An autonomous shuttle dubbed the WATonoBus, developed entirely at the University of Waterloo, is showcased on campus on June 24, 2021.Photography by Glenn Lowson/The Globe and Mail
The compact turquoise bus wove through the University of Waterloo campus, guided by images and data from its cameras and sensors, then halted in front of an array of orange traffic cones and started to beep.
In a research lab across campus, a remote driver who was monitoring the shuttle’s journey sprang into action, steering the vehicle around the obstruction.
The manoeuvre wouldn’t have been possible without 5G wireless technology, which reduced the latency – the amount of time it takes for data to be transferred between the shuttle and the remote driver – from more than 100 milliseconds to 50. Although the ultimate goal is for self-driving vehicles to be fully autonomous, the technology is still in its infancy. Remote driving capabilities, enabled and enhanced by 5G, will allow a single backup driver to operate an entire fleet.
Research Assistant Jeff Graansma in the Mechatronic Vehicle Systems Laboratory at the University of Waterloo.
The WATonoBus research project – a partnership between the university and Rogers Communications Inc. – is one of many such initiatives under way by Canadian telecoms as they look to recoup billions of dollars of investments in 5G, which promises to reshape everything from health care, to agriculture, to manufacturing.
For telecoms seeking growth in a mature market, the fifth generation of wireless technology offers an exciting prospect: new sources of revenue. The catch is that the technology’s potential is still, to a large extent, unclear.
Canadian carriers are also still smarting after the somewhat disappointing outcome of their rollout of 4G in the early 2010s. New platforms such as Uber, Airbnb and Snapchat generated huge pre-IPO interest from investors and captured the lion’s share of new business from 4G.
Rogers-Shaw deal would give both the scale to compete globally and deliver 5G, telecoms tell CRTC
Even so, Canada’s telecoms are pouring billions into deploying 5G. Last year, a federal government auction for beachfront 5G airwaves fetched a record-breaking $8.9-billion in proceeds for Ottawa. And that’s just spectrum. A 2018 Accenture analysis estimated that Canadian wireless carriers will also spend $26-billion on 5G network infrastructure.
In a bid to develop new services to sell to their commercial and industrial customers, Canada’s largest wireless carriers are investing millions into research partnerships with academic institutions.
Rogers has spent more than $25-million on such partnerships, including collaborations with the University of British Columbia and, most recently, Sheridan College. Rival BCE Inc., which owns Bell Canada, is working with Western University, the University of Sherbrooke and a “living lab” called the PIER (Port Innovation, Engagement and Research) in the Halifax Seaport district to research applications for the technology. Telus Corp. announced its most recent partnership, with the University of Ottawa, earlier this year.
What remains unclear is just how substantial 5G revenues will be – and how quickly they will materialize. “It’s early. Everyone gets anxious at this stage,” Claire Gillies, executive vice-president of consumer marketing for BCE, said in an interview. “We are at the first rung on the ladder and there’s a long way to go.” Still, Ms. Gillies is bullish on the profitability of 5G, calling it “the next industrial revolution.”
Other industry players aren’t so sure. Quebecor Inc.’s Videotron Ltd. is taking a more gradual approach to investing in the technology.
“Will we be able to monetize 5G? The answer is far from being obvious today,” Pierre Karl Péladeau, Quebecor’s president and CEO, told The Globe and Mail late last year.
Much will depend on how quickly various sectors adopt 5G and the Internet of Things (IoT). “There’s always some risk and uncertainty in investing in new technologies,” said Will Mitchell, a professor of strategic management and the Anthony S. Fell Chair in New Technologies and Commercialization at the Rotman School of Management at the University of Toronto.
“The question is, is there a big enough logical case that this thing is going to take off in some unknown way that it’s worth using the available resources and new resources to invest in it? And the short answer to that, unless everyone is smoking dope, is yes.”
Canada’s telecom industry is a mature market, with revenue generally growing at an annual rate in the low to mid single digits. In 2020, the industry’s revenues declined by 1.4 per cent owing to the COVID-19 pandemic. Most people already have a cellphone, so the wireless sector relies on population growth, such as from immigration and foreign students, as well as the proliferation of second phones.
The key to deriving new revenues from 5G lies not in charging more on wireless bills, but in selling the service to commercial and industrial customers. Some telecoms considered charging retail customers extra for 5G service, but they abandoned those plans because consumers are unwilling to pay for it, said Sascha Segan, lead mobile analyst for technology publication PCMag.
“In most situations there is no unique consumer benefit from 5G,” Mr. Segan said “People aren’t clear what advantage they would be paying for.”
Instead, the monetization opportunity lies in industrial and IoT applications, such as using 5G to remotely operate machinery at a mine, on a farm or in a warehouse. The technology is perfect for these types of applications because, in addition to offering faster speeds and less latency, it allows for a vast increase in the number of devices that can be connected.
Older 4G technology allows for 100,000 active connections per square kilometre, according to Colin Earp, national transport leader and global infratech chair at KPMG. With a 5G connection, that number jumps to a million, far outstripping the number of potential retail customers, said Mr. Earp – “which means we’re actually talking about machines to machines.”
The technology also enables so-called “network slicing” – allowing carriers to build one main network and then use software to create virtual slices, each dedicated to fulfilling the specific needs of a particular customer.
“The carriers really want companies and industries to pay premium prices for guaranteed, quality premium service,” Mr. Segan said. “Just as businesses pay more for their land line internet service ... than home users do, the wireless companies are hoping to create a new class of business wireless – a sort of super WiFi.”
Neel Dayal is director of innovation and partnerships at Rogers.
The challenge, said Neel Dayal, who is senior director of innovation and partnerships at Rogers, is that the market for the technology doesn’t exist yet. “With something like 5G, you have to create the market, and you have to be able to demonstrate the value of the technology,” he said.
That’s where research partnerships with academic institutions come in. “That is really the primary objective – what can we create and demonstrate that’s real, and that has value to society and to our customers,” Mr. Dayal said.
Earlier this year, Telus announced a $6-million investment to wire up the University of Ottawa with 5G. The deal follows Telus’s $15-million investment into establishing a living lab at the University of Alberta to accelerate research into using 5G for precision agriculture and autonomous vehicle systems.
Ibrahim Gedeon, Telus’s chief technology officer, said giving researchers the ability to experiment with real 5G networks allows them to work on developing new applications for the technology.
“We’re not here to just give money, we’re here to actually provide intellect,” Mr. Gedeon said. “We want to create the new Nortels, the new Amazons. We want to be part of that.”
There are benefits for the companies: The technology can cut costs through automation, boost profits by increasing a facility’s output and improve worker safety. But it also requires a substantial upfront investment.
How likely particular industries are to make those investments is one factor Bell Mobility weighs when deciding which 5G applications to try to develop, Ms. Gillies said. “As much as we’re excited about it, on the receiving end in these businesses they have to be equally vested to make change in their business.”
Some companies appear to be early adopters. In January, Rogers announced plans to build a 5G wireless private network at Kirkland Lake Gold Ltd.’s Detour Lake Mine in northern Ontario. The project will allow the company to expand its remote drilling operations, conduct research into autonomous haul trucks and improve worker safety, Tony Makuch, who recently stepped down as Kirkland Lake Gold president and CEO, said in a statement. (Kirkland Lake has since merged with Agnico Eagle Mines Ltd.)
The aggressive push to monetize 5G is driven partly by the industry’s desire to not repeat the mistakes of 4G, which saw Uber, Airbnb, Snapchat and other digital platforms capture most of the value of the technology.
“For 4G, most of the value went to Silicon Valley, and I think carriers are very mindful of that,” Desjardins analyst Jérome Dubreuil said in an interview. “This time around there’s a clear willingness and effort from the industry to capture a bigger portion of the value created by 5G networks.”
However, last year’s pricey auction for 5G airwaves has saddled the carriers with debt, prompting debt-rating agency DBRS to put Telus on credit watch. DBRS, which rates Telus and its notes BBB (high), changed the agency’s trend on Telus from stable to negative after the auction, to reflect Telus’s higher debt load.
Telus spent $1.95-billion on the wireless airwaves, and it “must execute to precision on its business plan in order to achieve industry-leading earnings growth as previously forecast,” DBRS noted.
Mr. Dubreuil called the auction “a thorn in the side of 5G profitability prospects.” There are also still two more 5G auctions on the horizon; one is scheduled for early 2023, the other for the following year.
It’s still early days for 5G, and telecom executives concede its full potential remains unknown.
Despite the murky prospects for monetization, Prof. Mitchell says Canadian carriers can’t afford not to build out 5G. “We’re part of a global market that’s rapidly adopting 5G,” he said, noting that Canadian companies will struggle to compete globally if they don’t have access to the technology.
“The downside to not doing it is massive – for companies in the country, individual consumers, the country as a whole and for Bell, Telus and Rogers.”
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