Ericsson AB said Tuesday it would start delivering all components necessary to roll out so-called 5G mobile-phone networks in 2017 — three years before a 2020 deadline that inter-government agencies have set to agree on frequencies and standards for the new equipment.
The Swedish company, one of the world’s largest suppliers of wireless networks, said it has struck partnerships with 26 telecom carriers willing to deploy the technology, which promoters say will power self-driving cars and other connection-hungry projects.
“5G is happening now,” said Arun Bansal, head of Network Products at Ericsson.
Ericsson might appear as if it is putting the cart before the horse because the telecom industry has yet to say precisely what 5G will bring beyond broader bandwidth and smoother interaction between connected objects. But the early marketing salvo is part of a highly competitive race in which Ericsson is sparring with rivals Nokia Corp. of Finland and Huawei Technologies Co. of China for a larger seat at the table where 5G capabilities are being defined.
At stake are billions of dollars in future intellectual property and patent revenue.
Final 5G standards will be set by the International Telecommunication Union, a United Nations agency, after taking into consideration proposals by the industry. The most important body feeding the ITU with proposals is the Third Generation Partnership Project, or 3GPP, a telecom industry group that developed current mobile-phone standards, known as 4G.
By supplying 5G prototypes to customers, network-equipment makers are seeking to gain influence on the standard-setting process. Like Ericsson, Nokia and Huawei said they also were testing future equipment with customers.
Industry officials expect 5G standardization rounds to be hotly disputed. They say that is because of a shrinking presence of Western vendors, whose number has fallen sharply after a series of mergers. In contrast, Huawei and other Chinese suppliers have invested heavily in research and development and are playing a more active role in setting standards.
“Europe’s total impact is in decline,” said Toon Norp, chairman of one of 3GPP’s working groups. “The influence of the Chinese vendors has grown enormously.”
Ericsson has a lot riding on 5G. The company, which ousted its chief executive, Hans Vestberg, last month, is straining to remain profitable amid weak demand for 4G networks. Carriers world-wide have spent billions of dollars in recent years to deploy 4G, but most projects in mature markets have been completed, while many emerging markets lack financial resources to upgrade their networks.
“Ericsson and several of its industry peers are haunted by declining sales volumes,” said Mathias Lundberg, an analyst at Swedbank. “A new generation of wireless technology would set about a much needed investment cycle at the operators.”
Ericsson posted a second-quarter net profit of 1.59 billion Swedish kronor ($187.8 million), a 24% drop from a year earlier, while revenue fell 11% to 54.1 billion kronor. The company collected 2.2 billion Swedish kronor in intellectual property rights in the period, about 4% of total revenue.
During the standard-setting negotiations, each vendor seeks to include as much of its intellectual property into product specifications to maximize fees from other players when the technology comes in use, said Bengt Nordström at Stockholm-based telecom consulting firm Northstream.
Telecoms carriers involved in testing experiments usually weigh in. Swisscom, a Swiss operator that has agreed to acquire Ericsson’s 5G equipment, said it would report the results of its tests to standard-setting bodies.
Ericsson said it was confident that bringing its 5G products in line with the technology’s final standards could be achieved through software updates.
While large 5G rollouts aren’t expected until early in the next decade, vendors and operators are expected to launch large-scale networks at some major sports events in the years to come, such as the Winter Olympics in South Korea in 2018.