AT&T recently described their long-term 5G strategy using what they call the 3 pillars of 5G – the three areas where the company is putting their 5G focus. The first pillar is a concentration on 5G cellular, and the company’s goal is to launch a 5G-based cellular service, with some cities coming on board in the second half of 2020. This launch will use frequencies in the sub-6 GHz range. This admission that there won’t be any AT&T 5G until at least 2020 contradicts the AT&T marketing folks who are currently trying to paint the company’s 4G LTE as pre-5G.
This is a real gamble for cellphone makers because a 5G phone will become quickly obsolete. A 5G phone sold in late 2019 probably won’t include all of the 5G features that will be on the market by late 2020 – and this is likely to be true for the next 3 or 4 years as the carriers roll out incremental 5G improvements. It’s also a gamble for customers because anybody that buys an early 5G cellphone will have early bragging rights, but those cool benefits can be out of date in six months. I think most people will be like me and will wait a few years until the 5G dust settles.
AT&T’s second pillar is fixed wireless. This one is a head-scratcher because they are talking about the fixed cellular product they’ve already been using for several years – and that product is not 5G. This is the product that delivers broadband to homes using existing low-band cellular frequencies. This is not the same as Verizon’s product that delivers hundreds of megabits per second but is instead a product that delivers speeds up to 50 Mbps depending upon how far a customer lives from a cell tower – with reports that most households are getting 15 Mbps at best. This is the product that AT&T is mostly using to satisfy its CAF II requirements in rural America. All of the engineers I’ve talked to don’t think that 5G is going to materially improve this product.
The final pillar of AT&T’s strategy is edge computing. What AT&T means by this is to put fast processors at customer sites when there is the need to process low-latency, high-bandwidth data. Like other carriers, AT&T has found that not everything is suited for the cloud and that trying to send big data to and from the cloud can create a bandwidth bottleneck and add latency. This strategy doesn’t require 5G and AT&T has already been deploying edge routers. However, 5G will enhance this ability at customer sites that need to connect a huge number of devices simultaneously. 5G can make it easier to connect to a huge number of IoT devices in a hospital or to 50,000 cell phones in a stadium. The bottom line is that the migration to more edge computing is not a 5G issue and applies equally to AT&T’s fiber customers.
There is really nothing new in the three-pillar announcement and AT&T has been talking about all three applications from some time – but the announcement does highlight the company’s focus for stockholders.
In what was mostly a dig at Verizon, AT&T’s CEO Randall Stephenson did hold out the possibility of AT&T following Verizon into the 5G fixed wireless local loop using millimeter wave spectrum – however, he said such a product offering is probably three to five years into the future. He envisions the product as an enhancement to AT&T’s fiber products, not necessarily a replacement. He emphasized that AT&T is happy with the current fiber deployments. He provided some new statistics on a recent earnings call and said the company is seeing customer penetration rates between 33% and 40% within 18 months of new fiber deployment and penetration around 50% after three years. Those are impressive statistics because AT&T’s fiber deployments have been largely in urban areas competing with the big cable companies.
A year ago, Stephenson said that getting sufficient backhaul was his number one concern with deploying high-bandwidth wireless. While he hasn’t repeated that recently, it fits in with his narrative of seeing millimeter wave radio deployments in the 3-5 year time frame. The company recently released a new policy paper on its AirGig product that says that the product is still under development and might play well with 5G. AirGig is the mysterious wireless product that shoots wireless signals along power lines and somehow uses the power lines to maintain focus of the signal. Perhaps the company is seeing a future path for using AirGig as the backhaul to 5G fixed wireless deployments.