Closer connections

Carmakers want their own 5G networks

Onboard A KT Corp. 5G Connect Bus
There’ll be a busload more. Source: Bloomberg

Joachim Göthel has a clear vision of future car factories. Self-driving forklifts bring material to intelligent construction robots, while completed cars drive themselves off the production line. As BMW’s head of factory planning, he wants to make that vision a reality.

5G wireless networks will mean data speeds one hundred times faster than today, with information transmission in near-real time. The infrastructure will be critical to delivering new technology linked to the Internet of Things. It will be an essential component for self-driving vehicles on the roads, and automakers also plan to digitize industrial processes, enabling automated and highly flexible car production.

German industry wants to bring self-driving cars into production by 2021. But carmakers are nervous that the country’s telecoms network providers may not be up to the job of rolling out 5G. In response, they are increasingly looking to set up their own local 5G networks, giving them full control over the data that will be the lifeblood of their new factories.

BMW has already informed the Federal Network Agency (BNA) — which oversees use and ownership of Germany’s frequency spectrum — that it is interested in operating local 5G networks. Volkswagen and Daimler, the maker of Mercedes vehicles, have done likewise.

Not just cars

In fact, the interest in operating smaller-scale, industry-specific 5G networks goes even wider. BNA president Jochen Homann says inquiries have come in from many industrial sectors: “There’s a gold rush atmosphere about it.”

However, the BNA remains unsure what to do about local frequencies. The main spectrum will be auctioned off for billions of euros, but local-level rights are to be sold in some as-yet unspecified way, with an as-yet unspecified pricing system. Final plans will be announced on November 26.

The car giants’ interest in networks can be summarized as a reluctance to entrust their entire digitized operations, along with priceless associated data, to big network operators like Deutsche Telekom, Vodafone, and Telefónica.

G S05 Mobilfunk-01

Carmakers would prefer to take care of their own data security and network reliability, without relying on third parties to protect them from industrial espionage, hacker attacks, and network wear and tear. “If the network breaks down, we can’t hang around waiting for a technician to show up and fix it,” said one car industry executive.

Volkswagen is even hoping that local frequencies may be handed out for nothing: In its submission to the BNA, seen by Handelsblatt, it says free distribution would “make a real contribution to the competitiveness of our production locations.”

For the car industry, the networked factory is the great hope for productivity increases in the medium term. The sheer quantity of data should give unprecedented control over all aspects of production, allowing factories to switch focus rapidly and with great precision, making different models simultaneously on the same assembly lines.

Five go live

Plans to build and maintain private 5G networks are already taking shape. In August, Audi — a Volkswagen subsidiary — agreed in principle to a joint venture with Swedish telecoms firm Ericsson. It plans to establish a 5G test laboratory at its HQ in Ingolstadt.

For network equipment providers like Ericsson or Nokia, corporate 5G networks could be a very lucrative business. “Firms looking to operate their own networks will have to build a complete infrastructure,” said Nokia boss Thorsten Robrecht.

But relations in the sector are complex, and equipment providers will be careful about taking business from the big network operators, with whom they constantly collaborate. “Our preference is to supply network operators: this gives us better effects of scale,” said Stefan Koetz, head of Ericsson’s German operations.

For example, Nokia collaborates with Telekom on a 5G test lab for the port of Hamburg, and the Chinese firm Huawei is developing industrial network applications while emphasizing its relations with network providers.

Telekom, Vodafone and Telefónica have all spoken out against local 5G networks, saying they run the risk of fragmenting coverage. But they understand where the demand is coming from: Telekom CEO Timotheus Höttges recently acknowledged the company had been slow to understand industry’s 5G requirements, while announcing a major conference on industrial networks, due to take place next year.

In the meantime, network providers are developing their own industrial collaborations. Telekom is working together with lighting manufacturer Osram, while Vodafone has recently opened an industrial testing laboratory in Düsseldorf.

Markus Fasse specializes in aviation and automobile industry news and works from Handelsblatt’s Munich office. Stephan Scheuer is co-head of Handelsblatt’s feature and people’s desk. To contact the authors: fasse@handelsblatt.com, scheuer@handelsblatt.com

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