A New Road To 5G Nirvana

By Brian Clark, Managing Partner, M|C Partners

As an ardent follower of wireless-network evolution and investor in wireless infrastructure and ecosystems, I am closely monitoring the “rollout” of 5G and its adoption and use cases.

Two years ago, I remember sitting with some friends and the conversation turned to a buddy’s new iPhone. He was boasting that he already had 5G and that “it worked great.” He was crestfallen, however, when I broke it to him that the “5Ge” displayed on his handset was nothing more than a promised evolution and that he was in fact still riding a 4G network (true 5G was not yet available). Fast forward to today and a new report revealing that one carrier’s “highest speed” version of 5G — after a multi-billion-dollar investment — is only being accessed 0.5% of the time by 5G devices.

So what is going on here? 5G promised to revolutionize the wireless experience, powering self-driving cars, making AR/VR a part of our everyday life, and enabling movie downloads to our iPads in seconds.

This brings me to a central misconception about 5G. We are used to every “G,” every generation of wireless networks, being bigger, better, and faster than its predecessors. But 5G isn’t all those things…yet.

The reality is that building these networks is a lengthy and very expensive undertaking that can take five years or more to reach full nationwide coverage. Additionally, early deployment of 5G has been largely dependent on poorly propagating millimeter wave (“mmW”) spectrum, which often can’t penetrate through leaves on trees let alone a LEED Certified Building. Some of this accessibility pain will ease as carriers begin to deploy recently acquired C-Band spectrum and, in the case of T-Mobile, 2.5 GHz spectrum, which propagates meaningfully better than mmW.

While we’re waiting for this to happen, the true promise of 5G will have to wait a little while longer.

So what then is 5G good at and for, and why do investment firms like mine view it as a door-opener to exciting swathes of investment opportunities? I’m happy to answer these questions, but first a little history.

A Short History of the “G”s: Spectrum and Use Cases

To best understand the evolution, potential, and current situation of 5G, it’s useful to “think spectrum.” Today’s “ultra-high speed” 5G resides in large swaths (100 MHz+) of higher frequency spectrum (sub-6 gigahertz and the much higher “millimeter wave” frequency), whereas the original analog cellular networks were built on relatively small amounts of low-band spectrum (25 MHz at 1 gigahertz and below). This is noteworthy, because signals on low-band spectrum travel really well over long distances and are optimal for penetrating buildings and walls.

Next came the 2 and 3G eras, characterized by incrementally faster speeds and support for larger data volumes, laying the groundwork for text messaging (2G’s killer app), photo sharing (arguably the crown jewel of 3G), and an incipient mobile Internet capability. These eras required approximately twice the spectrum capacity as 1G and the use of new mid-band spectrum.

While this sounds like a logical, predictable drumbeat of higher speeds, larger data capacity, and more intricate and exciting use cases and apps, it’s worth remembering that 3G wasn’t an overnight sensation. Billions of dollars were invested in 3G networks, and initially there was little to show for it.

Verizon launched early with their online “BREW” app store for flip phones where you could buy ringtones and wallpapers. Next came a “WAP” browser that enabled you to look up stock prices and news stories — all on a tiny little screen. All of which may have moved the needle, but not by much.

That changed with the iPhone. And, of course, the rest is history.

I bring this up, because 5G echoes some of this history. On its face, 5G boasts some staggering capabilities: speeds up to 100 times faster than 4G and ability to connect exponentially more devices. But adoption has been slow.

Interest, however, is high, and from an investment point of view, and even a societal one, I believe 5G is going to be another case of “if we build it, they will come.” Given that, here’s who I see coming, and where I see 5G helping them go.

Enterprises to the Rescue

5G’s high-speed + mega-data combo could be just what the doctor ordered for virtual and augmented reality applications and gaming. But while these are certainly some of the sexiest use cases for consumers, I think a more pedestrian one is going to take off first: home broadband. If 5G lives up to its potential, it could prove to be a disruptive “cord cutter,” but taking some home broadband market share is certainly not enough to justify the $100+ billion spent acquiring spectrum and building infrastructure to enable 5G networks.

iPhone- and smart-phone-wielding consumers spurred adoption and innovation in 3 and 4G, but the dynamic is different with 5G. I agree with industry watchers like Dan Hays of PricewaterhouseCoopers that the enterprise might prove to be 5G’s true “power user.” However, with current 5G public cellular networks, it is difficult for enterprises to tailor the coverage, capacity and latency to their specific needs.

Enter the private network. Private 5G networks can provide coverage in specific locations, such as at factory floors, construction sites or even rural farms. According to Grand View Research, the global market size for private 5G networks is projected to grow tenfold from $1.4bn in 2020 to $14.3bn in 2028.

With private 5G, enterprises can build their own networks using unlicensed, leased or owned spectrum, powering advanced communications and applications across their operations, most notably on their manufacturing lines and in their warehouses. John Deere is a great example.

The company recently purchased spectrum for its Illinois-based headquarters and surrounding factories with a view towards connecting shop-floor equipment to the Internet wirelessly, replacing ethernet cables. Notably, Wi-Fi wasn’t viewed as an option, because of its higher latency and inadequate security.

I think this move is huge, because it points to what believers in IoT, the Factory of the Future, and AI-enhanced manufacturing have long desired, but just couldn’t get through public carrier networks: the benefits of super-low latency and support for massive data volumes delivered in-building. This will pave the way for more and more connected devices to talk to each other, to the cloud, and to all lines of business that depend upon them and their output.

As an added benefit, data is the fuel of AI and machine learning. Soon, because of that, the 5G-driven enterprise — commercial, industrial, you name it — will also be the smartest.

About the Author

Brian Clark is a managing partner at M|C Partners, where he has spent over 20 years actively identifying and managing investment opportunities in the mobile, wireless infrastructure (towers and DAS), IoT, fiber and broadband services sectors. He currently serves on the Board of BAI Connect, Connectivity Wireless, Everywhere Wireless, Soniqwave, TowerCom, and has primary responsibility for Omega Wireless and Canopy Spectrum. Past experience includes investments in Cellular One of East Texas, Lightower Holdings, Mobi PCS, PR Wireless, MetroPCS and Triad 700. Prior to joining M|C Partners, Brian worked in Corporate Finance in the Global Telecommunications Group at Salomon Smith Barney. Brian received a B.B.A. with dual concentrations in Finance and Accounting and a Masters in Accounting with distinction from the University of Michigan in Ann Arbor.