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.

5G Integrated Access and Backhaul

I’ve been discussing in this blog how I don’t believe there are any real 5G deployments yet in the US. A 5G deployment requires the implementation of the new features that are defined by the 5G specifications. To date, each of the major carriers is in the process of implementing new spectrum bands they are labeling as 5G – but the technology being delivered is still 4G that happens to use different spectrum bands. The carriers are at least a few years away from deploying any features that can be said to be 5G such frequency slicing or dynamic spectrum sharing. It’s going to be interesting to see how carriers will announce real 5G after having labeled everything else under the sun as 5G.

One of the first 5G features that will likely to be implemented is IAB – Integrated Access and Backhaul. This feature is defined in 3GPP Release 15 of the 5G specifications and will let a cell site share spectrum between connections to customers and connections to another cell site. It’s likely that the carriers will test this new feature this year and could start to deploy before the end of the year.

IAB will be useful in the deployment of small cell sites. Carriers will be able to use the bandwidth from a cell site connected to fiber to provide bandwidth for a nearby cell site – all integrated into the cell site electronics. This has several benefits for carriers:

  • This avoids needing a second set of wireless electronics to handle backhaul – and the extra antennas and power supplies needed to feed more electronics. The carriers are sensitive to the issue of reducing the profile of small cell sites and want to make them as small and unobtrusive as possible. IAB eliminates the need for extra hardware on poles.
  • It allows deployment of small cell sites before fiber is constructed to every site, and that means being able to activate small cell sites earlier. One of the primary purposes of deploying small cell sites is to offload some of the traffic that is clogging the tall tower cell sites today. Bring fiber to at least a few small cell sites in a neighborhood with IAB will allow connections to other nearby small cells before fiber is constructed everywhere.
  • It allows placing cell sites at locations that would be difficult to feed with fiber. Both Verizon and AT&T say that they view IAB in most cases as a temporary solution to use before fiber is constructed. But there will be situations where a few IAB connections could be permanent where it’s cost-prohibitive to bring fiber.
  • IAB will also provide for emergency backhaul at times when fiber to a small cell site is cut – the backhaul can be fed from nearby small cells until the fiber is repaired.

It is possible to daisy-chain multiple cell sites in a row with wireless backhaul, but that largely kills the reason for deploying small cell sites. The primary purpose of a small cell is to be a fully functional cell site that can grab traffic in a given local neighborhood to keep that traffic off the larger big tower cell sites. The physics of bandwidth is that the amount of bandwidth available for customers cuts in half at both the transmitting and receiving cell site when bandwidth is shared between two cell sites. Splitting bandwidth a second and third time further reduces the effective bandwidth available for customers at each cell site in the chain.

However, there are circumstances where splitting bandwidth is acceptable. While small cell sites are being touted as a way to beef up the 4G LTE network, the biggest use of small cell sites currently is to beam cellular signals into large buildings that have poor indoor cellular coverage. These small cells are often placed on the rooftop and beam cellular signal downward. IAB wireless backhaul could be a permanent solution to feed small cell sites that don’t need as much bandwidth as a full 5G cell site.

IAB is one of the new 5G features that will work in the background and that customers won’t notice, other than to perhaps start enjoying the benefits of small cells earlier before fiber is constructed. However, it will be one of the 5G features that will be deployed first and that will eventually enable the deployment of real 5G.

It’s Hard to Like AT&T

Over the last year, I’ve said some nice things about AT&T. It was nice to see AT&T wholeheartedly embrace their commitment to build fiber past 12 million homes as they had promised as part of the conditions of buying DirecTV. In the past, they might have shrugged that obligation off and faked it, but they’ve brought fiber to pockets of residential neighborhoods all over the country. It seemed that they were unenthusiastic about this requirement at first, but eventually embraced when somebody at the company realized that new fiber could be profitable.

I also thought that AT&T was by far the most responsible wireless carrier in terms of not ridiculously exaggerating the supposed coming of 5G, although they finally gave in to their marketing arm and started labeling the latest version of 4G LTE as if it is 5G.

But overall, AT&T is hard to like as a company. AT&T puts stock prices and Wall Street above everything else and is probably as good of an example as any of large corporations gone amuck. AT&T clearly values the bottom line over employees, customers, and the public good.

If you look back a few years, you can find numerous times where AT&T lobbied against net neutrality and broadband regulation. The company repeatedly said that unfair regulation was stopping them from making capital investments and promised that if the government would lift regulations that they would invest more. The FCC handed them even more than they had publicly asked for when the agency eliminated Title II regulation along with net neutrality.

AT&T didn’t react to the end of regulation by increasing capital investment as promised. They instead laid off a lot of employees and in the year after net neutrality was eliminated spent about the same for capital – only due to big spending on their sole-source First Net contract. Then in 2019, capital spending dropped by $1.9 billion and they are planning to cut an additional $3 billion this year. The drop in capital spending is hard to reconcile with the supposed 5G race that we are supposedly waging against China.

AT&T also joined with other large corporations and publicly pledged that if the government would lower the corporate tax rate that they’d hire thousands of new high-paying tech jobs and again promised to increase capital spending.  The unions that work for AT&T claim that since the enactment of the 2017 tax act that AT&T has laid off nearly 38,000 employees and are down to under 248,000 employees. Rather than investing in new capital and people, AT&T has been spending billions to buy back their stock to help keep stock prices high. The company used excess cash to buy back almost $2 billion of its stock in the fourth quarter of 2019 and had announced $4 billion of additional buybacks this year that was just recently put on hold due to the COVID-19 pandemic.

Meanwhile the company significantly raised consumer prices. There were moderate rate increases for broadband and cellular customers, and larger ones for video customers. But the biggest increases came when AT&T ended promotional pricing on video and expected customers to pay full price at the end of contracts. This move raised video rates significantly and led 4.1 million customers to drop DirecTV, U-verse TV, and the online AT&T TV in 2019. The company has said they were glad to be rid of low-margin customers.

In the summer of 2019, AT&T was sued in a class-action suit alleging that the company was selling real-time customer location data for cellular customers, even though the company had repeatedly told customers that they were not doing so. A series of reports by Motherboard showed that AT&T, Sprint, and T-Mobile had continued selling customer data even after promising to stop the practice.

AT&T recently made headlines by dropping data caps during the COVID-19 crisis. What’s worth noting is that the company has perhaps the most restrictive data caps in the country, particularly on DSL and fixed-wireless. The data caps at AT&T are clearly in place to make money over and above any rates promised to subscribers. Hopefully, there will be a huge public outcry when the company quiets puts the data caps back in place.

During all of the above, the company has significantly increased compensation for its CEO Randall Stephenson. His salary in 2019 was more than $32 million, up from $29 million the year before. However, much of that number is based upon stock bonuses, and shares of AT&T closed under $29 last week, down from over $39 at the start of this year. The company announced a new CEO last week and we’ll have to wait to see how he is compensated.

It’s honestly hard to say much nice about AT&T these days. I think back to when I worked at the company pre-divestiture, when the company made a steady, but unspectacular monopoly profit. The company and employees in those days were proud of the US communications network which was second to none in the world. It’s been clear for a long time that none of that old Ma Bell thinking is left in the company that now is driven to maximize stock price over everything else.

Broadband in China

For years I’ve been hearing how we are losing the broadband battle with China, so I decided to take a look at the current state of broadband in the country. The China Internet Network Information Center (CNNIC) publishes statistics about the state of broadband in the country, and I used the Statistical Report on Internet Development in China from August 2019 in writing this blog.

Here are some of the more interesting statistics about the state of broadband in the country:

  • China is a lot larger than the US with a current population just below 1.4 billion, compared to an estimate of US population of around 327 million.
  • As of June 2019, China had 854 million people connected to the web in some manner, for an overall Internet penetration based on population of 61.2%. It’s not easy to compare that statistic to the US since we track Internet usage using subscriptions to households.
  • China is still rapidly adding people to the internet. In the first six months of 2019, the country added 26 million new Internet users.
  • The Chinese interface with the internet in a variety of ways, with the following statistics for June 2019:

Cellphone        847 million      99%

Desktop           394 million      46%

Laptop             308 million      36%

TV                     283 million      33%

Tablet              242 million      28%

  • As of June 2019, China had 396 million users on fiber-to-the-home. China is adding fiber faster than the US and there were over 67 million customers added for the year ending in June 2019.
  • Chinese speeds for landline connections averaged 31.3 Mbps in June 2019, up 25% since 2018. Mobile speeds in 2019 averaged 23 Mbps, up 7% from 2018.
  • Like the US, China has a rural digital divide. In 2018 the country had 225 million rural Internet users representing a 39% penetration. Urban Internet users were 630 million, a 77% penetration. There are 347 million rural Chinese without access to the Internet, almost 25% of all citizens in the country. It’s hard to compare that statistic to the US since the FCC does such a lousy job of counting households with broadband.
  • China is working to solve the rural digital divide and added 3 million rural Chinese to the Internet in the first half of 2019. However, much like here, that rate of growth is glacial, and at that rate of growth it will take 36 years for the rural population to grow to the same current penetration seen in urban areas.
  • The Chinese are heavy users of instant messaging with 96.5% of Internet users using messaging in 2018.
  • It’s important to remember that Chinese web users are monitored closely and live behind what the west calls the Great Firewall of China. The government tracks how people use broadband, and we don’t have direct statistics for the following:

Watch online video       88.8%

Use online news            80.3%

Shop online                   74.8%

Online bill payment      74.1%

Order meals online       49.3%

Car hailing services       39.4%

  • China’s mobile data traffic is growing even faster than in the US. In the first half of 2018, the Chinese mobile networks carried 266 petabytes of traffic. By the first half of 2019 that traffic had doubled to 554 petabytes. China’s cellular data usage doubled in one year, while here it’s taking two years to double. The numbers are huge, and a petabyte equals 100 billion gigabytes.
  • The average Chinese broadband user spent 27.9 hours online in 2019.
  • The CNNIC tracks why people don’t use the internet. 45% don’t have access to broadband; 37% lack the skills to use broadband; 15% don’t have computers; 11% say they have no need. The interesting thing about the list in China is that nobody said they couldn’t afford Internet access.

There was one interesting thing missing in the Chinese report. There was no mention of 5G. That means, at least to the government agency that tracks broadband usage in China, there is no 5G race. It’s obvious that the Chinese need 5G, probably more badly than here since the volumes of data on their mobile networks are doubling annually. But the topic wasn’t worth a mention in their annual report of the status of broadband.

There is No Artificial Intelligence

It seems like most new technology today comes with a lot of hype. Just a few years ago, the press was full of predictions that we’d be awash with Internet of Thing sensors that would transform the way we live. We’ve heard similar claims for technologies like virtual reality, block chain, and self-driving cars. I’ve written a lot about the massive hype surrounding 5G – in my way of measuring things, there isn’t any 5G in the world yet, but the cellular carriers are loudly proclaiming its everywhere.

The other technology with a hype that nearly equals 5G is artificial intelligence. I see articles every day talking about the ways that artificial intelligence is already changing our world, with predictions about the big changes on the horizon due to AI. A majority of large corporations claim to now be using AI. Unfortunately, this is all hype and there is no artificial intelligence today, just like there is not yet any 5G.

It’s easy to understand what real 5G will be like – it will include the many innovations embedded in the 5G specifications like frequency slicing and dynamic spectrum sharing. We’ll finally have 5G when a half dozen new 5G technologies are on my phone. Defining artificial intelligence is harder because there is no specification for AI. Artificial intelligence will be here when a computer can solve problems in much the way that humans do. Our brains evaluate available data on hand to see if we know enough to solve a problem. If not, we seek the additional data we need. Our brains can consider data from disparate and unrelated sources to solve problems. There is no computer today that is within a light-year of that ability – there are not yet any computers that can ask for specific additional data needed to solve a problem. An AI computer doesn’t need to be self-aware – it just has to be able to ask the questions and seek the right data needed to solve a given problem.

We use computer tools today that get labeled as artificial intelligence such as complex algorithms, machine learning, and deep learning. We’ve paired these techniques with faster and larger computers (such as in data centers) to quickly process vast amounts of data.

One of the techniques we think of artificial intelligence is nothing more than using brute force to process large amounts of data. This is how IBM’s Deep Blue works. It can produce impressive results and shocked the world in 1997 when the computer was able to beat Garry Kasparov, the world chess champion. Since then, the IBM Watson system has beat the best Jeopardy players and is being used to diagnose illnesses. These computers achieve their results through processing vast amounts of data quickly. A chess computer can consider huge numbers of possible moves and put a value on the ones with the best outcome. The Jeopardy computer had massive databases of human knowledge available like Wikipedia and Google search – it looks up the answer to a question faster than a human mind can pull it out of memory.

Much of what is thought of as AI today uses machine learning. Perhaps the easiest way to describe machine learning is with an example. Machine learning uses complex algorithms to analyze and rank data. Netflix uses machine learning to suggest shows that it thinks a given customer will like. Netflix knows what a viewer has already watched. Netflix also knows what millions of others who watch the same shows seem to like, and it looks at what those millions of others watched to make a recommendation. The algorithm is far from perfect because the data set of what any individual viewer has watched is small. I know in my case, I look at the shows recommended for my wife and see all sorts of shows that interest me, but which I am not offered. This highlights one of the problems of machine learning – it can easily be biased and draw wrong conclusions instead of right ones. Netflix’s suggestion algorithm can become a self-fulfilling prophecy unless a viewer makes the effort to look outside of the recommended shows – the more a viewer watches what is suggested, the more they are pigeonholed into a specific type of content.

Deep learning is a form of machine learning that can produce better results by passing data through multiple algorithms. For example, there are numerous forms of English spoken around the world. A customer service bot can begin each conversation in standard English, and then use layered algorithms to analyze the speaker’s dialect to switch to more closely match a given speaker.

I’m not implying that today’s techniques are not worthwhile. They are being used to create numerous automated applications that could not be done otherwise. However, almost every algorithm-based technique in use today will become instantly obsolete when a real AI is created.

I’ve read several experts that predict that we are only a few years away from an AI desert – meaning that we will have milked about all that can be had out of machine learning and deep learning. Developments with those techniques are not leading towards a breakthrough to real AI – machine learning is not part of the evolutionary path to AI. At least for today, both AI and 5G are largely non-existent, and the things passed off as these two technologies are pale versions of the real thing.

Can 5G Replace WiFi?

Verizon recently posted a webcast with investors where Ronan Dunne, EVP and CEO of the Verizon Consumer Group said that he believed that 5G hotspots using millimeter wave spectrum will eventually displace WiFi in homes.

He cites major benefits of 5G over WiFi. He believes that a 5G network will be more reliable and more secure. He thinks that people will value the safety that comes from having traffic inside their home being encrypted as it rides Verizon’s 5G network compared to the more public nature of WiFi where every neighbor can see a home’s WiFi network.

He also cites the convenience of being able to transfer 5G traffic between networks. He paints a picture where a customer making a call or watching a video using a home 5G hotspot will be able to walk out the door and seamlessly continue the session outside on their cellphone. That’s pretty slick stuff should that ever come to pass.

The picture he’s painting for Verizon investors is a future where homes buy a Verizon 5G subscription to use in place of WiFi. This is part of Verizon’s ongoing effort to find a business case for 5G. His vision of the future is possible, but there are a lot of hurdles for Verizon to overcome to achieve that vision.

It’s going to get harder to compete with WiFi since the technology is getting a lot better with two major upgrades. First, the industry has introduced WiFi 6, which brings higher quality performance, lower latency, and faster data rates. WiFi 6 will use techniques like improved beamforming to greatly reduce interference between WiFi uses within the home.

Even more importantly, WiFi will be incorporating the new 6 GHz spectrum band that will increase bandwidth capabilities by adding seven 160 MHz bands and fourteen 80 MHz bands. It will be much easier to put home devices on separate channels when these new channels are added to the existing channels available on 2.4 and 5 GHz. This means that 5G will be competing against a much improved WiFi compared to the technology we all use today.

Another big hurdle for Verizon to overcome is that WiFi is ubiquitous today. WiFi is built into a huge number of devices, and a homeowner might already own a dozen or more devices capable of using WiFi. Verizon will have to somehow convince homeowners that 5G is so superior that it’s worth replacing the panoply of WiFi devices.

Another hurdle is that there is going to be WiFi vendors painting almost the same picture as Verizon. The makers of WiFi routers are already envisioning future devices that will introduce millimeter-wave spectrum including 5G into the home. There are vendors already working on devices that will provide both WiFi 6 and 5G using millimeter-wave connections simultaneously, using the publicly available 60 GHz V band. These solutions envision offering everything that Verizon can do, except the ability to roam seamlessly in and out of a home – and it will be done by selling a box instead of a new monthly subscription.

Another interesting hurdle to switching home networks to 5G is that there might be separate 5G solutions for each cellular carrier that uses different bands of spectrum. It’s relatively easy for device makers today to build a cellphone or other device that can use different cellular carriers because the carriers all use similar spectrum. But as each cellular company picks a different mix of frequencies moving forward, there is likely going to be cellphones and other devices that are specific to one carrier. It’s impossible to build a cellphone with today’s battery technology that can receive a huge range of spectrums – the multiple antenna systems would drain a cellphone dry in no time.

The largest hurdle of all is that WiFi is free to use after buying a WiFi router or meshed WiFi devices for the home. There is no monthly subscription fee to use the wireless WiFi connections within the home. Verizon clearly foresees a world where every home has a new monthly subscription to use its in-home 5G network.

Mr. Dunne makes one good point. It’s becoming increasingly clear that public WiFi networks are susceptible to hacking. A 5G network controlled by a carrier should be a lot safer than a WiFi hotspot managed by a coffee shop. The big question is if this enough incentive for people to buy 5G-capable devices or for coffee shops to switch to 5G networks. Even should coffee shops go with a 5G solution, will homes follow suit?

Mr. Dunne vision has an underlying assumption that people will value data security enough to be willing to pay more for it. He envisions people choosing a managed network when they have a choice. He could be right, and perhaps there will be enough data breaches in coming years with WiFi that the paradigm will change from WiFi to 5G. But it’s going to be incredibly hard to dislodge WiFi, particularly when it’s evolving and improving along with 5G.

Even if Mr. Dunne is right, this shift is not coming soon, probably not within this decade. For now, WiFi has won the device war and any shift to 5G would drag out over many years. It’s going to be incredibly difficult for the cellular carriers to convince everybody to switch to 5G.

I sympathize with Mr. Dunne’s dilemma. Investors want to understand where the revenues will come from to fund the expensive upgrades to 5G. Verizon and the other cellular carriers have tossed out a lot of ideas, but so far none of them have stuck to the wall.  Investors are getting rightfully nervous since there doesn’t appear to be any significant 5G revenues coming in the next few years. The carriers keep painting pictures of an amazing 5G future as a way to not have to talk about lack of 5G revenues today.

The 5G Experience in 2020

The cellular carriers are in full 5G marketing mode. If you believe the TV commercials, you’d now think that the country is blanketed by 5G, as each cellular carrier claims a bigger coverage area than their competitors. However, almost all of their claims are marketing hype. What’s the reality of 5G coverage in 2020?

What does it mean when the carriers claim wide coverage of 5G? In 2020 there will be no cellular deployment that can be legitimately called 5G. Full 5G will not arrive until the carriers have implemented the bulk of the new features described in the 5G specifications. For now, none of the important features of 5G have been developed and introduced into the market. 5G deployment will come in stages as each of the 5G features reaches markets – the same thing that happened to 4G. For now, all of the major 5G improvements are still under development in the labs.

Then what are the carriers calling 5G? Most of what is being called 5G is the introduction of new bands of spectrum. New spectrum does not equal 5G – the 5G experience only comes with 5G features. Existing cellphones cannot receive the new spectrum bands, and so the carriers are selling new phones that can receive the new spectrum and labeling that as 5G.

What does the new spectrum mean for cellular performance? At first, anybody lucky enough to grab new spectrum will likely have a great experience. This will mostly be because almost nobody else is using the spectrum at a given cell site. We will see some early claims of blazingly fast speeds that will fade away over time. As more phones can use the new spectrum, the performance will drop back to normal 4G speeds – and maybe even a little slower. Much of the first wave of spectrum being released is in lower frequency bands such as 600 MHz for T-Mobile and 850 MHz for AT&T. These lower frequency bands don’t carry as much data as higher frequencies, and in the long-run these lower frequencies will be used to bolster voice traffic.

Why are the carriers claiming widespread 5G? I can only guess that carriers have gotten so caught up in 5G hype that they feel compelled to show something new to the market. The carriers don’t like to talk about it, but their 4G networks are in big trouble in urban areas. The amount of cellular data being used by customers is doubling every two years. You don’t have to be a network engineer to understand that continuous doubling of traffic can quickly swamp any network and degrade performance. Most of the carrier activity in 2020 is aimed at propping up the 4G networks until 5G is a mature technology.

When will we see 5G features? From what I read in the IEEE forums, most of the 5G features are 2 – 5 years away. The same thing happened with 4G and it took most of a decade to see 4G fully implemented – in fact, the first US cell site fully meeting the 4G standards was not activated until late 2018. Over time we’ll see a new 5G features implemented as they are released from labs to field. New features will only be available to those that have phones that can use them, so there will be a 2 to 3-year lag until there are enough phones in the market capable of using a given new feature. This means every 5G phone will be out of date as soon as a new 5G feature is released.

What about millimeter wave spectrum – is that 5G? No, it’s just another new frequency band. The characteristics of millimeter wave spectrum are so different from traditional cellular frequencies that it’s even hard to call this a cellular frequency. The frequency is 10-30 times faster than traditional cellular frequency. It only travels short distances, mostly under 1,000 feet from a cell site. It needs line-of-sight and can be easily blocked by any impediment in the environment. It’s not going to pass from outdoor transmitters into buildings. It’s easier to understand millimeter wave spectrum if you think of it as a broadband hotspot that is mounted outside, and which can be received by special phones designed to use the frequency.

Does all of this mean a better cellular experience in 2020? It will for some people. Those who buy new phones that can receive the new frequency bands, and who live or work within two miles of an upgraded cell site will likely see improved performance – no drastically so, but a little better. Anybody who wants blazing data speeds on a cellphone and who lives or works in the urban city centers might be able to get outdoor broadband from millimeter wave hotspots. The rest of us are going to see a gradual degradation of our 4G experience as existing cell sites grow busier. This means more dropped calls, fewer bars. Until the cellular carriers have deployed a lot of small sites and started to implement the 5G features our cellular experience is likely to get worse before it gets better.

Finally, what about rural America in 2020? It’s going to still be more likely for a rural caller to snag a 3G connection than a 5G one using the new frequencies. The FCC figured out last year that the cellular carriers had greatly exaggerated their rural 4G coverage areas – something that is not news to rural residents. Rural cell sites aren’t under the same stress as urban ones due to fewer customers trying to use a given cell site, so calling should remain the same this year. There is hope over the next 2-4 years to see money from the FCC’s 5G Fund bring better 4G coverage to rural areas. True 5G features will make little noticeable difference in rural America for many years to come.