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(Le Creuset, Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Fanyu Lin, CEO, Fluxus LLC & Michael Gallagher, Business Innovation & Strategy Executive Advisor, Fluxus LLC


“2019 will be a critical year in the evolution of 5G as global roll-out pilots will shape the landscape and specifications will start to be formalized. Intelligent connectivity, enabled by 5G, will be the catalyst for the social-economic growth that the 4IR (4th Industrial Revolution) could bring.” – World Economic Forum

Despite the current financial, operational and regulatory barriers for inclusive implementation of 5G at a global scale, we see affordable home delivery as one of the low-hanging fruit application areas to make an environmental and societal impact without taking on significant technical or business risk.

The multi-trillion-dollar underserved and underperforming affordable housing market can benefit directly or indirectly from 5G’s increasing adoptions in other related industries, including manufacturing, financing and smart homes, throughout the home delivery value chain.

Manufacturing

Technologies of industrial automation and advanced manufacturing are proven effective to produce quality housing at scale without the challenges faced historically. 5G’s strong focus on massive machine-type communication (MTC) and the internet of things (IoT) connectivity could further advance future smart factories with robot-oriented design and management, sensor-driven components and production lines, and help accelerate the implementation of productivity-improving technologies for construction industry.

A new type of prefabrication model is emerging with Industry 4.0 applications, including utilization of cyber-physical assistance systems, advanced Building Information Modeling (BIM) and Design-to-Fabrication technologies. With such technologies, traditional architectural phases and data-sharing among different parties are made more efficient as all parties give and take information to and from the same source or system platform. These data-rich technologies require a large amount of processing power to precisely translate the physical structures into digital ones, to intelligently analyze and process the collected data for parametric adaptation based on inputs from mobile devices or perhaps autonomously, in real time.

5G could help speed up the standardization and optimization process of digitalizing construction industry, to enable the next generation rapid mass-production and mass-customization achieving economies of scale. From a business model perspective, this could further encourage a vertically integrated business infrastructure for industrialization of the construction industry, with seamless collaboration available between all stakeholders, to efficiently control the cost of raw materials and production, align market demand with product supply, and optimize profit margins, distribution and marketing in a sustainable fashion.

Design for 5G-friendly buildings

As population centres across the world gear up for 5G technology, new challenges await the building and construction industry. Architects, developers and builders are beginning to develop structures with connectivity in mind. As stated in an article by Corning, many common construction materials such as concrete, masonry, steel, wiring and low-e glass will interfere with 5G signals. And while there are many technologies being developed to bring signals into buildings and distribute them to devices, careful selection of building materials and intelligent design can reduce the complexity of these solutions and improve reliability.

The importance of material selection and building design can be easily overlooked. For the most part, 3G and 4G signals were strong enough to circumvent the interference of many materials. However, they will play a critical role in performance of 5G systems. For example, commonly used foil backed fiberglass insulation can completely block signals. Sheet rock will also significantly reduce signal strength. Other examples are given in the table below.

The construction industry will find it necessary to accelerate the shift toward pre-fabricated and modular building processes. As opposed to on-site installation approaches, the factory setting enables many new possibilities in creating buildings with connectivity reliably integrated into the structure. Advanced materials and devices can be incorporated into in the panel construction process more efficiently and at lower cost by comparison. A good example is the integration of sensors and controllers into the envelope to manage building energy use. At the factory scale, these systems can be purchased at lower cost. Modern quality-control processes can be used to assure reliability and optimise performance. As component technologies and materials improve, system level testing and validation can be managed in development centers to assure compatibility and functionality. By contrast, on-site installation troubleshooting can be time-consuming and expensive with sub-optimal performance.

With careful consideration, the builder or developer can avoid trade-offs between energy efficiency and connectivity. For example, open floor spaces combined with advanced materials will be an effective strategy for enhancing 5G connectivity in energy efficient modern households.

Financing

The demand side of the value chain for affordable home delivering is fractionally defective. The purchasing power of households is a critical challenge. Affordable housing developers often face offtake problems due to poorly functioning or inaccessible mortgage market.

Today, more and more financial service corporations are transforming themselves with digitalization to reach unbanked sectors of society. By reducing latency and transaction times to ensure an effective network with capacity to process large scale transactions, 5G will better support mobile payments adoption in low-income communities. The newly collected financial data of this population can effectively address the challenge in credit underwriting on the demand side of home delivery, to better judge the quality of the borrower and assess credit risk.

Connectivity provides the opportunity to create new business model options for the finance community to make capital available for low income markets. In the business community such as airlines, a shift from ownership of capital-intensive assets, such as airplanes to a Pay-for-Access model was made possible by digitization. We see this same trend emerging in the consumer sector with automobiles. Similarly, households may shift from traditional home ownership or lease models to pay for access, system lock or other business models in a shared economy. Lenders having access to the digital footprint of the low-income household may find it more profitable and lower risk to access revenue streams as an alternative to fixing financing to hard assets.

With 5G technology, it becomes much more feasible to access and monetise revenue streams such as energy savings. This in turn can create increased prosperity for low-income households. Let’s for example consider the potential to deploy an Energy Services Company (ESCO) model at the household level. ESCO’s have been successfully utilized in large scale commercial building retrofit markets. However, scale is necessary to operate them profitably.

With the increasing prevalence of energy-efficient, connected home appliances and the computing power of 5G, it becomes less onerous to capture energy savings at the household level. The installed cost of a suite of energy-efficient, connected appliances, which can exceed $20,000, is assumed by the household ESCO. The ESCO in turn charges the household a fee for services and captures the energy savings. This model helps low income households avoid the upfront prohibitive cost of appliances. It can accelerate the retirement of old and poor performing appliance stock. This creates an environmental benefit that otherwise would not be realized. In subsidized housing, ESCO’s could receive government guaranteed revenues. An example is illustrated in the table below.

Smart homes

5G will be critical to unlock the opportunity in the development of smart homes, which would lead to reduction of cost of ownership for affordable housing communities.

Smart home technology use devices connected to the internet of things (IoT) to automate and monitor in-home systems. As an increasing number of IoT devices with full mobile connectivity are commercially available and used for smart homes application, the network congestion due to limitations of previous generation networks can be solved by 5G. Communities located in urban centres with large population will be able to experience notable improvement as 5G technology can manage much greater numbers of users at the same time.

Currently, fragmentation in the smart home industry and lack of common protocols to allow different smart devices to communicate with each other are among the biggest challenges to fully take advantage of the technology advancement. 5G with omnipresent and high-speed connectivity with one wireless protocol has the potential to solve these interoperability issues. It could enable seamless integration of many devices for a fully compatible smart home delivery, so that homeowners can benefit from the holistic home solutions capable of energy-saving, improving safety and health among others. There are expanding market opportunities for companies to produce 5G compatible devices.

Connectivity product and service providers may also consider partnering with mass housing owners or providers to jointly develop a digital affordable housing market. The former can benefit from greater access to the housing domain knowledge and value chain insight with larger dataset to better understand, respond to and anticipate user’s needs and accordingly improve products and services, and come up with repeatable or even standardised solutions to drive scale. The latter can benefit from adding a new asset class – data collected by real-time monitoring of buildings through sensor networks and high-speed connectivity, and the resulting reduced cost of ownership, taking into account the life-cycle energy, operating, and maintenance cost savings, which will ultimately benefit households.

The internet of things for social housing
Image: River Clyde Homes

In the digital economy, the boundaries of industries are increasingly blurring. Implementing new technologies such as 5G can provide the foundation to accelerate productivity and cooperation across core industries throughout home delivery value chain. Together with other interdisciplinary efforts, a paradigm shift would be made possible to enable billions of the world’s population to participate in the housing market as full economic citizens.