Nothing lasts forever, and so it is that the beginning of the end is here for the UK’s 3G mobile network service. Vodafone has announced that its 3G service will end in June, with other networks following suit in 2024.
With limited spectrum available, 3G frequencies need to be re-allocated for use by newer 4G and 5G services which are much faster, more reliable and – in the case of 5G – up to 10 times more energy efficient.
It’s not all upside, though. UK government estimates put the cost of upgrading networks to 5G for mobile network operators (MNOs) at £2bn per year, at a time when operators’ margins are already wafer thin. And while some estimates say 5G could add up to £15bn to the UK economy, the path to 5G profitability for MNOs remains murky.
H+K Strategies recently hosted a UK telecoms industry dinner to discuss the operating climate for UK telcos. It’s clear that these are challenging times for the industry, and equally obvious that the enormous CapEx investment in 5G must be recouped somehow.
Operators are facing pressure from government to invest, from the public to provide ever faster and faster services, and from both to keep prices low. In the context of the rising cost of living and the need to connect for increasing amounts of live and work, these are all important asks – and it’s key to recognise that this leaves the sector squeezed in the middle. We have seen the real impact of this just this week, with both BT and Vodafone announcing plans to cut jobs and in BT’s case with the goal of increasing efficiencies through the adoption of AI.
This pressure to increase efficiencies and investment in new infrastructure means retiring and switching off older services that are no longer widely used is now becoming a priority for the industry. While all UK networks will eventually shut down 3G services, Vodafone claimed the first mover (dis)advantage as its announcement made headlines last week. Concerns were raised by charities and some consumers about the impact of the 3G shutdown on elderly, vulnerable and rural users.
BT estimates there are 2-3 million 3G mobile phones in use in the UK (i.e. handsets not capable of receiving 4G or 5G signals). Less than 4% of data on Vodafone’s network is transmitted via 3G, and the corresponding figure at EE is just 2%. In 2016 this figure was around 30%, so reliance on 3G networks is dwindling. But some older critical devices including personal care alarms, security alarms and payment terminals may also rely on 3G networks to operate.
We’ve been here before of course. A strategy first announced in 2001 culminated in October 2012 when analogue television signals went dark, as the UK’s digital television switchover was made permanent. That date was preceded by a lengthy, expensive and unmissable marketing and consumer education campaign, focusing especially on elderly and less tech-savvy viewers, and those who might have been more resistant to change. For their part, the UK’s MNOs are contacting 3G phone users to advise them of their options and offer help with upgrades. The affected base of consumers is much smaller this time around, making more targeted interventions more appropriate (and, crucially, more cost-effective). That said, there is still an argument to be made for additional government support in raising awareness of the need to upgrade.
The death of 3G is a necessary precursor to the dawn of vastly superior 5G SA – 5G standalone, or “true” 5G networks – the vision for which is 100% coverage of the UK’s populated areas by 2030. This will be a paradigm shift in mobile communications, as a faster, more reliable and higher quality mobile network unlocks new opportunities for businesses and consumers alike.
New financial opportunities from 5G will be very welcome, but there is a long road paved with yet more cost to travel first. The 3G switch-off is another turning to be navigated, and MNOs will be hoping for a smooth journey – and one which doesn’t lead to even more scrutiny from government and regulators. This is perhaps the greatest risk, because any missteps or consumer backlash may provoke consequences that the industry can ill-afford.