Is There a Business Case for Fast Cellular?

We’ve gotten a glimpse of the challenges of marketing faster cellular usage since the two major cellular providers in South Korea made a big push in offering ultrafast cellular broadband. South Korea has two primary cellular carriers – SK Telecom and KT – and both have implemented cellular products using millimeter wave spectrum in Seoul and other dense urban areas.

The technology is nearly identical to the technology introduced by Verizon is small sections of major US cities. The technology uses millimeter wave hot spots from small cell sites to beam broadband to phones that are equipped to use the ultra-high spectrum. In South Korea, both companies are selling a millimeter wave spectrum version of the Samsung Gallery. In the US there are still barely any handset options.

5G hotspot data is not the same as traditional cellular data. The small cells blast out gigabit broadband that carries for only short distances of 500 to 800 feet. The signals can bounce off buildings in the right circumstances and can be received sporadically at greater distances from the transmitters. Millimeter wave spectrum won’t pass through any obstacle and the broadband signal reception can be blocked by any obstacle in the environment, including the body of the person using the cellphone.

Even with those limitations, the speeds delivered with this technology are far faster than traditional cellular data speeds. Verizon has reported peak speeds as fast as 600 Mbps in trials being deployed in US cities. That’s an amazing amount of bandwidth to deliver to a cellphone since a cellphone is, by definition a single user device. Since the average 4G LTE data speed is less than 25 Mbps, our cellphone apps are not designed to be bandwidth hogs. Current 4G speeds are more than adequate to stream video, and with the small screens, there’s no benefit to streaming in 4K or even in 1080p. All of the major cellular carriers already chop down the quality of video streams and thus use only a fraction of the bandwidth used to deliver a single video stream to homes. Cellphones are also not designed to multitask and handle multiple simultaneous tasks.

For now, the biggest benefit of millimeter wave spectrum for cellphones looks to be the ability to quickly download big files like movies, apps or software updates. There is certainly an appeal to downloading a big movie to watch later in less than 30 seconds rather than the more normal 10 minutes. But with data caps on even most unlimited plans I have to wonder how many people routinely download big movie files when they aren’t connected to WiFi.

Another way that faster cellular speeds could be beneficial is for faster web browsing. However, the slow cellphone browsing we experience today is not due to 4G LTE speeds, which are adequate for a decent browsing experience. The painfully slow browsing on cellphones is due to operating systems in cellphones that favor display over functionality – the cellular companies have chosen to downplay browsing speed in favor of maximizing the display for phone apps. Faster millimeter wave spectrum won’t overcome this inherent and deliverate software limitation.

There is another use for faster broadband. South Korea likely has a much higher demand for high-speed cellular because the country is game-crazy. A large majority of the population, including adults, are heavily involved in intensive gaming. There is obviously some appeal for having a fast gaming connection when away from a desktop.

South Korean market analysts are looking at the cost of millimeter wave deployment and the potential revenue stream and are already wondering if this is a good investment. SK Telecom expects to have 2 million customers for the faster broadband by the end of this year. In South Korea, sales of millimeter wave spectrum phones are going well. (these can’t be called 5G phones because they don’t handle frequency slicing or the other slew of 5G features that won’t be introduced for at least three more years).

If the analysts in South Korea don’t see the financial benefits, it’s much harder to see the benefits here. Remember that in South Korea that urban homes can already buy gigabit broadband at home for the equivalent of $30 per month. Moreover, the two big ISPs are in the process of upgrading everybody to 10 Gbps within the next five years. This is a country where everybody has been trained to expect an instant response online – and the faster cellular speeds can bring that expected response to mobility.

The business plan here in the US is a lot more challenging. In South Korea, a lot of people live in dense urban city centers unlike our spread-out population with far-stretching suburbs around cities. The network cost to deploy the millimeter wave technology here will be significantly higher to achieve the same kind of coverage seen in South Korea. At least for now, it’s also a lot harder to paint a picture in the US for large numbers of users willing to pay extra for faster cellular data. Several recent surveys indicate that US consumers think faster 5G data speeds should be offered at the same high prices we already pay for cellular broadband (the US has some of the highest cellular data prices among industrial countries).

I can’t see a major play here for ultra-fast cellular broadband outside of dense city centers and perhaps in places like stadiums and convention centers. It’s hard to think that somehow deploying this technology in the suburbs could ever be cost-justified. We are likely to upgrade cellular data to the more normal 5G using mid-range spectrum, and that’s going to nudge cellular data speeds in time up to 100 Mbps. I think most users here will love somewhat faster speeds but won’t be willing to pay extra for them. It’s hard to think that there are enough people in the US willing to pay even more for millimeter wave speeds that can justify the cost of deploying the networks. This is further compounded by the fact that these millimeter wave networks are outdoors only and the spectrum doesn’t penetrate buildings at all. The US has become an indoor society. At least where I live you rarely see teenagers outdoors in their home neighborhood – they are consuming broadband indoors. Does anybody really care about a fast outdoor network?

Cellular Broadband Speeds – 2019

Opensignal recently released their latest report on worldwide cellular data speeds. The company examined over 139 billion cellphone connections in 87 countries in creating this latest report.

South Korea continues to have the fastest cellular coverage in the world with an average download speed of 52.4 Mbps. Norway is second at 48.2 Mbps and Canada third at 42.5 Mbps. The US was far down the list in 30th place with an average download speed of 21.3 Mbps. Our other neighbor Mexico had an average download speed of 14.9 Mbps. At the bottom of the list are Iraq (1.6 Mbps), Algeria (2.1 Mbps) and Nepal (4.4 Mbps). Note that these average speeds represent all types of cellular data connections including 2G and 3G.

Cellular broadband speeds have been improving raoidly in most countries. For instance, in the 2017 report, Opensignal showed South Korea at 37.5 Mbps and Norway at 34.8 Mbps. The US in 2017 was in 36th place at only 12.5 Mbps.

Earlier this year Opensignal released their detailed report about the state of mobile broadband in the United States. This report looks at speeds by carrier and also by major metropolitan area. The US cellular carriers have made big strides just since 2017. The following table compares download speeds for 4G LTE by US carrier for 2017 and 2019.

2019 2017
Download Latency Download Latency
AT&T 17.8 Mbps 57.8 ms 12.9 Mbps 63.8 ms
Sprint 13.9 Mbps 70.0 ms 9.8 Mbps 70.1 ms
T-Mobile 21.1 Mbps 60.6 ms 17.5 Mbps 62.8 ms
Verizon 20.9 Mbps 62.6 ms 14.9 Mbps 67.3 ms

Speeds are up across the board. Sprint increased speeds over the two years by 40%. Latency for 4G is still relatively high. For comparison, fiber-to-the-home networks have latency in the range of 10 ms and coaxial cable networks have latency between 25 – 40 ms. The poor latency in cellular networks is one of the reasons why browsing the web on a cellphone seems so slow. (the other reason is that cellphone browsers focus on graphics rather than speed).

Cellular upload speeds are still slow. In the 2019 tests, the average upload speeds were AT&T (4.6 Mbps), Sprint (2.4 Mbps), T-Mobile (6.7 Mbps) and Verizon (7.0 Mbps).

Speeds vary widely by carrier and city. The fastest cellular broadband market identified in the 2019 tests was T-Mobile in Grand Rapids, Michigan with an average 4G speed of 38.3 Mbps. The fastest upload speed was provided by Verizon in New York City at 12.5 Mbps. Speeds vary by market for several reasons. First, the carriers don’t deploy the same spectrum everywhere in the US, so some markets have less spectrum than others. Markets vary in speed due to the state of upgrades – at any given time cell sites are at different levels of software and hardware upgrades. Finally, markets also vary by cell tower density and markets that serve more customers for each tower are likely to be slower.

Many people routinely take speed tests for their home landline broadband connection. If you’ve not taken a cellular speed test it’s an interesting experience. I’ve always found that speeds vary significantly with each speed test, even when run back-to-back As I was writing this blog I took several speed tests that varied in download speeds between 12 Mbps and 23 Mbps (I use AT&T). My upload speeds also varied with a top speed of 3 Mbps, and one test that couldn’t maintain the upload connection and measured 0.1 Mbps on the test. While landlines broadband connections maintain a steady connection to an ISP, a cellphone establishes a new connection every time you try to download and speeds can vary depending upon the cell site and the channel your phone connects to and the overall traffic at the cell site at the time of connection. Cellular speeds can also be affected by temperature, precipitation and all of those factors that make wireless coverage a bit squirrelly.

It’s going to be a few years until we see any impact on the speed test results from 5G. As you can see by comparing to other countries, the US still has a long way to go to bring 4G networks up to snuff. One of the most interesting aspects of 5G is that speed tests might lose some of their importance. With frequency slicing, a cell site will size a data channel to meet a specific customer need. Somebody downloading a large software update should be assigned a bigger data channel with 5G than somebody who’s just keeping up with sports scores. It will be interesting to see how Opensignal accounts for data slicing.