premises; PCNs deployed by MNOs; PCNs managed by enterprises; PCNs managed by cloud providers?

This varies from country to country. Private networks* deployed by MNOs are the most prevalent approach in much of the developing world, with the exception of Brazil and some Latin American countries where dedicated spectrum has been set aside for private networks. In the West, there is a diverse mix of networks installed independently and those deployed in collaboration with mobile operators, system integrators and managed service providers.

*Depending on specific security requirements, many of these installations are physically isolated from the national public networks operated by MNOs.

Is investment future-proof – or at least upgradeable with minimum discomfort? What is the standardisation situation?

Although this depends on specific feature set requirements, upgrading existing standalone private 5G networks to 5G-Advanced – 5G’s next evolutionarily phase that begins with 3GPP Release 18 specifications – should be relatively straightforward with software upgrades. The very first 6G networks are expected to be launched by 2030 and there is a common understanding in the 3GPP community that initial 6G RAN (Radio Access Network) deployments will be supported by 5GC (5G Core) networks to ease the transition from 5G to 6G technology.

At present, 5G standards are commercially mature enough for the implementation of most Industry 4.0 applications in manufacturing and process industries, which are best served by localized private 5G networks covering geographically limited areas. 3GPP Release 18 adds support for 5G NR equipment operating in dedicated spectrum with less than 5 MHz of bandwidth, paving the way for private 5G networks operating in sub-500 MHz, 700 MHz, 850 MHz and 900 MHz bands for public safety broadband, smart grid modernization and FRMCS (Future Railway Mobile Communication System).

The GSMA has released research indicating that setting aside spectrum for private networks has had an adverse impact on public networks, slowing download speeds for consumers – while failing to incentivise adoption of private networks, thereby delivering little benefit to businesses. They caution against setting aside spectrum “as a mechanism for encouraging industrial connectivity” – would you agree with this?

One might be inclined to agree with the assessment above if solely looking at the situation in China – where MNO spectrum has been successfully leveraged to drive the adoption of both public and private 5G networks. However, despite a slow start, we are beginning to see many successful production-grade implementations in the United States, Germany, Japan, Korea, Taiwan and other national markets where spectrum has been set aside for private networks. BMW, Tesla, Toyota, Walmart, Nestlé, Ricoh, Siemens, Bosch, LG Electronics, John Deere, Airbus, Mercedes-Benz, Volkswagen, Nissan and Honda are among the many well-known household brand names that have committed to deploying private 5G networks using dedicated local area licensed spectrum.

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