5G – Silver lining.

Upgrade demand could help 5G.

• Despite British Telecom’s denials and the efforts of the broadband providers in the USA, it is clear that the Internet is creaking under the strain of the great home working and e-learning experiment opening further the way for 5G’s best use case by far.
• British Telecom has denied that its network is under pressure and in the core network this is certainly the case, but it is not in the core where the bottleneck is to be found, it is in the last mile.
• Much of the UK still uses a technology called ADSL which sends internet signals down the old copper wires which rapidly degrade depending on the length of copper being used to reach the user.
• The USA has some fibre, but many users still rely on the old cable TV infrastructure in the last mile.
• Furthermore, while the core network in the UK appears to be coping well, the USA has not been so lucky, and many cities are recording a substantial decline in average download speeds.
• New York has seen a 24% decline in the last 10 days while Austin, San Jose and several others have seen a decline of 40% or more.
• A very large piece of the surge in traffic is due to video and YouTube, Amazon and Netflix have all downgraded the streaming quality to help the networks cope.
• As the lockdown continues, user frustration is going to increase meaning that when the crisis has passed, there will be pent up demand to ensure that domestic internet is more robust than this crisis has proved it to be.
• A few opportunities include:
  • First and foremost, 5G: I have long argued that one of the best use cases for 5G is fixed wireless access.
  • 5G at millimetre wave frequencies is more than fast enough to handle domestic internet demand.
  • This combined with the opportunity to have line of sight to the basestation and a large antenna array on the side of the building should give more than enough bandwidth even with significant signal attenuation.
  • Hence, when business resumes, I can see a lot of frustrated users ready to give this a try.
  • Second, WiFi: WiFi is everywhere but as a technology for transmitting internet signals, it is woefully inadequate.
  • In countries where houses are made of wood (USA), it performs reasonably but in other countries that use brick, stone or concrete it is dreadful.
  • Furthermore, it operates at crowded frequencies and domestic appliances such as microwave ovens can interfere with it.
  • WiFi often causes download speeds to be less than half than what the user’s internet premises are capable of delivering.
  • Hence, I suspect that there will be a wave of home upgrades once the crisis has passed.
  • This is likely to include both home router upgrades to mesh networking solutions as well as increased demand for ethernet cable wiring in homes.
  • Third, home offices: with a large proportion of the workforce hunched over tiny laptops on kitchen counters productivity will be poor and necks and shoulders will be sore.
  • Hence, there could also be a spike in purchases of monitors, desks, webcams, audio headsets once this has is all over.
  • Visits to chiropractors are also likely to increase.
• To date, no one has really taken working and learning from home very seriously, but this is changing now that this is very fresh in the memory of several billion people.
• With the shops closed and e-commerce only selling essential items users are going to make do with what they have but once this has passed, I suspect there will be a burst of purchasing.
• Furthermore, like the 1920 flu epidemic, Covid-19 is likely to come in waves with the next one coming as winter sets in in the Northern Hemisphere.
• Hence, it is not impossible that working from home and homeschooling become a regular occurrence until the virus is properly understood and a vaccine is found.
• This could further increase a wave of upgrades in domestic networking.
• Netgear, Cisco, TP-Link, Poly (Plantronics), Logitech are the home networking and home office upgrade beneficiaries.
• Huawei, Ericsson and Nokia will also benefit should there be a large upswing in interest in 5G as a fixed wireless solution.
• US ISPs would also benefit from taking market share away from the cable companies unless they too, get in on the act to protect their established position.
• That being said this is a longer-term trend and I still think that the overall market has further to correct given the coming collapse in earnings and the very low probability of a quick bounce.
• I am not coming back to the equity market yet.