TO enable enterprise connectivity—and not just any connectivity, but ultra-reliable, high-speed, low-latency, power-efficient, high-density wireless connectivity—a company likely has two basic options. It can connect to a public 5G network. Or it can opt for a private 5G network, either by purchasing its own infrastructure while contracting for operational support from a mobile operator, or by building and maintaining its own 5G network using its own spectrum. For many of the world’s largest businesses, private 5G will likely become the preferred choice, especially for industrial environments such as manufacturing plants, logistics centres and ports.
We expect that more than 100 companies worldwide will have begun testing private 5G deployments by the end of 2020, collectively investing a few hundred million dollars in labour and equipment. In subsequent years, spend on private 5G installations, which may be single-site or spread across multiple locations, will climb sharply.1 By 2024, the value of cellular mobile equipment and services for use in private networks will likely add up to tens of billions of dollars annually.
It’s easy to understand the appeal of 5G, which promises superior performance to that of other wireless standards and greater flexibility than wired networks. What wasn’t so easy was to make cellular mobile networks thrive in environments full of metal and radio interference—until now. In June 2020, the long-anticipated release of 5G’s standards for enterprise may largely remove that limitation, opening the door to 5G’s implementation, over the next decade, in factories, warehouses and other previously inhospitable locations.
And although not all enterprise 5G networks will be private, many organisations will have good reasons to want them to be. Unlike a public network, a private 5G network can be configured to a location’s specific needs,2 and configurations can vary by site, depending on the type of work undertaken in each venue. A private network also allows companies to determine the network’s deployment timetable and coverage quality. The network may be installed and maintained by onsite personnel, enabling faster responses to issues. Security can be higher, affording network owners a degree of control that may not be possible on a public network:3 The company determines which users connect and data can be contained within the site. Keeping data onsite can reduce latency as well. The private network may even run on dedicated spectrum, reducing the risk of variable service levels due to usage by third parties.
A private 5G network has obvious privacy and security advantages over a public one—or so one might think. But just because a company owns its own network doesn’t mean that data never leaves it. A company can take a variety of approaches to where it chooses to process its data, with different security and privacy implications for each.
An enterprise that wants to keep its data wholly onsite would need, in addition to a private network, the appropriate hardware and software to process the data locally. For machine learning computations, for example, the company would need to run its own machine learning appliance and/or equip its devices with edge AI chips to enable them to perform those computations onsite. Other companies may be willing to have some of their data leave the private network to be processed in the public cloud. This can elevate privacy and security risks, but techniques such as federated learning, in which data is preprocessed inside the private network and only the encrypted results sent to the cloud, can help mitigate those risks.4
Where it can become more complicated is when an enterprise works with a network operator that uses a “telecom edge” architecture. In these cases, the telecom edge AI computer could be located on the telco’s premises, but it would be physically close to the enterprise (less than 50 kilometres). Data could travel to and from the telecom edge computer over public networks, or it could be colocated on the company’s premises inside its private 5G network, an approach known as “colo edge.” It seems likely that most private 5G deployments that choose telecom edge AI approaches will use colo edge.
Private 5G for enterprises will exploit new capabilities available in the next phase of the 5G standard, known as 3GPP Release 16. Release 16 aims to enable 5G to substitute for private wired Ethernet, Wi-Fi and LTE networks, and includes multiple capabilities designed specifically for industrial environments.5 The various 5G networks that launched commercially in 2019 were based on Release 15; a Release 17 that will focus on additional applications, such as 5G broadcast, is also planned for the mid-2020s.6
Release 16 includes three pillars that, in combination, equip 5G for a range of industrial environments:
Release 16 also incorporates support for time-sensitive networking (TSN), which permits fixed Ethernet and 5G networks to coexist and converge.9 TSN will allow 5G networks to be used for applications that are currently usually only carried over Ethernet wireline networks.10 Additionally, Release 16 should include support for unlicensed networks, which means that private 5G deployments could use spectrum in unlicensed ranges.
5G’s enhanced capabilities can take wireless connectivity where no standard has gone before, opening up many previously infeasible locations and uses. With Release 16, 5G will be capable of:
5G isn’t the only option for getting online, of course. In the short term (through about 2023), 5G will likely coexist with the many other cellular mobile and Wi-Fi standards, as well as wired standards, that are widespread today. In fact, in the medium term (through 2026 or so), most companies will likely deploy 5G in combination with existing connectivity, including wired Ethernet networks. However, in the long term—over the next 10 to 15 years—5G may become the standard of choice in demanding environments, when flexibility is paramount, reliability is mandatory, or for installations that require massive sensor density.
5G may be a big leap forward for wireless, but it isn’t the only technology that works. For many uses and environments, Wi-Fi and/or LTE will do just fine, and we expect companies to continue to build private networks using both (figure 1).
Wi-Fi deployment is fast, easy, and cheap compared to private cellular networks, making it an attractive choice where speed and economy are a priority. Private Wi-Fi networks are already used in factories, typically for noncritical applications. New Wi-Fi standards, including Wi-Fi 6, are being launched that offer significant enhancements. Wi-Fi 6 routers were on the market as of summer 2019,14 although client devices were not yet available.
Multiple private LTE networks—based on public LTE standards, but scaled down for private deployment—are also likely to be deployed in 2020. Some companies may do this as a stopgap measure until full 5G industrial networks are available (likely starting in 2021–2022). A private LTE network, which typically uses high-calibre radio frequency equipment, can be expensive. However, the most advanced versions of LTE may be more spectrally efficient than Wi-Fi, and it also offers network slicing, although only of the radio network. LTE can also be more stable than Wi-Fi.
To date, LTE has usually been the technology of choice to enable connectivity in the most demanding industrial environments. China’s Yangshan Port, for instance, uses a variant of LTE to run its fleet of automated guided vehicles (AGVs).15 The advantage of LTE for this use is its greater coverage and mobility than fixed Ethernet or Wi-Fi. When fully deployed, the port will house 130 AGVs, 26 bridge cranes, and 120 rail-mounted gantry cranes, all operating remotely or autonomously. Similarly, in the United Kingdom, Ocado has deployed a private LTE network to control 1,000 fast-moving robots in a logistics centre for online grocery orders. The network allows the robots to be managed from a single base station, communicating with them up to 10 times per second.
Though potentially expensive, a private LTE network can pay off economically. For instance, Nokia has used private advanced LTE networks (4.9G) to automate one of its base station factories. The LTE network has enabled IoT analytics running on an edge cloud, a real-time digital twin of operational data and internal logistics automation via connected mobile robots. According to Nokia, the use of these networks has improved productivity by 30 per cent and reduced the cost of delivering products to market by 50 per cent, benefits that add up to millions of euros annually.16
Thanks to the specifications in Release 16, 5G has the potential to become the world’s predominant LAN and WAN technology over the next 10 to 20 years, especially in greenfield builds. Those building a new factory, port, or campus may significantly reduce their usage of wired connexions. The next five years will likely see a boom in private 5G implementations at locations that would greatly benefit from better wireless technology—in terms of speed, capacity, latency and more—right now.
We predict that about a third of the 2020–2025 private 5G market, measured in dollars of spend, will come from ports, airports and similar logistics hubs, which we expect to be among the first movers. It’s not hard to see why. A major seaport (for instance) has some fixed machinery and equipment that can connect to networks over cables, but it also needs to track and communicate with hundreds of forklifts and dollies—not to mention hundreds or thousands of employees—in a controlled, sensitive and secure environment. Further, port managers need to track multiple data points for thousands or tens of thousands of containers: exactly where each container is, whether it has cleared customs, whether it is at the right temperature, whether anyone has moved or opened it, whether anything has been removed or added and so on. Ideally, every single high-value object in every single container could be tracked—potentially a million objects. And all this must be done in an area only about one kilometre square, filled with moving metal objects and radiofrequency-emitting devices.
For operations such as these, 5G is the clear choice. 5G works in these types of environments; all other technologies, including 4G and Wi-Fi, do not. And security, flexibility and price considerations will likely drive these organisations to want to control their own networks.
Another third of the total private 5G opportunity will come from factories and warehouses. Today, these facilities operate with a mix of wired and wireless technologies, but many companies are adopting new equipment that they expect to transform their business—but that won’t work with wires. Again, the “private” nature of these networks can offer better security, privacy and flexibility; allow companies to develop proprietary, specialised solutions; and cost less than buying services from a public network.
Several of 5G’s Release 16 capabilities will be crucial in industrial settings. Paramount among them is the ability to function in an environment filled with metal, which has stymied all prior generations of wireless technology. Another critical driver of adoption will be network slicing. Instead of allocating equal network share to each device, network slicing allows network performance to be assigned by priority. Top priority might go to remotely piloted vehicles operating at speed, while sensors and tracking devices could make do with lower speed or higher latency.
Still another of enterprise 5G’s important features is its ability to support an extremely high connexion density. Every industrial screwdriver in an assembly plant or weighing scale in a hospital can become part of a massively expanded network, allowing the equipment to be better monitored and managed for higher productivity. Connecting everything can also greatly enhance simple asset management: knowing where the screwdriver is and how often it has been used since it was last serviced.
Using 5G to communicate with and among machines, manufacturers can build flexible factories that can be reconfigured with relatively little downtime. Some factory equipment, of course, might not need to move: A traditional industrial robot arm is powerful, expensive and may always need to be fixed in place. But companies are introducing more and more mobile elements into factories and warehouses in their efforts to improve productivity. One example is the growing use of autonomous professional service robots—machine-controlled, not driven remotely by a human operator—to take things from place to place. We predict that nearly half a million of these devices will be sold in 2020, up 30 per cent from 2019; by 2025, annual sales could exceed a million units.17 These autonomous dollies will need 5G capabilities to support activities such as precise indoor navigation and positioning (within 10 centimetres).18 As devices such as these become more important, factory floors will evolve into a blend of fixed and mobile equipment aimed at an ideal of complete flexibility.
The final third of the private 5G market will consist of greenfield installations, especially on campuses. In fact, many companies may initially choose to deploy 5G only for greenfield sites, creating islands of private 5G adoption among a heterogenous mix of connectivity technologies at legacy sites.
Historically, building a new facility or campus entailed designing, buying, installing and operating a wildly heterogenous jumble of copper wires, Ethernet cables, fibre-optic cables, 3G and/or 4G cellular repeaters and Wi-Fi equipment. Over the next five years, however, private 5G networks will become cost-effective enough for many sites to skip wires entirely, or at least to have as few as possible. In some cases, these campuses may be temporary. For example, a private 5G network could be deployed for a few days to support a major music festival. A mobile operator may ship in a mobile network to serve the influx of 200,000 music fans, reserving a portion of capacity, with specific speed and latency requirements, for festival operations such as television broadcasting (with 5G replacing cabled connexions), speaker connexions and emergency services.19
Companies can take multiple approaches to deploying a private 5G network. The very largest companies are likely to instal private 5G networks using fully owned infrastructure and dedicated spectrum (in markets where this is permitted), managing these networks either through an in-house team or via an outsourced mobile operator. Medium-sized and smaller companies are more likely to lease network equipment, outsource network management and sublease spectrum (geofenced to their location) from a public mobile operator—or, in some cases, use unlicensed spectrum.20 A mobile operator, systems integrator, or equipment vendor may manage the network and all of its attached elements.
The first 5G launches in 2019 were aimed at consumers, in large part because the standards applicable to consumers (known as 3GPP Release 15) were available first. But first offered does not necessarily mean most useful, at least in terms of broader economic impact. Most consumers may experience only incremental benefits from 5G. It alleviates congestion in densely populated areas such as train stations, and can offer an alternative to fixed connexions for home broadband, but the resulting gains in speed, convenience, and availability may be too small for many to notice.
Businesses are a different story. With the advent of Release 16 in June 2020, 5G is poised to drive massive changes in the way companies work, particularly in the manufacturing industry.
In 2020, only an estimated 10 per cent of the world’s machines will have a wireless connexion. (This compares to the estimated 5 billion people worldwide who will have a mobile data connexion by 2025—the majority of the human population.)21 This means that most of today’s production lines are fixed and cabled, making it time-consuming and expensive to reconfigure production lines. This, in turn, constrains the flexibility of their outputs. Physical cables attached to moving machines also weaken over time. Maintaining and replacing them is expensive, not just due to parts and labour costs, but also because of the interruption to production.
Recent manufacturing history is rife with efforts, not all of them successful, to reconcile the factory floor’s inflexibility with customers’ burgeoning expectations for mass personalization.22 5G Release 16, deployed in a private environment, may be the solution.
Enterprises are likely to deploy 5G in stages, with initial deployments in the next couple of years largely focussed on cost reduction. Some deployments may start off on public 5G networks and then be converted to private networks; the opposite may also occur.
Below are some of 5G’s applications in industrial contexts. All of these applications could be deployed over public networks, but companies may stand to gain greater benefits if their networks were eventually made private.
In some cases, an organisation may opt for 5G simply because it is cheaper than adding additional fixed connexions. This is the rationale for Rush University Medical Hospital in Chicago, which is installing 5G in one of its older buildings. At 100 years old, the building’s architecture was simply not designed for the computer age: 23 Its false ceilings are already full and there is no space for additional cables. Adding wires to the building would cost millions of pounds more than connecting it with 5G, which offers equivalent connectivity and greater flexibility. That’s not to say that Rush is indifferent to 5G’s potential for newer buildings—the hospital is also designing a new 11-storey facility with 5G connectivity at its heart.
5G can also be used to control facilities remotely. For example, a small farm in the United Kingdom plans to use 5G to create a “hands-free hectare”—a fully automated farm. 24 Remote-controlled machines, such as tractors and drones, will be used to sow, maintain and harvest crops. Extra sensors at ground level provide additional information.
Similarly, one Japanese company uses 5G to connect drivers, based in a Tokyo office building, to a mechanical digger at a construction site tens of kilometres away. 25 Video streams from multiple 4K cameras relay the digger’s surroundings at 5G speeds. The driver can thus control the digger without having to sit cramped in a taxi, possibly in arduous weather conditions, or having to commute to a distant site. Besides the advantages in comfort and convenience, remote-controlled machinery can allow ageing or disabled individuals to remain economically active—an important benefit in countries such as Japan with ageing populations.
Some ports are also looking at using cellular mobile to monitor autonomous guided vehicles or to control cranes remotely, as well as for video surveillance. In Rotterdam, Netherlands, 5G-connected ultra–high-definition cameras enable visual inspection of a 160,000-kilometre pipeline network. 26 In Tianjin, China, 5G-connected drones have been used to inspect electric power lines. 27
The full 5G standard may enable some relatively niche, nascent device form factors to attain their full potential. Augmented reality (AR) and virtual reality (VR) goggles are two examples. As of 2019, sales of AR goggles in both consumer and enterprise contexts were estimated to be in the hundreds of thousands, 28 as were sales of VR goggles for industrial use. 29 5G’s high-speed, reliable connectivity could allow these devices to process images in the cloud rather than locally, greatly improving the user experience. In trials, 5G has been able to deliver images to VR goggles with a 2880-by-1600-pixel display (equivalent to between HD and 4K resolution) with a refresh rate of 75 frames per second. 30 This rapid frame rate is necessary to minimise goggle-related motion sickness. 31
Of their possible enterprise applications, AR and VR goggles may be especially useful for maintenance. Maintenance workers could don high-calibre AR goggles to access automated assistance in the field, for instance, with AR overlays guiding workers around the equipment. 32 VR, too, could be used for remote maintenance, relaying images from 360-degree spherical cameras.
By improving the efficiency of existing processes, 5G has the potential to drive huge productivity gains. One trial by Worcester Bosch in the United Kingdom found that private 5G enabled a 2 per cent productivity improvement for some applications, double what was expected. To put this figure in context, 2 per cent improvement is equivalent to the United Kingdom’s average productivity gain over the whole of the past decade. 33
The manner in which 5G can help improve processes is constrained only by human ingenuity. At one manufacturing plant in Helsinki, for instance, a 5G-connected camera provides real-time feedback to staff assembling low-voltage drives. The camera’s video feed is analysed using machine vision, 34 and any assembly errors trigger an instant alert. An absence of alerts reassures workers that the assembly is perfect. The machine vision application also guides workers on ergonomically correct body and hand positions for assembly.
Ericsson is using 5G to automate the maintenance of about 1,000 high-precision screwdrivers based on utilisation levels. Previously, workers had to manually calibrate and lubricate the screwdrivers, using a paper-based system to track when service was needed. Adding motion sensors to quantify screwdriver usage, along with narrowband Internet of Things (NB-IoT) modules for connectivity, has enabled Ericsson to automate the process, cutting annual workload by 50 per cent. 35
Perhaps 5G’s most compelling aspect is its ability to contribute to fundamental process redesign, particularly in manufacturing. 5G technology is arriving at a time when manufacturing, in many markets, is looking to reinvent itself. For many companies, the timing could not be better.
Take the automobile industry as an example. Car buyers today expect and will pay for, personalisation in their vehicles. While vehicle manufacturers are offering an ever-widening range of car models and subcategories to meet this demand, assembly lines need to be more flexible to accommodate their manufacture. In response to this need, Mercedes has created a template for a new type of factory based on a flexible production line, called “TecLine.” Mercedes’s TecLine facility, equipped with 5G, houses a flexible assembly line composed of 300 driverless systems. Rather than moving step by step down a linear assembly queue, builds in progress are carried by autonomous transport systems to different areas of the factory, with the appropriate parts brought to each station by intelligent picking systems. 36
Bosch Rexroth is taking this concept even further. It is building a factory in Xi’an, China, in which only the walls, floors and ceiling are fixed; everything else is mobile. Assembly lines are modular, with their constituent machines—communicating with each other over 5G—autonomously moving and reconfiguring themselves into new production lines. 37
Other industries can reinvent processes using 5G as well. A 5G-equipped hospital, for instance, could connect many more devices than was formerly possible and the devices would remain connected even if they were moved around. Medical instruments, from scales to blood pressure cuffs, would no longer need to stay in a fixed location to be connected, 38 while doctors could access more sophisticated remote imaging and diagnosis capabilities from these devices.
In the early days of enterprise telephony, when the sole application was voice calls, a company that wanted each of its 10 employees to have a different phone number needed to provision and pay for 10 separate lines. If one employee wanted to make an internal call—for example, a call to a colleague five metres away—the call was routed from that employee’s phone out of the building, to the telecommunications operator’s central office switching centre and then back into the building to the colleague’s office. This was neither cheap nor efficient.
The 1970s saw the development of an alternative solution: an automated private branch exchange (PBX). A PBX is a telephone switch that resides inside the business’s premises. Each internal phone has its own extension number. With a PBX, internal calls never leave the office: It is, in effect, a private network, which connects to the public network only for external calls. A business can lease or let a PBX from the telephone company, which maintains and services it for a monthly charge—or, from the 1990s, the business could buy and maintain its own PBX. A PBX offers various benefits and features (hold music, for example) not available on public network lines and also offers cost savings.
In the early days of the PBX, almost every company left installing and maintaining PBXs to the telephone company. It took decades for the enterprise-owned and -operated PBX market to take off.
By 1988, the US PBX market amounted to nearly 5 million phone lines annually. 39 The launch of internet protocol PBX (IP PBX) technology in 1997 allowed enterprises to use PBXs for local and even long-distance calls as well as internal calls, enabling them to offer even more features and reduce costs even further. 40 IP PBXs enable a company’s geographically dispersed sites to be part of a single nationwide, or even multinational, voice network.
Like a PBX, a private 5G network is internally self-contained, but it also needs to be connected to the external network. It can work in partnership with a telco on a managed service basis, or it can be entirely run by the enterprise. It enables features as well as many benefits that are not available on public 5G and it may offer cost savings.
We expect that in the early days of private 5G, most companies will opt to leave it to the experts: the operators who also run the public 5G networks.
Businesses have always been disrupted by successive generations of communications technology improvement. 5G’s Release 16, however, could be the most disruptive mobile technology yet. Its broader adoption for private networks has implications for many types of companies.
For mobile operators, the growth of private 5G networking can mean additional income. Operators supporting private 5G deployments have an opportunity to bring their network management skills to individual companies, especially small and medium businesses to establish and operate private networks. In some markets, they may be able to sublease their spectrum in specific geofenced locations. To effectively tap into these opportunities, mobile operators will need to build vertical sector capabilities or partner with companies with sector-specific knowledge: Each sector—indeed, each deployment—will likely have a custom set of needs and applications, each requiring a different combination of performance attributes such as speed, latency and reliability.
For network equipment vendors, the private 5G prize is a much-expanded market into which to sell cellular mobile equipment. One (admittedly hyperbolic) estimate projects that private wireless networks could eventually account for up to 14 million cellular base stations, which would be more than double the 7 million base stations currently operated by the world’s public mobile operators (although the price per site for enterprise cellular is likely to be lower than for public). 41 Additional income opportunities can come from companies’ needs for service and support to maintain their private 5G networks. Vendors will need to determine whether to sell directly to companies or to partner with mobile operators, often as part of a consortium.
Regulators should determine how much, if any, spectrum to make available to companies’ private networks. In some markets, regulators may need to decide whether to allocate spectrum directly to companies or to distribute it through mobile operators. Regulators should also consider at which frequency bands to make spectrum available.
The performance of private 5G networks will depend on the quantity and ranges of spectrum available. Mid-band spectrum (1–6 GHz) works well in indoor environments, enabling wide coverage with a relatively small number of transmission points. Millimetre-wave spectrum (24–29 GHz, 37–43.5 GHz, and 66–71 GHz) offers higher speeds and lower latency, and its signals are easier to contain within a building, thus lessening the potential for interference with macro mobile networks; however, it requires denser radio deployment than mid-band.
Many approaches to spectrum for private mobile networks are currently deployed, in trial, or under consideration. These include:
Hundreds of thousands of companies are likely to deploy private cellular networks over the next decade. Some may simply swap some or all their cables for wireless, but potentially much more rewarding—though more challenging—would be to pair private 5G deployment with process change and business model redesign. As more and more companies undertake transformations on the back of 5G, the shape of industry itself will alter, perhaps dramatically. If and when that happens, history will likely view 5G not just as a technological marvel, but as an elemental force that reshaped the way companies do business.
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