Finding a Business Case for 5G

We are now more than a year into what the carriers are labeling as 5G. If you read this blog regularly you know by now that I don’t think we’ve seen any 5G yet – what has been introduced so far is new spectrum. A new band of spectrum can improve broadband performance in crowded markets, and so the carriers are getting some praise for this development. But these new spectrum bands are operating as 4G LTE and are not yet 5G.

However, we’re getting closer to 5G. Within another few years we will start to see some of the innovations contained in the 5G standards hit the market. This won’t be spectacular at first. Remember that the carrier’s primary short-term goal for 5G is to improve the capacity of cellular networks to get ahead of the exploding demand curve. Cellular data traffic is growing at an astronomical 36% annually and that is stressing cellular networks to keep up with demand. 5G is part of a 3-prong approach to increase capacity – introducing small cells, introducing new spectrum, and finally introducing 5G features. These three changes ought to brace cellular networks for another decade, although eventually, the networks will hit a wall again if growth stays on the current growth curve.

Over the last two and three years, the cellular carriers and the press were full of stories of the wonderful ways that 5G would transform our world. AT&T, Verizon, and T-Mobile spun stories about having gigabit cellular, having fleets of self-driving cars, and having big broadband with us wherever we go. You may not have noticed, but those stories have disappeared. The carriers are not talking much about 5G capabilities other than faster speeds. They are no longer trying to soothe investors with stories of huge future 5G revenue streams.

I think the reason for this is that cellular carriers don’t have any grand visions of future 5G revenues. They still have not built a business case for 5G that justifies the cost of deploying dense networks of small cells.  Consider some of the ideas that were highly touted just a year or two ago.

Millimeter wave spectrum that can deliver gigabit broadband speeds is likely to remain a novelty. The carriers have introduced this in downtown urban neighborhoods to produce a marketing wow factors with TV commercials showing broadband speeds faster than a gigabit. But millimeter wave networks only work outdoors., and even that is funky since everything including a customer’s body can block the signal. There is no business case for spending the money for dense fiber-fed networks since cellphones are not designed for big bandwidth applications. Urban 4G is already pretty good, and there is no benefit other than bragging rights for a customer to shell out extra money for a millimeter wave phone and data plan.

There was talk for a while that 5G would displace WiFi inside homes and businesses. The idea was that 5G could do a better job of keeping data private while also bringing blazing speeds. However, the FCC has approved new WiFi spectrum that when coupled with WiFi 6 technology promises a magnitude improvement in WiFi performance. Once people start using the new WiFi there is going to be little interest in paying a monthly subscription for something that can be done well with off-the-shelf routers.

There still is talk about using 5G in medicine, touting things like the ability of surgeons to perform remote surgery. But is that ever really going to be a thing? It’s taken fifteen years and the COVID-19 crisis to get doctors to finally try telemedicine. There can’t be many doctors ready to tackle performing surgery in another city using robots. It’s also hard to think that insurance companies are going to support surgery that could go off the rails due to a fiber cut or electronics failure. 5G has also been touted as making it easier to monitor patients away from hospitals. But that’s a small bandwidth application that can be handled fine with the ever-improving 4G LTE.

There has been the hope of using 5G technology to help automate factories, and that sounds like a legitimate use of 5G. Factories that need high-precision and low latency are perfect for 5G. This will avoid any interference issues that might come with WiFi. But are there going to be enough new factories using this technology to move the financial bottom line of AT&T or Verizon?

For several years there was a story spun about how self-driving vehicles would communicate with the cloud using 5G. This never made any sense because for this to work there would have to be a dense cellular network built along every road. If the fleets of self-driving cars are developed before the 5G network, they’ll find a solution other than 5G. There also came the ugly realization that networks crash and the image of all the cars coming to a halt in a city because of a broadband outage means this may never become a reality.

Finally, there was talk of how 5G would free people from the monopoly power of the cable companies for broadband. People could have their entertainment with them at all times everywhere. However, most people are smart enough to know that the big cellular companies are also ugly monopolies. They have been engaging in bad behavior such as selling customer location data, even after being told by the FTC to stop the practice. The cellular companies are not going to win an argument that they have the moral high ground.

I have been trying to figure out the 5G revenue stream for several years and I’m no closer to it today than I was three years ago. Some people are willing to pay extra money to get faster cellular broadband speeds, but most customers think they are already paying for this in their cellular subscription. If Dish is successful in launching a new 5G network, the price pressure for 5G will likely be downward rather than increasing. The cellular carriers are going to introduce 5G even without new revenue streams because it’s the only way to keep their networks from crashing in a few years. But what they do after that is still a mystery to me.

 

Just a quick personal note. I’ve now published 1,800 blogs since I started in March 2013. That’s about 1,600 more than I thought I would be able to do. I tell myself once in a while that I’ll stop writing this blog when I run out of topics – but that doesn’t seem like it will be happening any time soon. I thank those of you who have been reading my musings. Onward to 1,800 more!

2 thoughts on “Finding a Business Case for 5G

  1. Related: FCC doesn’t think starlink is developed enough to receive support. Which is rich given where 5g is. Although, not inconsistent with the idea that the FCC is basically advocating for the benefit of the existing telcos.

    https://arstechnica.com/tech-policy/2020/05/elon-musks-promise-of-low-latency-broadband-meets-skepticism-at-fcc/

    5g is a thing that’s needed for mobile scaling and a transparent effort to turn an infrastructure liability into a business for an industry that has a saturated market. (And, I still believe, to get it paid for by taxpayers.)

    Like

  2. Congratulations Doug! Your blog is very useful to many people because your topics are so broad and your analysis is down to earth in looking past the exceptional marketing hype that is out there.

    I agree, with the state of the industry, you will never run out of topics and I’m quite happy about that. Here’s to another 1800 blogs!

    Like

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