OPINION — We want to know your thoughts; is 5G technology everything it’s hyped up to be?
“5G mania has swept the wireless industry, regulators and tech enthusiasts — but the hype may be getting ahead of the market demand for it.
Why it matters: The promise of 5G — with mobile broadband speeds up to 100 times faster than current 4G networks — and the pressure to keep up with global competitors are impacting major merger reviews and city budgets. But unrealistic expectations for 5G could lead to big disappointments.
Between the lines: It’s always hard to anticipate how and when new technologies will catch on. No one predicted Uber and Airbnb would spring from 4G networks and the smartphone, for example.
- A McKinsey survey found roughly 60% of chief technology officers say the business case for 5G is the biggest challenge.
2. Lack of consumer demand: According to recent HarrisX research, most business decision-makers (72%) believe 5G will be worth paying more for, but consumers are split on its value. Only 24% of wireless subscribers say they would switch to a new carrier for 5G, and only 19% say they’d switch to a new device to access 5G phones.
- Smartphones are lasting longer and new models are pricey, so consumers aren’t upgrading to new devices as often. Unless they see a real benefit to 5G devices and services, most won’t be willing to pay extra for them.
- “If the carriers are going to charge more for 5G, dramatically more value is going to have to be delivered in the form of better performance or new capabilities,” said Kevin Crull, former chief strategy officer at Sprint.
3. Enormous investment: Without clear paths to revenue, analysts worry about lackluster return on investment for big carriers who’ve pumped billions of dollars into network upgrades.
- “Because there isn’t actually a revenue use case for 5G yet, going out and telling your investor base that we’re going to spend another $10 or $20 billion, let alone $100 billion, is a nonstarter if there’s nothing to justify that investment,” said Craig Moffett, founding partner at MoffettNathanson Research.
4. Spotty rollout: 5G is rolling out commercially, but the highest speeds of 5G come with the drawback that signals don’t travel far. That means that, in most cases, 5G is coming to only parts of a few cities for each carrier.
- Sprint is a bit of an exception as it is using lower frequency spectrum so it is covering a bit more area, but not at the highest possible speed.
- AT&T drew criticism for labeling existing 4G devices and networks as 5G “E” even though they aren’t necessarily any faster than other 4G connections.
- Shortly after launching its 5G service in parts of Chicago and Minneapolis, Verizon waived the extra $10 charge to access it after complaints of limited coverage.
5. Global race: Mobile carriers have gained leverage over policy decisions that bolster their 5G ambitions by invoking the specter of a Chinese victory in the wireless competition.
- For example, the FCC set fee limits that weakened cities’ leverage to negotiate with carriers over where they can place 5G antennas.
- Proponents argue the trade-offs are worth it to realize the massive economic benefits of 5G. But skeptics say it’s unclear when we’d actually see those benefits.
6. Merger review: 5G has even become a factor in the proposed merger of T-Mobile and Sprint. To convince regulators to approve the deal, T-Mobile has promised to cover 85% of rural Americans with its 5G network within 3 years, and 90% in 6 years.
- But the specific speed commitments T-Mobile made to the FCC are below the 5G speeds typically touted by the industry, noted Blair Levin, analyst at New Street Research.
- Plus, 5G is not well-suited for rural areas because the high-frequency signals have such short range.
- Still, the promise worked at the FCC, which signaled its approval. But the Justice Department seems to have bigger antitrust concerns.
The bottom line: “The hype is so preposterously misaligned with economic reality that inevitably there’s going to be this disastrous crash in expectations and people are going to call it a failure,” Moffett said. “In fact, it’s not a failure other than inappropriate expectations. It will actually be better than 4G, and it will be an impressive next step for the network.”