How will 5G deliver on its potential?
The pandemic made businesses and users more reliant on wireless services and paved the way for the 5G deployments. Here’s why it’s hard to predict just how beneficial 5G will be.
There is no doubt that 5G, once fully deployed, will radically transform the world. Smart cities, self-driving vehicles, and advanced robotics are barely the tip of the iceberg.
However, 5G is also expected to require $275 billion in new capital expenditures by mobile operators, according to CTIA, a wireless communications industry trade association, and there has yet to be a defined ROI.
The world is a different place than before the COVID-19 lockdowns of March 2020. How we live has changed significantly as well. Our reliance on wireless services and its integration into our lives has increased dramatically, as has the demand for more speed and bandwidth.
It would be negligent to think that as vaccines roll out and the U.S. reopens, wireless data traffic will decline. If 2020 has shown anything to the wireless industry and the rest of the world, it’s that both the consumption and importance of mobile technology will continue to increase.
Slow networks have become more than just an inconvenience — they’ve become unacceptable. Operators are working more rapidly than ever to provide users with fast networks. In many ways, the pandemic may have been the catalyst needed for operators to hasten their 5G infrastructure and deployment, as evidenced by the $81 billion C-band spectrum auction this spring.
Near-term impact of 5G technology
As an application-based technology, we won’t know the full ROI of 5G until it is fully deployed, which will take five to 10 years. Until then, we can judge 5G’s near-term impact and ROI in mainly two ways: how today’s applications perform on 5G networks, and how 5G affects economic opportunities during its deployment.
Even while 5G is application-based, businesses must recognize that today’s mobile applications will not disappear once the next generation of wireless is fully deployed. Applications should experience a boost in performance on 5G, such as faster downloads, enhanced streaming and gaming, and more reliable video conferencing. Operators who can measure and monetize this difference may be able to gain more market share.
The other lens in which to view 5G’s near-term impact is how it benefits the economy. Currently, the wireless industry contributes close to $500 billion in GDP to the U.S. and employs 4.7 million people. These numbers are poised to grow with 5G. According to a study from Boston Consulting Group, 5G will contribute anywhere from $400 billion to $500 billion in GDP to the U.S. economy and create up to 1 million new jobs from 2020 to 2030.
While these numbers may seem impressive, it’s important to regard them through a historical context. The estimated economic impact of a new wireless network is usually undervalued. Early research at the start of 4G rollouts suggested that U.S. investment in 4G networks would contribute around $73 billion to $151 billion in GDP from 2012 to 2016 and 371,000 to 771,000 new jobs. By 2016, however, 4G had contributed nearly $445 billion in GDP. Over the course of the „4G decade,“ it contributed more than 20 million jobs.
To that end, the true impact of 5G on job creation and GDP is likely to be much higher and more critical than we currently realize.
Researching 5G’s potential
While the near-term impact of 5G is quantifiable by application performance and GDP growth, it doesn’t take into account the broader effect of the 5G ecosystem. However, for 5G to gain a true foothold, the industry must prove the technology’s business case. Why should investments continue to pour into the sector without a proven use case? How can one develop use cases for 5G without using 5G technology? It’s the ultimate chicken-and-egg scenario: What comes first, the technology or the application?
With 4G, it was the technology. Application versus network was never an issue with 4G because it was content-driven. Consumers wanted faster speeds to stream movies, go online, and integrate mobile benefits into their lives. However, while 4G represented a huge step forward for how cellular users consumed content, the technology rocketed only after the emergence of applications that changed how cellular users lived. The emergence of those applications required developers to understand what the technology could do. Once that happened, we saw the launch of Uber, Waze, and Venmo among other applications, all of which took advantage of 4G’s ability to transmit data and locations.
Once a business model is established that takes advantage of 5G’s connection capabilities, the ROI will likely be greater than anyone predicted.
When it comes to 5G, it’s very different. Unlike 4G, 5G lacks a foundational network for developers to begin creating applications. That’s because we don’t yet know what 5G can truly do. Nor do we know how applications will take advantage of its near-zero latency and its IoT capabilities.
As a result, it’s impossible to judge the true impact of 5G. The possibilities are endless, as are its applications. At its core — and perhaps this is an oversimplification — 5G is about real-time connections and connection to everything. Once a business model is established that takes advantage of 5G’s connection capabilities, the ROI will likely be greater than anyone predicted. Just as Uber created a ride-sharing market, which would have been impossible without 4G, businesses that listen to their customers can find similar niches with 5G.
What comes next
Each new generation of technology has brought improvements with faster and more reliable connections. Since the launch of 4G/LTE, wireless services have transformed the way people play, work, and live. However, while these advances have been astronomical, 5G will overshadow them.
No one can predict what the future will hold, but as 5G grows and matures, there’s no question that it has limitless potential. The question is how and when the potential of this technology will become fully realized.
Tom Leddo Chief Strategy Officer Bio