5G mania has swept the wireless industry, regulators and tech enthusiasts — but the hype is getting ahead of both demand and the nascent reality of the networks, Axios' Kim Hart reports.
Why it matters: The promise of 5G — with mobile broadband speeds up to 100 times faster than current 4G networks — and the pressure to keep up with global competitors are impacting major merger reviews and city budgets. But unrealistic expectations for 5G could lead to big disappointments.
Between the lines: It's always hard to anticipate how and when new technologies will catch on. No one predicted Uber and Airbnb would spring from 4G networks and the smartphone, for example.
- Yes, but: When 4G launched, the U.S. wireless market still had plenty of room to grow and revenue margins were relatively high. So the telecom industry's promotion of 4G service was more measured and less hyped.
- Now the wireless market is mature and has little subscriber growth (around 1%), so telecom companies are searching for ways to wring new revenue from current subscribers.
- That has driven the industry to push flashy marketing campaigns to sell consumers on the benefits of 5G.
Here's how the hype is playing out:
1. Unclear business case: The technology hasn't yet materialized on a large scale, and many business leaders aren't convinced there will be real use cases anytime soon.
2. Lack of consumer demand: According to recent HarrisX research, most business decision makers (72%) believe 5G will be worth paying more for, but consumers are split on its value.
- Only 24% of wireless subscribers say they would switch to a new carrier for 5G, and only 19% say they'd switch to a new device to access 5G phones.
3. Enormous investment: Without clear paths to revenue, analysts worry about lackluster return on investment for big carriers who've pumped billions of dollars into network upgrades.
4. Spotty rollout: 5G is rolling out commercially, but the highest speeds of 5G come with the drawback that its signals don’t travel far. This means 5G is only coming to parts of a few cities for each carrier, in most cases.
5. Global race: Mobile carriers have gained leverage over policy decisions that bolster their 5G ambitions by invoking the specter of a Chinese victory in the wireless competition.
6. Merger review: 5G has even become a factor in the proposed merger of T-Mobile and Sprint. To convince regulators to approve the deal, T-Mobile has promised to cover 85% of rural Americans with its 5G network within 3 years, and 90% in 6 years.
The bottom line:
"The hype is so preposterously misaligned with economic reality that inevitably there’s going to be this disastrous crash in expectations and people are going to call it a failure."
"In fact, it’s not a failure other than inappropriate expectations. It will actually be better than 4G and it will be an impressive next step for the network."— Craig Moffett, founding partner, MoffettNathanson Research
Go deeper: Kim has more here.