5G – Rotten race.

A race not worth winning.

• With Mobile World Congress just around the corner, the focus for the next week or so will be back on 5G as this will be all that anyone has to talk about next week.
• At the same time, Huawei will be on a massive charm offensive to convince regulators and mobile operators that its equipment is not full of backdoors and that it is not an agent of a Chinese spy agency.
• However, what this also reveals is that Europe is a laggard in the 5G race but contrary to most opinion, I see this as a good thing as I think the 5G race is not worth winning.
• This is because:
  • First, 4G: is an excellent technology which is capable of delivering to handsets more bandwidth than almost any consumer is going to need in the foreseeable future.
  • I also do not see 4G capacity as being hugely constrained.
  • Furthermore, 5G is unlikely to make a difference to the user experience other than to increase the size of the handset as well as the price paid for the handset and for data.
  • Therefore, I think that in the initial phase, 5G makes no sense for the consumer.
  • Second, Latency: The real promise of 5G is 1ms latency but with LTE able to achieve 10ms latency, a use case is hard to find.
  • Consumers are not going to notice and RFM research has found that the online gaming and automotive use cases for 5G do not stand up to scrutiny (see here).
  • What does make sense is industrial IoT for robots that need adjustments in real-time, but this will take time to materialise.
  • Third, millimetre waves: which is the spectrum above 28Ghz and here 5G has a lot to offer both in terms of huge throughput and spectral efficiency.
  • However, at these frequencies getting the signal to the terminal and back again is a real issue as almost anything will absorb the signal.
  • Furthermore, antenna design becomes a real issue because glass and metal smartphones will absorb the signal long before it ever reaches the guts of the phone.
  • Users will not be willing to put up with ugly plastic blobs all over the surface of their devices meaning a lot of radio engineering ingenuity will be required.
  • This is why the initial roll-outs are not at 28Ghz but around 3-6Ghz to which I ask the question: would it not be better just to roll-out 4G to cover those frequencies?
• The net result is that the best use case remains fixed wireless access.
• This is particularly the case in the USA where the last mile is not very competitive creating a big economic incentive for anyone who can cost-effectively offer reliable and fast last-mile access.
• Having the receiver fixed on the outside of the building can solve many of the technical problems that occur when using millimetre waves and allow the antenna technologies deployed in 5G to be used to best effect.
• However, this is not very exciting and so the industry is pushing a story of 5G being a must have and that anyone declining to deploy 5G will end up losing subscribers hand over fist.
• It is this fear of being left behind that is driving the roll-out of 5G just as it drove the roll-out of 3G and that did not turn out well for anyone except the governments who collected fat licencing fees.
• Consequently, I expect a flurry of very thin roll-outs and then a pause while everyone works out what to do with the technology causing a dip in infrastructure spending.
• As the technology matures and new use cases emerge, I can see demand picking up slowly again resulting in a more sustained and demand-driven roll-out.
• This is not where expectations have been set and I can see 5G-hyped share prices taking a tumble once this reality asserts itself.
• Hence, I see no problem in Europe being left behind in the race to 5G because, in my opinion, there is no rational reason to win it other than for the mere sake of appearances.
• Ericsson has recovered really well since the lows of 2017 and so I would be looking for an opportunity to exit before the 5G balloon attracts some lead weight.