If you live in an American city, your cell phone employs a fourth-generation wireless protocol called 4G.  Data rates using the 4G network enable content-intensive applications such as streaming and mapping.  4G signals broadcast long distances and their radio waves are able to penetrate buildings.  Although 4G has improved the mobile experience, the technology has limitations as data quantities rise, and data consumption rose nearly 50% last year.  To handle the greater volume, a new generation of wireless technology is required.  It has the imaginative name of 5G.  The tradeoff to achieve higher speed appears to be shorter range, and that short range will make 5G capital intensive.

Capital spending to support the roll-out of 5G, began in earnest in 2018.  The previous technology upgrade, from 3G to 4G, required more than $300B in domestic investment over seven years.  The 5G deployment is expected to have a greater expense.  With new technology being deployed in the field, it might surprise you to learn that total US wireless capital spending is expected to be flat each of the next two years.  Absent growth in the industry, the gradual shift in capital spending from 4G to 5G will create winners and losers among the equipment providers.  With acknowledgments to the film “All the President’s Men,” let’s follow the money.

Consumers are expected to welcome the first 5G smartphones when they launch later this year.  Once fully deployed, 5G is expected to increase current data speeds by 10X up to 100X.  The advantage of this technology is a larger “channel” for data traffic.  Large channels are expected to give consumers nearly instant movie downloads and sufficiently low latency for live play of fast-twitch video games.  However, those phones will not work without infrastructure investments, and those investments have been partially made in only 16 cities nationwide.  5G will require cell tower upgrades and a near quadrupling of cell sites as early testing suggests a maximum range of 600 feet from each site, two-thirds of a football field.  Each of those sites requires power, backup power, and backhaul equipment to be functional.

5G Playbook:

  • Quadruple the number of cell towers.
  • Increase fiberization from 20% to 80%.
  • Initialize radio network security.
  • Redeploy computing back to the edge.

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