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Business | Leadership & Communication | Technology

How will the Huawei ban affect the 5G rollout?

7 Feb 2019, by Informa Insights

Since the onset of the global financial crisis (GFC) in 2008, global productivity has slowed, at times, to the point of stagnation.

This ‘productivity slowdown’ has manifested, among other things, as low GDP and wage growth. In other words, productivity matters at both a national and individual level.

David Kennedy of Ovum believes that enterprise automation – fuelled by fifth generation (5G) broadband technology – is a vehicle by which Australia can reach its full productivity potential.

But, with the world’s leading 5G technology provider, Huawei, now banned from selling 5G equipment in Australia, David is concerned that the next wave of industrial automation may not be within easy reach.

“I believe the Huawei ban is going to have a significant impact on the economics of the 5G rollout”, David told us ahead of the Ovum 5G Summit.

“Based on international experience, having Chinese vendors in the marketplace typically cuts network equipment costs by up to 30 percent. They can offer very good equipment at very good prices, partly because they have scale that other providers don’t.

“This is already having an impact on the Australian market”, David continued. “Just last week, TPG announced that it will drop plans to build a fourth mobile network, explicitly referencing the absence of Chinese vendors in their decision not to proceed.

“My prediction is that the ban is going to either slow down roll-outs or increase capital requirements. Either way, there are implications for the viability and scalability of the industry”, he said.

From an industrial perspective, David believes the ban will affect pricing and innovation.

“Forty years ago, the global equipment industry standards were fragmented, which undermined vendor competition. This led to higher prices and slower rates of innovation.

“The situation significantly improved when global standardisation strengthened vendor competition. However, history may be set to repeat itself, with weaker vendor competition becoming the norm”.

An additional concern for David is the formation of a “two pillar world”, with countries either in the “Huawei camp” or not – and those who are in the “not camp” deprived of valuable IP from China, who are currently driving a lot of IoT (internet of things) innovation.

“China is making good headway with industrial automation and has one of the most advanced IoT markets in the world. How much access to that IP are we going to have if the world is split in two?”, he said.

Addressing these concerns and sharing his expert views on industry responses to the Huawei ban, David Kennedy will present at the Ovum 5G Summit – due to take place 12 March, 2019.

You may download the full agenda here.

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