Why hasn’t 5G been a success?
While 5G has been boasted as the future of telecommunications, there’s been little revenue to show for it. The three largest US telecom carriers — Verizon, AT&T, and T-Mobile — invested over USD 100 bn into the technology last year, but have seen very little returns, industry analysts tell Bloomberg. This has raised concerns that while governments and policy makers worldwide are encouraging such spending with hopes that 5G would nurture high-tech industries, uneven revenue prospects have raised fears that the expensive upgrades won’t translate into a higher bottom line.
Is the 5G juice really worth the squeeze? Crystal balls seem to think so: The full economic impact of a 5G rollout worldwide could potentially enable up to USD 13.1 tn worth of goods and services and add up to 22.8 mn jobs by 2035, according to a study done by Qualcomm. This payout comes with a USD 700-900 bn bill, according to a separate report by McKinsey.
Why are expectations so high? 5G is meant to make internet speeds and response times significantly faster: 5G is a software defined network, meaning it will lessen dependence on cables by operating through the cloud. It’s anticipated that it will have 100x more capacity than its predecessor, 4G, which will dramatically improve internet speeds, according to a video explainer by CNBC (watch, runtime: 05:13). Internet response times will also be much faster on 5G at 0.001 seconds, or 400 times faster than a blink of an eye. This is particularly important when it comes to autonomous vehicles, medical devices, smart homes, industrial operations, and agricultural machinery.
But the need for it just isn’t present yet: The current mainstream uses of the internet, such as watching high-quality videos and gaming, often function just fine under normal 4G speeds. This means that internet users are often uninterested in paying a premium to access 5G, especially at the cost it is at now, writes the Wall Street Journal.
And setting up 5G is so darn expensive: While 3G and 4G were easier to roll out as they could be set up on existing frequencies, 5G needs a frequency with much higher bandwidth which will require brand new infrastructure to be set up.
And technical issues persist: A main opponent to the rollout of 5G is the aviation industry which has been vocal about worries that the network could interfere with key aircraft radars. In the US, safety concerns have led the country’s federal aviation regulator to warn that it may prohibit low-visibility landings in the proximity of 5G signals — a move that could disrupt up to 350k flights per year and cost the industry as much as USD 2.1 bn.
Nonetheless, telecoms are banking that if you build it, they will come: While uses for things such as IoT aren’t prevalent yet with few businesses offering this advanced type of wireless service, industry optimists insist that the boom is on its way, but it will take several more years to jump off the drawing board.
Even if the optimists are proven correct, it might not be the telecoms that reap the rewards. Tech giants such as Google, Amazon, Microsoft, Facebook, and Apple are working to create new products and services tailored for 5G networks — which could bring them more revenues than the telecoms that introduced the technology. Apple’s new iPhones and other devices all boast 5G technology while Google has also introduced smartphones that connect to the network. Their efforts have proven successful so far, with 5G phone sales exceeding those of 4G for the first time in 2021, even in markets where the technology hasn’t even been rolled out yet, reports LiveMint. Meanwhile, Amazon and Microsoft are lining up new IoT devices for the home or industry that require 5G and Facebook has taken it upon itself to try and introduce the needed infrastructure itself, teaming up with partners such as Marvell Technology Group.
If you can’t beat them, join them: Telecoms such as AT&T have teamed up with these tech giants, joining forces with Microsoft and Amazon to create partnerships in the 5G space that will prove financially beneficial for all parties. The telecom carriers are offering to provide businesses with a roster of services including voice, data, network management, and security, explains longtime Wall Street industry analyst Peter Supino to the WSJ. This might see telecoms shift to more of a wholesale supplier of network capacity and mobile cellular service to the cloud companies, Supino adds.