RESTRICTING COMPETITION IN 5G NETWORK EQUIPMENT THROUGHOUT EUROPE - AN ECONOMIC IMPACT STUDY - Huawei

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RESTRICTING COMPETITION IN 5G NETWORK EQUIPMENT THROUGHOUT EUROPE - AN ECONOMIC IMPACT STUDY - Huawei
RESTRICTING
COMPETITION
IN 5G NETWORK
EQUIPMENT
THROUGHOUT
EUROPE
AN ECONOMIC IMPACT STUDY
DECEMBER
JUNE 2020 2019
Restricting competition in 5G network equipment throughout Europe

TABLE OF CONTENTS
                               Executive summary2

                               1. The 5G opportunity6
                                  1.1 5G rollout in Europe                                     7
                                  1.2 The impact of coronavirus on 5G rollout                  8
                                  1.3 The economic benefits of 5G                              9

                               2. How the 5G infrastructure market works11
                                  2.1 Who are the key players in the European market?         11

                               3.	How we assess the impact of restricting 5G competition13
                                  3.1 What happens if Huawei is restricted from competing? 13
                                  3.2 Our three-stage modelling approach                      14
                                  3.3 Transmission mechanism of competition restrictions      15
                                  3.4 Accounting for uncertainty                              16

                               4. The economic impact of restricting 5G infrastructure
                                  competition in Europe18
                                  4.1 Total impact of restricting competition across Europe   18
                                  4.2 Impact of restricting competition in each country       19
                                  County-by-country analysis                              20–80

                               Appendix 1: Glossary of terms                                  82

                               Appendix 2: Modelling approach and methodology                 84

                               Appendix 3: The Global Economic Model                          93

                               Appendix 4: Full results                                       96

                                                                                                1
Restricting competition in 5G network equipment throughout Europe

  EXECUTIVE SUMMARY
  The next generation of mobile technology,                             RESTRICTING COMPETITION IN THE 5G MARKET
  5G, offers enormous opportunities for
  countries who facilitate its widespread                               In Europe as well as globally, the
  provision. During the global coronavirus crisis,                      telecommunications network infrastructure
  telecoms networks have kept vital health,                             market is dominated by three players: Ericsson,
  education and emergency services online,                              Huawei, and Nokia. These companies were
  helped many businesses to smoothly shift to                           largely responsible for the rollout of 4G
  remote-working patterns and allowed friends                           networks via the deployment of mobile base
  and family to stay connected.                                         stations which facilitate connections to mobile
                                                                        user devices.
  As social distancing has become the norm (in
  the short run, at least), digital infrastructure                      However, the participation of one of these
  has played an ever-more important role in                             organisations—Huawei—in the rollout of 5G is
  keeping the wheels of the economy turning.                            likely to be constrained by a series of political
  Furthermore, the faster connection speeds                             decisions. The US and Australia have sought to
  achieved using the 5G network, and the                                restrict competition for further 5G infrastructure
  potential new-use cases for this technology,                          contracts. In several other markets, respective
  will be crucial in boosting productivity levels                       governments have indicated that they are either
  as countries seek to bounce back from                                 considering exclusion or have imposed partial
  financial collapse. Moreover, the act of 5G                           restrictions. In May 2020, the UK initiated a
  infrastructure building can provide a stimulus                        fresh review of Huawei’s participation in the UK
  for recovery in the short term.                                       telecoms market.1

  However, the recession associated with the                            The European Commission (EC) regulatory
  coronavirus pandemic is set to delay its                              guidance on the issue does not make any
  rollout, endangering the extent to which                              direct references to Huawei but recommends
  these opportunities can be realised. Slower                           that member countries should make their own
  economic growth and heightened uncertainty                            decisions by balancing security implications
  has led telecommunications operators to                               against other economic and industrial priorities.
  pullback on investment—an action that will
  inevitably slow the rollout of 5G.                                    Economic theory suggests that restricting
                                                                        competition leads to higher prices—as such, it
                                                                        can be expected that restricting a large player

€3 billion
                                                                        from competing in the 5G network will lead to
                                                                        higher investment costs, delaying the speed
                                                                        of rollout. This, in turn, will result in slower
                                                                        technological growth and innovation, lower
                                                                        incomes for households, and slower recovery
Estimated additional annual cost
                                                                        from the recession across the economy.
of building 5G infrastructure
across 31 European countries
if competition is restricted,
in our central cost scenario.

  2    1
           The Financial Times. 2020. “UK draws up plans to restrict Chinese inward investment”. The Financial Times, 24 May
Restricting competition in 5G network equipment throughout Europe

ECONOMIC IMPACTS OF RESTRICTING 5G COMPETITION

In this context, Huawei commissioned Oxford                            A delay in the rollout of 5G would also result in
Economics to assess the economic costs                                 slower technological innovation and reduced
of restricting competition in 31 European                              economic growth. In our central cost scenario,
countries.2 To reflect the uncertainty inherent in                     this would result in reductions to national GDP
such a process, we modelled three alternative                          in 2035 ranging from €13 million in Iceland
scenarios termed “low cost”, “central cost”,                           to €7.3 billion in France. The total GDP in
and “high cost”. All give results relative to our                      2035 lost in the 31 countries in our study is
(post-coronavirus) baseline scenario, in which                         estimated to be €40 billion in 2020 prices.
no competition restrictions are imposed on the
5G infrastructure market.                                              When interpreting these results, it is important to
                                                                       note that we have not made allowance for costs
Under the central cost scenario, our modelling                         that network operators would face if they were
suggests that restricting a key supplier of 5G                         to need to replace existing equipment built by
infrastructure in our 31 European countries                            the restricted provider. Such additional costs
would increase total 5G investment costs by                            would further delay rollout and technological
almost €3 billion per year on average over the                         innovation resulting in higher productivity losses.
next decade, in 2020 prices. This represents an
annual cost increase of 19%, which translates to
€3 million per year in Iceland but as much as

                                                                          €40 billion
€479 million per year in Germany.

The associated restriction in competition
for 5G infrastructure would lead to delays in
the network rollout. Under the central cost                               Estimated reduction in Europe’s
scenario, we estimate that around 56 million                              annual GDP in 2035 if competition is
fewer people across Europe would be covered                               restricted (central scenario, 2020 prices).
by the 5G network in 2023.

Fig. 1: Total Europe-wide impacts of restricting a major participant in 5G network provision,
under our three modelling scenarios

                                                                          Low cost             Central cost             High cost
                                                                          scenario              scenario                scenario
    Increase in average annual investment costs                          €1.4 billion           €3.0 billion           €4.5 billion
    for 5G infrastructure over the next decade                              (9%)                  (19%)                  (29%)
    Absolute number of people who will have                               29 million             56 million             78 million
    delayed access to 5G by 2023                                            (6%)                   (11%)                  (15%)
    Estimated permanent loss in Gross Domestic
                                                                          €12 billion           €40 billion            €85 billion
    Product (GDP) due to delay in 5G rollout in 2035

2
 In this study, we cover the following 31 countries: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia,
Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway,
Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland and the United Kingdom. In a previous report published in   3
December 2019, we had covered France, Germany and the United Kingdom using the same methodology. The results for these three
countries presented in this report differ from those presented in the previous study due to differences in 5G rollout forecasts and
macroeconomic projections (particularly in light of coronavirus).
Restricting competition in 5G network equipment throughout Europe

THE IMPACTS OF 5G
INFRASTRUCTURE RESTRICTION*
                                               €98 mn (19%)
                                               600,000 (11%)

                     €3 mn (19%)
                                    NO         €1.1 bn

                     20,000 (6%)
          IS         €13 mn                    €29 mn (19%)
                                               800,000 (13%)

                     65 mn (19%)
                                    DK         €600 mn

                     1.7 mn (14%)
         BE          €1.1 bn                   €52 mn (19%)
                                               2.1 mn (12%)

     €374 mn (19%)
                                     NL        €1.6 bn
                                                                                    €120 mn (19%)
     7.3 mn (11%)
UK   €4.4 bn
                                                                        PL
                                                                                    3.3 mn (9%)
                                                                                    €1.0 bn

     €27 mn (19%)
     345,000 (7%)
IE   €700 mn

     €5 mn (19%)
     50,000 (7%)
LU   €130 mn

     €479 mn (19%)
     11.9 mn (14%)
DE   €6.9 bn

     €63 mn (19%)
     1.0 mn (10%)
PT   €500 mn

     €292 mn (19%)
                                                    €73 mn (19%)                   €4 mn (19%)
     5.0 mn (11%)
ES
                                                    1.1 mn (12%)                   20,000 (4%)
     €3.7 bn
                                          AT        €1.1 bn           MT           €40 mn

     €447 mn (19%)                  €94 mn (19%)                   €282 mn (19%)
     4.0 mn (6%)                    800,000 (9%)                   6.9 mn (12%)
FR   €7.3 bn              CE        €1.7 bn                   IT   €4.7 bn
Restricting competition in 5G network equipment throughout Europe

                              €64 mn (19%)
                              1.4 mn (13%)
                   SE         €1.1 bn

                              €79 mn (19%)
                                                                                  €2.4 bn (19%)
                              600,000 (11%)
                   FI         €400 mn
                                                                                  46.9 mn (11%)
                              €10 mn (19%)
                              130,000 (10%)
                                                                 EU27             €32.4 bn
                  EE          €60 mn

                              €8 mn (19%)                TOTAL for all 31 countries
                              180,000 (10%)
                   LV         €70 mn

                              €8 mn (19%)
                              200,000 (9%)
                                                           €3.0 bn       56 mn                  €40 bn
                                                             (19%)        (11%)
                   LT         €60 mn

        €57 mn (19%)                    €31 mn (19%)
        1.2 mn (11%)                    200,000 (4%)
CZ      €400 mn           SK            €200 mn

                                                       €55 mn (19%)          Increase in average annual
                                                       500,000 (5%)          investment costs for 5G

                                         HU            €300 mn
                                                                             infrastructure over the next
                                                                             decade; € millions (%)
                   €59 mn (19%)
                   2.4 mn (13%)
      RO           €80 mn
                                                                             Absolute number of people
                                                       €20 mn (19%)
                                                                             that will have delayed access
                                                       700,000 (10%)
                                         BG            €100 mn
                                                                             to 5G by 2023; number of
                                                                             people (% of population)
               €23 mn (19%)
               200,000 (6%)
     HR        €80 mn
                                                                             Estimated permanent loss
                                                       €15 mn (19%)
                                                                             in Gross Domestic Product
                                                       120,000 (6%)
                                          SI           €150 mn
                                                                             (GDP) due to delay in 5G
                                                                             rollout in 2035; €

               €37 mn (19%)                       €7 mn (19%)
               800,000 (8%)                       38,000 (4%)
     GR        €600 mn              CY            €40 mn                *Results for each country show the
                                                                          central cost 5G impact scenarios
Restricting competition in 5G network equipment throughout Europe

1. THE 5G OPPORTUNITY
As the next generation of                       As European economies                             Businesses are preparing
mobile wireless network                         emerge from the Coronavirus                       for millions of new wireless
technology, 5G will provide a                   pandemic, the building                            devices—from smartwatches
better consumer experience                      of digital infrastructure,                        and other wearable items to
and improve business                            especially 5G networks, is                        sensors embedded in industrial
performance through faster                      expected to play a significant                    products—to be connected
data transmission and more                      role in recovery from the                         to the next generation of 5G
reliable connectivity. 5G will                  recession. The construction                       mobile networks. These devices,
reduce the cost of mobile                       of 5G networks will support                       which together constitute the
internet use, with prices                       jobs, and this spending on                        Internet of Things (IoT), will not
expected to drop 10-fold per                    suppliers and employees is                        use a lot of data (a sensor built
gigabyte of data, compared                      expected to have significant                      into a highway, for example,
with current 4G mobile                          multiplier effects5 across                        will need to send only small
networks.                                       the wider economy. Should                         amounts of digital information
                                                remote working become                             across the network every
5G will also unlock new income                  more common in the long run                       couple of hours). But when
streams for businesses in all                   after restrictions are lifted,                    combined, these hundreds of
sectors of the economy, and                     the connectivity provided by                      millions—potentially billions—
increase their productivity                     5G networks will help boost                       of new sensors will require
levels, through enhanced                        productivity levels beyond                        almost universal connectivity,
capabilities including higher                   the new-use cases that 5G is                      forcing operators to extend
data speeds, lower latency3, and                likely to enable, and which are                   their networks to practically
network slicing4 (see Fig. 2).                  discussed below and in Fig. 3.                    every corner of a country. Fig.
                                                                                                  3 gives an indication of how 5G
                                                                                                  and the IoT will affect people
                                                                                                  and businesses across a wide
                                                                                                  range of activities.

Fig. 2: Summary of 5G’s key benefits to businesses and consumers

                          5G, characterised as Enhanced Mobile Broadband (eMBB), is expected to
 Faster
                          improve mobile internet use with higher speeds and seamless user experience
 connection
                          in dense or high‑mobility environments. It will support high-bandwidth
 speeds
                          services such as Augmented Reality (AR) and Virtual Reality (VR) apps.

 Greater                  5G will enable Massive Machine-type Communications (mMTC). Put simply,
 bandwidth for            it will enable the connection of a very large number of connected devices,
 more devices             which together comprise the Internet of Things.

                          5G will also provide Ultra-reliable and Low Latency Communications (URLLC).
                          Low latency means the response times for 5G will be much quicker than
 Quicker                  for previous generations of mobile technology, and that access to 5G will
 response times           be far more reliable. This will allow the development of “mission critical”
                          applications—for example, in transport (vehicle-to-vehicle communications),
                          healthcare (remote monitoring), and logistics (drone delivery).

Source: Ofcom, Oxford Economics

      3
        Latency is the amount of time between a command and its corresponding action over the internet.
      4
        Network slicing allows the physical infrastructure to be split into several virtual networks that can be tailored to different end-users,
6     thereby facilitating dedicated disruption-free networks for critical users such as health and transport services that are free from
      disruption from other consumer and business uses.
      5
        The multiplier effect comes about because the money paid to suppliers and employees will be create demand for other goods and
      services in the wider economy, which in turn will stimulate further rounds of spending. The eventual final effect on employment and
      output could be bigger than the initial spending on infrastructure.
Restricting competition in 5G network equipment throughout Europe

Fig. 3: Examples of 5G and IoT applications by sector
 Sector                 Examples of applications
 Health and             IoT enables remote health monitoring, creating timely alerts for patients,
 social care            nurses, or carers.
 Automotive             Connected smart cars for tracking mechanical diagnostics, autonomous
                        vehicles (e.g., driverless cars), locations, and media streaming.
 Smart cities           Optimisation of street lighting, monitoring of parking, rubbish collection
                        timing, and environmental monitoring.
 Utilities              Smart meters and smart thermostats allowing for more accurate billing and
                        better control of energy consumption.
 Manufacturing          Digitisation and automation of production lines, and remote control of
                        industrial processes.
 Logistics              Connected containers to record and share the item’s location and temperature
                        to streamline production and reduce the risk of damage to temperature-
                        sensitive produce.
Source: Ofcom, Oxford Economics

1.1 5G ROLLOUT IN EUROPE

Amid hype and high                            Fig. 4: 5G rollout in Europe as of May 2020
expectations, the 5G rollout
                                                                Single launch
has begun. Before the onset
of coronavirus, GSMA6 had                                       Multiple launches
forecast that there would                                       Fully launched
be 1.2 billion 5G mobile
users globally by 2025, with
network coverage extending
to roughly a third of the
planet’s population.7 Due to
the restrictions in response to
the pandemic, the rollout of
5G services is expected to be
delayed in the short run. GSMA
expects that 5G connections
in 2020 will be 25% lower than
the levels planned before the
onset of the coronavirus.8

                                             Source: GSMA

6
  The GSM Association (commonly referred to as ‘the GSMA’ or Global System for Mobile Communications, originally Groupe Spécial
Mobile) is an industry organisation that represents the interests of the mobile network operators worldwide.
7
  GSMA. 2018. The Mobile Economy 2018                                                                                             7
8
  Mobile World Live. Intelligence Brief: How will Covid-19 impact 5G?
Restricting competition in 5G network equipment throughout Europe

The European Commission                      operators have also switched                    in industrial espionage, nor
(EC) established a Public                    on their 5G networks in                         allowed its technology to
Private Partnership on 5G (5G                Belgium, Latvia, Norway, the                    be knowingly hacked by the
PPP) in 2013 to accelerate                   Netherlands, and Spain.                         Chinese state.10
research and innovation in
5G technology. The EC had                    Commercial 5G networks                          Within Europe, the EU
earmarked public funding                     began going live in 2019, and                   has introduced regulatory
of €700 million through its                  the rate of new launches is                     guidance that allows countries
Horizon 2020 Programme to                    expected to pick up in 2020,                    to balance the security risks
support the development and                  with an estimated $160 billion                  from a vendor against other
deployment of 5G in Europe.                  being invested each year                        priorities—including the
EU industry was expected to                  in the construction of 5G                       economic implications of
amplify this investment by up                networks globally.                              restricting any vendor from
to five times, to more than €3                                                               participating in 5G network
billion. These activities have               However, concerns expressed                     deployment. In July 2019,
been accompanied by an                       about cyber security have led                   the Intelligence and Security
international plan to ensure a               several countries to consider                   Committee (ISC) of the UK
standardised implementation                  imposing restrictions on                        Parliament issued an official
of 5G.9                                      Chinese network providers                       statement on 5G suppliers
                                             from selling 5G network                         that “limiting the field to
Fig. 4 offers a snapshot of                  equipment to telecoms                           just two […] would increase
5G networks as of October                    companies. In particular, as of                 over-dependence and reduce
2019. Multiple operators                     June 2020, Huawei has been                      competition, resulting in less
have launched services in                    blocked from competing in                       resilience and lower security
Austria, Finland, Germany,                   any 5G provision tenders in the                 standards”.11 More recently, in
Hungary, Italy, Ireland,                     United States and Australia,                    May 2020, the UK initiated a
Romania, Switzerland and                     despite the company stating                     fresh review of Huawei’s role in
the United Kingdom. The first                that it has never engaged                       5G deployment.12

1.2 THE IMPACT OF CORONAVIRUS ON 5G ROLLOUT

The restrictions put in place                As of early April 2020, delays                  However, in the medium-to-
across Europe to tackle the                  were already confirmed in a                     long term, it is likely that this
spread of coronavirus and the                number of countries due to                      crisis will increase the appetite
associated delays in spectrum                the coronavirus pandemic                        for digital solutions (such as
auctions have had a significant              such as France and Portugal                     remote medical check-ups)
impact on 5G rollout plans.                  and potentially others13.                       for services that traditionally
In the short-to-medium                       Further, the shutdown of                        required face-to-face
term, a number of European                   government offices has                          interaction.
mobile network operators                     slowed the process of granting
are expected to delay their                  permits to mobile operators to
investments in 5G networks.                  build new cell sites.

     9
        Towards 5G. European Commission. https://ec.europa.eu/digital-single-market/en/towards-5g
8    10
         The Guardian. 2019. “Huawei boss: UK ‘won’t say no to us’ over 5G rollout.” The Guardian, 16 August.
     11
        The Intelligence and Security Committee, UK Parliament. “Statement on 5G suppliers”, 19 July 2019..
     12
        The Financial Times. 2020. “UK draws up plans to restrict Chinese inward investment”. The Financial Times, 24 May.
     13
        The European Commission. 2020. “5G Observatory Quarterly Report 7”. March 2020.
Restricting competition in 5G network equipment throughout Europe

   BOX 1: HOW 5G CAN BOOST RECOVERY FROM THE CORONAVIRUS CRISIS

   In common with the rest of the world, Europe                             to improve the quality of life for residents
   is currently experiencing a deep recession.                              by enabling diverse economic activities,
   At the time of writing, we are expecting a                               reducing environmental impacts, and providing
   decline in real GDP this year of nearly 7.6%                             enhanced services and amenities—all of which
   in the Eurozone, compared with a 2.8%                                    could be boosted by greater 5G provision.
   contraction globally.
                                                                            Moreover, the coronavirus pandemic may well
   Deployment of the 5G network will play an                                accelerate trends towards remote working and
   important role in stimulating the region’s                               e-commerce. Such trends would place an even
   economic recovery. The investment in network                             greater imperative on ensuring high quality
   building will not only spur activity on-site, but                        network connectivity.
   also boost the economy through associated
   supply chain spending, and as a result of                                However, restricting a large player from
   employees spending their wages in the wider                              competing in the 5G network at such a crucial
   consumer economy.                                                        time will lead to increased investment costs,
                                                                            delaying the speed of rollout which, in turn,
   In addition to its significant economic benefits,                        will result in slower technological growth and
   5G has the potential to bring quality-of-life                            innovation, and lower incomes for households
   benefits to both cities and rural communities.                           and slower recovery from the recession across
   Cities are increasingly searching for ways                               the economy.

1.3 THE ECONOMIC BENEFITS OF 5G

To date, only a small                           the total contribution of 5G                     $13.2 trillion in 2035 (5% global
number of studies have                          value chain alone over the                       real output in 2035).
attempted to estimate the                       2020–2034 period at $2.2
macroeconomic impact of                         trillion—5.3% of total GDP                       An EC study forecasting the
5G around the world. The                        growth during this period.                       qualitative and quantitative
magnitude of the findings                                                                        socio-economic benefits of 5G
varies greatly across different                 In a 2019 report, IHS Markit                     estimated that 5G deployment
studies, reflecting different                   predicted that the global 5G                     costs would have been
underlying assumptions                          value chain would generate                       approximately €56.6 billion in
and methodological                              a US$3.6 trillion contribution                   EU28 member states in 2020.
approaches taken.                               to GDP, and support 22.3                         Analysis focusing purely on
                                                million jobs, by the year                        the economic benefits of this
Summarising these findings,                     2035. 5G will enable new                         investment spending suggests
5G-enabled economic activity                    market opportunities and                         that 5G investment will lead
is forecast to contribute                       may even profoundly change                       to ‘trickle-down’ or multiplier
between US$1.4 trillion and                     some industries. IHS Markit                      effects with a value of
US$13.2 trillion to global                      estimates that potential global                  €141 billion. These effects are
GDP by 2035. A 2018 study                       sales of products and services                   likely to create 2.3 million jobs
commissioned by GSMA put                        enabled by 5G could reach                        in EU28 Member States.14

14
   Identification and quantification of key socio-economic data to support strategic planning for the introduction of 5G in Europe.
European Commission. 2016.                                                                                                            9
Restricting competition in 5G network equipment throughout Europe

As previously discussed,                       5G capabilities in vehicles will               estimated that 5G is expected
various industries will use the                enable transport authorities                   to generate benefits of €62.5
improved capabilities of 5G                    to better monitor vehicular                    billion in these industries in
to create new and enhanced                     flow and manage traffic. An                    2025—of which 63% will arise
products, which will produce a                 in-depth analysis of these                     for business, and 37% will be
knock-on benefit to consumers                  benefits for four key sectors—                 provided for consumers and
and the wider economy. For                     automotive, healthcare,                        society.15
example, the incorporation of                  utilities, and transport—

Fig. 5: Estimates of 5G’s contribution to GDP growth

 Country               5G investment     Direct multiplier                     Jobs associated with investment spending
                     2020 (€ millions) effect (€ millions)                              and associated multiplier effects
 Austria                                970                          2,170                                                      25,200
 Belgium                             1,230                          3,150                                                      36,300
 Bulgaria                               840                        2,320                                                      128,900
 Croatia                                480                         1,540                                                      64,400
 Cyprus                                 100                            470                                                     20,800
 Czech Rep.                          1,200                         3,990                                                      143,000
 Denmark                                620                         1,480                                                        14,800
 Estonia                                 150                           560                                                       13,600
 Finland                               600                            1,501                                                      19,900
 France                             7,030                            17,110                                                  224,700
 Germany                            9,280                        20,740                                                          211,100
 Greece                              1,220                          2,180                                                      101,300
 Hungary                               1,130                       3,450                                                      134,600
 Ireland                               490                            1,210                                                      10,700
 Italy                              6,830                        15,700                                                       186,830
 Latvia                                 230                            570                                                       16,800
 Lithuania                              330                            700                                                      28,200
 Luxembourg                               60                             122                                                        600
 Malta                                    50                            190                                                       3,900
 Netherlands                         1,870                         5,030                                                       68,300
 Poland                             4,350                        13,040                                                       569,553
 Portugal                              1,170                       3,730                                                       127,300
 Romania                            2,270                          4,660                                                     252,300
 Slovakia                               620                         1,980                                                        71,500
 Slovenia                               240                             610                                                      14,700
 Spain                               5,190                       14,600                                                      329,400
 Sweden                              1,060                         2,450                                                        25,300
 UK                                 7,040                         16,520                                                        172,100
 EU28                              56,640                       141,840                                                    2,394,800
Source: European Commission (2016)

       Identification and quantification of key socio-economic data to support strategic planning for the introduction of 5G in Europe.
      15

10    European Commission. 2016.
Restricting competition in 5G network equipment throughout Europe

2. H
    OW THE 5G
   INFRASTRUCTURE
   MARKET WORKS
To understand the impact of                          2.1 WHO ARE THE KEY PLAYERS IN THE EUROPEAN MARKET?
restrictions on 5G equipment
providers, it is important to                        Ericsson (29% market share),      Fig. 7: Regional market shares
understand the current market                        Huawei (31%), and Nokia (23%)     in the RAN market, 2018
structure, and the nature of                         are the largest players in the              2%              1%
competition in this market.                          global RAN market, across
                                                     all generations of mobile
The telecoms infrastructure                          technology. These three                          6%
underlying the 5G network                            companies have the broadest
consists predominantly of the                        product portfolios and widest
Radio Access Network (RAN),                          global reach (see Fig. 6), as                                      35%
                                                                                           24%
which in turn consists mainly                        well as the strongest service
of mobile base stations that                         support, and are expected to
connect telecom networks                             remain key global players as
wirelessly to mobile user                            5G becomes more prominent.
devices.
                                                                                                           31%
    Fig. 6: Key players’ European shares of RAN market and
    relative market positions, 2018
                                                                                          Huawei                  Ericsson
                                    Niche      Challengers            Leaders
                                                                                          Nokia                   ZTE

                                                                            Nokia         Samsung                 Others
Breadth of portfolio and services

                                                                  Huawei
                                                      ZTE                              Source: Oxford Economics

                                                                           Ericsson
                                                                                       While network providers are
                                                                                       global players with a worldwide
                                                                                       footprint, there are some
                                               Samsung                                 differences in their regional
                                                                                       market shares (see Fig. 7).
                                                                                       Currently, Huawei has a small
                                                                                       presence in North America,
                                                                                       where Ericsson and Nokia
                                      Others
                                                                                       dominate with a combined
                                                                                       market share of close to 90%.
                                                                                       On the other hand, ZTE has a
                                               Global reach                            small but significant presence
     Source: Ovum, Oxford Economics                                                    in the Asia Pacific region, at the
                                                                                       expense of Nokia and Ericsson.
                                                                                       Despite these differences,
                                                                                       responses to a 2015 EC review
                                                                                       suggested that there are no
                                                                                       obvious geographical barriers
                                                                                       to the reach of the largest
                                                                                       network providers.16

16
   Nokia/Alcatel-Lucent Merger. 2015. Case No COMP/M.7632 - REGULATION (EC) No 139/2004 Merger Procedure (European
Commission, 24 July).                                                                                                         11
Restricting competition in 5G network equipment throughout Europe

BOX 2: CROSS-COUNTRY DIFFERENCES IN THE 5G NETWORK MARKETS

In Europe, there are 45 network operators            common set of measures aimed at mitigating
who provide mobile telecoms services across          the main cybersecurity risks of 5G networks.
various national markets. Operators with cross-
border presence must meet EU-wide regulatory         However, despite these measures, the
requirements (if they operate in the EU) as well     differences in regulatory requirements across
as those of the respective national markets.         countries remains a major challenge for
                                                     operators. For those that have cross-border
The EU telecoms market is one of the most            interests, restrictions or additional regulatory
highly regulated in the world through the            requirements with respect to procurement of
Framework Directive, Directive on Privacy            network equipment in one country may have
and Electronic Communications, Directive             an impact in all the countries they operate
on Network and Information Security (NIS),           in. These cross-border effects could lead to
Cyber Security Act (CSA) certifications,             the economic consequences of restricting
European Electronic Communications Code              competition in one market being felt more
(EECC), and Radio Equipment Directive (RED).         broadly outside its borders.
National governments and telecoms authorities
have taken steps to coordinate regulations.          Given the uncertainty surrounding these
For example, EU member states set up the             effects, we have not included these in our
EU Toolbox for 5G Security to identify a             estimates of the economic costs of competition
coordinated European approach based on a             restrictions in the 5G market.

2.2 THE 5G INFRASTRUCTURE TENDER PROCESS

Having declined over the last       processes are already under        made any direct references
few years, the RAN market           way in many countries, with        to Huawei. The regulatory
is expected to start growing        the duration of such contract      guidance indicates that these
again—driven by the rollout         awards being around three          countries will have to balance
of 5G networks. In 2019,            years, on average.                 the security implications against
worldwide RAN sales was                                                other economic and industrial
forecast at around US$31 billion,   Economic theory implies            priorities.
to which 5G equipment is            that a competitive tender
expected to contribute roughly      will typically yield benefits      In the next chapter, we discuss
US$3.6 billion. The contribution    for consumers, in terms of         the theoretical impact of
of 5G is then expected to grow      prices, quality of service, and    restricting competition on
rapidly over the next decade        technological innovation.          the 5G network provision
as the contribution of 4G                                              market, before going on
declines, resulting in total RAN    Across Europe, 5G services have    to explain our three-stage
sales exceeding US$35 billion       been launched in 10 countries      modelling approach. Then in
by 2023.                            as of March 2020. However, the     Chapter 4, we quantify the
                                    EU and the UK have introduced      economic consequences of
Mobile network operators,           regulatory frameworks that         such a restriction across the 31
such as EE and Vodafone in          could potentially exclude one of   countries in our study, in terms
the UK, issue tenders to the        the vendors from participating     of increased investment costs,
network providers for building      the 5G network building            delayed 5G rollout, and lost
5G networks. These tender           process. The EU has not yet        productivity.

12
Restricting competition in 5G network equipment throughout Europe

3. H
    OW WE ASSESS THE
   IMPACT OF RESTRICTING
   5G COMPETITION
The technological benefits           3.1 WHAT HAPPENS IF HUAWEI IS RESTRICTED FROM
of 5G are expected to                COMPETING?
be transformational, and
potentially revolutionary. As        For this study, we assume that         We also assume that 5G
the world prepares to roll out       if Huawei is restricted in each        network equipment market
5G, a healthy and competitive        country’s 5G infrastructure            shares over the next decade
market will help to ensure that      market, network operators              in the baseline scenario (no
the network infrastructure is        in that market would switch            restrictions on Huawei) will
installed as efficiently, quickly,   to one of the two other large          remain close to 4G market
and cheaply as possible.             providers, Ericsson and Nokia,         shares in 2018. In that year,
                                     in proportion to their existing        Huawei had 29% of the global
Economic theory suggests             market shares. We believe              4G market, while Ericsson
imposing restrictions on a major     that the other providers do            and Nokia had 27% and 25%
global provider such as Huawei       not have the same global               respectively of the global
would be expected to increase        reach or breadth of products           4G market.
prices, which might in turn slow     and services that would allow
down 5G rollout. Furthermore,        them to successfully compete           With Huawei blocked from the
the quality of the infrastructure    for Huawei’s customers, and            market, our assumption means
may be diminished, and               therefore their market shares          that Ericsson and Nokia’s
productivity growth delayed          would remain unchanged.                market shares would increase
and possibly lost.                                                          to 42% and 39% respectively,
                                                                            while Samsung, ZTE, and the
                                                                            other operators would not
                                                                            see a change in their market
                                                                            shares (see Fig. 8).

                                     Fig. 8: Worldwide market shares, with and without restrictions
                                     on Huawei (based on 2018 4G revenues)
                                              2%              1%                     2%        1%

                                                   6%                                 6%

                                                                   35%
                                        24%

                                                                               39%                  51%

                                                        31%

                                                         Huawei          Ericsson          Nokia
                                                         ZTE             Samsung           Others
                                     Source: Oxford Economics

                                                                                                          13
Restricting competition in 5G network equipment throughout Europe

This results in an increase in                In this study, we only consider                  advantage over its competitors
concentration17 in European                   the economic impact due to                       due to its technological
markets. In our study, we focus               increases in concentration and                   prowess.20 Therefore, the rest
on 31 technology markets in                   do not account for the loss of                   of the modelling, described
Europe. 18 Given the proximity                the technological know-how,                      further in the following
and similarity of the markets,                experience and capabilities that                 chapter, is more appropriately
we use European market                        are unique to Huawei or the                      described as being based on
shares as the basis for our                   potential additional transition                  the exclusion of a competitor
calculations.19 Huawei has                    costs related to moving                          of Huawei’s size.
a significant market share                    from Huawei 4G equipment
in Europe and therefore,                      to a different vendor’s 5G
restrictions on Huawei in                     equipment. Huawei is among
Europe will lead to a significant             the leading spenders on R&D
increase in concentration.                    and is considered to have an

3.2 OUR THREE-STAGE MODELLING APPROACH

Reduced competition due                       Stage 1: Impact on investment costs
to restrictions on Huawei
can be expected to increase
                                              To calculate the economic                        •   merger simulation
                                              impact of restricting                                techniques that are used
investment costs, slow down
                                              competition, we started by                           by competition authorities
rollout and delay productivity
                                              estimating the increase in                           to estimate the price
improvements. Using Oxford
                                              mobile network operators’                            impact following changes
Economics’ world-leading
                                              investment costs when a                              to the market structure e.g.
Global Economic Model
                                              major infrastructure provider                        following the completion of
(GEM) and a host of other
                                              is restricted from the market.                       a merger; and
sophisticated industry and
                                              We did this using a range
market structure models,
                                              of techniques developed in                       •   empirical evidence from
we analysed the impact of a                                                                        a range of studies across
                                              collaboration with Dr Martin
supplier of Huawei’s size being                                                                    industries that estimated
                                              Pesendorfer from the London
restricted from each market’s                                                                      the change in price
                                              School of Economics.
5G network infrastructure, in                                                                      following a merger.
terms of the projected increase
                                              The techniques used were:
in investment costs, delays                                                                    Given the worldwide nature
in 5G rollout, and reduced                    •   a theoretical model of                       of the network infrastructure
national GDP levels. We used                      oligopoly characterising the                 market, we made some
a three-stage modelling                           5G network infrastructure                    adjustments to standardise
framework to assess the                           market that simulates the                    the price impacts across our 31
economic impact of restricting                    change in price of network                   countries of interest.
competition in the provision of                   infrastructure associated with
5G network equipment.                             restrictions on competition;

     17
        A concentrated market is one where a small number of firms account for large percentage of the total market. Concentration
     increases as the size of the market controlled by the small number of firms increases.
     18
        In this study, we cover the following 31 countries: Austria, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland,
     France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland,
14   Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland and the United Kingdom.
     19
        Ideally, we would have used national market share data to tailor our analysis to the individual markets, but we had to use regional
     market shares as the corresponding national data was not available.
     20
         Strategy Analytics. 2019. “Comparison and 2023 5G Global Market Potential for leading 5G RAN vendors - Ericsson, Huawei and Nokia.”
Restricting competition in 5G network equipment throughout Europe

Stage 2: Impact on rollout        required to extend 5G coverage       is partly due to the increase
                                  on a per person basis. The           in the costs of building the 5G
We translated the increase in
                                  increase in investment costs         network and partly due to the
investment costs to delays in
                                  due to restricted competition,       reduced investment in 5G and
rollout using a network rollout
                                  as estimated in Stage 1, was         related services due to delays
model built in collaboration
                                  used as an input into the rollout    in rollout.
with Dr Edward Oughton
                                  model. Assuming that nominal
(University of Oxford). This
                                  investment remains unchanged,        These were then fed into the
model translates an increase in
                                  the higher cost of rollout results   Oxford Economics Global
investment costs to a reduction
                                  in lower coverage.                   Economic Model to estimate
in the share of the population
                                                                       the impact on a range of
covered for each country and
                                  Stage 3: Impact on                   macroeconomic indicators
scenario by assuming that
                                  productivity and                     such as GDP and household
the overall operators’ capex
                                  macroeconomic growth                 consumer spending.
remains the same.
                                  The increase in investment
Our baseline—i.e. with no         costs and delays in rollout
competition restrictions—         were translated into lower
forecasts for 5G rollout and      productivity growth using
capital expenditure were          estimates of the productivity
sourced from GSMA. Based on       benefits of 5G from various
this, we calculated the average   academic and industry studies.
investment expenditure            The lower productivity growth

3.3 TRANSMISSION MECHANISM OF COMPETITION RESTRICTIONS

There are a large number          Our modelling approach does          competitor such as Huawei.
of ways through which             not account for a number
restrictions on competition       of other potential costs of          The higher network equipment
in the network infrastructure     restricting competition. For         prices translate into higher
market results in loss in         example, in addition to the          investment costs, which
productivity and GDP. Fig. 9      increase in prices, there may        translates into delays in rollout.
summarises the transmission       also be a reduction in quality       We assume that network
mechanism, highlighting the       and technological innovation         operators do not suffer from
channels that have not been       in the 5G network equipment          any capital constraints or
included in our modelling.        as the unrestricted firms do         increased costs of capital as
                                  not face the same pressures to       they increase their investment
In general, restricting           invest in R&D and innovation.        expenditure.
competition in the 5G network
infrastructure market leads to    Further, network operators           The increase in investment
lower competitive pressures       and providers may face               costs and the consequent
on the unrestricted network       some transition costs as they        delays in rollout lead to
providers, who will be able to    adapt their plans and existing       productivity losses across the
charge higher contract prices     infrastructure to adequately         economy.
for 5G equipment.                 fill in the gap left by a large

                                                                                                      15
Restricting competition in 5G network equipment throughout Europe

Fig. 9: Transmission mechanism of restrictions in competition

             Restrictions on network providers leads to reduced competition as unrestricted
                                   providers fill the gap in the market

                                         Unrestricted
         Increased                    network providers                       Reduced                 Loss in restricted
     investment costs                face transition costs               investment in R&D             providers’ R&D
        for network                     (e.g. increasing                   by unrestricted            and technological
         operators                    capacity) to match                 network providers                knowhow
                                      increased demand

                                                                        Capital constraints and higher cost of capital
     Reduced returns from investing in networks
                                                                         due to increased investment costs lead to
              lead to delays in rollout
                                                                                       delays in rollout

           Reduction in productivity in the                                Spillover productivity impact across the
                  telecoms sector                                                       wider economy
Note: The grey boxes indicate channels that are not considered in our modelling approach.
Only the channels described in the blue boxes are modelled.

3.4 ACCOUNTING FOR UNCERTAINTY

The precise extent of this                    year, which is based on the                   of the range of estimates
negative impact will depend on                lower end of estimates from                   from our three price models
the potential future benefits of              various studies. To account                   in Stage 1. In the central cost
5G, and the market reactions                  for limited increases in prices               scenario, we assumed that 5G
to competition restrictions. To               in the low cost scenario, we                  leads to productivity benefits
capture the uncertainty around                assumed that investment costs                 of 0.15% in GDP growth per
the future benefits of 5G and                 increase by the lower end of                  year in the first year of 5G
the different market responses                the range of estimates from                   rollout, increasing to 0.30%
to competition restrictions, we               our three price models.                       in five years. The increase in
modelled three scenarios which                                                              investment costs was based
are summarised in Fig. 10.                    For the high cost scenario,                   on the median of estimates
                                              we assumed that 5G leads to                   from the three price models
The modelling assumptions                     productivity benefits of 0.30%                in Stage 1.
corresponding to these                        in GDP growth per year, which
scenarios are shown in                        is based on the higher end
Fig. 11. To model the low cost                of the estimates from the
scenario, we assumed that 5G                  various studies. Similarly, the
leads to productivity benefits                increase in investment costs
of 0.15% in GDP growth per                    was based on the higher end

16
Restricting competition in 5G network equipment throughout Europe

Fig. 10: Definitions of scenarios modelled to reflect uncertainty

Source of
               LOW COST scenario             CENTRAL COST scenario              HIGH COST scenario
uncertainty

Potential      5G, characterised             5G enables Massive Machine-        5G is revolutionary, providing
future         as Enhanced Mobile            type Communications                Ultra-reliable and Low
benefits       Broadband (eMBB),             (mMTC): i.e. the connection        Latency Communications
of 5G          provides higher broadband     of a very large number             (URLLC) that enables
               speeds and supports high-     of connected devices               applications which are heavily
               bandwidth services such       (one million per sq. km),          dependent on low latency
               as Augmented Reality          supporting low-power, low-         and high reliability, and
               (AR) and Virtual Reality      energy devices which enables       supports critical applications
               (VR) apps.                    large-scale IoT deployments        in transport, healthcare
                                             across sectors.                    and energy.

Market         We assume that the scope      Other vendors are able to          Given the revolutionary
reaction to    for other 5G infrastructure   increase their prices to some      impact of 5G, infrastructure
competition    vendors to exercise their     extent but are not fully able to   vendors can fully exercise
restrictions   market power and increase     exercise their market power.       their market power and
               prices is limited.                                               increase prices to the
                                                                                maximum extent.

Fig. 11: Modelling assumptions to reflect uncertainty

     Source of uncertainty         LOW COST scenario       CENTRAL COST scenario         HIGH COST scenario

 Potential future benefits of 5G   0.15% per year from     0.15% in 2020; increasing     0.30% per year from
 modelled using GDP growth per         2020-2035             to 0.30% in 2025 and            2020-2035
      year in the baseline                                  constant at 0.30% per
   (no restrictions) scenario                                      year after.

 Market reaction to competition      8%-9% increase            16%-19% increase           24%-29% increase
   restrictions modelled using          per year                   per year                   per year
  increase in investment costs
       (varies by country)

                                                                                                               17
Restricting competition in 5G network equipment throughout Europe

4. T
    HE ECONOMIC IMPACT
   OF RESTRICTING 5G
   INFRASTRUCTURE
   COMPETITION IN EUROPE
Our analysis suggests that                   4.1 TOTAL IMPACT OF RESTRICTING COMPETITION
throughout Europe, there                     ACROSS EUROPE
would be significant economic
impacts from restricting a key               Our modelling suggests                           As highlighted, there is a
supplier from participating                  restricting a major participant                  large amount of uncertainty
in the development of 5G                     could increase the cost of                       attached to these results, so
infrastructure. As explained                 building the 5G network in the                   we also present result ranges
in Section 3.4, our findings                 31 countries in our study by €3                  based on our low and high cost
are based on modelling                       billion per year over the next                   scenarios. Restricting a key
three different scenarios                    decade (19% of baseline costs)                   supplier of 5G infrastructure
(low, central, and high cost)                in our central cost scenario.                    in all 31 countries studied was
which capture both the                                                                        found to increase the total
potential future benefits of                 Due to these price increases,                    5G investment costs across
5G, and the market reactions                 56 million people (11% of                        Europe by between 9% and
to competition restrictions,                 the population) who would                        29%. This equates to a total
for each of the 31 European                  have otherwise had access                        increase in investment costs of
countries in our study.21                    to the 5G network could be                       €1.4 billion to €4.5 billion per
                                             left without access to a 5G                      year over the next decade.
We begin this chapter by                     network in 2023.
presenting Europe-wide                                                                        According to our low and high
results, which are the sum of                Restricting competition in                       cost scenarios, between 29
all our country-specific results.            the network infrastructure                       million and 78 million fewer
In each case, the results are                market may significantly                         European residents would be
given relative to our (post-                 reduce economic growth                           covered by the 5G network in
coronavirus) baseline scenario               in Europe over the next 15                       2023 if all 31 countries faced
in which no competition                      years. We estimate this could                    restrictions.
restrictions are imposed on                  reduce GDP in the 31 countries
the 5G infrastructure market.                in 2035 by €40 billion in                        Europe’s economic growth
All monetary figures are in                  aggregate (see Fig. 12).                         would also be significantly
2020 prices.                                                                                  reduced over the next decade
                                                                                              and beyond, due to the delays
                                                                                              in 5G rollout and associated
                                                                                              slower technological growth.
                                                                                              In 2035, we estimate a total
                                                                                              (permanent) loss in GDP
                                                                                              of between €12 billion and
                                                                                              €85 billion.

      The results presented for Europe in this report do not cover all European countries. In particular, our study does not cover Russia,
     21

     Ukraine, Belarus, Serbia, Moldova, Bosnia and Herzegovina, Albania, North Macedonia, Montenegro, Andorra, Monaco, Liechtenstein,
18   San Marino, or the Vatican City.
Restricting competition in 5G network equipment throughout Europe

Fig. 12: Total Europe-wide impacts of restricting a major participant in 31 countries, under our
three modelling scenarios

                                                     Low cost        Central cost       High cost
                                                     scenario         scenario          scenario
Increase in average annual investment costs          €1.4 billion    €3.0 billion      €4.5 billion
for 5G infrastructure over the next decade              (9%)           (19%)             (29%)
Absolute number of people who will have              29 million       56 million        78 million
delayed access to 5G by 2023                           (6%)             (11%)             (15%)
Estimated permanent loss in Gross
Domestic Product (GDP) due to delay in 5G            €12 billion      €40 billion      €85 billion
rollout in 2035

4.2 IMPACT OF RESTRICTING COMPETITION IN EACH COUNTRY

Over the remainder of this         two baseline rollout rates,
chapter, we detail our results     reflecting the impact of the
for each of the 31 countries       coronavirus pandemic on
in our study, according to all     our short‑term 5G forecasts.
three scenarios. In each case,     All of the country results are
we include a chart showing         given relative to our “post-
projected 5G rollout rates for     coronavirus” baseline scenario,
that country, with and without     in which no competition
competition restrictions. In       restrictions are imposed on
fact, these charts include         the 5G infrastructure market.

BOX 3: ECONOMIC COSTS OF REPLACING EXISTING 4G/5G INFRASTRUCTURE

Our results for each country reflect the             built by the restricted vendor. Estimates of the
macroeconomic impact of network competition          replacement costs are not readily available
restriction for future 5G rollout. In other words,   on a consistent basis for the countries in our
they capture the loss in productivity and            study and would involve a detailed review of
increased investment costs resulting purely          the operators’ network assets on a country-
from restrictions in competition to build            by-country basis. The replacement costs could
network infrastructure in the future.                be significant and consequently our estimates
                                                     of the impact on rollout and productivity are
However, if a large network vendor is restricted,    potentially conservative.
then operators may also incur significant costs
in replacing existing telecoms infrastructure

                                                                                                      19
Restricting competition in 5G network equipment throughout Europe

           AUSTRIA
 IMPACTS OF RESTRICTING A MAJOR PARTICIPANT
                                                   Low cost             Central cost            High cost
                                                   scenario              scenario               scenario

                   Increase in average
                   annual investment costs
                   for 5G infrastructure           €35 mn               €73 million                 €111 mn
                   over the next decade                 (9%)                (19%)                    (29%)

                   Absolute number of
                   people who will have          600,000                 1.1 million                1.5 mn
                   delayed access to                    (6%)                (12%)                    (17%)
                   5G by 2023

                   Estimated permanent
                   loss in Gross Domestic         €300 mn               €1.1 billion                €2.3 bn
                   Product (GDP) due to
                   delay in 5G rollout in 2035

 5G ROLLOUT RATES, WITH AND WITHOUT COMPETITION RESTRICTIONS
 Percentage of population covered

 100%

     90%

     80%

     70%

     60%

     50%

     40%
                                                                                    Baseline

     30%                                                                            Low scenario
                                                                                    Central scenario
     20%                                                                            High scenario
                                                                                    Pre-COVID-19 baseline
     10%

      0%
           2019     2020        2021    2022     2023     2024   2025    2026   2027    2028       2029      2030
     Source: Oxford Economics

20
Restricting competition in 5G network equipment throughout Europe

MARKET ANALYSIS

The Austrian economy is              While most industry players         The resulting loss in
suffering from strict lockdown       expect 5G to transform the          productivity has significant
measures as the Coronavirus          economy, 5G may end up              economic consequences.
pandemic brings activity to an       being merely an enhancement         Lower economic growth
abrupt halt. We now see GDP          to the existing 4G technology.      due to delays in 5G rollout
falling 7.5% this year before        Or it could be revolutionary in     and the associated slower
rebounding next year. In the         the way the steam engine or         technological growth reduces
context of the recession and         electricity was. The uncertainty    GDP by between €300 million
the subsequent recovery, a           about the nature of benefits        and €2.3 billion in 2035.
competitive market for 5G            will also be reflected in the
infrastructure would help            economic consequences of            Operators may also have to
maximise the gains from              restricting competition in the      incur additional investment
technological innovation and         network infrastructure market.      expenditure replacing existing
growth in Austria. 5G services                                           network equipment built by
and associated activities will       To account for this, we have        the restricted operator. This
stimulate economic activity          modelled two additional             could further delay rollout
worth €2 billion in GDP and          scenarios that capture the lower    and technological innovation
support around 25,200 jobs           and higher end of the range of      which could result in larger
in Austria.                          potential future outcomes from      GDP losses.
                                     competition restrictions in the
On the other hand, restricting       5G network market.
competition can have
significant adverse economic         Across our scenarios, we
impacts. Our modelling               expect the increase in average
suggests restricting a major         annual investment costs
participant could increase           over the next 10 years due to
the cost of building the 5G          competition restrictions to
network by €73 million per           vary between €35 million (9%)
year over the next decade            and €111 million (29%). The
(19% of baseline costs) in our       wide range in these estimates
central cost scenario. Due to        is due to the uncertainty
these price increases, 1.1 million   around the reaction of
people (12% of the population)       other vendors of network
who would have otherwise             infrastructure.
had access to the 5G network
could be left without access to      This increase in prices would
a 5G network in 2023.                translate into delays in rollout.
                                     We estimate that these delays
Restricting competition in the       would leave up to 1.5 million
network infrastructure market        more people (17% of the
may significantly reduce             population) without access to
economic growth in Austria           5G by 2023.
over the next 15 years. We
estimate this could reduce
GDP in 2035 by €1.1 billion. The
potential future benefits of 5G
are hard to predict.

                                                                                                     21
Restricting competition in 5G network equipment throughout Europe

            BELGIUM
 IMPACTS OF RESTRICTING A MAJOR PARTICIPANT
                                                  Low cost            Central cost            High cost
                                                  scenario             scenario               scenario

                   Increase in average
                   annual investment costs
                   for 5G infrastructure          €31 mn              €65 million                 €98 mn
                   over the next decade               (9%)                (19%)                    (29%)

                   Absolute number of
                   people who will have         900,000                1.7 million                2.3 mn
                   delayed access to                  (8%)                (14%)                    (15%)
                   5G by 2023

                   Estimated permanent
                   loss in GDP due to delay
                                                 €300 mn              €1.1 billion                €2.5 bn
                   in 5G rollout in 2035

     5G ROLLOUT RATES, WITH AND WITHOUT COMPETITION RESTRICTIONS
     Percentage of population covered

     100%

     90%

     80%

     70%

     60%

     50%

     40%
                                                                                  Baseline
     30%                                                                          Low scenario
                                                                                  Central scenario
     20%                                                                          High scenario

      10%                                                                         Pre-COVID-19 baseline

       0%
            2019    2020        2021    2022   2023     2024   2025    2026   2027    2028       2029      2030
     Source: Oxford Economics

22
Restricting competition in 5G network equipment throughout Europe

MARKET ANALYSIS

Lockdowns to contain the           While most industry players         The resulting loss in
Coronavirus pandemic are           expect 5G to transform the          productivity has significant
taking a massive toll on the       economy, 5G may end up              economic consequences.
Belgian economy. We now            being merely an enhancement         Lower economic growth
see GDP falling 8.9% this year     to the existing 4G technology.      due to delays in 5G rollout
before rebounding next year.       Or it could be revolutionary in     and the associated slower
In the context of the recession    the way the steam engine or         technological growth reduces
and the subsequent recovery,       electricity was. The uncertainty    GDP by between €300 million
a competitive market for 5G        about the nature of benefits        and €2.5 billion in 2035.
infrastructure would help          will also be reflected in the
maximise the gains from            economic consequences of            Operators may also have to
technological innovation and       restricting competition in the      incur additional investment
growth in Belgium. 5G services     network infrastructure market.      expenditure replacing existing
and associated activities will                                         network equipment built by
stimulate economic activity        To account for this, we have        the restricted operator. This
worth €3 billion in GDP and        modelled two additional             could further delay rollout
support around 36,300 jobs         scenarios that capture the lower    and technological innovation
in Belgium.                        and higher end of the range of      which could result in larger
                                   potential future outcomes from      GDP losses.
On the other hand, restricting     competition restrictions in the
competition can have               5G network market.
significant adverse economic
impacts. Our modelling             Across our scenarios, we
suggests restricting a major       expect the increase in average
participant could increase         annual investment costs
the cost of building the 5G        over the next 10 years due to
network by €65 million per         competition restrictions to
year over the next decade          vary between €31 million (9%)
(19% of baseline costs) in         and €98 million (29%). The
our central cost scenario.         wide range in these estimates
Due to these price increases,      is due to the uncertainty
1.7 million people (14% of         around the reaction of
the population) who would          other vendors of network
have otherwise had access          infrastructure.
to the 5G network could be
left without access to a 5G        This increase in prices would
network in 2023.                   translate into delays in rollout.
                                   We estimate that these delays
Restricting competition in the     would leave up to 2.3 million
network infrastructure market      more people (20% of the
may significantly reduce           population) without access to
economic growth in Belgium         5G by 2023.
over the next 15 years. We
estimate this could reduce
GDP in 2035 by €1.1 billion. The
potential future benefits of 5G
are hard to predict.

                                                                                                   23
Restricting competition in 5G network equipment throughout Europe

           BULGARIA
 IMPACTS OF RESTRICTING A MAJOR PARTICIPANT
                                                  Low cost            Central cost           High cost
                                                  scenario             scenario              scenario

                   Increase in average
                   annual investment costs
                   for 5G infrastructure          €9 mn               €20 million                €30 mn
                   over the next decade               (9%)               (19%)                    (29%)

                   Absolute number of
                   people who will have         300,000               700,000               900,000
                   delayed access to                  (5%)               (10%)                    (14%)
                   5G by 2023

                   Estimated permanent
                   loss in GDP due to delay
                                                  €30 mn          €100 million               €250 mn
                   in 5G rollout in 2035

 5G ROLLOUT RATES, WITH AND WITHOUT COMPETITION RESTRICTIONS
 Percentage of population covered

 100%

     90%

     80%

     70%

     60%

     50%

     40%
                                                                                 Baseline
     30%                                                                         Low scenario
                                                                                 Central scenario
     20%                                                                         High scenario

     10%                                                                         Pre-COVID-19 baseline

      0%
           2019     2020        2021    2022   2023     2024   2025    2026   2027   2028       2029   2030
     Source: Oxford Economics

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