International Journal of Technology (2016) 4: 635-642

ISSN 2086-9614 © IJTech 2016

5G AS DISRUPTIVE INNOVATION: STANDARD AND REGULATORY

CHALLENGES AT A COUNTRY LEVEL

Muhammad Suryanegara1*

1
Graduate Program of Telecommunications Management, Department of Electrical Engineering,
Faculty of Engineering, Universitas Indonesia, Kampus UI Depok, Depok 16424, Indonesia

(Received: February 2016 / Revised: March 2016 / Accepted: April 2016)

ABSTRACT
Understanding 5G from a perspective of innovation is to explore both technical research and
development (R&D) and non-technical issues. While 4G has been considered as an incremental
innovation from its predecessors (3G and 2G), design features and key technologies have
indicated 5G as a disruptive innovation. Consequently, 5G will create new market values, in
which new services and applications will emerge in unexpected ways. Hence, it is predicted that
policy makers will face significant challenges concerning 5G implementation in their respective
countries. This paper aims to investigate the challenges to standards and regulations at a country
level. The discussion begins with the challenges because of the emergence of non-human markets
as well as the complexity of multi-device technological platforms. Due to anticipated massive
cloud-based applications, security issues of cloud-based applications will be a subsequent
challenge for national policy makers. Finally, as 5G may require various supporting technologies,
the challenge for the policy maker is also to trigger national development of local standards.

Keywords: Disruptive innovation; Mobile technology; Policy maker; Regulation; Standard

1. INTRODUCTION
The development of 5G mobile technology is a global R&D initiative, involving worldwide
research, academia, and multinational industries. Under the ITU standardization body, 5G has
been labeled as IMT-2020. Yet, despite the fact that standards are not yet maturely defined, all
have shown a consensus on 5G visions. It is commonly noted that 5G will be built from several
key technologies (Andrews et al., 2014; Felita & Suryanegara, 2013; Boccardi et al., 2014; IMT-
2020 Promotion Group, 2014), emphasizing the very high speed data rate on a large bandwidth.
It is believed that 5G technical realization may come to the market by the next decade. By that
time, most countries will have already rolled out 4G and 3G. Therefore, once 5G is implemented,
a country regulatory body will govern the technological change from 4G to 5G. However,
determinants of technical change cannot be separated from institutional change (Mansell, 1998).
Therefore, it is important for a policy maker to anticipate and to prepare for the coming of the
new technology. Early anticipation is needed, so that the arrival of the new technology will be
swiftly adopted by the market. In the field of mobile technology, the role of policy makers may
refer to the national regulator (government). Thus, some issues to be addressed are: What is the
non-technical impact? How will 5G affect the country’s industrial

*Corresponding author’s email: m.suryanegara@ui.ac.id, Tel. +62-21-7270078, Fax. +62-21-7270077

Permalink/DOI: http://dx.doi.org/10.14716/ijtech.v7i4.3232
636 5G as Disruptive Innovation: Standard and Regulatory Challenges at a Country Level

ecosystem? How will the regulatory regime build its response?

An approach based on innovation studies is proposed. The underlying concept is to regard 5G as
disruptive innovation. This point of view may foster our understanding, since the concept of
‘disruptive’ provides relevant consequences and ideas. Why innovation studies? The perspective
of innovation finally leads to economic performance, in which the national policy makers
(government) establish industrial policy over a technological sector. In general, the industrial
policy has “the first best” objective to compensate for various perceived market failures and
“second best” attempts to exploit market imperfections to benefit the domestic economy
(McFetridge, 1999).
This paper comprises six sections. The second section discusses commonly accepted 5G visions,
while the third discusses the framework from a disruptive innovation perspective. A subsequent
perspective of 5G as disruptive innovation is presented in the fourth section. The fifth section
presents the discussion of standard and regulatory challenges, while the conclusion is presented
in the sixth section.

2. 5G VISIONS
The consensus of academia and industry devise the 5G visions as centered on the increased
performance of data rate by 1000 from 4G to 5G, while roundtrip latency is designed to perform
at about 1ms (Andrews et al., 2014; IMT-2020 Promotion Group, 2014). 5G vision is not only
driven by an explosive increase of the data rate but also by the number of interconnected devices
(IMT-2020 Promotion Group, 2014). It was forecast that the amount of wireless IP data could
exceed 500 exabytes by 2020 (Andrews et al., 2014), while many new applications would come
to the market exhibiting extraordinary data flow. Apart from personal communications, we are
hardly able to guess what kind of applications will present in future decades.
China’s IMT-2020 Promotion Group has described the overall 5G visions in its 2014 white paper
(IMT-2020 Promotion Group, 2014). Under such visions, 5G will touch many aspects of life in
the future, characterized by three scenarios, i.e. ultra-high traffic volume density, ultrahigh
connection density, and ultra-high mobility (IMT-2020 Promotion Group, 2014). Some typical
services, such as augmented reality, virtual reality, ultra-high-definition videos, cloud storage,
Internet of Vehicle (IoV), smart home, and over-the-top (OTT) services, will take place in these
scenarios.
Many researchers have worked to formulate key technologies to enable the realization of 5G
visions. Table 1 lists a resume of the big three key technologies of 5G, which is discussed in
(Andrews et al., 2014).

3. THE INNOVATION STUDIES APPROACH TO 5G

3.1. The Perspective of Innovation
The creation of innovation is always associated with the R&D activities of firms, countries, or
sectoral industries. The basic concept is to always link output of such R&D with its commercial
effect on the economy. As a result, R&D has a strong connection with industrial and national
economic performance. The development of mobile technology is a R&D intensive sector. Hence,
the innovation approach is essential when discussing such a topic.
It was also argued that new emerging technologies (such as mobile and Internet) have taken
essential roles in the new telecommunications era, performing co-evolution with other factors and
supporting the engine of innovation (Fransman, 2002). One of the key problems in managing
innovation is to make sense of a complex, uncertain, and highly risky set of phenomena (Tidd et
al., 2005).
Suryanegara 637

Table 1 The big three key technologies of 5G (Andrews et al., 2014)

Performance Target Key Technologies Issues
- Base-station densification gain
Extreme densifications to
Extreme densification - Multi RAT association
improve the area spectral
and offloading - Mobility support
efficiency
- Costs
mmWave spectrum - Propagation issues
Increased bandwidth allocation of 30 – 300 - Leveraging the legacy 4G Network
GHz
- Pilot contamination and overhead reduction
- Architectural challenges
Increased spectral - Elevation beam-forming
Massive MIMO
efficiency - Channel models
- Coexistence with small cells
- Coexistence with mmWave

In the sense of innovation study, we can refine innovation into incremental innovation and radical
innovation. Under the concept of innovation study, the series of mobile technology from 2G to
3G and from 3G to 4G, can be regarded as a sequence of incremental innovation, since each
emerges gradually with continuous improvement from the preceding technology. Meanwhile,
radical innovation may refer to sudden emergence, and has no historical connection with any
other product or services; the first version of WiMAX technology is an example.
3.2. Disruptive Innovation
Disruptive innovation is sometimes referred to as radical innovation. However, to make a clear
distinction, we may say that the classification of “radical innovation” puts more emphasis on its
historical emergence; while the classification of “disruptive innovation” is more about its impact
and consequences on the economy. The work of Bower and Christensen (Bower & Christensen,
1995) has signified the role of disruptive innovations in creating new market value. Such
disruptive technologies and innovations often create new market value in unexpected ways, both
independently and through combination with existing standards and protocols (Bower &
Christensen, 1995; Rao et al., 2006). When talking about their applications, the typical
technologies are often cheaper and inferior in performance, yet they involve features that may
provide competitive advantage in the future (Rao et al., 2006). On the other hand, most empirical
studies have also shown that disruptive innovation need not necessarily be inferior in quality. For
example, the storage-media technology of flash disc was superior to floppy disc.
Since the introduction of its terminology, disruptive innovation offers a very different package
of attributes from those that mainstream customers historically value (Bower & Christensen,
1995). As a rule, at first, mainstream customers are unwilling to use a disruptive product in
applications they know and understand (Bower & Christensen, 1995). Consequently in most
cases, disruptive innovations often relate to “the fall of mainstream technology”.

4. 5G AS DISRUPTIVE INNOVATION
Significant works in 5G research (Andrews et al., 2014; Boccardi et al., 2014) have described
some technical aspects that could lead to disruptive changes in the implementation of 5G
networks. Literature (Boccardi et al., 2014) focused on five technical aspects including
devicecentric architecture, mmWave spectrum, massive MIMO, Smarter Device, and M2M
communications. An important aspect of renewable energy, related to 5G small cell deployment,
is also mentioned (Andrews et al., 2014).
638 5G as Disruptive Innovation: Standard and Regulatory Challenges at a Country Level
From the domain of pure technical perspective, such technologies are qualified to be “disruptive”,
since they offer very different attributes from mainstream cellular generations (3G and 4G). For
example, despite MIMO has been able to increase the capacity in many wireless platform (Arifin
& Ohtsuki, 2013), 5G will require a new technique, so called massive MIMO. Another clear
example is concerned with the mmWave spectrum. The technologies of 3G and 4G utilize the
IMT-band which is mostly below 6 GHz. A disruptive change is there, indicated by the
consideration of mmWave (30–300 GHz) spectrum allocations.
From a non-technical perspective, the 5G system could be disruptive when it offers new market
value for mobile cellular users. The 5G vision has foreseen that the 5G market would no longer
be just human, but all “things”. 5G has come along with the rise of IoT (Internet of Things), as
well as M2M (Machine to Machine). However, up to now, we can hardly answer the question of
whether 4G will be killed by 5G. Will it become like VoIP devastating “voice call”, or like a flash
disk diminishing the floppy disk?
A daunting condition for industry is if 5G does not entirely support backward compatibility with
preceding technological generations. Up to now, research works are saying that the evolution of
LTE may not be sufficient to meet the anticipated 5G requirements (Andrews et al., 2014).
Designed with disruptive technologies, 5G will come with a new smarter device as well as a new
infrastructure. Consequently operators should make a new investment, and the costs could be
huge, as these technologies are just evolving. The bigger picture can be drawn centering on the
survival of the existing operators.
One of the crucial impacts of disruptive innovation, is that the new technology could diminish the
old one. Further, the existing system could collapse due to the emergence of a new system.
Therefore, a country’s regulator has also a responsibility to ensure fairness and stability of
industry. A collapse of operators would disrupt a national economy. In 2014, the mobile industry
generated 3.8% of global GDP, a contribution that amounts to over US$3 trillion of economic
value across 236 countries (GSM Association, 2015).
Thus, the next question to policy makers is how to ensure each 5G operator would have a safe
revenue model. Policy makers should avoid a condition where only one big operator survives the
new technology. In 2014, GSMA reported that revenue growth was forecast to slow further over
the coming years, with a combined annual growth rate (CAGR) of 3.1% per annum through to
2020, down from just over 4% in the period 2008-2014, reflecting the ongoing impact of factors
in this particular market maturity and tight competition (GSM Association, 2015).
5G cannot be a monopoly of new operators or strong operators only. A more clear explanation
can be given by taking into account (Noble, 1986) the extension of power and control due to a
new technology. If any operator establishes a monopoly, it will keep tight control over the market
and close the doors of creativity. Demand would be restricted as the operators are driving the
direction of the market. Such a situation could bring a negative effect on a firm’s competitiveness
and innovativeness.
Why would market fairness and competitiveness become main directions of regulatory action?
Firstly, a regulatory shift towards market fairness has been one of the implications of
technological change in the last two decades. In the pathway towards 5G, the industrial system
requires conditions which are conducive to operator productivity. Mobile advanced services
would appear from a market based on needs and demand. The market would define service
features, and operators would provide their implementation. Therefore, for a smooth functioning
of such a mechanism, the concern for market fairness is necessary.

5. CHALLENGES AT COUNTRY LEVEL

This paper discusses the impact of 5G as disruptive innovation at the dimension of country level,
in which standards and regulation are becoming the concern for policy makers (governments). It
Suryanegara 639
is a clear concept that the objectives of regulatory policies should eventually lead to support the
welfare of a country. Yet, another classical concept of policies recognizes that the regulatory
policies tend to be reactive to technological change (Ro & Kim, 1996). There is an explicit
recognition that government is quite limited in the things it can do well, while policy should be
concerned with such constraints (Nelson & Winter, 1982). Therefore, when technological change
from 4G to 5G is predicted to be a disruptive change, a constructive anticipation is necessary.
We discuss the challenges for the country’s policy maker as follows:
5.1. The Massive Emergence of Non-human Market
Reflecting on what has happened in the past two decades, the era of mobile high-speed data has
been characterized by the importance of a service-driven perspective. The commercial value of
an implemented technology would be centered on the types of new services and applications
(Suryanegara & Asvial, 2013). There is co-evolution between technology and the market, in
which both are exhibiting action-response under the continuous sequence of demand and supply.
A service-driven perspective would make the regulator focus on non-technical regulatory matters,
while the technical matters will be given to the implementer of technology, i.e. network operator.
For example, when the market is expecting advanced applications to support financial
transactions, the regulator should not be concerned with the technology. The regulator should let
the operators find a suitable technology to support such a demand. The regulator should focus on
managing non-technical matters, such as regulatory coordination with financial institutions.
However, in the era of 3G and 4G, there is a clear condition that among all applications, the main
targets are personal communications between humans. Therefore, it is plain to see that regulators
drive their policies with the main orientation towards the support of personal communications.
Examples of such concerns include the establishment of market fairness and subscriber privacy
protection.
What if the market is not human? Disruptive innovation brings the consequence of new market
value, in which 5G will certainly build a new market of non-human subscribers. There will be
excessive growth of IoT and M2M applications, while personal communications would already
have reached saturation level.
In short, policy makers should be aware of the implications of excessive growth of interconnected
devices. A simple mathematical picture can be imagined as a number of devices connected with
a human subscriber. In day to day life, one person may interact with his/her car, watch, air
conditioner, vehicle, utensils, etc. 5G vision is to assist human lifestyle by connecting devices
within a human’s network, so that they can then be easily managed and maximally utilized. In
such ecosystem, the machine-human connection is getting more intense and complex.
Consequently, the issue of privacy and security are getting more important.
Another crucial issue appears to be that policy makers should deal with the emergence of various
technological non-human platforms. A problematic aspect of the process of diffusion of new
technological standards is how the regulator can ensure successful implementation of such
standards in the market. Along with the growth of connected devices, the number of technological
platforms will also become diverse, which requires the regulator to treat them fairly and give
similar opportunity within the market. In addition, the complexity of such market changes will
also cause policy makers to consider a broader dimension of social and cultural factors.
5.2. The Security Standardization of Cloud Applications
5G will likely trigger profound cloud-based applications. The services which will emerge in the
next decades are hardly imaginable. Many organizations, small and large, have embraced it
because of the advantages it promises in terms of flexible cost structure, scalability, and efficiency
(Sultan & Van de Bunt-Kokhuis, 2012). Cloud itself can be seen as a disruptive innovation,
640 5G as Disruptive Innovation: Standard and Regulatory Challenges at a Country Level
because the technology may change many of the traditional ways of delivering computing
services to people and organizations (Sultan & Van de Bunt-Kokhuis, 2012).
However, in the market of Internet data communications, the circulation of data is easily leaked.
When everything is based on cloud, consequently, the data security issue is becoming important.
A security issue comprises many aspects, such as network security, perimeter security, and data
security. At the global level, the standardization reference is listed in ITU-T Recommendation
X.805 “Security architecture for systems providing end-to-end communications, Data Security
Framework Rev1.0” issued by the Open Data Center Alliance (ODCA) (ODCA, 2014).
In data communications, the term “data life cycle” describes the data through the process of
creation, storage, use, sharing, archiving, and destruction (ODCA, 2014). To obtain holistic data
security end-to-end on a distributed data network, the ITU-T standards on security architecture
uses X.805 models as shown in Figure 1.

Figure 1 Security Architecture X.805 ITU-T (ITU-T, 2003)

The basic principle of the framework of a security system is to provide security for the entire
application by considering the types of attacks (threats) and crack potential (vulnerabilities).
Security system architecture framework is built on the concept of layers (layering) and field or
section (plane). The concept is intended to obtain security end-to-end on each layer including
infrastructure layer, service layer, and application layer. In general, ITU divides the security
aspects into eight portions, i.e. Access Control, Authentication, Non-Repudiation, Data
Confidentiality, Communication Security, Data Integrity, Availability, and Privacy (ITU-T,
2003).
The challenge for a national regulator is how to ensure the security framework on each level.
Should a country simply adopt the global standard, or should they customize and develop their
own? At the country level, standardization is concerned with the function of country as a member
of ITU. Typically, a country would adopt an international standard to ensure the market would
be for the common good. However, in reality, national threats can differ country by country.
National regulators should anticipate this by setting up their own framework.
5.3. Maximizing Opportunity of Local Standard and Industrial Development
One of the characteristic of disruptive innovation is against the mainstream. When global trend is
the mainstream, local innovation may appear as the alternative. Windows of opportunity are
opened, yet the challenge for the policy maker is to trigger developments to its own standard.
For example, 5G needs to be supported by enough energy resources (Andrews et al., 2014). There
is opportunity to conduct research related to renewable energy, where it drives support for the 5G
network. However, the most important long term challenge facing renewable energy remains
economic, in which renewable cost is often greater than fossil energy (Andrews et al., 2014).
Under such conditions, we may assume fossil energy as the mainstream energy resource, and
renewable energy as the disruptive one. Successful R&D of renewable technology will eventually
Suryanegara 641
threaten such fossil energy. Therefore, a policy maker can drive its national research plan to
engage in related R&D activities.
Why is the development of local innovation significant? There is a correlation between the
empowerment of innovation and supporting the industrial environment of a country. Particularly
for a developing country, they should grasp the opportunities provided by mobile technology
development.
Industrial policies are the product of learning from technical opportunities and the relevant 5G
technological framework based on that country’s specific characteristics. Since regulators focus
on telecommunications policy product, they need to cooperate with supporting institutions.
Industrial policy should be linked to the science and technology (S&T) creators, because they are
the knowledge generators in innovation building.
The profile of any mobile technological generation can be elaborated into issues regarding
technological standards and service applications. Consequently, there is great opportunity for
research activities to support service applications on top of technological standards. Such a greater
opportunity will finally lead to more room for innovations. Meanwhile, a country can set up two
streams of innovation building, i.e. first, contribution to an international standardization body
(such as ITU), based on issues regarding technological standard implementation; second,
collaborative research output can be directed to support the development of 5G-relevant service
applications.

6. CONCLUSION
This paper has discussed the challenges emerging from 5G as a disruptive innovation. We focused
on the area of standards and regulations at the country level. As a disruptive innovation, it is
indicated that 5G technology will create a new market value of non-human users. Such a condition
may challenge policy makers in any country to anticipate the relevant impact, in particular the
complexity of multi-device technological platforms.
Subsequent challenges appear with security issues of cloud-based applications. Since 5G’s
latency will no longer be a problem, 5G service will enable the creation of massive cloud-based
applications. However, national threats can be different country by country; therefore, national
regulators should anticipate setting up their own frameworks and also complying with global
standards.
Finally, 5G technological services would require many supporting technologies, for example
renewable energy can be utilized to support future BTS. Therefore, we argue that local standard
may appear as the alternative solution to mainstream technologies. The windows of opportunity
are opened, yet challenge policy makers to trigger development of their own local standards. It is
signified that developing countries may utilize such opportunity to empower their industrial
competitiveness.

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