Since the development of the telegraph in the early 1800s the telecoms industry has been continuously innovating. Today the sector is more disruptive than ever.

Americans alone are reported to collectively spend more than 9 billion hours every day looking at their smartphones. So it’s easy to see why the stakes are high when it comes to making the next technological breakthrough.

The sector used to be highly centralised with a few big players dominating the field. But deregulation has opened it up to many smaller tech companies as well as the large caps.

The telecoms industry includes a diverse range of activity including among other things: consumer handset design and manufacture, wireless networks, satellites, industry equipment, wired networking infrastructure and messaging services.

R&D in the telecommunications sector

As you would expect in such an innovative sector, research and development (R&D) is rife. For companies developing new telecoms technology in the UK there is a government incentive called the R&D tax credit. It is designed to reward and encourage innovation. There are two types of tax credit, one for large companies and one for SMEs (which can include businesses with up to 500 staff).

Typical types of research and development in the telecoms sector that may qualify for R&D tax credits include:

  • Reducing latency in networks and devices
  • Developing new materials for use in the telecoms sector
  • Experimenting with 5G networks
  • Work on ensuring backwards and forwards compatibility in wireless networks
  • Developing new messaging, voice, and video calling services
  • Improving security measures to protect against cyber crime

How do you qualify for R&D tax credits?

If you are carrying out qualifying activity like that which we have listed above, it is your expenditure that determines the value of the R&D tax credit. Qualifying expenditure includes staffing costs like salaries, pensions, NI and sub-contractors. And consumables like some materials and software costs as well as heating, lighting and electricity. These costs are all carefully taken into account to calculate the R&D tax credit.

For SMEs, a tax credit can be worth up to £33,000 for every £100,000 of qualifying costs. For large companies, which tend to have much higher R&D expenditure, it can be worth £88,000 for every £1 million spent.

Innovation in 5G

One area of the telecoms industry which is particularly exciting right now is the next generation of mobile network: 5G. This will bring new levels of speed and capacity to mobile data transfer that will certainly transform our lives.

And with fresh money announced for 5G in the Spring 2017 Budget, a test 5G network up and running in Bristol and a potential limited commercial launch in late 2017, it is a subject well worth us taking a closer look at.

What is 5G?

5G (the 5th generation mobile network) is the next development in mobile wireless technology. Just as our current 4G network revolutionised the standards set by its predecessor, so the 5G network will set new benchmarks for mobile data.

GSMA is an organisation that represents the interests of mobile operators around the world. They identify eight requirements that need to be met for a successful 5G network.

These include: real-world speeds of 1-10Gps; 1 millisecond latency, 1,000 times bandwidth per unit area; 10-100 times the number of connected devices; perceptions of 99.999% availability and 100% coverage; a 90% reduction in network energy usage and up to a ten-year battery life for low power, machine type devices.

5G and 5G phones are not expected to become mass market until at least 2020. However, closed test networks are operational and some limited launches are touted for the end of 2017! Tech companies such as Nokia, Samsung, Ericsson and BT are busy working to develop the technology required to power it.

5G in the UK

In the 2017 Spring Budget, the UK government announced a £16 million investment into 5G R&D. This will facilitate the creation of a new innovation hub to develop 5G standards. It was also announced that further funding would be available for future trials.

While this investment is welcome, it would appear the UK has some catching up to do! The UK is currently ranked 54th in the world for its 4G network – coming in lower than less developed countries such as Albania, Panama, Peru and Romania.

As our economy is becoming increasingly dependent on a connected workforce, many feel that this poor coverage is holding UK business back, stifling the nation’s economy.

5G mobile technology offers the UK a chance to rapidly develop its wireless mobile network infrastructure, so it is vital that innovative companies embrace the opportunity to shape this emerging technology.

5G and Bristol Is Open

We are pleased to see that Bristol is at the forefront of the 5G revolution. Bristol Is Open, a joint venture launched in 2015 between Bristol City Council and the University of Bristol, is attempting to create a ‘smart city’ of the future. The project includes fibre laid in the ground, a mesh of 1,500 Internet of Things (IoT) lampposts and a mile of experimental closed 5G network.

The University of Bristol received £540,000 from the Engineering and Physical Sciences Research Council (EPSRC) to develop the closed 5G network in Bristol. The money has been used to purchase two radio channel emulators which will be used to test the effectiveness of 5G technology.

In laboratory conditions, they will replicate the radio channel between a city base station and a handset. The 5G network has been installed between Temple Meads train station and the At Bristol science museum. The research and development it will focus on includes:

  • Testing different 5G waveforms and antenna technologies
  • Seeking affordable 5G solutions as part of the European 5G-XHaul project to eliminate reception black spots.
  • Validation of new optical and wireless architectures
  • Design of 5G signals
  • Beam steering technology

University of Surrey 5G Innovation Centre

Bristol is actually one of two 5G hubs in the UK. The leading hub is the 5G Innovation Centre at the University of Surrey. This has received in excess of £70 million of investment and is home to more than 170 researchers.

In the fourth quarter of 2016, they announced the world’s first demonstration of virtualised 5G infrastructure. Known as a “Flat Distributed Cloud” it is an exciting advance as it will offer major cost savings on installation and maintenance of 5G networks. Ultimately this will make the delivery of 5G more commercially viable.

Current network infrastructure is expensive to operate. The demands of 5G will be considerably more complicated. Virtualised architecture allows for quick deployment, flexible complex combinations and speedy software updates.

Using this cloud solution will mean that engineers no longer have to visit physical networks to perform upgrades. Deployment speed will be quickened from tens of days to just ten minutes.

What technical challenges is 5G facing?

Some of the technical challenges that those developing 5G face include:

  • Weaker signals – 5G is likely to run on a high radio frequency. The higher the frequency the less powerful it is. One way of overcoming this is to use beam steering technology. Instead of sending out signals everywhere, they would be focused on individual devices like a beam of light.
  • Developing faster download speeds – current 4G networks can hit download speeds of 100Mps – 5G is seeking to increase this to up to 10Gbps.
  • Ultra-low latency – Latency is the time it takes for one device to send information to another. The higher the latency rate, the longer the delay is. 4G has a latency rate of approximately 50 milliseconds and 5G is aiming to reduce this to one millisecond.
  • Backwards-compatibility with 4G and 3G technology to ensure a smooth transition to the new technology.
  • Developing the next generation of handsets to support 5G technology.
  • Researching how 5G technology can be applied to specific industries and the technical challenges that these will create.
  • Significantly reduced power requirements.

How will 5G revolutionise our lives?

As these technical challenges are overcome, 5G will revolutionise our lives. And not just in the way we interact with each other, but also with the objects around us. 5G has been described as a special generation of mobile technology that will be as much as connecting machines (via the internet of things) as about connecting people. Let’s explore some of the ways in which 5G technology is predicted to change our lives.

5G and ultra high definition streaming

A simple illustration of the power of 5G speed comes in streaming video – something that many of us do using services such as Netflix. Netflix state that an hour of streaming standard definition film uses 0.7 GB of data. For high definition it is 3GB per hour. And for ultra high definition that is 7 GB per hour.

Clearly on a 4G network running at speeds of 20Mps, ultra high definition streaming is a serious challenge. But for 5G – handling 1-10Gps – this will be no problem.

5G and driverless cars

The technology already exists to connect cars to the internet – It’s called V2X (vehicle to everything). But the quality of current infrastructure is not sufficient for driverless vehicles to rely upon.

Radically improved latency is the key technological advance that is relevant to 5G networks and driverless car application. As we have explained, latency is the delay between two connected devices communicating with each other.

The 50 milliseconds standard latency of 4G may be fine for communication between two phones. But if you are talking about autonomous cars travelling at speed it is just too long. One millisecond though, that 5G offers, would enable driverless vehicles to communicate with each other sufficiently quickly to avoid collisions and manage traffic flow.

This will be a hugely exciting application of 5G technology. It will see vehicles working together significantly improve road safety (1.3 million people die on roads each year) and optimise traffic management.

Traditional car manufacturers and pioneers in driverless cars like Google’s Waymo are all likely to be devoting significant R&D resources to 5G technology. One example is the PSA Group, which owns Peugeot and Citroen, who have got together with Orange, Qualcomm and Ericsson to develop a “Towards 5G” car platform.

5G and connected homes

5G may be mobile technology but it will have a big impact within our homes. In some parts of the UK, a 4G router is already preferable to a wired internet connection. The speeds are fast enough and you do not have the cost of line rental. Poor network coverage is one reason why it has not become a mainstream alternative.

However, if 5G does meet the specifications that are expected of it, it may overcome that hurdle and become a complete telecommunications connection solution.

That is perhaps rather dry. But there are many more exciting applications. For instance Professor Andrew Nix, from the Bristol University 5G project, describes 5G enabled sensors and cameras in an elderly person’s home. And how they could monitor the well-being of vulnerable people and call an ambulance if they detect and accident or medical problem.

5G and the internet of things (5G IoT)

The internet of things is already here, with tens of millions of devices connected to the internet in the UK alone. They are presently using 4G and Wi Fi networks of course. But 5G is being designed with the internet of things in mind.

While latency is the key attribute for driverless cars; low power consumption, improved coverage, higher capacity and faster download speeds may be more relevant to other connected machines.

These breakthroughs will allow devices like wearable tech to be much smarter. Instead of requiring processing power to be built in, they will be able to harness cloud servers to do that work.  And owing to the far superior network capacity, it will be possible for every connected “thing” to send and receive as much data as is useful.

This will transform the internet of things into a much more integrated entity where machines share data with each other to increase their overall usefulness.

Are you innovating with 5G technology?

It’s clear that 5G technology is going to change the way the world works. And while mass market penetration is still some way off, it will come around soon enough. Now is when much of the serious R&D is taking place.

If your company is developing technologies that will be used with 5G, you are probably doing work that could qualify for R&D tax credits.

To make full use of this valuable funding option, speak to one of our expert chartered tax advisers on 0117 926 9022. We can help you claim R&D tax credits and ensure your business is set up to receive the maximum benefit.

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