5G – Headed For The Greatest Train Wreck In Tech History

5Gs seems to be headed for the greatest train wreck in modern tech history. Over-hyped, rushed to market, incomplete standards, lack of vendor interoperability, no real business case or killer apps (not until ultra-low latency and ultra-high reliability are standardized and implemented), operators have no serious plan to monetize 5G and recover their build-out costs, small-cell permit and placement objections/NIMBY (Not In My Back Yard), power issues, massive fiber deployments needed in urban areas for mmWave small-cell backhaul, and many other caveats.

It is basically 5G. Think of it like when electricity replaced steam. Who is going to win, who is going to lose? The reason that you see so much international competition for the leadership of 5G is because it is so important to the fundamental way in which economy works. The first 5G wave will be a handset wave, which is very good for us, and will continue for a long time. But there is a second wave – with artificial intelligence, the cloud, and all that data. That second wave makes me think, Wow, we are on the cusp for something very big!

5G rollouts hit slow patch

The rollout of new 5G wireless networks is showing signs of slowing, denting near-term sales prospects for some networking equipment makers, and potentially delaying access for some consumers to the lightning-fast data speeds the technology promises.

Industry stalwarts say there is no common cause for the slowdown seen across multiple markets, with various countries affected by different dynamics. In some cases, the equipment makers say, telecom providers want certainty that the investments made will reap returns before ploughing more money into further infrastructure.

Investments required to deploy 5G cellular networks are significant, in part because of how the systems operate. To blanket a city, 5G requires more base stations and local relay points than traditional communications infrastructure to connect devices to the network.

Research firm Gartner Inc. estimates companies spent more than USD 2 billion on 5G wireless infrastructure last year, more than triple the level in 2018. But spending growth is expected to slow somewhat this year, reaching about USD 4 billion.

Delays in the build-out of 5G infrastructure in Asia and the US are causing the slowdown. South Korea was a trailblazer in 5G adoption, and operators that invested heavily in the first half of 2019 have since eased up. Samsung Electronics Co. expects its domestic 5G business would decline this year though grow elsewhere.

The 5G rollout in the US is somewhat slower than expected because some cities and towns oppose the massive number of antennas needed to deliver ultrafast 5G data speeds to consumers. Some have banned antennas in residential areas, and a group of cities is suing the Federal Communications Commission over its requirement that cities make decisions on approval of 5G antennas within 60 or 90 days.

It is basically 5G. Think of it like when electricity replaced steam. Who is going to win, who is going to lose? The reason that you see so much international competition for the leadership of 5G is because it is so important to the fundamental way in which economy works. The first 5G wave will be a handset wave, which is very good for us, and will continue for a long time. But there is a second wave – with artificial intelligence, the cloud, and all that data. That second wave makes me think, Wow, we are on the cusp for something very big!

5G rollouts hit slow patch

The rollout of new 5G wireless networks is showing signs of slowing, denting near-term sales prospects for some networking equipment makers, and potentially delaying access for some consumers to the lightning-fast data speeds the technology promises.

Industry stalwarts say there is no common cause for the slowdown seen across multiple markets, with various countries affected by different dynamics. In some cases, the equipment makers say, telecom providers want certainty that the investments made will reap returns before ploughing more money into further infrastructure.

Investments required to deploy 5G cellular networks are significant, in part because of how the systems operate. To blanket a city, 5G requires more base stations and local relay points than traditional communications infrastructure to connect devices to the network.

Research firm Gartner Inc. estimates companies spent more than USD 2 billion on 5G wireless infrastructure last year, more than triple the level in 2018. But spending growth is expected to slow somewhat this year, reaching about USD 4 billion.

Delays in the build-out of 5G infrastructure in Asia and the US are causing the slowdown. South Korea was a trailblazer in 5G adoption, and operators that invested heavily in the first half of 2019 have since eased up. Samsung Electronics Co. expects its domestic 5G business would decline this year though grow elsewhere.

The 5G rollout in the US is somewhat slower than expected because some cities and towns oppose the massive number of antennas needed to deliver ultrafast 5G data speeds to consumers. Some have banned antennas in residential areas, and a group of cities is suing the Federal Communications Commission over its requirement that cities make decisions on approval of 5G antennas within 60 or 90 days.

The protracted antitrust battle over T-Mobile US’s merger with Sprint also affected the pace of 5G spending. The two agreed to combine nearly two years ago, but it was only recently that a federal judge gave the go-ahead, siding with the companies over states that had raised antitrust concerns. The companies have yet to formally close the deal. As the companies were awaiting the merger outcome, T-Mobile told contractors in a letter last fall that new work orders were postponed. Michael Sievert, T-Mobile’s COO, told The Wall Street Journal that engineers overshot their budget at the end of 2019, but the company would ramp up investment again early this year.

Some makers of networking equipment that pipes data to and from new 5G antennas are still largely awaiting the anticipated spending spree. Juniper Networks Inc. CFO Ken Miller said in one of his interviews that reaping the 5G opportunity would have to wait until 2021 or 2022. I think it is going to be a little slower and a little longer spending cycle than maybe people predicted a year or two ago, he said.

Xilinx Inc., a San Jose, California, chip maker, also cut its sales growth outlook and announced it was reducing its workforce by 7 percent because of US restrictions on some trade with China, and a slower 5G outlook. CEO Victor Peng said many telecom operators that spent heavily to put the initial 5G networks in place now are waiting to see if the spending generates anticipated returns before plowing more money into the infrastructure.

Ericsson AB admitted it has encountered higher 5G-related costs and seen a slowdown in North America sales that it attributes partly to Sprint-T-Mobile merger delays. Ericsson CEO Börje Ekholm said concerns around the use of Huawei Technologies Co. equipment also have affected deployments. The US has been pressing allies not to use Huawei’s 5G gear because of cybersecurity concerns about the Chinese manufacturer – the concerns Huawei has rejected.

Several countries have been reviewing what role Huawei equipment should have in their systems because of US concerns. The UK, after months of debate, recently said it would allow some use of Huawei equipment in its 5G infrastructure. Huawei late last year struck a 5G deal in Germany.

Some industry analysts expected the US campaign to stem the use of Huawei equipment or to boost other vendors, such as Ericsson. Ekholm said, this whole notion that this was a win for Ericsson and Nokia so far has not materialized. Some rollouts in Europe also have been delayed because governments have not completed the spectrum allocation to operate such systems.

Despite the recent slowdown in equipment purchases, executives remain bullish on longer-term 5G prospects. Handset makers are ramping up plans for new devices –
Gartner forecasts 221 million 5G smartphones will be sold this year. Samsung, one of the world’s largest smartphone maker, recently unveiled three Galaxy S phones with 5G capability.

Not every network operator is taking a pause, either. AT&T Inc. CEO Randall Stephenson said the company’s 5G network covered 50 million people and was expected to reach the entire US in the second quarter. “We are not slowing down,” he said.

Verizon Communications Inc. chief executive Hans Vestberg last month projected fast growth of the company’s 5G network, though he said it would be more pronounced next year.

In China, a key market for 5G handset sales, network rollout plans remain broadly on track, according to analysts. Bernstein Research telecom analyst Chris Lane said Chinese operators were building hundreds of thousands of cell towers and were not going to slow down, barring any effects of the coronavirus outbreak.

5G sends a confusing signal

Marketing hype remains hot for next-gen wireless technology, but network expansion seems to have slowed. Part of the problem is that services marketed under the 5G label can vary widely in terms of speed and availability. Some are not much faster than existing 4G networks. And the fastest – including those using millimeter wave technology – currently are available only in certain dense urban areas owing to their signal limitations.

Meanwhile, 5G devices remain expensive. Samsung’s new 5G phones range in price from USD 999 to USD 1399. The lowest of those would be the cheapest price seen in the US for a 5G phone so far, but still a bundle for a product offering an unclear benefit. Samsung itself noted previously that smartphone prices creeping above the USD-1000 range were driving market resistance.

5G will see its biggest test this fall, when Apple Inc. is widely expected to launch its first 5G iPhones. Many assume this will spur adoption of the technology – Apple’s share price has nearly doubled in the past 12 months in part based on hope for a 5G-driven supercycle. But Apple’s phones would not be cheap either, given the cost of 5G chips and Apple’s famous focus on maintaining industry-leading margins.

The onus will remain on carriers to get 5G services built out enough to attract consumers to invest in the phones. In the US,

Verizon, AT&T, and T-Mobile all have broadcast aggressive plans in this vein for the year. Like its predecessors, 5G will one day be the default standard for all wireless devices. A growing number of companies and investors are counting on it happening sooner than later. That looks risky.

The author, Alan Weissberger is the content manager and principal contributing author to IEEE ComSoc blog since March 2009.