Ed. Note: All material in this article taken from the author’s report “5G: What Are the Real Status and Real Economics?” published by IGI Group. 5G Technology World interviewed Holliday in Analyst: 5G is all about the traffic, which will post on January 21, 2020.
We read a great deal about 5G in the local papers and hear about it almost every night on TV news. Most of what we read and hear is, at best, confusing and, too often, misleading and downright wrong.
Carrier A claims to be the first in the country;
Carrier B claims to be the first in the country;
Carrier C claims the fastest service:
One carrier is suing another carrier for false advertising;
This company is barred from the US because of spying accusations.
So what’s going on? What exactly are 5G and its status, and who is going to pay for its deployment?
Where does 5G stand?
5G refers to a set of international standards for the 5th generation of mobile communications services. It’s intended to ultimately replace the service currently available in most of the US: 4G LTE. 5G is designed to be perhaps up to 100 times faster than 4G LTE in terms of download or upload speeds, and to have much lower latency (time spent in transmission) so that the data is received in very near real-time-close to zero lag. In straightforward terms, these two main objectives are achieved through much higher bandwidth, reached by either or both means of utilizing much more radio frequency, or of many more radio sites (antennas.)
In the US, four major mobile carriers are planning to or beginning to provide 5G service: AT&T, Verizon, T-Mobile, and Sprint. For comparison, both AT&T and Verizon are in the 150 million mobile subscriber range, and T-Mobile and Sprint are in the 70 million subscriber range. These are almost exclusively 4G LTE subscribers.
Each company’s current plans and progress is as follows:
AT&T: In 2018 and 2019, AT&T has deployed 5G network capabilities in 19 cities around the country. Obviously, “deployed in 19 cities,” doesn’t mean that the locations are completely covered. Instead, it means that some areas (usually high traffic areas – downtown, stadiums, etc.) are included. AT&T is using the version of 5G based on very high-frequency mmWave carriers that offer high bandwidth but are very short range and are easily blocked. This limitation requires many small cells located very close (within a few hundred feet) that are interconnected with fiber.
AT&T has also been advertising a “5G E” service, which is a 4G LTE service with some of the 5G technologies added. To make things more confusing, AT&T in 2019 also started advertising something called 5G+, which is 5G based on the high-frequency radio as previously described.
AT&T plans on a longer-term basis to add deployment of low-frequency radios to broaden the coverage of its 5G network.
Verizon: Verizon deployed a “Fixed 5G” service on a limited basis in several areas in 2018. This service allowed the use of 4G end devices through a ‘puck’ or hotspot. It was meant for residential use.
In 2019, Verizon began to deploy 5G mobile service in up to 30 cities around the country. Its first two were Chicago (in the downtown, Loop area) and Minneapolis. This coverage is very spotty, in that it is reported that you can be using it and walk around a corner and it’s lost. This service can be used with a Moto Z3 and 5G Moto Mod phone. After the initial free period, there is a small extra charge for using the 5G network.
Like AT&T, Verizon’s deployment is based on the use of small cells. Verizon’s longer-range plans include expanding coverage by incorporating the use of lower frequency radios.
T-Mobile: This company has been busy building out a nationwide low-band 5G network. They started offering service on the low-band system in the second half of 2019. Using the low-band approach allows for many fewer antenna sites as the radio at these frequencies can travel much further and penetrate walls and other obstructions. The downside is that these frequencies will not support as fast or as low latency as the higher frequencies that AT&T and Verizon are using. Some of the ads for this service are really eye-catching, but the 5G they offer is not the 5G that has been sold to the public.
The big question on T-Mobile is its pending merger with Sprint. As of this writing (Jan 2020), the final decision on approving the merger has been delayed again into February. It has been under consideration since mid-2018. It was thought that the Department of Justice (DOJ) approval in 2019 would eliminate any holdup on the merger, but a Federal Judge is hearing complaints from parties dissatisfied with the DOJ ruling. A failure to complete the merger could be terrible for both companies.
Sprint: This carrier is using what is known as the mid-band of radio frequencies to launch its mobile 5G service. It will use towers on its existing 4G LTE network with massive additions of antennas. This approach will allow the rapid introduction of the service on a reasonably widespread basis (at least as compared with the high-frequency methods of Verizon and AT&T) at much less cost, and much quicker. As with the T-Mobile approach, these frequencies do not provide the super-fast speeds, not the super low latency of the target 5G networks. Although, they are certainly improvements over what we have with 4G LTE.
It began to be offered in nine or ten major US cities starting in mid-2019. Sprint is also working on implementations of 5G on high frequencies, but no deployment is now scheduled.
As with T-Mobile, much depends on the fate of their proposed merger. If they merge, the two networks will be combined, offering a very widespread 5G service.
All four companies planning some form of 5G for service in 2020, generally in the largest US cities. While these are true, big starts, they are only very spotty coverages (or relatively slow services) and nothing like the kind of all-encompassing, super high-speed network shown in the grandiose 5G drawings that are so common. Some of the systems being deployed (Verizon and AT&T) are only going to be available in limited areas. At the same time, T-Mobile and Sprint are going to be much more widespread, but will not provide the speed and low latency needed for many of the envisioned applications. To achieve those plans (dreams?), we will need to fully develop high frequency based networks.
Who will pay for it?
We have now reviewed the current status of 5G, so let’s consider the economics. The first question is the cost. There are many estimates available for 5G full deployment (small cells, high frequency) in the US. Early (2017) estimates fell in the $28B to $36B range for five years. Newer estimates now suggest that the cost over seven years would be as much as $275B and that the fiber alone needed for deploying the small cells would be as much as $130B-$150B. For a reference point, $275B would be well over ten times the total AT&T 2019 Capital Budget! A current study takes a different approach to the cost question and estimates that the total cost of ownership (TOC – includes maintenance, capital, and all fees) could increase for the mobile networks by as much as 300%.
These are big numbers – yes, the B’s above are billions of dollars. In my opinion, we may be letting the technical hype run away with reality. A fully developed 5G large metro area, as is depicted in the many beautiful drawings, would be prohibitively expensive without some new services that would help, substantially, pay the bills. The question is, what new services will pay for this? Or to put it differently, where are the customers who will pick up this big tab?
Let’s briefly consider some of the applications that are often mentioned as possibilities for justifying the 5G cost.
Autonomous Vehicles: These are often called self-driving cars. A 5G network would be the perfect answer to allow cars to communicate with each other and with surrounding infrastructure and built-in sensors. The low latency and high speed would be prerequisites for this kind of service, and the 5G, the high-frequency network could do it like nothing else. Of course, it would require that the system was exhaustively deployed, and only the high-frequency version of 5G would achieve the needed parameters. The scenario envisioned for fully autonomous vehicles would not allow “dead-spots” nor lapses, nor time down for maintenance. The full availability of the network would be a life and death requirement. Such reliability and penetration of 5G is a long way off.
Another problem is that while 5G is in the developmental stages, the car manufacturers are all producing and selling an array of driving aids that are proprietary, similar to many of the autonomous car features, built-in, and don’t require external networks. True, these can’t do, and will never be able to do, everything that indeed autonomous cars could. However, they will go and are going a long way to making fully autonomous vehicles unnecessary to the public.
The bottom line here suggests that, while 5G is a perfect application, it may be a long while before there is any significant payoff in the autonomous vehicle application.
Internet of Things (IoT): Here is another perfect application for 5G. The IoT will (is) interconnect many, many small devices and sense points to a giant network. The Internet of Things is a robust network of devices, all embedded with electronics, software, and sensors that enable them to exchange and analyze data. The IoT has been transforming the way we live for nearly two decades, gradually paving the way for responsive solutions, innovative products, efficient manufacturing, and, ultimately, surprising new ways to do business. First, the Internet must connect the unconnected. That means taking current unconnected devices and adding sensors and technology that allows them to transfer data to the cloud, where it can be analyzed and transformed into actionable insight. There are currently many companies actively engaged in providing end-to-end solutions for businesses and individuals to do this interconnection that to achieve improved safety, enhanced business performance, and more.
The biggest question for an IoT is the availability of a network to interconnect the devices economically. Currently, there are several answers implemented. A discussion of these is far beyond the intent of this article, but they include these variations of cellular networks: Cat-0, Cat-1, LTE-M, NB-IoT, and EC-GSM. The point is that again, like autonomous vehicles, there is a chicken and egg situation. The industry is already answering the question of a network, while 5G is being developed. Thus an embedded answer is going to delay IoT from being that perfect solution and from being a cash cow for 5G.
Traffic: Mobile traffic is increasing at a high rate, and shows no sign of slowing down. Cisco, in its latest published estimates, projects an average annual increase of 46% (CAGR) through 2022. They anticipate that 5G will handle only 10% of the total by 2022. However, the continual growth of this traffic represents an area that 5G can serve with great ease. Because of its high speed, it can handle vast amounts of traffic. The 4G networks in major cities are already becoming overcrowded, and, at a 46% annual growth rate, that situation is going to become unbearable. Thus 5G may be the only answer to that situation.
This traffic need is a perfect driver for 5G, and it is timely. In other words, the answer to who is going to pay for 5G can well be those people (computers, whatever) who are generating all this increased network usage. Not a new, ‘magic service bullet,’ but just more traffic. This may not (likely will not) be the full-blown, high-frequency, small cell, very expensive version of 5G, but it will be 5G. The ‘dream’ version will develop over the years, in specific areas, as demand is created.
This analyst’s view is that 5G will have a sensible growth path in meeting the increased mobile traffic loads. It will become the answer of choice as to building out cellular capacity in areas as demand requires. This deployment will occur in the five-year window and likely be the lower frequency (mid- and low-bands) version of 5G that offer better coverage, lower capital costs, but are slower and have higher latency. High-frequency, small cell 5G will also be deployed, but over a longer time frame, on an as-needed basis. As the 5G technology becomes mature, and its deployment spreads, applications such as autonomous vehicles and (sooner) IoT transport will start to be deployed.
Clifford Holliday founded the consultancy, A & C Consulting Services. Here he has designed major fiber networks serving customers on three continents. He is also a lead analyst for Information Gatekeepers, Inc, and has published over 50 major reports and multiple books since 1999.