The Race for 5G Dominance is Heating Up
The Winner Could Shape the Global Economy for Decades
By Yigal Newman
Senior Advisor to Finro
5G is becoming a reality. It’s being tested, improved, and rolled out in various locations around the globe. Monaco is the first country to be fully fitted with 5G, thanks to technology from the Chinese giant telecom Huawei. Several European countries have introduced 5G service.
In the U.S., Verizon launched its 5G network in April 2019. It’s currently available in limited parts of Chicago and a few other locations, where they’ve experienced speeds of up to 1.4Gbps, which is significantly faster than 4G's theoretical top speed of 300Mbps (although average speeds tend to be below 100Mbps).
AT&T rolled out its 5G network to 19 cities across the States, but it still doesn't offer any 5G phone – the only option for now a 5G Netgear Nitehawk mobile hotspot. T-Mobile has yet to launch its 5G network in the U.S., but it previously said it would bring 5G to 30 cities, starting in New York City, Los Angeles, Dallas, and Las Vegas.
Initial reports highlight deficiencies in 5G networks. Coverage is spotty and drops entirely indoors. As the kinks are worked out, it’s not expected that 5G will be available to consumers in the U.S. until 2020.
The move to 5G will not merely create a faster experience on our devices, like the move from 3G to 4G/LTE. It's the next (fifth) generation of cellular technology, which promises download speeds 10 to 100 times faster than current 4G networks. The key factor here is ‘low latency,’ the response time between when you click on a link, sending a request to a network, and when the content is delivered to you.
In the ultimate 5G world nearly everything will be connected and controlled remotely, referred to as the IoT – the Internet of Things. This will unleash the disruptive force of artificial intelligence on a host of applications like autonomous vehicles, surgical instruments, and industrial factories.
China and the U.S. are leading the race for first place in 5G readiness, according to a report by the Cellular Telecommunications Industry Association (CTIA), which represents the U.S. wireless communications industry.
"5G is the platform for tomorrow's economy," said Meredith Attwell Baker, president of the CTIA. "It's going to transform everything from education to AI, to medicine, and the industry is so competitive because of that."
A big challenge in roll out of 5G is creating the physical infrastructure required for reliably running such a network, not just in urban areas but also in currently unconnected rural areas. The importance of winning this race is due to the expectation (rooted in the experience of past network upgrade cycles) that in the process of winning the technological race, the winners will control much of the IP that will enable economies to grow into the new technology.
Let’s take a look at how the world’s top three economies are pursuing 5G:
A major issue is the capital costs of installing 5G infrastructure and software upgrades. Effective deployment will require hundreds of thousands of new cell sites, new or upgraded connective nodes and central switches, new software and redesigned mobile devices. Cost estimates run into the hundreds of billions of dollars for the full transition.
There is an intense effort from the U.S. government and the tech community to “win the 5G race” so the U.S. can maintain its global technology leadership role. The critical nature of the battle between the U.S. and China for 5G dominance was underscored when the U.S. had Canada arrest Huawei CFO Meng Wanzhou for allegedly doing business with Iran, bank fraud, and theft of technology.
China announced 5G to be a national priority imperative. With the closest thing to a centrally planned economy and a demonstrated willingness to engage in industrial espionage (i.e. Huawei), one should never discount the ability of China to bridge an existing technological gap and leapfrog an incumbent. U.S. and China trade talks are currently stalled over the question of Huawei, and several other countries are debating whether to use Huawei technology in 5G rollouts.
A recent Citigroup survey found that 87% of Chinese consumers say they definitely or probably will purchase a new smartphone in 2019. More than 70% of Chinese buyers said they would replace their current phones to adopt 5G. Asked about the features they wanted in a new phone, China consumers named 5G first. For U.S. consumers, 5G ranked fourth, behind superfast charging, wireless charging, and a new, upgraded waterproof standard.
Following the success of 5G trials in Tokyo in 2016, Japan is planning to have segments of a national 5G network at the 2020 Olympics. It is using this important international event for additional motivation to deploy 5G. It is also being inventive, using 208,000 traffic signals throughout the country to install relay devices for a 5G network covering urban and rural areas. Japan's government approved plans by four mobile network operators to build superfast fifth-generation wireless networks (5G), with investment set to total 1.6 trillion yen ($14.4 billion) over the next five years.
Despite the efforts of China, Japan, South Korea, and others, I suspect the U.S. will be victorious in the 5G race, albeit with what will eventually be considered a smaller margin and smaller market.