Strategic Analysis of Technology Industry – 5G Boom

Silverwood Partners has released a Strategic Analysis of the Technology Industry, Please read more to know about how 5G is transforming the New Era.  

5G: A (Wireless) Race to the Finish

The Fifth Generation (5G) network has been on the cusp of deployment for a number of years. Recent developments suggest the long-awaited technology will soon become a consumer reality. The high speed 5G network was first studied and utilized by NASA in 2008, but wireless providers at the time were still in the 3G era. Once internet carriers began offering 5G Wi-Fi to residential customers in 2015, the next hurdle was to take those speeds and make them available on the cellular wireless network.

Consumers may have 5G availability for cellphones as early as the end of this year.  The effects of this upgrade to consumers have already been widely forecasted. From enhanced autonomous car capabilities, smart cities, practical IoT technology, and new avenues of entertainment, there is no doubt 5G will facilitate applications that are not possible on the current 4G network.

Logistical Challenges

Network speed increases have been steady over time with 3G introduced in 2003 and 4G introduced in 2009. The jump from 3G to 4G took only six years, but the jump from 4G to 5G is just now about to roll out. Why has it taken almost a decade to make 5G available to the public? The answer lies in the difference in transmission frequency for 5G networks. Legacy 4G networks use frequencies of 6 GHz whereas 5G leverages higher frequencies in the range of 30-300 GHz. With the higher frequency, the 5G network has a higher capacity for very fast data transmission. In addition, 5G networks operate on shorter wavelengths that require smaller antennas compared to 4G networks, allowing for increased device support in any given area. Unfortunately, the higher frequency of 5G networks has a disadvantage in that, for optimal performance, there needs to be a clear line of sight between base station and receiver. The higher frequency 5G radio waves have trouble making their way through impedances and are easily absorbed by buildings, walls, humidity and even rain. The challenges of 5G networks require new technology and significant transmission infrastructure upgrades. 

Infrastructure Refresh – Network “Densification”; Self-Organizing Networks

Shorter wavelengths, a preference for direct line-of-sight transmission and smaller cellular base-stations means many more network transmission nodes.  Specialized receivers will have to be placed in urban areas, businesses and homes to better serve cellular wireless device users. The CTIA suggests that the approximately 200,000 cellular base stations that support the current 4G network will need to be replaced by millions of 5G base stations.  The rapid increase in the number of cellular base stations will require automated optimization and provisioning of network functionality – self-organizing networks.  To improve transmission over the  5G network, fiberization of carrier backhaul infrastructure to the network nodes will be optimal. It is estimated that total cost of ownership for mobile carriers will increase anywhere between 60%-300% over the next decade, based on the aggressiveness the carrier places on becoming fully 5G capable. South Korea’s Minister of Engineering, Science, and Technology predicts that carriers will spend upwards of $300 billion on infrastructure upgrades, including 5G, over the next ten years.

Early Competition

As 5G transitions from concept to reality, new competition is expected in the telecom industry. On October 1, 2018, Verizon unveiled its first commercialized “5G Home” experience for selected customers in Houston, Indianapolis, Los Angeles, and Sacramento. However, Verizon was criticized by other carriers because the service was a fixed broadband network, and not a truly wireless service network. The first carrier to provide a mobile next-generation network may be AT&T, which is releasing mobile 5G “puck” hotspots by the end of 2018. T-Mobile and Sprint are expected to soon follow with the roll-out of 5G networks in early 2019. Verizon has stated that it will also join T-Mobile and Sprint in 2019 with a 5G network introduction, but a specific time window has not been discussed.

Handset Makers Catching Up To 5G Speed

Verizon has released a “Moto Mod” which attaches to the Z3 Motorola smartphone to make the device 5G compatible. Qualcomm also publicly announced that it has partnered with more than a dozen handset manufacturers to deploy 5G devices in 2019. With most of the 5G networks estimated to be rolled out in early 2019, a steady stream of device announcements is expected in 2019 with the January CES Show likely to be the venue of choice for new product announcements.  Apple is an unknown quantity but the Company conventionally releases products later than competitors, which suggests Fall 2019 as a possible announcement date for Apple’s 5G offerings.

Investment Implications

The 5G infrastructure investment cycle has been anticipated for some time.  However, 5G has taken longer to become a commercial reality than first expected.  Initial expectations have been impacted by subsequent technology advances.  There is likely to be more applications using the network than first anticipated.  Autonomous vehicles will be heavy 5G users with guidance and telemetry technology but particularly with mobile entertainment technology as autonomous vehicles become mobile, immersive high definition entertainment experiences.

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