I’m Not a Fan of the 5G Hype

I read a lot of articles talking about what a huge deal 5G will be for the economy. The source of the excitement is the huge numbers being thrown around. For example, Qualcomm and IHS Technology issued a report in 2017 that estimated that 5G could enable $12 trillion in economic output around the world by 2035. That same report made the incredibly hyped claim that 5G could be as important to the world as the introduction of electricity. It’s no wonder that financial people are excited about the potential for 5G and why so many companies want to somehow grab a piece of this new market.

But I look around my own part of the world and I have a hard time seeing this kind of impact. I live in a town of 90,000 people. If we are like the average US market then roughly 85% of homes here already have landline broadband. Practically everybody here also has a cellphone, with the majority using smartphones.

People may read my blog and think I am not a fan of 5G – but that’s not true, I’m just not a fan of the hype. I would love for Verizon to offer me another choice of home broadband – I would consider changing to Verizon at the right price, as would many other households. My biggest question is how much value Verizon would create by introducing 5G in my town. Let’s say Verizon was to capture 30% of the broadband market here – that certainly creates an advantage to Verizon and gives them a significant new revenue stream. However, for every customer Verizon gains, Charter or AT&T would lose a customer, and overall that’s a zero-sum game. Further, if you assume that 5G competition would drive down prices a bit (it might not since oligopolies tend to not compete on price), then the overall spending on broadband in the town might actually decrease a bit.

The same thing would happen with cellular 5G. The big four cellular companies will have to spend a lot to upgrade all of the cell sites here to 5G. We’re a hilly and heavily wooded City and it will take a lot of small cell sites just to fill in the existing cellular holes. But unless they can find a way to charge more for 5G cellular broadband, then cellphone broadband is also a zero-sum game. Everybody in town already has a cellphone and a data plan, and the long-term trend is for cellular data prices to drop. I don’t see the new revenue stream from 5G cellular that will pay for the needed upgrades. Perhaps faster cellular data speeds will attract more people to drop landlines, but that’s also a zero-sum for the market as a whole.

There is one new aspect of 5G that the cellular carriers are counting on to create a new revenue stream. Once the 5G technology has been developed, the 5G standard calls for the ability of a cell site to communicate with as many as 100,000 devices – a huge increase over today’s capabilities. The cell carriers are clearly banking on IoT as the new revenue opportunity.

However, that kind of transition isn’t going to happen overnight. There are a whole lot of steps required before there is a huge cellular IoT revenue stream. First, the technology has to be developed that will handle that huge number of IoT devices. The 5G core standards were just developed last year and it will take years for vendors and labs to achieve the various goals for 5G. As those improvements are realized it will take a lot longer to introduce them into the cellular networks. We are just now finally seeing the deployment of 4G LTE – AT&T is just now deploying what they call 5G Evolution into any major markets, which is actually fully-compliant 4G LTE. The same slow roll-out will occur with 5G – we’ll advance through 4.1G, 4.2G, etc. until we see fully-compliant 5G network in a decade.

We’ll also have to wait for the rollout of IoT sensors that rely on a 5G network. It will be a bit of a chicken and egg situation because nobody will want to deploy devices that need 5G until 5G is active in a sufficient number of neighborhoods. But eventually this will come to pass – to a degree we can’t predict.

The question is if IoT usage is the trillion-dollar application. I certainly look forward to a time when I might have an embedded chip for 24/7 health monitoring using a 5G network – that’s a service that many people will be willing to pay for. But there is no guarantee that the revenue streams will materialize for IoT monitoring to the extent envisioned by AT&T and Verizon. I’ve done the math and the only way that the carriers can see a trillion-dollar benefits from IoT is if future homes have an IoT monitoring bill of the same magnitude as our current cellular or broadband bills – and that may never come to pass. I would love to see a concrete business plan that predicts where these huge new benefits come from, but I’ve seen nothing specific other than the big claims.

There is one aspect of the hype that I do buy. While I can’t see any way to equate the value of 5G to be as important as electricity, it is likely to share the same kind of introduction cycle that we saw with the electric grid. It took 25 years for electricity to spread to the majority of US cities and another 25 years until it was in most of rural America. New technologies today deploy faster than the deployment of electric grids – but this still can’t happen overnight and is at likely to be many years until rural America sees 5G cellular and a lot longer for 5G fixed broadband.

If you believe the hype in the press, we’ll start seeing big benefits from 5G in 2019 and 2020. I can promise you a blog at the end of next year that looks to see if any of this hype materialized – but I already suspect the answer will be no.

5 thoughts on “I’m Not a Fan of the 5G Hype

  1. Pingback: Doug Dawson is Not a Fan of the 5G Hype | Rural Economy Technology

  2. Mate you can have your health monitoring chip even with 4G with better coverage, indoor penetration and seamless throughput that 5G mmwave might offer. You don’t need 5G for this.

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    • You can, but the benefit of 5G will be the ability to connect to as many as 100,000 devices simultaneously from a cell site. It doesn’t take a lot of devices to fill all of the slots on a 4G site. It’s going to likely be using the same frequencies as today for something like medical monitoring – the needed upgrade is just a guarantee that your medical device won’t get a busy signal when it tries to connect to the world. This is one of only a few applications where I think 5G will make a difference, so in general you are right.

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      • That’s somehow not correct. A device sends a SR (scheduling request in uplink) so eNodeB can reserve slots for it’s uplink transmission as per its own processing time and convenience. Accordingly such a device can be scheduled in a time interval of 20-30 seconds from the request so there will be a slot for every device in a kind of filling all the uplink transmissions conveniently. Remember there’s data to be sent not every ms but rather once every minute with IOT. I would like to know one single cell in US that has more than 10000 users right now. There isn’t such a cell. The story with 100,000 connections per cell is another marketing topic that will not happen 10 years from now not even in Manhattan. If you work in wireless you would know that every single IOT application right now is handled by 4G in an excellent way. 5G is a major hype. Then you will be told same stories about 6G. Then about 7G. There will always be a G to be sold and uses cases for every new G will not only be forced but also lured to politicians, city halls and other kind of possible authorities. Eeventually each one of it will be adopted. Don’t you think if’s funny that Mobile Network Operators have not covered the 4G coverage holes in major cities but instead they spend budgets in rolling out 5G?

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