5G should boost productivity and economic growth

| April 14, 2018

5G – the next generation of mobile wireless network technology – will be introduced in Australia from 2019 and should improve consumer experiences and business utility through faster data transmission and more reliable connectivity.

The Bureau of Communications and Arts Research has released its assessment of the potential impacts of 5G on Australia’s productivity and growth.  The working paper aims to inform consideration of any regulatory changes required to support the rollout and adoption of 5G services. It also provides estimates of the costs and benefits that may stem from 5G and the impacts on businesses and consumers.

The report argues that Australia is well-placed to make the most of 5G technology as Australia’s use of telecommunications-enabled goods and services ranks well in comparison with other developed nations such as the United States, Canada, Germany and South Korea.

5G is likely to have a positive effect on productivity growth across the Australian economy. Early estimates suggest that 5G could add up to $2,000 in gross domestic product per capita at the end of the first decade after the rollout.

Industries which rely on current networks, including the Information, Media and Telecommunications, Arts and Entertainment, Education and Wholesale and Retail sectors, will be well placed to take advantage of new 5G services.

Furthermore, not all the benefits from 5G will be captured in ‘dollar values’ as the additional choice and reduction in costs driven by 5G-enabled technology is likely to improve the wellbeing of consumers and households.

5G represents a step change from previous generations of mobile technology by enabling lower latency, essentially reducing the time it takes for signals to travel through the network. This will allow it to support a wider range of applications, robotics and the Internet of Things.

Digital transformation of this scale has long held the promise of improving economic outcomes, and 5G is represents the next stage in improving the capacity of communications services across the economy. However, as with previous technologies, some investment choices are likely to be made when the broader economic and commercial benefits are still uncertain.

The new paper focusses on 5G’s potential to improve productivity as a key driver of income growth. About 80% of per capita growth in income in Australia over the past 30 years is attributable to labour productivity growth, but it has slowed markedly in recent years and there are good reasons to be concerned for its future.

An ageing population is expected to slow growth in the labour supply and the transition of the Australian economy to one based largely on services will also slow labour productivity growth as services tend to have a lower level of productivity than non-service industries.

Australia is unlikely to experience the same boost to incomes experienced in the recent mining boom and productivity growth is not even expected to bounce back to where it was in previous decades. This means that new drivers of productivity will have to be found if income growth and wellbeing are to improve in the coming years.

5G should improve multifactor productivity across the economy and the estimate of an additional $1,300 to $2,000 in gross domestic product per person after the first decade of the rollout could be conservative as it does not fully take into account the consumer and non-market benefits not captured in economic statistics.

These benefits include cost and time savings for households arising from ‘smarter cities’ and the indirect effects from improvements in health services on participation and productivity enabled by better mobile telecommunications.

The continued growth of the ‘sharing economy’, which harnesses household assets for market production, is also likely to increasingly blur the line between productive and household sectors in terms of the drivers of output, innovation and productivity growth.

As with any transformative digital technology, there may also be distributional effects within and between industries, and across society, as resources are reallocated, although the precise shape of these changes remains to be seen.

The economic impact of 5G will be the extent to which it is more than an incremental advance on previous mobile technology, or even a more radical shift to a ‘general purpose technology’ (GPT) typically associated with industrial revolutions.

Both consumers and businesses are becoming increasingly mobile, with faster growth in demand for mobile data relative to fixed-line connectivity reflecting the shift from a wired world to a wireless one. 4G technology theoretically allows download speeds of 100 megabits per second (Mbps), while 5G could potentially enable speeds of more than 1,000 Mbps. While it currently takes about eight minutes to download a feature film using 4G; people could be able to do this in seconds with 5G.

5G should support the introduction of new goods and services, with higher data rates and lower latency allowing greater use of IoT devices.  It should also improve business efficiency in terms of the production and delivery of goods and services, and enable scope for greater innovation and the development of new products.

Faster download speeds and lower latency will make cloud computing more effective, for example, and allow for better collection and analysis of big data that can lead to more real‑time decision making.

5G should also improve health and social outcomes by enabling new kinds of technology and better data sharing.  For example, wearable technology and IoT devices will help people better access health and education services in a more timely and personalised fashion, the gains from which will have a flow‑on effect and will largely accrue to individuals.

The long anticipated Internet of Things involves the addition of internet-connected sensors and controllers to objects, infrastructure or locations, and using the data to provide an improved service or capability. 5G should empower much wider use of such devices, allowing them to communicate with one another quickly and reliably and automate a range of household and business processes.

While IoT has become a common term in technology circles, less familiar concepts may soon become equally ubiquitous.  Massive machine type communications (mMTC), for example, involves automatic and real-time communications between IoT-enabled devices. The ability for these devices to communicate between each other is expected to drive productivity growth through the automation of business processes.

Multiple Input Multiple Output (MIMO) refers to the use of multiple antennas in transmitting and receiving devices, which enables more data to be broken down into multiple pieces. This process improves the efficiency and reliability of wireless transmissions and because 5G will enable greater rates of data transfer, MIMO technology should develop to take advantage of the new standard.

Network slicing – the partition of 5G networks to provide dedicated capacity for particular technologies –  could provide dedicated resources to IoT devices to ensure that they work effectively in particular areas or for particular industries. Network slicing may also allow for sharing of a capital-intensive 5G network between many operators.

As 5G enables greater sharing of data through cloud computing and IoT devices there will also need to be a greater focus on keeping those data secure. 5G will lead to an increase in the number of applications and connected devices, and with it the risks from cybercrimes such as identity theft and hacking.

Network security architecture will therefore need to adapt to achieve the right balance between security and flexibility of use to address new challenges that could emerge.

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