5G for LatAm: Nokia knows why, but perhaps not who

A new report from Nokia predicts huge economic add over time from 5G adoption in LatAm. But will Huawei, ZTE et al reap the rewards more than Nokia?

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A new report from Nokia makes a convincing case for rapid adoption of 5G mobile technology in Latin America. Nonetheless it seems likely that much new Latin infrastructure will be supplied by companies like Huawei rather than companies like Nokia.

The new report is titled Why 5G in Latin America? It was produced by Nokia with analyst house Omdia, and published at the end of August. It makes several key points about the suitability of 5G for Latin America in particular.

The first of these is that mobile broadband is already in very widespread use among Latins. In Mexico and Peru more than 80 per cent of mobile subscribers use mobile broadband; in Argentina, Brazil, Chile and Colombia the figures are above 60 per cent. And yet, 4G is not nearly so common. In other words, large numbers of Latin users are getting their mobile data service via 3G technology: some, via 2G. For them, 5G would offer an enormous improvement, much greater than that experienced by a typical North American or European 4G user switching to 5G.

Then there’s the fact that fixed broadband connections are still not that common in Latin American homes, with household penetration still below 50 per cent across the region. When there is a connection, it tends not to be very good. Fixed broadband speeds in LatAm average 33.6 Mbps, well below the global average of 46.4 and far below top-ten nations such as Singapore, the Hong Kong Special Administrative Region and the USA, where fixed speeds average well above 100 Mbps. Many Latin respondents to an Omdia survey said they didn’t use fixed home broadband because it was unavailable, slow or unreliable.

5G could be used to bring household broadband to the huge numbers of Latin homes which don’t yet have it: it would also vastly improve the mobile services used by hundreds of millions of 3G subscribers across the region. In other words, 5G is much more exciting to Latin users than it is to users in developed nations who tend to have good home connections and who are probably already using 4G for mobile.

Xbox in the cloud

Another factor raised by the report’s authors is the possible emergence of so-called “cloud gaming”.

At the moment, videogames are broadly divided into two classes. There are casual games, typically played on phones, typified by the famous Candy Crush and Clash of Clans titles. Then there are resource-intensive traditional videogames played on powerful PCs or dedicated consoles. In recent times the explosion in casual mobile gaming has seen its revenues rise to outstrip those of traditional gaming. More and more, both types of gaming are requiring broadband-level, low-latency connectivity: this in itself is a point in favour of 5G, certainly for the increasingly data-hungry mobile segment.

But there is also a move afoot to do away with expensive home gaming consoles and PCs. The hard work currently done by these machines’ powerful processors and GPUs could, perhaps, be done in the cloud instead and the gamer’s own equipment used merely as a streaming device to view the gameplay. This idea hasn’t gained a lot of traction with gamers as yet, but the tech giants are getting involved: Google has its Stadia service and Microsoft its xCloud. The huge existing userbases of YouTube and the Xbox might be persuaded where other would-be game streamers have failed to achieve this.

The Omdia analysts write:

In conjunction with increasing internet speeds worldwide, cloud gaming is set to democratize premium games, meaning anyone with a smartphone can enjoy a premium, console-type gaming experience. Omdia forecasts gradual uptake of cloud gaming, reaching an inflection point in 2023.

Refined business models, improved cloud technology, and importantly, faster global internet access thanks to 5G will make accessing premium gaming frictionless and more immediate than ever before ...

Again, a North American or European gamer desiring a full-fat premium gaming experience probably already has an Xbox, PlayStation and/or a powerful gaming PC if he or she wants one, and a home broadband connection good enough to use it. But many Latin Americans cannot aspire to own such expensive devices, and don’t at present have any suitable broadband connection. They might, however, like to play top-end games in the cloud on a relatively affordable mobile device using 5G streaming.

‘Ambulances compete with cat videos’

Then again there’s the issue of latency. This isn’t terribly important for such purposes as watching video, which accounts for the great majority of internet traffic. But it’s a factor in the useability of videoconferencing, now much more important in the Covid-19 pandemic: and for gamers it is very important. As the Omdia analysts note, fixed broadband providers around the world often offer guaranteed low-latency service to gamers, prioritising their traffic for an extra fee.

But, the authors assert, this isn’t practical with any wireless technology other than upcoming releases of 5G. These permit network “slicing” which would allow designated 5G users to have much lower-latency service than others. This would have wider application than just gaming. As the report notes:

With today’s versions of 4G, emergency services get the same grade of service as any other mobile user. Ambulances compete with cat videos for bandwidth. Network slicing is possible in 4G, but it requires significant manual effort and is very complicated to accomplish end to end. With Release 16 and 17 versions of 5G, this will be a standard feature. Not only can slices be set up for emergency services during normal times but their parameters can be easily modified when there is a short-term crisis.

Apart from consumer uses, the authors point out the advantages of 5G for enterprise. They give examples of its use in important Latin sectors including industrial, mining and energy generation. As Latin America has the most urbanised populations on Earth, they also consider that so-called “smart city” applications of 5G have the potential to be especially impactful here.

Announcing the report, Wally Swain, Principal Consultant for Omdia Latin America said:

“Latin American countries must diversify their sources of income and jobs into higher value-added activities. Activities including mining and manufacturing must become more productive and 5G will play an important role on this.”

All in all, the Nokia report makes a convincing case for 5G mobile in Latin America. The existing nature of the region’s broadband market and the characteristics of its population should make 5G adoption in the near future more attractive to Latin businesses and consumers than it is elsewhere in the world.

Ignoring the Dragon in the room

But that doesn’t, in all likelihood, mean a big new market for Western networking firms like Nokia. Much existing network infrastructure across LatAm was supplied by Chinese vendors such as Huawei and ZTE, and they are just as ready to bring 5G to the region.

As early as 2013, Huawei proudly claimed that it was leader in market share across a range of different technologies and infrastructures in Latin America and second in market share for optical networks, routers and LAN switches for the entire region. The company had already built mobile infrastructure in Brazil, Mexico, Argentina, Colombia, Venezuela, Chile, Peru and Ecuador. Not only is Chinese equipment cheaper, it brings with it Chinese state-backed loans allowing cash-strapped customers to build projects quickly and pay for them later.

In the Western world, rising concerns over the People’s Republic being able to spy on users of Chinese-made network tech - concerns perhaps enhanced by revelations from Edward Snowden that Western-supplied kit is sometimes used in the same way by the Five Eyes spy alliance - look set to keep China out of the 5G market. Those concerns are mostly absent in LatAm, where national and local governments are typically quite happy not only with Chinese-supplied telecoms networks but even with Chinese-supplied facial recognition cameras on street corners. Western telcos led by BT, Deutsche Telekom and Telefónica are pulling out of the region.

Nokia executives are clearly aware of all this, but the situation was alluded to only obliquely in the announcement of their new report.

“With 5G, the security of telecommunications networks will be even more crucial,” said Osvaldo Di Campli, Nokia’s LatAm chief. “When we develop equipment in Nokia, we are addressing network security right on the architecture.”

Perhaps that will be a differentiator that will appeal to some Latin customers more than low prices and easy finance. But it might be a tough pitch to make.