5G – Wide open spaces

Coverage map lays bare the reality of millimetre waves.

  • Verizon’s 5G coverage map in the USA (see here) shows that the only time users are going to get reception is when they are outdoors with line of sight to the basetstation and, most likely, stationary.
  • Verizon’s 5G coverage map in the 18 US cities that it covers reveals extremely patchy coverage where it appears that each basestation is only capable of providing service within a short distance with line of sight and with no indoor coverage.
  • Furthermore, it also appears that the presence of trees also blocks the signal as evidenced by the coverage of Battery park (see above).
  • In this example, it would appear that there is a basestation on State Street that extends some coverage into the park itself.
  • When one looks at a satellite image of Battery Park it becomes clear why only a portion of the park is covered as there is an empty space next to State St (see here) and then a line of trees.
  • It looks like it is the trees that are preventing the signal from propagating further into the park.
  • This comes as no big surprise because Verizon is deploying 5G at 28Ghz and 39Ghz which are in the millimetre wave band.
  • This refers to frequencies between 28Ghz and 300Ghz which is where 5G has really been designed to operate.
  • The key differences between 4G and 5G that make them separate standards are coding changes that have been implemented to ensure very low latency and high efficiency in millimetre wave frequencies.
  • Millimetre-wave is great for throughput and high capacity as the extremely rapid oscillation of the radio wave means that vast amounts of data can be transported at very high speed.
  • However, the trade-off is that propagation (how far the radio wave can travel before its energy is absorbed by the air or obstacles) is very poor.
  • This is why large numbers of basestations are required which can only offer very limited coverage outdoors and almost none at all indoors.
  • This probably means that there will also be no in-vehicle coverage either.
  • Consequently, Verizon’s 5G service is going to be next to useless because, in almost all use cases where a user might want to make use of this bandwidth, there will be no coverage.
  • This is why most operators are also rolling out 5G at frequencies between 6Ghz and 3Ghz.
  • This will give much better coverage, but one also finds 4G at these frequencies which will provide comparable performance given how similar the standards are.
  • Hence, the added value that 5G brings to the table for the user is highly questionable.
  • I continue to think that the real impetus for rolling out 5G is fear of being left behind and the reputational loss that might occur as a result.
  • This is being exacerbated by the growing rivalry between the USA and China where China is rolling out 5G as fast as it can.
  • This will put pressure on US operators to accelerate their roll-out in spite of the low or negative return that will result.
  • The real winners here are Ericsson and Huawei who are winning the lion’s share of this spending.
  • Limitations on Huawei’s infrastructure business look likely to be limited to the core network rather than the radio access network and it is in the radio where most of the spending is to be found.
  • Ericsson is where I would put my investment exposure in 5G if I was forced to invest in this theme.

RICHARD WINDSOR

Richard is founder, owner of research company, Radio Free Mobile. He has 16 years of experience working in sell side equity research. During his 11 year tenure at Nomura Securities, he focused on the equity coverage of the Global Technology sector.