Why 5G Won’t Be Here Tomorrow

I just saw another article yesterday written by a major-city newspaper telling the public that 5G is coming in 2020. I hate to see reporters who have accepted the nonsense being peddled by the carriers without digging a little deeper to find the truth. At some point in the near future, the public will finally realize that the 5G talk has mostly been hype.

I don’t mean to always sound like a 5G critic because over time 5G will vastly improve the cellular experience. However, many of the improvements being suggested by the cellular companies – like gigabit cellular service – may never happen. Of more immediacy is the fact that there won’t be any major improvements to cellular networks from 5G for at least 3 – 5 years. The carriers have the country and politicians fully convinced that 5G is right around the corner – but it’s not.

There was a recent article written by Sue Marek in FierceWireless that is a great example of why 5G is not going to be here tomorrow. Titled Network Slicing is a Security Nightmare for Operators, Marek explains how complicated it’s going to be to implement network slicing – perhaps the most important new aspect of 5G cellular service.

Network slicing is the ability of the cellular network to size the transmission path to exactly meet a customer’s bandwidth needs. Network slicing is one of the ways that will enable a cell site to communicate with many more customers at the same time. Today, every customer gets the same-sized data channel, meaning a lot of bandwidth is wasted when customers use less than a full channel.

Marek points out the difficult technical challenge for providing security for every slice of bandwidth. She says that getting this right is going to take two to three years. Until network slicing is viable there really is nothing that can be called 5G. The important takeaway from her article is how difficult it is to implement new technology. 5G is a drastic change from 4G in many ways. There are thirteen major changes in the 5G specification compared to 4G and implementing each of them will be a technical challenge.

What is annoying about the 5G marketing hype is that we’ve always known it would take up to a decade to fully implement 5G, just as it did to implement 4G. The cellular companies can’t seem to help themselves from overhyping new technology, but the 5G hype is many times worse than the 4G hype a decade ago. This mostly seems due to the fact that the cellular carriers decided to use the 5G hype as a way to cram through regulatory changes they’ve wanted for a long time. That forced them to really crank up the 5G rhetoric.

5G will take the same path used by all other electronic technologies – there is a tried-and-true method of introducing upgrades. New breakthroughs start in a lab. They then go to a ‘breadboard’ process where working models are developed. Once the breadboards have been thoroughly tested they go into prototype chips, which are then retested to make sure the performance made it through the conversion to silicone. Finally, the chip design is approved and the new breakthrough goes into production. At the very fastest this process might be done in 12 – 18 months, although this can take as long as three years. Breaking in new changes in the cellular world is doubly complicated because these same changes also have to be introduced into cellphone handsets.

The likely progression we’ll see for 5G is that some new aspect of the 5G specification will make it annually into chipsets. As that happens, only the newest phones will be able to use the upgrades, while earlier versions of 5G phones won’t recognize the new breakthroughs. The idea that the handset manufacturers are introducing 5G handsets in 2020 is laughable because practically none of the important 5G upgrades are yet in chip production. Those handsets will be 5G in name only (and still priced ridiculously high).

Marek is pointing out the complexity of getting 5G security right. There are dozens of other equally difficult technical challenges needed to fully realize 5G, and there are scientists in labs working on all of them. The labs will plow through all of this over time, and long after the hype is far in the past, we’ll get 5G phones that implement most of the 5G specification. It’s worth noting that there never may be a phone that meets the entire specification – because the specifications for a new technology are a wish list. It may turn out that some parts of the specification may never practically work in the field.

AT&T and Verizon Fiber

If you look at the annual reports or listen to the quarterly investor calls, you’d think that AT&T and Verizon’s entire future depends upon 5G. As I’ve written in several blogs, there doesn’t seem to be an immediate financial business case for 5G and the big carriers are going to have to figure out how to monetize 5G – something that’s going to take years. Meanwhile, both companies have been expanding their fiber footprints and aggressively adding fiber-based broadband customers.

According to the Leichtman Research Group, AT&T added only 34,000 net broadband customers in the first quarter of this year – not an impressive number when considering that they have 15.7 million broadband numbers. But the underlying story is more compelling. One the 1Q investor call, the company says they added 297,000 fiber customers during the first quarter, and the smaller net number recognizes the decline of DSL customers. The overall financial impact was a net gain of 8% for broadband revenues.

AT&T is starting to understand the dynamics of being a multimedia company in addition to being a wireless carrier and an ISP. According to John Stephens, the AT&T CFO, the company experiences little churn when they are able to sell fiber-based Internet, a video product and cellular service to a customer.

The company views its fiber business as a key part of its growth strategy. AT&T now passes over 20 million homes and businesses with fiber and is aggressively pushing fiber broadband. The company has also undergone an internal consolidation so that all fiber assets are available to every business unit. The company has been expanding its fiber footprint significantly for the last few years, but recently announced they are at the end of major fiber expansion. However, the company will continue to take advantage of the new fiber being built for the nationwide FirstNet network for first responders. In past years the company would have kept FirstNet fiber in its own silo and not gotten the full value out of the investment.

Verizon has a similar story. The company undertook an internal project they call One Fiber where every fiber asset of the company is made available to all Verizon business units. There were over a dozen Verizon business units with separate fiber networks in silos.

Verizon is currently taking advantage of the One Fiber plan for expanding its small cell site strategy. The company knows that small cell sites are vital for maintaining a quality cellular network and they are also still weighing how heavily to invest in 5G wireless loops that deliver wireless broadband in residential neighborhoods.

Verizon has also been quietly expanding its FiOS fiber footprint. The company has gotten regulatory approval to abandon the copper business in over 100 exchanges in the northeast where it operates FiOS. In those exchanges, the company will no longer connect customers to copper service and says they will eventually tear down the copper and become fully fiber-based. That strategy means filling in neighborhoods that were bypassed by FiOS when the network was first built 20 years ago.

Verizon is leading the pack in terms of new fiber construction. They say that are building over 1,000 route miles of fiber every month. This alone is having a big impact on the industry as everybody else is having a harder time locating fiber construction crews.

Verizon’s wireline revenues were down 4% in the first quarter of this year compared to 2018. The company expects to start benefitting from the aggressive fiber construction program and turn that trend around over the next few years. One of the most promising opportunities for the company is to start driving revenues in markets where it’s owned fiber but had never fully monetized the opportunity.

The main competitor for all of the fiber construction by both companies are the big cable companies. The big telcos have been losing broadband customers for years as the cable company broadband has been clobbering DSL. The two telcos are counting on their fiber products to be a fierce competitor to cable company broadband and the companies hope to start recapturing their lost market share. As an outsider I’ve wondered for years why they didn’t do this, and the easy answer was that both companies sunk most of their capital investments into wireless. Now they are seeing that 5G wireless needs fiber, and both companies have decided to capitalize on the new fiber by also selling landline broadband. It’s going to be an interesting battle to watch since both telcos still face the loss of huge numbers of DSL customers – but they are counting on fiber to position them well for the decades to come.

Existing 4G Spectrum

I suspect that most people don’t realize the small number of frequencies that are used today to support cellular service. Below is a list of the frequencies used by each US cellular carrier for providing 4G LTE. Except for Sprint, they all use the same basic frequencies.

Frequencies (in MHz)

AT&T  – 1900, 1700 abcde, 700 bc

Verizon – 1900, 1700 f, 700 c

T-Mobile – 1900, 1700 def, 700 a, 600

Sprint – 1900 g, 850, 2500

The letters represent separate licenses for specific sub-bands of the various frequencies. For example, the 1700 MHz band has been licensed in bands a through f and the carriers own rights to various sub-bands rather than to the whole spectrum. The same is also true for 1900 MHz and 700 MHz spectrum. In many cases, the licenses for the various spectrum bands are not nationwide. This means the frequencies used in Cleveland by one of the carriers might be slightly different than the spectrum used in San Francisco.

The carriers are using these limited spectrum bands today to support both 4G voice and data. In metropolitan areas, the carriers are in big trouble. They are finding it impossible to satisfy customer requests for data service, which is resulting in customer blockages or greatly reduced broadband speeds.

One of the primary reasons that the carriers are running into blockages on 4G data is that they aren’t deploying enough different bands of spectrum for broadband. The carriers have three remedies that can be used to improve cellular data – use more bands of spectrum, build more cell sites (small cells), and implement 5G which will allow for more simultaneous connections.

The CTIA, the lobbying group for the wireless carriers has been heavily lobbying the FCC to allocate 400 MHz of additional mid-range spectrum for cellular data. The FCC is considering repositioning numerous bands of spectrum and the CTIA wants to grab everything possible for data purposes.

Unfortunately, spectrum alone is not going to provide the solution the wireless carriers are hoping for. One of the primary reasons that the cellular carriers only use a few different bands of spectrum today is to simplify handsets. There is a huge price to pay for using multiple bands of spectrum in a cell phone. The more bands of spectrum, the more antennas that must be supported and the more power that is used.

If the cellular companies try to load many more bands of mid-range spectrum onto cellphones they will have majorly overstressed the battery life of phones. Most cellphone customers are not likely going to want to trade faster data speeds for shorter battery lives. As I look forward at the strategies of the cellular carriers, the battery life of cellphones might be their biggest limitation. The question is not so much about how much data a cellphone can handle, but rather how much battery life must be sacrificed to gain broadband  performance. The only solution for this is likely some new battery technology that is not yet on the horizon.

I don’t believe that the average cellphone user values cellular data speeds in the same way that they value fast landline data speeds. 4G today is easily capable of streaming video and there’s no reason on a cellphone to stream more than one video stream at the same time. 4G is reasonably okay today at operating most celular apps. The one group of cellphone users that always want more bandwidth are gamers – but there is no way that cellphones are ever going to be able to match the capabilities of gaming systems or gaming computers using landline broadband connections.

I scratch my head every time I hear 5G claims about providing gigabit cellular service. I don’t want to sound like an old-timer who sees no need for greater speeds. But I think we need to be realistic and ask if superfast cellular bandwidth is really needed today – after all, there are still no landline applications for homes that require anything near to a gigabit of bandwidth. The primary reason homes need faster download speeds is to handle multiple big bandwidth applications at the same time, something that is not today a requirement for cellphones.

The idea of gigabit cellular is mostly coming from the imagination of the cellular company marketers. The 5G standard calls for eventual ubiquitous 100 Mbps cellular speeds. Even achieving that much speed is going to require tying together multiple mid-range bands of spectrum. I’m having a hard time seeing the additional revenue streams that will pay for the massive upgrades needed to reach the 100 Mbps goal. The cellular companies all know this but aren’t talking about it because that would dilute the message that 5G will transform the world.

Protesting 5G

There were over 90 protests nationwide recently against the coming 5G technology, mostly related to health concerns. The protesters have some of the facts wrong about 5G and that makes it easier for policymakers to ignore them. It’s hard to fault anybody about getting the facts wrong about 5G since the carriers have purposefully filled the press with misleading 5G rhetoric. I would venture to say a lot of people in our industry have the same misunderstandings.

I watched a few news reports of the various protests, and protesters cited the following concerns about 5G. They say that it’s already being installed and will be active in most cities by next year. They say that in the near future that cellular speeds will be 100 times faster than today. They say that the FCC has blessed 5G as safe when it’s not. Let me address each of these issues:

What is 5G? Many of the protestors don’t realize that 5G is the marketing name of several different technologies. 5G can mean improved cellular service. 5G can mean high-speed wireless broadband loops like is being tested by Verizon in Sacramento. And 5G can mean gigabit radio connections made between two points, similar to traditional microwave backhaul. Protestors have conflated the claims for each technology and assume they apply to 5G cellular service.

Is 5G Being Installed Today? Cities everywhere are seeing permit requests for small cell sites and often believe these are requests to install 5G – I just talked to a fairly large city the other day who made this assumption. For now, the requests for small cell sites are to bolster the 4G cellular network. The cellular companies aren’t talking about it, but their 4G data networks are in trouble. People are using so much data on their phones that cell sites are getting overwhelmed. The amount of data being used by cellphones users is currently doubling every two years – and no data network can handle that kind of growth for very long. The cellular carriers are quietly beefing up the 4G networks in order to avoid the embarrassment of major network crashes in a few years. They are hoping that within 3 -5 years that 5G can relieve some of the pressure from cellular networks.

Will 5G Be Here Next Year? It might be a decade until we see a full 5G cellular installation. There are 13 major specifications for improvements between 4G and 5G and those will get implemented over the next decade. This won’t stop the marketing departments of the cellular carriers to loudly claim 5G networks after one or two of these improvements have been partially implemented.  What the cellular companies never bothered to tell the public is that the first fully-compliant 4G cell site was just implemented last year – 5G is going to require the same slow steady introduction of changes until full 5G gets here. Starting a year or two from now we might see some 5G improvements, with more 5G upgrades introduced each year thereafter. The carriers will loudly announce every time they make a 5G trial and will make the world think they are the improvements will be immediately installed everywhere.

Will Cellular Speeds be 100 Times Faster? The 5G specification calls for cellular speeds to be improved over time to 100 Mbps, about 6 times faster than 4G cellular speeds today. Speeds won’t improve overnight and this certainly isn’t going to be here in a year or two.

The public thinks that we’ll see gigabit cellular speeds for several reasons. First, Verizon recently introduced a trial for fast cellular using millimeter wave spectrum in small portions of a few downtown areas. Millimeter wave cellular is not going to make sense for wide deployment because the fast data speeds only carry perhaps 200 feet from the transmitter. Millimeter wave spectrum in this application is blocked by almost everything in the environment. This trial was mostly to grab headlines, not to portend a real product. Confusion also came when AT&T recently announced a 2 Gbps connection made to an outdoor hot spot. This is using point-to-point technology that can never apply to cellphones – but the AT&T announcement made this fuzzy on purpose.

What About the Health Impacts? Most 5G cellular service will use the same spectrum, or some new bands that are similar to today’s cellular spectrum. The primary concern for 5G cellular (and 4G) is the introduction of small cell sites into neighborhoods. It’s concerning to citizens when a cell site is on a pole at their curb instead of at the top of a tall tower outside the neighborhood. The neighborhood cell sites are going to be broadcast at a lower power level than the current big cell sites, so theoretically the amount of cellular radiation ought to be similar to today. But to give credit to the protesters, we’ll only know that’s really true after small cell sites have been installed.

The real health concern that is troublesome is not related to 5G cellular using the same frequencies as today, but rather about the use of  millimeter wave spectrum. A significant percentage of the world’s scientists that work in this area recently warned the United Nations that some past research of millimeter wave spectrum shows negative impacts for plant and animal life. The scientists admit that much more research is needed and they pleaded with the UN to not use the general public as guinea pigs. Belgium recently banned millimeter wave spectrum deployment until the health risks are understood. The FCC joins with almost every other country in allowing the deployment of millimeter wave spectrum and is in the process of licensing more of the spectrum.

As mentioned earlier, Verizon recently did a few trials of sending millimeter wave spectrum to cellphones. This was viewed mostly as a gimmick because this doesn’t seem to have real-life market potential due to the limitations for the spectrum and cellphones. I just saw an estimate that it would take over 300,000 small cell sites to blanket Los Angeles with small cells that are close enough to deploy millimeter wave spectrum – that doesn’t sound like a plausable or profitable business plan.

The technology where the protesters should be focused is millimeter wave spectrum wireless loops. Verizon deployed this to a few hundred homes in Sacramento and a few other cities, delivering about 300 Mbps broadband to homes. Verizon says they have plans to deploy this widely. This is the spectrum use that the scientists warned about. A deployment of millimeter wave loops means constantly bombarding residential neighborhoods with millimeter wave spectrum from poles on the curb. The other planned use of millimeter wave spectrum is for indoor routers that will transmit gigabit bandwidth inside of a room. People can clearly decide to not use millimeter wave routers, but have no say about a carrier introducing it into the neighborhood. Protesters have a valid concern for this technology.

Is There a Business Case for 5G Cellular?

Readers might think I spent too much time writing about 5G. However, I’m asked about 5G almost every day. Existing ISPs want to know if 5G is a real threat. Potential ISPs want to know if they should pause their business plans until they understand 5G’s impact. Cities want to know what to expect. The cellular companies have made such a huge deal about 5G that they’ve spooked the rest of the industry.

Today I ask perhaps the most fundamental question of all – is there a business case for 5G cellular? I’m not talking about 5G wireless loops to homes – I’m just asking if there is a financial justification for the cellular companies to upgrade their cell sites to 5G?

Before answering that question, it’s good to remember that the cellular companies badly need to implement 5G because their 4G networks are facing a crisis. After years of training customers to be stingy in using cellphone data, they are now encouraging users to stream video. The result of this shift is that total cellular data usage is now doubling every two years. Any network engineer will tell that that is deadly growth, particular for a cellular network. The existing 4G network can’t handle this growth for more than a few more years. While some of this growth can be temporarily mitigated by inserting small cell sites into the network, that doesn’t look like it is more than a band-aid fix if broadband keeps growing at this fast pace. Small cell sites will be overwhelmed almost as quickly as they are built.

The carriers need 5G because it will expand the capacity of each cell site by allowing many more customers to use a cell site simultaneously. By taking advantage of frequency slicing and the ability to mix and match multiple frequencies a 5G cell site will be a huge step-up in efficiency. The cellular carriers have not publicly admitted that they need 5G just to keep their networks running – but they really don’t have a choice.

The question, though, is if there is a new revenue stream to help pay for the 5G upgrades? To be honest, I can’t find any early 5G cellular application that will generate much revenue in the near future. The obvious new revenue source would be to charge a premium price to use 5G data on a cellphone. There might be some people willing to pay extra in the early stages of the 5G roll-out, but as 4G morphs over time into 5G, any willingness to pay more for data will melt away.

I also wonder if customers will really value faster cellular data speeds. First, we aren’t talking about a ton of extra speed. Forget the recent trials of millimeter wave 5G – that’s a gimmick for now that will not be available anywhere other than in dense urban centers. The 5G specification that matters to the real world is the goal for 5G speeds to increase over a decade to 100 Mbps.

Good 4G data speeds today are in the range of 15 Mbps and that is more than enough speed to stream data while performing any functions we want from a cellphone. Faster speeds will not stream video any faster. Over time perhaps our cellphones will be able to create augmented reality universes, but that technology won’t be here for a while. Faster data speeds are vitally important in a home where we run multiple large data streams simultaneously – but a cellphone is, by definition, one device for one user.

The real advantage of 5G is the ability to make large numbers of connections from a single cell site. It’s also hard to see an immediate path to monetize that. I talk to a friend many mornings as he commutes and he always gets disconnected at the Eisenhower bridge on the DC beltway – there are not enough cellular connections there to allow for handoffs between Maryland and Virginia. 5G will finally fix that problem, but I can’t see anybody paying extra to not be cut off on the bridge – they will finally be getting what they’ve always expected.

Eventually 5G will have big potential as the connection for outdoor sensors, IoT devices, smart cars, smart streetlights, etc. There is also likely to eventually be a huge market for wearables that might include fitness monitors, medical monitors, smart glasses, and even smart clothes. However, all of these applications will take time to come to market – there is a bit of chicken and egg in that these technologies will likely never take off until there is universal 5G coverage. There is very little revenue likely in the next few years for outdoor applications – although this might eventually be the primary new source of 5G revenue.

I look back to last fall when Ronan Dunne, an EVP of Verizon Wireless, made his case to investors for the potential for 5G. He included the outdoor sensors I mention above. He also cited applications like retail, where holograms might spring up near merchandise in stores. He talked about stock trading that takes advantage of the low latency on 5G. He mentioned gaming, which would benefit from lower latency. Most of these applications offer eventual potential for 5G. But none of these applications are going to produce giant revenues over the next three or four years. In the short run it’s hard to imagine almost any immediate revenue from these applications.

Predicting technology is always a crap shoot and perhaps new applications will arise that need 5G that even Verizon hasn’t imagined. The list of applications that Verizon gave to investors is underwhelming and reflects the fact that there is likely no 5G application that will significantly add to the bottom line of the cellular carriers in the immediate future.

This really brings home the idea that as a nation we are not in a worldwide 5G competition. The carriers need 5G soon to stop the collapse of the 4G data networks in busy neighborhoods. I have a hard time thinking they need it immediately for anything else – although eventually we will be surrounded by 5G applications.

5G and Home IoT

I’ve been asked a lot recently about the potential future of 5G – everybody in the industry wants to understand the potential threat from 5G. One of the biggest proposed uses for 5G is to connect IoT devices to the cloud. Today I’m going to look at what that might mean.

It’s clear that 5G cellular will be the choice for connecting to outdoor IoT sensors. Sensors for farm equipment in rural areas or for outdoor weather and traffic sensors in urban areas are going to most easily handled by 5G cellular since the technology will eventually be everywhere. 5G is particularly suited for serving IoT devices due to frequency slicing where just the right amount of bandwidth, large or small, can be allocated to each small outdoor sensor. 5G has another interesting feature that will allow it to poll sensors on a pre-set schedule rather than have the sensor constantly trying to constantly connect – which will reduce power consumption at the sensor.

It’s clear that the cellular carriers also have their eye on indoor IoT devices. It’s harder to say that 5G will win this battle because today almost all indoor devices are connected using WiFi.

There are a couple of different 5G applications that might work in the indoor environment. The cellular carriers are going to make a pitch to be the technology of choice to connect small inside devices. In my home I can get a good cellular signal everywhere except in the old underground basement. There is no question that cellular signal from outside the home could be used to connect to many of the smaller bandwidth applications within the home. I can’t see any technical reason that devices like my Amazon Echo or smart appliances couldn’t connect to 5G instead of WiFi.

But 5G cellular has a number of hurdles issues to overcome to break into this market. I’m always going to have a wired broadband connection to my home, and as long as that connection comes from somebody other than one of the big cellular carriers I’m not going to want to use 5G if that means paying for another monthly subscription to a cellular provider. I’d much rather have my inside devices connected to the current broadband connection. I also want all of my devices on the same network for easy management. I want to use one hub to control smart light switches or other devices and want everything on the same wireless network. That means I don’t want some devices on WiFi and others on cellular.

One of the sales pitches for 5G is that it will be able to easily accommodate large numbers of IoT connections. Looking into the future there might come a time when there are a hundred or more smart devices in the house. It’s not that hard to picture the Jetson’s house where window shades change automatically to collect or block sunlight, where music plays automatically when I enter a room, where my coffee is automatically ready for me when I get out of bed in the morning. These things can be done today with a lot of effort, but with enough smart devices in a home these functions will probably eventually become mainstream.

One of the limitations of WiFi today is that it degrades in a busy environment. A WiFi network pauses each time it gets a new request for a connection, which is the primary reason it’s so hard to keep a good connection in a busy hotel or convention center.

However, the next generation with WiFi 6 is already anticipating these needs in the home. WiFi can adopt the same frequency slicing used by 5G so that only a small portion of a channel can be used to connect to a given device. Events can be scheduled on WiFi so that the network only polls certain sensors only periodically. The WiFi network might only interact with the smart coffee pot or the smart window shades when something needs to be done, rather than maintaining a constantly open channel. It’s likely that the next iterations of WiFi will become nearly as good as 5G for these functions within a closed home environment.

There is an even better solution that is also being discussed. There’s no reason that indoor routers can’t be built that use both WiFi and 5G frequencies. While the cellular companies are gobbling up millimeter wave spectrum, as long as there is an unlicensed slice of spectrum set aside for public use it will be possible to deploy both WiFi on mid-range frequencies and 5G on millimeter wave frequencies at the same time. This would blend the benefits of both technologies. It might mean using WiFi to control the smart coffee pot and indoor 5G to connect to the smart TV.

Unfortunately for the cellular carriers, these duel-function routers won’t need them. The same companies that make WiFi routers today can make combination 5G / WiFi routers that work with the full range of unlicensed spectrum – meaning no revenue opportunity for the cellular carriers. When I look at all of the issues I have a hard time seeing 5G cellular becoming a preferred technology within the home.

 

Millimeter Wave Cellular Service

Verizon is claiming to have the first real-world deployment of fast 5G cellular service. They launched an early version of what they are calling 5G in downtown Chicago and Minneapolis. This launch involves the deployment of millimeter wave spectrum.

A review of the cellular performance in FierceWireless showed exactly what was to be expected. This new service will only be available from a few cell sites in each city. For now the service can only be received using a Motorola Z3 handset that has been modified with a 5G Moto Mod adapter.

As would be expected, the millimeter wave broadband was fast, with peak speed measured at 500 Mbps. But also as expected, the coverage area is small, and millimeter wave spectrum is easily blocked by almost any impediment. Walking inside a building or around the corner of a building killed the broadband signal. The signal speed cut in half when received through a window. When not in the range of the millimeter wave signal the phone reverts to 4G, because Verizon is not yet close to implementing any actual 5G standards. This was not a trial of 5G technology – it’s a trial that shows that millimeter wave spectrum can carry a lot of data. That is especially easy to demonstrate when there are only one or two users on a given cell site.

Verizon announced a fee of $10 per month for the faster data speed, but almost immediately said the fee will be waived. This launch is another marketing gimmick letting Verizon get headlines proclaiming 500 Mbps cellular data speeds. The reviewer noted that the Verizon store in downtown Chicago was not ready to provide the product to anybody.

There are big issues with using millimeter wave spectrum for cellular service. I first ask what a cellphone user can do with that kind of speed. A cellphone can already be used to stream a video on a decent 4G connection. Other than software updates there isn’t any real need to download big files on a cellphone. It’s unlikely that the cellular carriers are going to let you tether speeds of that magnitude to a computer.

The other big issues will be the real-life limitations of millimeter wave spectrum outdoors. Since the frequency won’t pass through walls, this is strictly going to be an outdoor walking technology. As the FierceWireless review showed, it’s extremely easy to walk out of coverage. A cellular carrier will need to provide multiple cell sites in very close proximity in order to cover a given area.

It’s hard to think that there will ever be many subscribers willing to pay $10 more per month for a product with these limitations. How many people care about getting faster data speed outside, and only in areas of a city that are close to 5G transmitters? Would many cellular customers pay more so that they could save a few minutes per month to download software updates?

It’s hard to envision that the incremental revenues from customers will ever justify the cost of deploying multiple cell sites within close proximity of each other. T-Mobile already announced that they don’t plan to charge extra for 5G data when it’s available – there is no incentive to offer the product if there is no additional revenue.

What I found interesting is that Verizon also announced that they will be launching this same product in 20 additional urban markets soon, with 30 markets by the end of the year. The company will be using this launch to promote the new Galaxy S10 5G phone that will be able to utilize the millimeter wave spectrum. Verizon is touting the new service by saying that it will provide access to faster streaming, augmented-reality, gaming, and consumer and business applications.

If anything, this launch is a gimmick to sell more of the expensive 5G handsets. I wonder how many people will buy this phone hoping for faster service, only to realize that they have to stand outside close to a downtown millimeter wave cell site to use it. How many people want to go outside to enjoy faster gaming or augmented reality?

This is not to say that millimeter wave spectrum doesn’t have value, but that value will manifest when Verizon or somebody offers an indoor 5G modem that’s connected to a landline broadband connection. That would enable a cellphone to connect to faster gaming or augmented reality. That has some definite possibilities, but that is not cellular service, but rather an indoor broadband connection using a cellphone as the receiver.

I’m really starting to hate these gimmicks. Verizon and AT&T are both painting a false picture of 5G by making everybody think it will provide gigabit speeds everywhere – something that is not even listed as a goal of the 5G specifications. These gimmicks are pure marketing hype. The companies want to demonstrate that they are cutting edge. The gimmicks are aimed even more for politicians who the carriers are courting to support deregulation of broadband in the name of 5G. In the cease of this particular gimmick, Verizon might sell more Samsung 5G phones. But the gimmicks are just gimmicks and this trial is not a real product.

5G Claims for Rural America

There are a few hot-button topics that are the current favorite talking points at the FCC. T-Mobile and Sprint are pressing both the 5G and the rural broadband buttons with their merger request. The companies are claiming that if they are allowed to merge that they can cover 96% of America with a ‘deep, broad, and nationwide’ 5G network.

There are multiple technologies being referred to as 5G – wireless broadband loops and 5G cellular – and their claim doesn’t hold water for either application. In making the claim the companies want regulators to think that they are talking about wireless 5G loop like the technology that Verizon recently test-drove in Sacramento. That technology is delivering 300 Mbps broadband to those living close to the transmitters located on poles. The carriers are smart and know this is the kind of claim that will perk up the ears of regulators and politicians. A ubiquitous 300 Mbps rural broadband product would solve the rural digital divide.

T-Mobile and Sprint are not talking about 5G wireless loops. That technology requires two things to have any chance of success – sufficient neighborhood housing density and fiber backhaul. Rural areas with poor broadband generally lack fiber infrastructure built close to neighborhoods, so a 5G provider would have to build the needed fiber. I can’t imagine why anybody that builds fiber close to a neighborhood would then choose a squirrely wireless link that delivers less than a gigabit of speed instead of a direct fiber connection that can deliver 10 Gbps using today’s readily-available technology.

The other missing element in rural America is customer density. I read an article that says that each Verizon 5G wireless loop transmitter in Sacramento can see at least 20 potential customers. There are a number of industry analysts who think that even that is a hard business case to justify, so how can wireless loops ever work in rural American where a given transmitter will likely see only a few homes? I can foresee the 5G loop technology perhaps being used to deliver broadband to small rural subdivisions or small towns where the wireless link might be cheaper than stringing fiber. However, most of rural America is characterized by low density and homes that are far apart.

What T-Mobile and Sprint are really talking about is 5G rural cellular service. Sprint brings a unique asset to the merger – they are the only US cellular carrier using nationwide spectrum in the 850 MHz and the 2.5 GHz bands. T-Mobile is the only carrier currently using 600 MHz spectrum. The combined companies would have by far the biggest inventory of spectrum – giving them a big advantage in urban America.

But is there an advantage this spectrum can bring to rural broadband? The short answer is no. I say that because I don’t see 5G cellular being that important in rural America? There are several reasons why the T-Mobile and Sprint announcement makes little sense.

The biggest issue is that there is not going to be fully-functional 5G cell sites anywhere in the country for years. It’s likely to take most of the coming decade until we see cell sites that comply with all 13 of the major improvement goals listed in the 5G specifications. There will be a natural progression from 4G to 5G as the carriers implement upgrades over time – the same upgrade path we just saw with 4G, where the first fully-compliant 4G cell sites were finally implemented in late 2017.

The bigger question is if most rural cell sites need 5G. The new technology brings several major improvements to cellular. First will be the ability of one cell site to make up to 100,000 simultaneous connections to devices, up from several thousand connections today. This improvement will be mostly accomplished using frequency slicing. This allows a cell site to tailor the size of the broadband connection to each customer’s demand. For example, a connection to an IoT device might be set at a tiny fraction of a full cellular channel, thus freeing up the rest of that channel to serve other customers. Many rural cell sites won’t need this extra capacity. A rural cell site that serves a few hundred people at a time will continue to function well with 4G and won’t need the extra capacity.

5G also can be used to increase the speed of cellular broadband, with the goal in the standard to bring speeds to as fast as 100 Mbps. That is also unlikely to happen to any great degree in rural America. Speeds of 100 Mbps will be accomplished in urban areas by having multiple cell sites connect to a single cellphone. That will require densely packed small cell sites, which is something we are already starting to see in the busy parts of downtowns. It’s incredibly unlikely that the cellular companies are going to introduce small cell sites through rural America just to boost handset broadband speeds. Speeds are not likely to be much faster than 4G when a customer can see only a single tower.

The T-Mobile and Sprint claim is pure bosh. These companies are not going to be investing in fiber to bring 5G wireless loops to rural America. While a combined company will have more spectrum than the other carriers there is no immediate advantage for using 5G for rural cellular coverage . The T-Mobile and Sprint announcements are just pushing the 5G and the rural broadband hot-buttons because the topics resonate well with politicians who don’t understand the technology.

Why is the FCC Still Spinning Net Neutrality?

Chairman Ajit Pai and several other FCC Commissioners are still sticking with the story that regulation and net neutrality were quashing capital spending and innovation in the industry. This was the primary argument that justified killing net neutrality and gutting Title II regulation. Pai claimed that net neutrality was disrupting the big ISPs so much that they were reining in capital spending. Chairman Pai further claimed that killing regulation would free the big ISPs to expand their networks and to improve broadband coverage – he’s also repeatedly argued that without regulation that ‘the market’ would solve the rural broadband divide. Chairman Pai launched this story on his first day as Chairman and hasn’t let up – even now, over a year after the FCC successfully killed net neutrality and Title II regulation.

I find this to be unusual. Normally, when somebody in the industry wins a regulatory battle they quietly move on to the next issue, but at almost every public speaking opportunity the Chairman is still repeating these same talking points. I’ve been thinking about why Chairman Pai would keep harping on this argument long after he successfully killed net neutrality. I can think of a few reasons.

The Lawsuits. The FCC is probably concerned about the lawsuits challenging net neutrality. That order used some legal gymnastics in the FCC argument to kill Title II regulation. So perhaps Chairman Pai is continuing to make these same arguments as a way to let the courts know that keeping Title II regulation dead is still the number one priority of this FCC. I’m sure that if the courts challenge the FCC order that the agency will appeal, and so perhaps he continues to make the same arguments in anticipation of that coming court battle.

5G Deployment. In a very odd back-door way, the FCC has been using the net neutrality argument to grease the skids for an unregulated roll-out of 5G. The FCC’s message couldn’t be simpler: “all regulation bad / 5G and innovation good”.

I doubt that the average American understands the magnitude of what this FCC did when they killed Title II regulation. The agency basically killed its own authority to regulate what is probably the most important product it has ever regulated. Broadband is vital to both the economy and to people’s everyday lives. Yet this FCC thinks that their best regulatory role is to not regulate the industry in any manner. That means not regulating the many issues covered by net neutrality. It means not caring about consumer privacy on the web. It means not being concerned with runaway price increases and data caps. Killing Title II regulation means that future FCCs might have a hard time trying to reintroduce any regulation of broadband. The FCC handed the keys of the broadband industry to the monopoly ISPs and told them to run the industry as they see fit.

At the strong urging of the big wireless companies, this FCC wants to also make sure there are no restraints on 5G. It seems the only parties the FCC wants to regulate are those that might create roadblocks for 5G, such as cities that control rights-of-way.

Congress. Congress has the ability to permanently resolve the Title II and net neutrality battle. Congress could codify the current deregulated state-of-affairs or they could put Title II and net neutrality permanently back on the books. In fact, it’s the lack of Congressional action that led the FCC to kill net neutrality – they would much have preferred that Congress did it. But the Congress hasn’t undertaken any policy initiatives in the telecom industry since the Telecommunications Act of 1996, when most of us still were using dial-up.

There has been a lot of recent discussion in Congress on telecom issues and perhaps one of the reasons that Chairman Pai continues to lobby against net neutrality is to keep that position in front of Congress. However, it seems unlikely that any significant regulation is going to come out of a split Congress.

No Better Argument? Finally, and what is my favorite theory, perhaps the FCC doesn’t have any better argument about why they should be killing regulation. They’ve had years to come up with a story that the American people will buy, and the best they’ve come up with is that killing regulation will unleash innovation.

I think the FCC is afraid to touch the policy issues that the public really cares about. People in rural areas are adamant that the FCC finds a way to get them real broadband. The vast majority of broadband users are worried about being hacked and are worried about how the big ISPs are spying on them and selling their data. Everybody is concerned about the talk on Wall Street that encourages the big ISPs to significantly jack up rates. A large majority of the country cares about net neutrality and an open Internet. I can see why the FCC would rather stick with their story about how killing regulation unleashes innovation – because they are afraid of opening Pandora’s box to let all of these other issues into the open.

Predicting 5G CAPEX

If you ever want a bad headache, spend a few hours researching predictions about the future trajectory of capital spending by the big players in the telecom industry. It’s a topic worth following since the big ISPs all said that eliminating net neutrality and other regulation would unleash them to spend lavishly on new networks.

I was looking through projections over the past year that were forecasting capital spending for 2019. My main motivation in looking at these projections was to see if the big companies are actually planning on spending money yet on 5G. I figured the best way to get past all of the 5G hype is to follow the advice from the movie All the President’s Men, and “Follow the money”.

I started by looking at projections from the beginning of 2018. The headlines at that time centered around the big benefits to the industry from the Tax Cut and Jobs Act passed in December 2017. That legislation created an annual benefit to AT&T of $2.2 billion and a benefit to Verizon of $4 billion annually. At the beginning of 2018 industry analysts predicted the companies would roll those savings into increased capital spending. However, like with most big corporations those savings were not rolled back into the business.

There were rosy predictions at the start of last year about 2018 and 2019 capital spending. For example, the analysts at Deutsche Bank Research said in February 2018 that capital spending by the wireless carriers would increase by 14% in 2018 and even more into the future. It’s not hard to understand the enthusiasm of the analysts because the carriers were fueling this story. Early in 2018 Verizon said they would be investing $35 billion in 5G and AT&T said they would invest $40 billion.

This enthusiasm was fueled all last year by promises from AT&T and Verizon to roll out 5G by the end of 2018. In June the analysts at Oppenheimer raised forecasts of capital spending for 2019 by $18 billion by Verizon and $25 billion for AT&T. However, at the end of last year we saw the 5G announcements had been nothing but hype when AT&T announced an imaginary 5G product and Verizon installed fixed wireless in a few hundred homes.

As recently as the fourth quarter of last year a number of analysts were still predicting greater capital spending for wireless this year compared to 2018. For example, MoffettNathanson LLC predicted 2019 capital spending would be up 3.3% in 2019. Most other analysts made similar projections.

As the books closed for 2018 it became obvious that the big wireless companies hadn’t spent nearly as much as expected for the year. For example, Verizon actual spending was $1.5 billion less than their own initial projections. AT&T came in $3 billion less than projected. When real spending materializes you start to understand the complexity of these budgets. For example, AT&T said that part of the reason for lower capital spending was due to delays in the deployment of FirstNet, the nationwide public safety network. I sit here wondering why FirstNet was even included in their capital budget since it’s not being funded from AT&T’s own revenues, but 100% by taxpayers.

By the time I got to looking at 2019 the picture gets incredibly muddled. There are still those predicting 2% to 3% more capital spending for 2019. But we also see the big carriers admitting to their investors that there will be little spending on 5G this year. This first big capital expenditure in 5G will be for the core electronics for 5G cell sites called the RAN. It doesn’t look like there will be a 5G RAN available for a few more years. Both cellular carriers admit that they are not spending much on 4G LTE infrastructure other than working on cell site densification in urban areas through the deployment of small cell sites aimed at relieving pressure on the big tower cell sites.

I’ll be honest that all I got out of this reading was the headache because I still have no idea about how much money these big carriers will spend this year. This is probably not abnormal in an industry under so much flux and I would imagine there are still decisions being made inside these companies every day that will change capital spending even in this year. The one thing I came away with was a clear picture that there will be very little spending in 2019 on 5G, which means that the announcements of the carriers to have 5G cellular products by 2020 are clearly still hype.

But there are still those in the industry with rosy predictions. The research firm IDC predicts that spending on 5G core equipment will increase worldwide from $500 million this year to $26 billion per year in 2022. Ericsson is predicting that 5G will account for 50% of mobile subscriptions in the US by 2023 along with a worldwide penetration at 20% that year. That seems to be in conflict with Cisco which recently predicted worldwide 5G penetration of 3% by the end of 2022. I have no idea which of these predictions is right, but I now know that we can’t put any faith in predictions about 5G spending or deployment, so perhaps all of this reading was not in vain.