[W Forum] The Economics of Networks in the Ontact Era

Since the COVID-19 pandemic, our lives have undergone a change toward the "normalization of non-face-to-face interactions." This non-face-to-face trend is not leading to the "pain of disconnection and anxiety" as seen in Albert Camus's novel The Plague set in the city of Oran, but rather is bringing about a transition to a new way of life through "Ontact" (online contact). The effective adoption of remote work and online classes, along with increased use of e-commerce, Netflix, Watcha, and various social networking services (SNS), renders the notion of "isolation" meaningless. The most important foundation of this Ontact era is wired and wireless networks.

Services using networks cannot be freely provided by anyone; only a limited number of telecommunications operators authorized by the government can offer them. This is due to the high investment costs required to build communication networks and the externalities of networks, which make it difficult for new entrants to compete effectively.

In the context of efficient network utilization, the most important recent issue is undoubtedly "Local 5G (5G specialized communication networks)." Typically, when we exchange data, it must pass through the telecom operator's base stations and servers. This method is inefficient in terms of speed, quality, and security when services are provided based on specialized or limited areas. For example, when using a telecom operator's 5G network in a smart factory, optimizing performance and latency is difficult, and if there is a problem with the operator's network, immediate response is challenging, which can directly affect production.

Local 5G refers to networks created by general companies, not telecom operators, to operate for special purposes within limited areas such as their own factories or ports. Countries like the United States, Germany, Japan, and the United Kingdom have already proactively introduced Local 5G, and demand companies are developing various converged technologies. Companies such as Google and Amazon in the U.S., Bosch, Siemens, Volkswagen, and Audi in Germany, and Panasonic, Toshiba, and Hitachi in Japan are already developing and commercializing services based on Local 5G.

South Korea also announced a policy last month to expand Local 5G operators beyond telecom companies to include demand companies. This is very encouraging.

However, it is necessary to reconsider limiting the supply mainly to the 28 GHz band. The 28 GHz band is an ultra-high frequency band with fast connection speeds but lower stability. It has strong directivity, making it difficult to bypass obstacles or shielding materials, resulting in a short reach distance. To secure a reach distance comparable to the low-frequency 3.5 GHz band, more equipment must be installed in the same space.

For these reasons, it is known that there are almost no cases of Local 5G using the 28 GHz band overseas. In Japan, although the 28 GHz band, which has fewer considerations, was allocated first, recognizing its difficulty in use, they additionally reviewed and allocated the 4.7 GHz band. The U.S. recently approved the 3.55?3.7 GHz band. The German Federal Network Agency designates the 3.7?3.8 GHz band, and the UK Office of Communications designates the 1.8 GHz, 2.3 GHz, and 3.8?4.2 GHz bands as shared frequency bands and issues Local 5G licenses accordingly. South Korea also needs to adjust the frequency bands for issuing Local 5G licenses to ensure the practical and prompt commercialization of Local 5G. By leading the global 5G convergence service market through Local 5G, we hope to once again elevate South Korea's status as the world's first country to commercialize 5G.

Kim Hyun-kyung, Professor, Graduate School of IT Policy, Seoul National University of Science and Technology

This content was produced with the assistance of AI translation services.