The global economics of 5G

global economics

5G will offer a quantitative improvement over previous network technologies. But it will also provide a qualitative leap in innovation. This includes massive machine-to-machine communications (M2M) handling billions of new sensors and other “edge” devices that will communicate across a global information network. In fact, Bell Labs Consulting forecasts that this Internet of Things (IoT) ecosystem will be a 25 to 82x increase in wireless data demand by 2025 and a 7 to 15x increase in global internet traffic.

Much like electricity or the Internet, 5G has the capacity to improve the size of the global economy while expanding the scope of innovation. Supporting a dizzying array of applications including artificial intelligence (AI) and robotics, autonomous vehicles, and advanced factory automation, 5G will reshape much of the world’s manufacturing and communication infrastructure. 

Indeed, the wide array of applications 5G supports makes it a “general-purpose technology.” Other examples of general-purpose technologies include the steam engine, the printing press, the automobile, the computer, and of course AI.

Accelerating productivity growth

two women celebrating downtown

Digital transformation of this scale can drive substantial economic disruption. But also enormous growth in the global gross domestic product (GDP).

One underappreciated feature of 5G is the long-term impact of the technology on productivity growth. Productivity growth refers to improvements in the amount of output that can be achieved per unit of inputs. And productivity is especially critical to economic development because it is a key driver of income growth.

Unlike previous generations of mobile technology, 5G is specifically designed to support vast amounts of data. This includes massive numbers of devices and applications that require very fast and reliable communications with minimal latency, or lag. This will mean many orders of magnitude improvement in productivity, particularly through automation.

Research has shown that physical industries contribute to higher GDP than digital industries, but they remain low in productivity growth. However, huge increases in productivity in physical industries could mean a significant boost to the global GDP as well.

The next Industrial Revolution

Digital networks form the nexus of productivity growth by generating “network effects” in accelerating the wide diffusion of innovation. Unfortunately, the link between innovation and productivity seems to have stalled over recent decades. In fact, some now argue that the golden age of technology-driven transformation has subsided, leaving many to ask whether the economic link between technology and productivity has simply disappeared. One explanation for this productivity paradox is that we remain in the very early stages of a new industrial revolution.

Nonetheless, the pace of scaling 5G will depend on an array of interdependent factors including government regulatory policies, carrier preferences, product innovation timelines, and capital costs.

According to forecasts by Nokia Bell Labs, this next industrial revolution will not, in fact, reach full maturity until around 2030. They estimate that this Fourth Industrial Revolution will combine electric autonomous vehicles, smart transportation infrastructure and traffic management, with smart meters, smart grids, renewable energy technologies, and robotic and intelligent control systems. All of this new infrastructure builds on innovations in additive manufacturing (3D printing), biotechnology, and AI.

Catalyzing this shift to a Fourth Industrial Revolution will depend upon the digitization and automation of multiple industry sectors including manufacturing, construction, mining, utilities, healthcare, transportation, logistics, and wholesale and retail trade. Linking back to productivity growth, the problems associated with low productivity will remain until 5G networks have effectively scaled across industries. Nonetheless, the pace of scaling 5G will depend on an array of interdependent factors including government regulatory policies, carrier preferences, product innovation timelines, and capital costs.

The rise of data-driven markets

More than scale alone, however, the future of economic growth will depend upon innovation. And the core of innovation today is data. As a recent article from Harvard Business Review observes, companies are now becoming data-driven, especially with regard to operational decision-making. Data has become key to the ongoing evolution of industries in the form of training algorithms to improve prediction, automate tasks, and accelerate decision-making.

5G is not a zero-sum game.

According to IDC, more than 5 billion consumers globally interact with data every day. By 2025, that number will be 6 billion, or 75 percent of the world’s population. Feeding on the tsunami of data made possible by 5G networks will provide algorithms with massive resources for advancing real-time decision making via AI and machine learning. Beyond expanded applications for smart devices, the truly revolutionary aspects of 5G networks are yet to be discovered.

Technologies that build on 5G networks represent a massive opportunity for generating new sources of revenue alongside a huge expansion in GDP. Fortunately, 5G is not a zero-sum game. Driving economic growth on a scale yet to be fully determined, 5G promises significant economic rewards across a range of industries.

About Futurithmic

It is our mission to explore the implications of emerging technologies, seeking answers to next-level questions about how they will affect society, business, politics and the environment of tomorrow.

We aim to inform and inspire through thoughtful research, responsible reporting, and clear, unbiased writing, and to create a platform for a diverse group of innovators to bring multiple perspectives.

Futurithmic is building the media that connects the conversation.

You might also enjoy
illustration of Nokia CEO Rajeev Suri
Podcast episode 28: Accelerating Industry 4.0 with Nokia CEO Rajeev Suri