From AI to advances to next-generation 5G networks, Europe’s telecoms firms have been investing heavily into new technologies in a bid to move beyond the legacy model of laying down cables that enable internet connectivity — a business model that’s earned them the pejorative term “dumb pipes.”

However, this costly endeavor of modernization has happened in tandem with sluggish revenue growth and an inability for the sector to effectively monetize its networks to the same degree that technology giants have done with the emergence of mobile applications and, more recently, generative AI tools.

At MWC, many mobile network operators talked up their usage of AI to improve network quality, better serve their customers and gain market share from competitors.

Still, Europe’s telco bosses say they could be accelerating their digital transformation journeys if they were allowed to combine with other large multinational players.

“There’s this real focus now around European competitiveness,” Luke Kehoe, industry analyst for Europe at network intelligence firm Ookla, told CNBC on the sidelines of MWC last week. “There’s a goal to mobilize policy to improve telecoms networks.”

In January, the European Commission, the executive body of the European Union, issued its so-called “Competitiveness Compass” to EU lawmakers.

The document calls for, among other things, “revised guidelines for assessing mergers so that innovation, resilience and the investment intensity of competition in certain strategic sectors are given adequate weight in light of the European economy’s acute needs.”

Meanwhile, last year former European Central Bank President Mario Draghi released a long-awaited report that urged radical reforms to the EU through a new industrial strategy to ensure its competitiveness.

It also calls for a new Digital Networks Act that would look to improve incentives for telcos to build next-generation mobile networks, reduce compliance costs, improve connectivity for end-users, and harmonize EU policy across the network spectrum, or the range of radio frequencies used for wireless communication.

“The common theme and the mood music is certainly reducing ex-ante regulation and to foster what they would call a more competitive environment which is an environment more conducive of consolidation,” Ookla’s Kehoe told CNBC. “Moving forward, I think that there will be more consolidation.”

However, the telco industry has some way to go toward seeing transformational cross-border mergers and acquisitions, Kehoe added.

For many telco industry analysts, the demands for increased consolidation is nothing new.

“European telco CEOs have never been shy about calling for consolidation and growth-friendly regulation,” Nik Willetts, CEO of the telco industry association TM Forum, told CNBC. “But regulation is only one piece of the puzzle.”

“In the last 12 months we’ve seen a new energy from our members in Europe to get on with the huge task to transform themselves: simplifying, modernizing and automating their operations and legacy tech.”

“This will make it possible to rapidly adapt to new customer needs and market realities, whether building new partnerships, undergoing M&A or delayering integrated businesses – all trends we expect to reach new heights over the next 24 months,” he added.

The Artificial Intelligence Action Summit will see world leaders and bosses from some of the leading companies developing the technology gather in Paris.

Big-name attendees include U.S. Vice President JD Vance, EU President Ursula von der Leyen, German Chancellor Olaf Scholz, Canadian Prime Minister Justin Trudeau, Google CEO Sundar Pichai, Microsoft President Brad Smith, OpenAI CEO Sam Altman, Google DeepMind CEO Demis Hassabis and Anthropic CEO Dario Amodei.

Elon Musk is currently not slated to attend.

On Saturday, Axios reported that OpenAI’s Altman will this week warn world leaders they need to widen their AI mindset so that, rather than just focusing on risk — as has often been the case in Europe — leaders will instead look to embrace growth and opportunity.

The emergence of Chinese firm DeepSeek’s breakthrough open-source AI model R1 in recent weeks has stirred debates in the industry around the huge capital expenditures companies are committing toward computing infrastructure to train their systems.

DeepSeek said total training costs for its newest AI model amounted to $5.6 million. However, doubts have been raised about DeepSeek’s claims.

Last month, semiconductor research firm SemiAnalysis estimated that DeepSeek’s hardware spend is higher than $500 million over the company’s history, adding that the startup’s research and development and ownership costs are significant.

On Sunday, Google DeepMind’s Hassabis said DeepSeek’s AI model is “probably the best work” he’s seen out of China — but added that, from a technology point of view, it was not a big change.

“Despite the hype, there’s no actual new scientific advance … it’s using known techniques [in AI],” Hassabis said, adding that the hype around Deepseek has been “exaggerated a little bit.”

Nevertheless, with companies spending billions on data centers filled with advanced semiconductors from U.S. chipmaker Nvidia, DeepSeek’s new model has led to worries of a potential bubble in the AI space.

Ahead of the AI summit, Mike Capone, CEO of U.S. software firm Qlik, told CNBC that DeepSeek is likely to be a major discussion point this week as world governments grapple with China’s AI advances.

“This summit isn’t just about AI—it’s about influence,” Capone told CNBC on Friday. “Expect a strategic messaging war as U.S., French, and UK AI leaders downplay DeepSeek’s relevance while China works to prove it’s not just catching up — it’s setting the pace.”

“AI diplomacy is now as critical as AI development. The power struggle won’t be about who builds the best model; it’ll be about who controls the AI narrative,” he added.

– CNBC’s Arjun Kharpal contributed to this report

IT providers can also be fined under DORA. The rules threaten levies of as much as 1% of average daily worldwide revenue for up to six months.

“These sanctions are necessary,” Brian Fox, chief technology officer of software supply chain management firm Sonatype, told CNBC. “They are a powerful motivator, pushing leaders to take compliance and operational resilience more seriously than ever.”

Orange Cyberdefense’s Lindsay said there’s a risk longer term that financial services firms end up moving their critical security functions and services in-house.

“Advances in technology may allow financial institutions to move services back in-house, simplifying this aspect and reducing the risk of non-compliance,” he said.

“Either way, existing contracts will need to be updated to ensure compliance is contractually mandated and monitored between entity and provider,” Lindsay added.

Meanwhile, there are several other cybersecurity-focused regulations that organizations will have to come to terms, such as the Network and Information Security Directive 2, or NIS 2, and the Cyber Resilient Act. The former entered into force in October.

“As with any new regulation, there will certainly be a transitionary period as organisations adjust to new requirements and standards,” Sonatype’s Fox told CNBC. “This is the start of a long journey toward improving software security and resilience.”

That’s not to say regulations haven’t proven an important factor in getting tech giants to think more about building localized AI infrastructure within Europe.

OVHCloud’s Sanesi said regulations like the EU’s GDPR catalyzed a lot of the interest in onshoring the processing of data in a given region.

The concept of AI sovereignty is also getting buy-in from local European tech firms.

Earlier this week, Berlin-headquartered search engine Ecosia and its Paris-based peer Qwant announced a joint venture to develop a European search index from scratch, aiming to serve improved French and German language results.

Meanwhile, French telecom operator Orange has said it’s in discussions with a number of foundational AI model companies about building a smartphone-based “sovereign AI” model for its customers that more accurately reflects their own language and culture.

“It wouldn’t make sense to build our own LLMs. So there’s a lot of discussion right now about, how do we partner with existing providers to make it more local and safer?” Bruno Zerbib, Orange’s chief technology officer, told CNBC.

“There are a lot of use cases where [AI data] can be processed locally [on a phone] instead of processed on the cloud,” Zerbib added. Orange hasn’t yet selected a partner for these sovereign AI model ambitions.

5G is the next generation of mobile internet after 4G, which promises superfast data speeds and better coverage.

You probably remember mobile network operators raving about the promise of 5G several years ago. Carriers in China, South Korea, the United States, and Europe, properly got underway with launches of 5G networks in 2019.

Now, nearly five years on, penetration of 5G among consumers remains low.

The number of consumers with a 5G connection is increasing. But it’s still well below “mainstream” levels.

5G has been the fastest mobile generation rollout to date, surpassing 1 billion connections by the end of 2022, rising to 1.6 billion connections at the end of 2023 and 5.5 billion by 2030.

5G connections are expected to represent more than half (51%) of mobile connections by 2029, though, and that is forecast to then rise 56% by 2030. Those numbers are up to date as of January 2024, GSMAi said.

5G has been positioned by the telecoms industry not just as a consumer product for faster download speeds, but as a network that could underpin new technologies like driverless cars or unpiloted air taxis.

That’s because it has lower latency than 4G. That means the time it takes for devices to talk to each other is significantly reduced, a feature important in scenarios where data needs to be delivered quickly.

However, after hundreds of billions of dollars of investment into 5G networks, carriers have struggled to see the return. Analysts say that the real potential to monetize 5G might be on the horizon.

5G Advanced, or the name for the next stage of 5G, is the next evolution of mobile networks.

Telecommunications networks require standards. These are globally accepted technical rules that define how a technology works and its interoperability around the world — interoperability is the ability for two or more systems to work together.

These standards take several years to come up with and finalize and involve several players from companies to academics and industry bodies.

The standards-setting body 3GPP, which contributed to 5G, uses a system of parallel “releases” to provide developers with a platform to implement new features at a given point and then allow more functionality to come in further releases.

In the 3GPP releases system, 5G is considered release 17. That means 5.5G is dubbed “release 18” by the industry.

Release 19 is what will effectively be 6G, another major network upgrade. Work is also underway on 6G standards, but it’s still in the early stages.

“Main priorities for developing 5G Advanced standards are to increase commercial relevance of 5G by expanding vertical markets, resolve deployment issues, and continue technology evolution to build a bridge towards 6G,” Milind Kulkarni, vice president and head of InterDigital’s wireless labs, told CNBC.

“Research in standards have introduced, improved, and finalized several new enterprise-specific features for 5G Advanced, including network slicing, the integration of private and public networks, enhanced positioning, and even applications specific to each enterprise vertical.”

Howard Watson, the chief technology officer of British telco giant BT, said that 5.5G will promise faster uplink speeds, meaning you’ll be able to stream video, post things online, and play multiplayer games, much faster than before.

“My children’s generation, or even dare I say it, my grandchild’s generation … that generation, they share a lot. And clearly, sharing requires quite a lot of upstream,” Watson told CNBC on the sidelines of MWC. “There will probably be a doubling of upstream capacities coming in release 18.”

Further benefits to 5G Advanced over current 5G, telco execs say, is that it will make the networks themselves more “intelligent” through the application of AI and machine learning, while also boosting performance and reducing overall power consumption.

Mats Granryd, director general of the GSMA, told CNBC he hopes the industry can continue focusing on staying in a 5G environment for years to come, as there’s still plenty of work to be done on monetization.

“I hope that we can stay in 5G territory for long, because normally in the 4G environment, you and I were the consumers. And it’s quite quick for us to just say, change a SIM card,” Granryd told CNBC’s Karen Tso. “In 5G, 5G is a technology standard that is predominantly towards business to business. And it takes a longer time for businesses to convert and use new technology.”

“This normal of 10 years between standards, I wonder if that’s going to be enough,” Granryd added. “We hope that we can stay in a 5G environment. 5G advanced — 5G standalone, that’s absolutely fine. But push out the time and make sure that we have enough mileage to capitalize and monetize and show the world that 5G is a fantastic technology.”

With 5G Advanced, telecoms firms could start to make more money from their 5G rollouts by charging higher prices. And, with a key focus of 5G being enterprise applications, that could be a much more significant money maker for network operators than consumers.

Telcos haven’t yet revealed how much more a 5G Advanced data plan will cost compared with 5G. But analysts expect they’ll look to make money from 5G Advanced by getting clever about subscriptions and using AI and other technologies to operate their networks more efficiently.

With a key focus of 5G being enterprise applications, that could be a much more significant money maker for network operators than consumers.

The telco industry has been awash with talk about so-called “private 5G” networks, nonpublic mobile networks that are installed on-premise at companies’ work sites for example, in a smart factory, or remote surgery operation.

Chinese telecommunications equipment supplier Huawei expects 2024 to be the year that commercial deployments of 5G Advanced officially begin. For Huawei, 5.5G is a network that will be capable of 10 Gbps downlink speeds — and in case you’re wondering, yes, that is very fast.

Huawei revealed eight 5.5G “innovation practices” last week which it says will help operators build 5.5G networks across all frequency bands. The company is working with carriers in the Middle East, Europe, Asia Pacific, and Latin America to deploy 5.5G.

It’s going to take some convincing for consumers to go from 5G to 5G Advanced, given the little noticeable improvement they’ve seen from their phones upgrading to 5G in the past five years. But Philip Song, Huawei’s chief marketing officer of the carrier business group, said that it’s important telcos convey the use cases of 5G Advanced to consumers well.

“The most important thing for us is how can we support the customers,” he said at a press briefing last Tuesday, in response to a CNBC question. The “biggest success” for 5.5G will only arrive if carriers “acknowledge solutions” and bring that across to customers sufficiently.

In some markets, operators are still working on deploying 4G, Song said — but he doesn’t think that matters because different parts of the world “are at different stages.”

Watson told CNBC that he thinks 5G Advanced will arrive on the EE network later this year. That’s because the 3GPP standard release 18, or 5.5G, is already open for experimentation and telcos have been working on trials. It is expected to conclude by June 2024, by which time the protocols that enable 5.5G should be stable.

“Release 18 we will start to roll out this year,” Watson told CNBC. “We also plan to launch 5G standalone this year as well.”

5G standalone is different from 5G Advanced. Sometimes referred to as “true” 5G, it refers to the development of a 5G network that uses technology independent of 4G and comes with the promise of realizing 5G’s full potential.

5G Advanced, on the other hand, is a complete evolution of the network.

There’s no definitive date for when 5G Advanced will start to be rolled out, though. And telcos are on the clock to get it up and running.

“I hope that we will be at the bandwidth, the latency, the capability needs to be sufficient,” Mats Granryd, director general of the GSMA, told CNBC’s Karen Tso at MWC last week.

“That’s what we’re struggling with to see in Europe. In five years, we’re going to have a quadrupling of data usage. And I am really concerned about what’s going to happen at that stage.”

“Will we have cut-offs? Will we have congestions?” he added. “Will we have a much much worse situation, a much worse landscape? By having that worse landscape, the competitiveness of Europe will go down.”

— CNBC’s Arjun Kharpal contributed to this report