Category Archives: Internet of Things

The Phantom Prospects of 5G

Source: Light Reading
Source: Light Reading

Telcos are once again touting a new generation of mobile protocols as their saviour. And once again, we should raise an arched eyebrow. 

A great piece by Mike Dano from Light Reading dissects the reasons behind — and the challenges facing — telcos’ push for 5G. And why you shouldn’t be expecting 5G to rock your world any time soon.

The reasons are relatively simple. The above chart from Wall Street analysts MoffettNathanson show how, for US telcos (and the story is similar elsewhere) there’s a lot more data traffic (the black line) , but a lot less money being made per user (the blue line).

So telcos need something new. Hence 5G. But how are they going to make money out of it? The old thinking about 4G was that the improved speeds and bandwidth was going to enable telcos to make more money out of each user. But that hasn’t happened (see chart again.) So why do they think 5G will be any different?

5G is going to be very expensive to deploy. This is not just a question of attaching a new box or upgrading an existing one to an existing basestation or tower. Mike quotes MoffettNathanson in a recent research note on Verizon. “Deploying 5G networks with enough density to meet expectations for blazing fast 5G speeds will cost real money. If not from charging more for using more, then where will the money come from?”

Atop that are the problems of heat, which I’ve written about before.

So the most likely outcome of 5G, at least in the first few years, is that it’s aimed at business. Think the Internet of Things (IoT): connected (and self-driving) cars, smart cities, healthcare, industrial automation. Or outdoor surveillance cameras, according to a Gartner report cited by Mike, which says this is likely to be the largest market for 5G in the short term.

But even then, there are questions about this. This won’t be cheap for enterprises. And 3G and 4G hardly shone when it came to connecting devices. Attaching a modem to a device and then having that ping back is expensive — installing and replacing a battery, if necessary, having and managing a SIM card for each device, etc.

Ericsson, one of the cheerleaders for mobile IoT, acknowledges in a June report that despite its grand claims for a mobile IoT future, most mobile IoT devices are actually using 2G and 3G:

Today, the majority of cellular IoT devices are connected via 2G and 3G technologies (GPRS, EDGE and HSPA). The number of legacy connections is expected to increase slightly until 2022, and then remain stable throughout the rest of the forecast period.

Hard to imagine that’s a huge source of revenue.

And then there’s narrowband IoT, which I’ve written about before. Yes, 5G offers the kind of speed and low latency that would be attractive for a lot of use cases, but when you just need to send a few bytes narrowband is much more appealing. And needn’t involve the telcos at all.

Most likely outcome? Telcos are going to have to demonstrate, somehow, to customers that the new use cases they’re hoping will save them will actually work. And that means working closely with them or investing in them, or vice versa. Build it and they will come might be the mantra, but that is going to require a lot of faith that they will indeed come, and in a timeframe that makes sense. New verticals don’t pop up overnight.