5G at a crossroad

Once considered futuristic, 5G’s growing importance across industries and services, such as e-health or remote healthcare diagnosis and surgeries, connected vehicles and intelligent traffic systems and advanced mobile cloud gaming, are now a reality. 

5G is revolutionizing key sectors of the digital economy, including:

• Healthcare: Remote surgeries, AI-powered diagnostics, and real-time patient monitoring.
• Logistics: Drones and autonomous delivery systems, warehouse automation, and predictive maintenance.
• Agriculture: Drone-assisted crop monitoring and IoT-enabled precision farming.
• Media and Entertainment: Enhanced VR streaming, interactive gaming, and immersive live events.

This landscape seems to be very attractive, but several challenges could hinder 5G's success in Europe. Economic sustainability and investment friendly spectrum policy, market fragmentation, cybersecurity concerns, the regulatory roll-out regime are among the most significant challenges worthy of mention.

Economic sustainability

The telecommunications industry is under severe Return-On-Investments (ROI) pressure and faces  significant challenges to achieving economic sustainability while meeting 5G deployment goals due to:

• Revenue erosion and artificial competition rules: Operators face declining revenues from traditional services such as voice and SMS, while costs to support exponential data growth and deploy new technologies are rising. Stringent EU competition policies hinder European telecom operators' ability to compete fairly in the global digital ecosystem, impacting profitability and investment capacity. 
• High spectrum acquisition costs and taxes: Spectrum is an essential resource, but governments often see auctions as a revenue opportunity, driving up prices. For instance, 5G spectrum auctions in Europe collectively cost operators billions of euros, which has drained financial resources and once again limited operators’ ability to invest in network infrastructure. This imbalance threatens the pace of innovation and expansion.
• Regulatory pressure and fragmentation: Regulations across Europe vary widely, leading to increased compliance costs but also hindering operator capacity to complete globally in the digital ecosystem. For example, differing cybersecurity requirements and varying environmental standards create financial and operational burdens for multinational operators and their providers.
• Environmental requirements: Telecommunications companies are under pressure to reduce their carbon footprint and adopt greener practices. While 5G and other innovative technology initiatives could anticipate these long-term benefits, they require substantial upfront investments in energy-efficient networks, renewable energy sources, and compliance with environmental regulations.

Spectrum availability must align with market needs, ensuring operators can deploy networks when the technology is commercially mature. Therefore, TIMELY ALLOCATION is critical yet history offers cautionary tales. The 3G auctions of the early 2000s saw spectrum allocated years before commercial maturity at exorbitant prices and this compromised the sustainability of the mobile telecommunications ecosystem.

Once again, a FAIR PRICING policy is needed to promote 5G deployment. If European governments continue to consider spectrum auctions only as an opportunity to raise money, then 5G will take much longer to become a reality. Private operators’ investment capacity cannot be substantially drained with heavy burdens to finance other public obligations. Each euro invested in spectrum acquisition is a euro less for network roll-out investment. In addition, the spectrum should only be paid when made available to operators and not beforehand.

Moreover, long license durations, automatic renewals, and secondary market availability are essential to create a predictable and investment-friendly regulatory environment. This predictability not only accelerates network roll-outs but also ensures that every euro spent on spectrum goes toward advancing the technology rather than financing unrelated public obligations. Policy-makers must view spectrum as a tool for enabling innovation, not merely as a revenue generator. By doing so, policy-makers can foster a healthier ecosystem where operators are free to invest in infrastructure and bring 5G’s promise to life.

Finally, spectrum needs to be available in FAIR CONDITIONS. On cleared, unfragmented global IMT bands, with long licence duration & secondary market availability, with reasonable coverage obligations and with licence conditions that do not distort competition.

The next wave of digital innovation, based on technologies such as 5G, IoT, edge-cloud computing, and AI, will lead to the creation of new applications and economic opportunities. To realise their full potential, it is crucial to invest in these technologies and to enhance network capabilities.

However, several reports have emphasised that lack of scale due to substantial market fragmentation in each national market has weakened telecom operators’ capacity to address the investment gap. This fragmentation has been fostered by a regulatory and price-based competition policy that has encouraged creation of artificial competition through asymmetric regulatory conditions. Unlike the U.S. or China, which benefit from larger, unified markets, Europe’s approach results in an inefficient fragmented telecommunications market that hinders 5G deployment.

Market structures should be adapted to competition conditions in each country led exclusively by market forces, without the introduction of artificial policies that could distort the market. Only fair and sustainable competition stimulates innovation and investments.

In addition, market fragmentation results in regulatory inconsistencies with divergent rules across countries. These inconsistencies slow down deployment and inflate costs for telecommunication operators.

As 5G networks are being deployed globally underpinning critical services such as finance, energy, transport, and healthcare, cybersecurity is paramount and 5G networks invokes major concerns and have national security implications. These growing concerns are leading the European Commission to consider cybersecurity as a crucial issue on its strategic agenda for the following five-year mandate.

A high level of data protection and privacy is ensured in the EU, using regulations or standards already defined at EU level such as the General Data Protection Regulation (GDPR).

Regarding growing concerns on 5G networks’ resilience and cybersecurity, telecommunication operators are at the forefront of security. Therefore, it is essential that a holistic and comprehensive approach in the EU that encompasses all the value chain agents is fostered. The approach should include consideration of technical and regulatory factors so as to guarantee an efficient management framework compatible with development and sustainability of these infrastructures in Europe.

Regarding technical matters, security actions in Network Access, SDN-NFV Core and MEC platform should be implemented to prevent unauthorized access and the expositon of sensitive information. On the regulatory side, member states will have to carry out national risk assessments which will be used as a basis for a coordinated one at EU level. These periodical and suitable risk assessments, involving both technical and non-technical cybersecurity matters, are essential to obtain a truly resilient infrastructure.

Analysing dependency on equipment manufacturers and technology providers presented on 5G networks is critical for network resilience. Operators’ infrastructure is usually  based on technology provided by other suppliers. Foreign investment in acquisition of critical assets or infrastructure may involve a risk to EU security. Such is the concern that the European Parliament’s resolution on security risks regarding the rising proliferation of technology coming from non-EU countries calls for action at EU level. All these risks emanating from a global supply chain which provides ICT equipment must be taken into consideration for coordinated risk assessment. Ensuring continuous monitoring of the overall process is highly recommended in order to mitigate risks such as information leakage. Additional measures should also be proposed to guarantee a suitable security level.

The roll-out of 5G requires a shift from thousands of macro cells to millions of small cells to densify the network. This massive densification demands significant regulatory adjustments to achieve notable reduction of deployment costs as well as the time required for securing permits.  

A harmonised light licensing regime will allow manufacturers and operators to streamline production processes and benefit from economies of scale. Resulting improvements in deployment costs and speeds would bring the EU closer to its connectivity targets. With their low power and minimal visual impact, small cells should benefit from lighter regulatory frameworks. Reducing barriers to small cell deployment including backhaul connectivity would also create opportunities for significant energy savings. The combined effect of (i) offloading mobile services from macro to smaller cells; and (ii) mobile edge caching could potentially reduce energy consumption.

Despite EC framework advancements to ease the licensing regime for small cells there is a clear need for a more ambitious regime for small cells. Rules and regulations should be adapted to a broader range of small cells due to its less intrusive nature compared with standard macro cells. We also see merit in a stronger reliance on the responsibility of operators to comply with the rules, without a need for time and resource-consuming prior certification. Selective ex-post controls seem more efficient.

5G is not just a technological evolution; it is a revolution that is redefining industries, enhancing European citizens’ lives, and transforming societies. However, realizing its full potential requires that critical challenges be addressed head-on or there is a clear risk the EU will lag behind other regions. The industry is fighting for its sustainability and this requires  more investment-friendly spectrum policies and fair market structures to deploy 5G with relevant cybersecurity measures in place that provide citizens with more resilient networks.

By tackling these barriers, Europe can unlock the transformative power of 5G, driving innovation, fostering sustainability, and ensuring competitiveness on the global stage. The promise of 5G is within reach, but it will take collective effort under the new EU mandate to bring 5G’s full vision to life.

Many thanks to Alberto Moreno Rebollo for the dedication and expertise that went into this article. He has been an important contact for CMS for years, and we are honored to have this valuable contribution to our project.