It is the eve of 5G. Over the next several months, all major U.S. operators will launch some flavor of 5G (Verizon has already quietly rolled out fixed wireless access in select neighborhoods in four cities). During 2019, we’ll also see some limited rollouts in South Korea, Japan, possibly China and possibly a couple of countries in Europe. You’ve all seen the hyperbole from one industry analyst or wireless trade organization or another – 5G will contribute X trillion to the economy, create X million jobs, catalyze entire new industries such as autonomous vehicles, and perhaps cure cancer while doing wireless remote surgery. While I’m optimistic about the prospects for 5G in the longer term, I think we’re in a particular period of pre-5G hype cycle, where a dose of reality is needed. A key to understand is that it’s going to be very, very different than 4G.
First, a bit of history. 2G allowed for very basic data, and some services such as text messaging. 3G revolved around e-mail, limited web access, and some rudimentary applications/content such as ringtones and games, where operators were really the kings of the hill. But the beauty of 4G LTE, especially after a couple of iterations when one could count on getting 10 MB or better in most locations, was that it allowed for the near replication of the home or office broadband experience, with the beauty of mobility. It also unleashed a wave of innovative applications that leveraged mobile broadband with some of the unique aspects of the phone, such as ‘always with you/always on’, location, and so on. Uber wouldn’t exist without 4G, and companies such as Facebook and Google would be shells of their highly valued and very profitable selves.
But it’s going to be hard to justify the $150+ billion in planned investment in 5G over the next five years in the U.S. (spectrum plus capex) if it’s just a faster, better, more spectrally efficient version of 4G. Let’s face it: a typical 4G connection today (and the average is about 20-30 Mbps) allows you to do pretty much anything you would want to do on a mobile device. And the LTE roadmap in and of itself is highly compelling, with the kitchen sink of carrier aggregation/LAA/CBRS/MIMO/256 QAM firing on all cylinders. The gating issues, really, are coverage, congestion, and economics (throttling typically kicks in at 20-30 GB of usage/month).
So, here are some of the ways 5G is going to be different than 4G.
- There are going to be multiple flavors of 5G. Initial mmWave deployments are going to be ‘5G hotspots’, sort of like a super Wi-Fi, focused on particular venues or geographic zones. 5G in the lower bands, such as that being rolled out by T-Mobile at 600 MHz, will be ‘coverage 5G’. I see this as extending the best of today’s 4G services, outside of cities – think ‘underserved’ locations for mobile broadband. The sweet spot is in the 2.5-4.0 GHz spectrum range, where over time and with additional spectrum allocations, could offer the holy grail of coverage and performance. Major operators will of course own assets across multiple bands, and over time there will be devices that support all these bands.
- Operator Strategies are Less Monolithic. 4G evolved to, essentially, a mobile version of fixed broadband: $50 per month for unlimited service with an asterisk. 5G will allow the operators to differentiate. Verizon is using mmWave to compete more directly in broadband. AT&T has important DirecTV and content assets that are surely part of their 5G strategy. One can envision Sprint or ‘New T-Mobile’ offering a creative metro-oriented service leveraging their 2.5 GHz holdings.
- Pricing Will be More Dynamic. It will be difficult to justify the 5G spend in order to merely maintain what has, essentially, been flat-ish revenue per subscriber (ARPU) for several years. As I mentioned in a recent column, operators will have to find a way to charge a premium price for premium services, particularly once certain milestones for coverage and performance are reached. There will be app-specific opportunities to offer variable pricing. Network slicing presents one of the most dynamic opportunities for 5G differentiation.
- 5G Coverage Will Not Be As Ubiquitous as 4G. Today, some 90% of the U.S. population has access to LTE. The economics don’t work to build out 5G as broadly, particularly in the mid- and mmWave bands. LTE will be the primary coverage layer for the foreseeable future. The aspects of 5G that seem really different from 4G will be very hotspot- or limited geography – centric
- There Will Be Overlap Between 4G and 5G. Continued advances in the LTE roadmap mean that the higher end of LTE performance (up to 2 GB) will feel very much like low to mid flavors of 5G, at a minimum. Repeating some history of 4G, operators might market the best of 4G LTE as 5G — certainly there will be overlap between the two ‘Gs’.
- 5G Cannot Rely on Enhanced Mobile Broadband Alone. Operators mainly monetized 4G by getting the vast majority of smartphone users onto a mobile broadband plan. We will need new market segments to develop as 5G gets rolled out: IoT of various flavors, more specific enterprise solutions, machine connectivity – each with potentially substantial revenue streams. In fact, the ability to connect millions of IoT devices with different power and bandwidth requirements is one of key differentiators of 5G versus 4G.
- Operators Will Have to Take Ownership. In 3G, operators sold Blackberries. In 4G, they sold mobile broadband data plans. For 5G, operators will have to build a sales, and marketing, and partner ecosystem to develop and grow the new market segments that will drive 5G. They’ll also have to be more proactive in developing applications, or working closely with partners, that will help them sell 5G ‘plans’. For example, while an operator might be able to sell you a higher speed data plan for a $10 per month premium, selling a ‘low latency’ plan or feature is a much tougher nut. Instead, operators will have to sell apps or experiences, such as a hot AR/VR capability, multi-player game, etc. that requires this ‘low latency’ capability.
- 5G is being rolled out much more in phases than 4G was. Many of the most important 5G capabilities, embodied in 3GPP Release 16 (which is not expected to be finalized until late next year), won’t be commercially viable until the early-to-mid 2020s. These are some of the features that will allow for some of the newer and ambitious market opportunities, such as massive MTC, industrial IoT, or autonomous vehicles, where the new 5G core network is required.
5G will evolve very differently than 4G. It will come in phases, in a staggered fashion, in various flavors, and won’t be ubiquitous. I urge folks to not rush to judgement, or declare 5G a ‘failure’ if they’re not getting 10 GB on their smartphones in two years. Patience and a long view will be needed.