Is the Line Between Wireless and Wireline Blurring?

In the Bernstein Strategic Conference in May, Ronan Dunne, Verizon CEO and EVP for Verizon Consumer talked about his vision for the future of 5G. During that presentation, he made a statement that has been bugging me for weeks, so I finally had to write about it. He said that he can foresee a day when consumers will purchase home broadband in the same way that they buy wireless service today. He said that will happen because the line between the wireless and wireline business are blurring.

Dunne is talking about a future when 5G is ubiquitous and where people won’t perceive a difference between landline broadband and 5G broadband. In a term used by an economist, Dunne foresees a day when wireless broadband is a pure substitute for landline broadband – where a customer won’t perceive a functional difference between the two products.

Verizon offers several wireless products, so let’s talk about them individually. The predominant Verizon product that is in every market is cellular broadband. This uses cell sites to beam voice and data traffic to cellphones or other devices that are connected to a cellular data plan. Those cellular plans are incredibly stingy in terms of the amount of broadband that can be used in a month, with the unlimited plans offering a little more than 20 gigabytes of data before a user has to pay more or become restricted. The specifications for 5G set a goal of 100 Mbps for cellular broadband speeds within a decade. That kind of speed might be a substitute for landline broadband today from a speed perspective. But networks are not likely to achieve these speeds for at least five more years, and by then I think cable companies will be considering increase urban broadband speeds to something like 250 Mbps. I have to question if cellular broadband speeds can keep up with the speeds provided by landline connections.

Of more importance is that cellular speeds drop when entering a building. Anybody who has walked into a large building using their cellphone understands that cellular signals don’t perform as well indoors as outdoors. By the time I walk 100 feet into my neighborhood grocery store, I often have zero bars of data. While speeds don’t drop that drastically in most homes, when outdoor cellular speeds hit 100 Mbps, indoor speeds in most homes might hit half that number. With slower speeds and incredibly stingy data caps it’s hard to see cellular broadband as a pure substitute for a landline broadband connection.

I also don’t think that the gimmick product that Verizon and others are selling in urban city centers that offers gigabit speeds using millimeter wave spectrum is a landline substitute. The product requires closely spaced small cell sites fed by fiber – but the big gotcha is that the millimeter wave spectrum won’t penetrate a building and barely even make it through a pane of glass. This is an outdoor product for which I still struggle to understand a willing market. It’s certainly not a substitute for landline broadband, except perhaps for somebody who is always outdoors.

The newest wireless product is Verizon’s fixed wireless access (FWA) that beams a broadband signal into the home from a pole-mounted transmitter at the curb using millimeter wave spectrum. I have to suspect that this is the product Dunne is talking about. I would agree with him that this is a pure substitute for landline broadband. But that’s because this is just another variation of landline broadband. This technology has historically been referred to as fiber-to-the-curb. Verizon is using a wireless transmission instead of a fiber line for the last hundred feet to reach a home – but this technology requires building the same fiber into neighborhoods as fiber-to-the-home. This is not a wireless technology since 99% of the network is still comprised of fiber. Anybody using this service can walk to their curb to see the fiber that is carrying their broadband. This technology is a clear substitute for a landline fiber drop – but it’s not a wireless network other than for the last 100 feet to a home.

The other way to challenge Dunne’s vision is by comparing the volume of traffic used by landline and wireless networks. The vast majority of data traffic is still carried over wires and the gulf between the data carried by each technology is widening every year. Consider the following chart from Cisco from 2019 that shows the volumes of monthly data traffic in North America by type. This is expressed in exabytes (one billion gigabytes).

Monthly Exabytes 2017 2018 2019 2020 2021 2022
Homes 35 43 53 64 75 90
Cellular 1.3 1.8 2.5 3.4 4.5 5.9
Business 6.5 8.3 10.3 12.8 15.5 18.5
Total 43 53 66 80 95 114

Both home and business broadband are carried on wires. In 2020, only a little more than 4% of all of the data traffic in North America is carried wirelessly. For wireless technology to be a pure substitute for wireline data, wireless networks would have to be capable of carrying a much bigger share of data – many times what they carry today. The laws of physics argue against that, particularly since landline data usage is growing at an exponential rate. It’s hard to envision wireless networks in our lifetime that can handle the same volumes of data as fiber-based landline networks.

This is not intended as a major criticism of what Dunne said. The country will be better off if Verizon offers a competitive alternative to the cable companies. However, Verizon is like the other cellular companies and can’t talk about 5G without overstating the potential. I know has to keep hyping 5G for Wall Street and I sympathize with that need. But we are still very far from a day when the average household will view landline and wireless data to be pure substitutes.

5G Carriers Hoping for Handouts

The Information Technology Industry Council (ITI) published a recent report that looks at “5G policy Principles and 5G Essentials for Global Policymakers’. For those who don’t know ITI, they are a DC-based lobbying group that represents most of heavy-hitter tech firms, and which works to help shape policy on tax, trade, talent, security, access, and sustainability issues. I don’t think I’ve seen another document that so clearly outlines the hopes of the big US cellular companies.

The paper makes specific policy proposals. In the area of innovation and investment, the paper proposes that the government provide incentives for 5G research and development. It asks governments to support open and interoperable network solutions so that 5G technology works everywhere – unlike with 4G where US cellphones don’t work in Europe. ITI warns that the industry will need a lot more datacenter technicians, cloud administrators, and cybersecurity experts, and asks governments to invest in workforce training. Finally, it asks for the free flow of data across borders.

In the area of 5G deployment, the report recommends freeing up more spectrum for 5G. The report also recommends harmonizing spectrum bands around the world to help make handsets universally usable. There is a recommendation to use targeted government funding to complement private sector investment in 5G. Finally, the report asks for governments to force local siting and licensing reform to speed up 5G deployment.

In the area of 5G security, the paper promotes the idea of supply chain security to ‘consider the geopolitical implications of manufacturing locations’ (keeping out the Chinese). The ITI also suggests that government and industry must share responsibility and collaborate on security.

Finally, in the area of standards, the ITI asks that governments avoid promoting country-specific standards to promote worldwide interoperability – something we failed to do with 4G. The paper suggests that governments should encourage consistent industry engagement in worldwide efforts to create standards.

The paper is titled to suggest that it is a list of policies to be pursued globally. But once I digested all of the recommendations, it’s clear that this is a paper intended to influence U.S. policymakers. Some of the recommendations, such as pushing federal solutions to override local barriers to 5G deployment are strictly U.S. issues. Most of the countries around the planet rely on cellular broadband as the primary source of connectivity, and in most countries, the rules are already slanted in favor of allowing wireless deployment.

If there were any doubts that this piece is sponsored by the big carriers, the paper ends with a summary of the conclusions of a 2018 report from Accenture that was published at the height of the 5G hype. That paper claims that “In the United States alone, 5G is expected to generate up to $275 billion in infrastructure investment, thus creating approximately three million new jobs and boosting GDP by $500 billion annually.’

The current reality of the 5G industry is already vastly different than that 2018 vision. Over the last few years, the big telcos have laid off many tens of thousands of workers and are heading in the exact opposite direction as suggested by the quote. In a recent blog, I noted that the cellular companies are still struggling to define an economic business case for 5G. At least for now, this doesn’t feel like an industry headed for those lofty goals.

The paper goes on to make huge claims for 5G. For instance, the paper claims that 5G has the ultimate capacity to deliver 20 Gbps broadband speeds. That’s such an outlandish claim that there is not much that can be done with it other than an eye-roll.

The paper also touts that 5G will ultimately be able to handle up to 1,000,000 separate connections to devices in a square mile from a single transmitter. If that claim was realistic, I have to wonder why the carriers are bothering to build small cells if a single cell site will have that much capacity. That paper also envisions a world where every device in our lives is connected to a 5G data plan so that we have to pay to connect devices. That ignores the reality that WiFi has already won the connectivity battle and that WiFi will be magnitudes better with the introduction of WiFi 6 and the 6 GHz spectrum band.

This is an industry piece aimed at persuading legislators that 5G is an amazing technology – the paper stops just short of claiming that 5G can leap over tall buildings in a single bound. However, most the paper also paints a picture of an industry that wants big government handouts to achieve the technology goals.  The recommendations in the paper ask for government financial help for training staff and ask for subsidized R&D. The paper also wants government help in eliminating regulation and squashing any local input into the placement of cell sites. It’s hard to understand why an industry that is going to conquer the world and create $500 billion in annual GDP, as this paper suggests, would need so much government help.

Can 5G Compete with Cable Broadband?

One of the recurring themes used to promote 5G is that wireless broadband is going to become a serious competitor to wireline broadband. There are two primary types of broadband competition – competition by price or performance. Cable companies have largely won the broadband battle in cities and suburbs and I’ve been thinking about the competition that cable companies might see from 5G.

Cable broadband is an interesting product. In most cities and suburbs today, the basic broadband product has a download speed between 100 Mbps to 200 Mbps with upload speeds in the range of 10 Mbps to 15 Mbps. The cable companies decided over a decade ago that they were going to stay in front of market demand and have periodically increased speeds, with the most recent speed increases introduced around two years ago. Cable systems can offer speeds up to a gigabit, but the ugly secret that cable companies don’t want to talk about is that it would be incredibly expensive if too many people bought and used gigabit speeds. CCG does market surveys and the primary complaints that customers have about urban cable broadband is inconsistency – networks have periodic slowdowns and outages that customers find frustrating. As much as one third of cable customers also poll as hating the customer service of the larger cable companies.

The biggest weakness of cable broadband is the upload speed. This wasn’t an issue for most homes until the recent pandemic sent students and parents home. Many homes that were satisfied with cable broadband have found that the upload streams are inadequate to allow multiple people in a home to connect to servers and video conferencing services. Cable companies can probably tweak upload speeds upward by 50% more, but that will still feel slow to many homes. Cable companies are faced with an expensive upload to DOCSIS 4.0 to create symmetrical speeds.

There are two products being marketed as 5G. The first is Verizon’s fixed wireless access product. This is not 5G and is best described as fiber-to-the-curb, because it requires a fiber network built close to homes to provide this product. This is a fiber technology that happens to use a wireless drop. As such, it is technologically superior to cable broadband in that speeds can be symmetrical. Verizon says speeds can be as fast as a gigabit, but speeds will vary by customer and will likely slow down during heavy rain or get slower in summer when shrubs and trees are in full leaf. From a price perspective, Verizon is using this product to reduce cellular churn and is pricing it at $50 for a Verizon wireless customer and $70 for everybody else.  The $70 price is not going to push Comcast and Charter to lower prices, but it might force them to hesitate with future rate increases for neighborhoods that are competing with the Verizon product.

The FCC and the industry have implied for years that 5G cellular will be a competitor for landline broadband. I still can’t see many homes accepting 5G cellular as a replacement for landline broadband. I can think of a number of important ways to compare and contrast the two broadband products:

Speed. Forget the millimeter-wave product that cellular companies are touting as delivering cellular speeds over a gigabit. It’s a gimmick product used  to try to promote the idea that 5G is fast. The millimeter-wave technology is only good outdoors, and even then only travels a few hundred feet from a cell site. It delivers gigabit speeds to cellphones – when cellphones aren’t designed to run multiple apps that require fast broadband. The 5G download speeds on regular cellphones should creep up 100 Mbps over the next 5 to 7 years, and would rival the base speeds on cable company networks – but by that time the cable companies are likely to upgrade all of their customers to 250 Mbps. Cellular upload speeds don’t matter, because no family is going to conduct multiple upload sessions over a single cellphone.

Overall Capacity. Cellular networks today carry less than 5% of all US broadband. Even the majority of data passed through cellphones is handed off to landline networks through WiFi. In North America this year, Cisco predicts that in 2020 there will be 77 exabytes per month carried by landline networks compared to 3.4 exabytes carried by cellular networks. By 2022 that will grow to 109 exabytes for landline networks and 6 exabytes for cellular networks – the gap between the two technologies is rapidly widening. There is no scenario where cellular networks can somehow steal away a lot of the traffic carried by landlines. When cellular companies make this claim they are arguing against the realities of physics.

Household Usage. Household usage of broadband has exploded. In the first quarter of 2018, the average US home used 215 gigabytes of data per month. At the end of the recent first quarter of 2020 that had grown to over 400 gigabytes per month. By 2024 the average home might be using more than 700 gigabytes per month.

Data Caps. The above statistics show the absurdity of the claim that cellular will somehow overtake landline broadband. Even the ‘unlimited’ cellular data plans today are capped or heavily throttled after 20 or so gigabytes of data used in a month. Cellular companies are not likely to raise the data caps much because they don’t want heavy data users sucking all of the capacity out of the cellular networks.

Pricing. US cellular data is the most expensive broadband in developed countries. For 5G to compete with landline broadband, the cellular companies would have to kill the paradigm of selling an extra gigabyte of data for $10. 5G can only compete with landline broadband if the cellular carriers can increase wireless network capacity by a factor of ten and are willing to lower prices by more than a factor of ten. The first is not possible due to the limitations of physics and there are no indications that cellular carriers are willing to consider the second.

Starry Back in the News

I’ve written about Starry several times since they first tried to launch in 2016. Their first market launch was a failure and it seems that the technology of beaming broadband to windows in apartment units never worked as planned. Since then the company has regrouped and now is using a business plan of connecting to the roofs of apartment buildings using millimeter wave radio. This is the same business plan pursued by Webpass, which was purchased by Google, although the technology and spectrum are different.

Starry was founded by Chet Kanojia who was also the founder of Aereo – the company that tried to deliver affordable local programming in cities through a wireless connection. Starry originally launched in Boston but has recently added Los Angeles, New York City, Denver, and Washington, D.C.

Starry is still advertising a simple product set – $50 per month for 200 Mbps symmetrical broadband. There’s a $50 install fee and then no add-ons or extra charges on top of the $50 rate. This easily beats the prices of the big cable companies or of Verizon FiOS. Starry is likely filling a competitive void in New York City where Verizon has still failed to connect broadband to thousands of high rises and millions of potential subscribers.

Starry is advertising ease of use along with low prices. Once a building is added to the Starry network they promise to install a customer at a scheduled time rather than providing a 4-6 hour window like their landline competition. Their web site doesn’t discuss the technology used to reach buildings, but it says they use existing building wiring. G.Fast is likely being used to deliver the technology over telephone wiring inside the building since there is no easy way to share coaxial cable if a customer is still buying cable TV. That would also explain how they can promise fast hook-ups since every unit in a high rise would typically already have telephone wiring.

Starry may be planning for faster speeds in the future since they were one of the largest buyers of spectrum in the 2019 auction for 24 GHz spectrum. Starry still advertises that they use phased-array antennas. This technology allows a single antenna radiator to transmit at different phases of the same frequency. This is one of the easiest ways to ‘steer’ the direction of the signal and Starry uses this technology to accomplish beamforming. What that means in a busy urban environment is that Starry can deliver more bandwidth to a rooftop than a traditional transmitter antenna.

Interestingly, the company doesn’t claim to be delivering 5G, as is every other wireless provider. This should provide a good example, that millimeter wave spectrum does not automatically equate to 5G. Starry says they are still using the simpler and cheaper 802.11 WiFi standards within the broadband path.

MoffettNathanson recently said they were bullish on the Starry model. Even though the company currently has a relatively small number if customers, their goal of chasing 30% of the urban high-rise market seems credible to the analysts. Starry’s technology can deliver broadband all across an urban downtown from one or two big tower transmitters. That contrasts with Verizon’s 5G technology that delivers fast bandwidth from small cells that must be within 1,000 feet of a home. MoffettNathanson did caution that Starry’s business plan is likely not replicable in the suburbs or smaller towns – but there are a lot of potential customers sitting in high rises in the urban centers of the country.

This kind of competition adds a lot of pressure on other ISPs wanting to serve large apartment buildings in downtown areas. Verizon found the gaining entry to buildings was their key stumbling block in gaining access to buildings in Manhattan, which resulted in the company badly violating their agreement with the City to bring FiOS to everybody. A wireless company like Starry can leap over the long list of impediments that make it hard to bring wires into urban high rises – and low prices for good broadband ought to be an interesting competitive alternative for a lot of people.

Beware of Deceptive Surveys

I was sent a copy of the results of a survey about 5G from Sykes, a market research company. In glancing through the survey, it looked like they were asking great questions. For example, the survey showed that over 85% of people have heard of 5G, meaning the cellular companies have done a good job creating brand awareness with the 5G name.

The second question is another good one. It asked if people currently pay for 5G service. 20% said they do. I think I know as much about 5G as anybody and I don’t know how to answer that question. I know my AT&T phone has been telling me for a year that I have 5G, when I know I only have 4G. Am I paying for 5G? I know I’m not paying anything extra for it.

The survey asked what people think of when they hear ‘5G’. 50% said they thought this means a faster and more reliable cellular data connection. A surprising 38% said they thought 5G means a faster and more reliable connection for anything that requires the Internet. That answer surprised me, but most 5G advertising is so generic I guess it’s not hard to see how people might think that 5G is a landline alternative.

The survey asked about the most significant benefits of 5G. 57% said faster speeds. 11% said lower latency, which is a bit surprising since I would bet you can’t find anybody who can point to an example of poor cell phone latency. 19% said the most important aspect is the capacity to use multiple devices – another allusion to 5G being a landline replacement.

An interesting question asked about people’s concerns about 5G. 36% said they were worried about exposure to 5G frequency, the increased presence of 5G transmitters in the environment, and the environmental effects if 5G infrastructure. Interestingly, 17% said they were concerned about the complexity and cost of the 5G infrastructure. I have a really hard time thinking that many people are really worried about what 5G is costing AT&T and Verizon – but that’s the answer they picked out of a list of choices.

Unfortunately, at this point the survey went sideways. Question 6 was: A 5G connection is more reliable and reportedly 100 times faster than 4G. If those claims are true, what impact do you expect 5G to have on your daily life in the next 2 years? This is a classic push poll question. A push poll question plants an untrue fact into a survey and then asks people to react to it. There is nobody in the industry who thinks that 5G is going be this fast for most people within 2 years, and perhaps not even within 10 years, or possibly ever. The cellular companies might never invest in the fiber needed to put a small cell site every 1,000 feet in city neighborhoods, suburbs, or anywhere rural.

A more honest question would have been: The cellular carriers have introduced millimeter wave spectrum in small sections of big city downtowns. This technology is as much as 50 times faster than 4G cellular. It requires a user to buy an expensive new phone and it only works outdoors within perhaps 500 feet of a cell site. Do you think you would pay extra for a phone and a monthly fee to use this technology if it comes to the neighborhood where you live or work?

The problem with a push poll question is that it pollutes every question that follows. People taking the survey were influenced with the idea of 100 times faster speeds within 2 years when they answer any additional questions about 5G. For example, the tenth question in the survey asks: Would you consider switching your Internet provider and/or mobile phone carrier this year in order to have 5G? 23% said yes and 46% said maybe. But they are answering this question with the influence of question 6 about 5G being 100 times faster. I would change my Internet provider for 100 times faster speed – but I know that is not an option that is coming from 5G. I don’t expect any 5G connection in my neighborhood to match my cable modem speed within the next decade – and even when they do, they’ll match it outdoors and not through the walls of my home. This is another ludicrous question.

They survey snuck in another push poll question when it asked: If you were guaranteed to never experience any speed or connectivity issues again with your home connected devices, would you pay more for 5G service this year? The killer wording in this question is the ‘this year’ part. I can’t wait for a cellular company rep to try to sell me on the pitch that cellular coverage this year can handle my computers, smart TV, tablets, and the other twenty connected devices I have in my home.

My experience of cellular coverage in the last month is that the networks are having a hard time keeping up with the demands created by the COVID-19 crisis. I’ve been on numerous conference calls when one of the parties had to drop and reinitialize the call due to a poor-quality cellular connection. We are a still a number of years away from seeing the technology improvements that will make 5G better than 4G. The cellular carriers are in no position to meet any of the expectations implied by this survey.

This survey results don’t disclose who sponsored the survey. Market research firms don’t generally conduct surveys without a paying client. This likely came out of an overzealous marketing department at one of the cellular carriers, or perhaps one of the 5G vendor. Whoever wrote this survey knew the answers would be bogus, but they obviously have an agenda to use the results to influence the general public, or perhaps politicians with the result. I’d hate to think that anybody thinks this poll represents real market research.

Dish – the Newest Cellular Carrier

One of the primary reasons that the T-Mobile and Sprint merger got approved was the agreement that Dish Networks will become the fourth nationwide cellular carrier. Now that the merger has been completed, Dish is off and running to take the steps needed to launch a new nationwide 5G network.

Dish is preparing to launch the cellular business with a lot of spectrum. The company is already sitting on 600 MHz and 700 MHz spectrum that covers most of the country. The company also owns blocks of 1,700 MHz AWS spectrum that is the workhorse in cellular networks. As part of the merger arrangement, Dish is purchasing Sprint’s 800 MHz spectrum.

The company envisions a new ‘virtual’ network that will be 100% software-driven, which would give the company the most modern cellular network in the country. If the network can be built quickly enough, the company should have an advantage for speed-to-market as new 5G features are introduced into the cellular network.

Like with any new venture, the company’s biggest challenge is going to be cash. Dish already paid T-Mobile $1.4 billion for the prepaid cellular company Boost Mobile. Dish is also paying $3.6 billion for the 800 MHz spectrum from Sprint. Meanwhile, Dish’s existing core satellite business continues to lose customers and revenues – the company lost 511,000 customers in 2019, and another 132,000 in the first quarter of this year – that’s 6.5% of its customer base.

Dish faces an immediate liquidity problem that has become complicated by the COVID-19 crisis. The company had enough cash on hand to pay off debt of $1.1 billion that will be due in May. But the company still faces debt retirements of $2 billion due in both June 2021 and 2022. Additionally, the company needs to raise an estimated $9 billion to build the new cellular network. The company needs to raise at least several billion in equity in a hurry if it wants to attract the needed new debt. That will be challenging due to the COVID-19 crisis as many big investors are sitting on the sidelines waiting for the markets to stabilize.

To really complicate things, Dish is operating under a tight time clock. As part of the merger agreement, Dish agreed to build over 15,000 cell sites by June 2023 that will cover 70% of the US population. That commitment not only requires Dish to raise the needed funds, but to get major construction started while the country is dealing with the COVID-19 crisis. The company faces fines of up to $2 billion for failure to meet that commitment. Dish has been battling with the FCC for years due to its failure to use its spectrum holding, so the deal comes with the tight timeline to ensure that the spectrum finally gets used to serve customers.

One of the interesting challenges the company faces is getting onto existing towers. Many of the most desirable urban towers are already full. It seems logical that T-Mobile will be decommissioning duplicative Sprint tower space over time, but that’s not something that will happen overnight, particularly with the COVID-19 crisis. It also seems likely that Dish will get caught up by the various supply chain issues that are cropping up everywhere in the industry due to the coronavirus.

Anybody who has ever launched a new broadband venture knows the other challenges facing the company. All of this growth much be done by a company that is just now hiring the staff who will pull it off. Deploying to 15,000 cellular sites in two years would be an intimidating challenge for any existing cellular company, and the idea of being nimble with a company that is adding the needed staff during the build-out period is frankly scary. Dish will obviously have to rely on outsourcing a lot of the cell site acquisition and construction – but in an industry that already has full employment, there aren’t hordes of skilled technicians sitting on the sidelines waiting for work. One of the key positions that is massively short-handed nationwide is experienced tower climbers.

Every detail of making this work is an intimidating task. For example, the company will need to arrange for 15,000 fiber backhaul connections to provide the needed bandwidth. Dish will have to conduct 15,000 load analyses on towers – something that is unique to each tower and that is done to make sure a tower can safely accommodate the new dishes and that the tower will hold up in windy conditions. Dish also needs to build one or more gigantic network operations centers to operate the new network. I can’t recall any equally ambitious telecom project.

Cellular customers everywhere should be rooting for the company to pull this off. Dish president Charlie Ergan has promised to compete vigorously on price to win market share – something that will be good for customers even if they don’t change to Dish.

The chances are high that the company won’t make its June 2023 deadline. The already overaggressive business plan will be further complicated by COVID-19 issues which likely means it will take longer to raise the needed money while dealing with issues like dealing with social distancing for the staff and supply chain delays. If the company meets some decent percentage of the plan, I hope the FCC will let them off the hook for fines. The country could use a new cellular network, particularly one that is technically superior to the other carriers and that wants to set low prices.

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!

The Proposed 5G Fund

The FCC is seeking public comments in a Notice for Proposed Rulemaking on how to determine the coverage areas and the timing for the new $9 billion 5G Fund. The money for the 5G Fund will come out of the Universal Service Fund. The 5G Fund is aimed at bringing cellular coverage to rural places that don’t have coverage today and will award the money using a reverse auction. The FCC is proposing to award $8 billion in the first round of auctions with $1 billion awarded later.

The FCC’s attempt to spend this money already has a checkered past. The FCC tried to award $4.5 billion of this same funding in 2019 under the name of Mobility Fund II. When preparing for that reverse auction the FCC asked existing cellular carriers to provide maps showing existing cellular coverage. It turns out that the maps provided by Verizon, T-Mobile, and US Cellular were badly overstated and smaller cellular carriers cried foul. The smaller carriers claimed that the overstatement of coverage was meant to shuttle funding opportunities away from smaller cellular companies. It felt eerily familiar to just watch Frontier and a few other big telcos make similar last-minute claims about their broadband coverage for the RDOF grants.

The FCC eventually agreed with the small carriers and canceled the auction last year. The $4.5 billion in funding from 2019 was augmented by an additional $4.5 billion and reconstituted as the 5G Fund.

The FCC is asking for comments on two different options for awarding the money. The first option would award the funds in 2021 based upon the best current cellular coverage maps available. This option would only award money to areas that have never had 3G or 4G coverage. The second option would delay the auction until 2023, by which time the FCC is hoping for better maps through a process they have labeled as the Digital Opportunity Data Collection initiative.

The need for this fund is further complicated by the T-Mobile / Sprint merger. One of the merger agreements made by T-Mobile is to cover 99% of the people in the country, including 90% of those living in rural areas with 5G of at least 50 Mbps data speeds within 6 years of the merger.

There doesn’t seem to be any logical way the FCC can award this money in 2021. By definition, they’d be awarding using grant coverage using maps that the FCC openly acknowledges are badly flawed. Maybe even more importantly, at this early date the FCC can’t know where T-Mobile plans to cover over the next 6 years. If the FCC proceeds now they will almost surely be spending money to cover areas that T-Mobile is already on the hook to serve. By using flawed maps, the FCC will almost certainly miss areas that need service that T-Mobile will not be serving.

The T-Mobile merger agreement also raises a serious issue about the size of the 5G Fund. The Fund was set at $9 billion before T-Mobile agreed to cover a lot of the areas that were proposed for funding in 2019. Isn’t the $9 billion now too high since T-Mobile will be covering many of these areas?

This raises a bigger policy question. Does the FCC really want to spend $9 billion to cover the last 1% of the US population with cellular when a much larger percentage of rural homes don’t have workable home broadband? Shouldn’t some of this money now be repurposed to fund rural broadband in light of the T-Mobile agreement to cover 99% of people with cellular coverage?

Finally, FCC Chairman Ajit Pai never misses a chance to overhype 5G. In the announcement for the NPRM the Chairman was quoted as saying, “5G promises to be the next leap in broadband technology, offering significantly increased speeds and reduced latency. The 5G Fund for Rural America focuses on building out 5G networks in areas that likely would otherwise go unserved. It’s critical that Americans living in rural communities have the same opportunities as everybody else.”

What the Chairman and the carriers are  never going to say out loud is that 5G is an urban technology. All of the coolest features of 5G only work when cell sites are close together. The areas covered by these grants are the most rural cell sites in the US and will be serving only a few people at any given location. Low density sites gain almost no extra advantage from 5G, so they will effectively act like 4G LTE sites forever. It’s even unlikely that a cellular carrier would bother using extra spectrum at a cell site with only a few customers. Such cell sites need only the basic 4G LTE coverage and spectrum bands, and it’s unlikely that these areas will get true 5G, regardless of the 5G name the FCC has attached to the funding mechanism.

The Evolution of 5G

Technology always evolves and I’ve been reading about where scientists envision the evolution of 5G. The first generation of 5G, which will be rolled out over the next 3-5 years, is mostly aimed at increasing the throughput of cellular networks. According to Cisco, North American cellular data volumes are growing at a torrid 36% per year, and even faster than that in some urban markets where the volumes of data are doubling every two years. The main goal of first-generation 5G is to increase network capacity to handle that growth.

However, if 5G is deployed only for that purpose we won’t see the giant increases in speed that the public thinks is coming with 5G. Cisco is predicting that the average North American cellular speed in 2026 will be around 70 Mbps – a far cry from the gigabit speed predictions you can find splattered all over the press.

There is already academic and lab work looking into what is being labeled as 6G. That will use terabit spectrum and promises to potentially be able to deliver wireless speeds up to as much as 1 terabit per second. I’ve already seen a few articles touting this as a giant breakthrough, but the articles didn’t mention that the effective distance for this spectrum can be measured in a few feet – this will be an indoor technology and will not be the next cellular replacement for 5G.

This means that to some degree, 5G is the end of the line in terms of cellular delivery. This is likely why the cellular carriers are gobbling up as much spectrum as they can. That spectrum isn’t all needed today but will be needed by the end of the decade. The cellular carriers will use every spectrum block now to preserve the licenses, but the heavy lifting for most of the spectrum being purchased today will come into play a decade or more from now – the carriers are playing the long game so that they aren’t irrelevant in the not-too-distant future

This doesn’t mean that 5G is a dead-end, and the technology will continue to evolve. Here are a few of the ideas being explored in labs today that will enhance 5G performance a decade from now:

  • Large Massive Network MIMO. This means expanding the density and capacity of cellular antennas to simultaneously be able to handle multiple spectrum bands. We need much better antennas if we are to get vastly greater data volumes into and out of cellular devices. For now, data speeds on cellphones are being limited by the capacity of the antennas.
  • Ultra Dense Networks (UDN). This envisions the end of cell sites in the way we think about them today. This would come first in urban networks where there will be a hyper-dense deployment of small cell devices that would likely also incorporate small cells, WiFi routers, femtocells, and M2M gateways. In such an environment, cellphones can interact with the cloud rather than with a traditional cell site. This eliminates the traditional cellular standard of one cell site controlling a transaction. In a UDN network, a cellular device could connect anywhere.
  • Device-to-Device (D2D) Connectivity. The smart 5G network in the future will let nearby devices communicate with each other without having to pass traffic back and forth to a data hub. This would move some cellular transactions to the edge, and would significantly reduce logjams at data centers and on middle-mile fiber routes.
  • A Machine-to-Machine (M2M) Layer. A huge portion of future web traffic will be communications between devices and the cloud. This research envisions a separate cellular network for such traffic that maximizes M2M communications separately from traffic used by people.
  • Use of AI. Smart networks will be able to shift and react to changing demands and will be able to shuffle and share network resources as needed. For example, if there is a street fair in a neighborhood that is usually vehicle traffic, the network would smartly reconfigure to recognize the changing demand for connectivity.
  • Better Batteries. None of the improvements come along until there are better ‘lifetime’ batteries that can allow devices to use more antennas and process more data.

Wireless marketing folks will be challenged to find ways to describe these future improvements in the 5G network. If the term 6G becomes associated with terabit spectrum, marketers are going to find something other than a ‘G’ term to over-hype the new technologies.