5G Winners and Losers: What Differentiates Them?

 1 year ago
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5G Winners and Losers: What Differentiates Them?

Every new technology creates winners and losers, and 5G is no exception. Light Reading talks about this, specifically in terms of mobile operators, but I think we need to look a bit harder at this issue. 5G is important to operators and vendors alike, after all, and it’s also important to use 5G as an example of how a hotly promoted technology does in the real world these days.

The LR article talks about Verizon and T-Mobile as the exemplars of losing and winning, respectively. The story seems to link the Verizon problem with the slowdown the mobile industry faced after a good 2021. The implication, necessarily, is that T-Mobile somehow avoided that problem, and to me that begs the question of why that should be. After all, Verizon is a big telco with a great home territory and an opportunity to create symbiosis between wireline and wireless services. There has to be more to it.

One obvious truth is that wireless has been, for decades, more profitable than wireline and T-Mobile is a wireless operator, where Verizon is both. While Verizon’s territory has higher demand density than rival AT&T and in fact comparable to EU telcos, the fact remains that return on infrastructure in wireline is under considerable pressure. And, unlike AT&T, Verizon hasn’t been on the leading edge of technology modernization for their broadband services overall. It’s my view that this combination has limited the value of Verizon’s dual-model broadband market position.

Another point is that Verizon has tried harder than perhaps any other operator in the US to promote the notion that 5G services are differentiable based on speed. Their push for 5G as something that would matter a lot to consumers set them up to exploit the early 5G hype, which peaked in 2021, and they enjoyed a nice pop based on that exploitation. However, in the world of tech media, every technology is first hyped to the sky and then faces a stark choice. You either have to redefine it so it looks like it’s met its hype-set goals, or you have to turn on it. 5G suffered the latter fate in late 2021 into this year, and so Verizon was vulnerable to the shift. T-Mobile never pushed speed that way, it simply said it had 5G, and that kept it out of the artificial 2021 upside and the real 2022 downside of 5G in the media.

Both T-Mobile and Verizon have 5G home Internet options, and it’s hard to say which of the two is doing better based on released financial data, but the stories I get suggest that T-Mobile is ahead in this space, and for sure they have a broader coverage map (estimated 120 million homes) versus Verizon (20 million homes). The broader availability of T-Mobile helps them justify a more aggressive ad campaign nationally, which of course then helps them sustain their coverage lead. However, Verizon’s home Internet is almost twice as fast, based on actual user experiences. T-Mobile also lacks any wireline broadband option that would compete with their 5G home Internet service, something that may also make their ad campaign more aggressive.

One question this raises is whether a strong 5G-to-the-home option could be the best answer for an operator who wants both mobile and fixed broadband. This question is particularly important for smaller countries and that depend on tourism. Should they consider true wireline, meaning fiber connectivity, for homes and businesses, or should they go bold and try to do everything with 5G, including millimeter-wave technology for home and business? That move could save a lot of money for them.

Another question that may be more pressing to the Tier One operators is what this might mean for business 5G service and 5G Core, including network slicing. Many operators (including Verizon) have hyped up the notion of IoT applications of 5G, meaning sensors connected via 5G. That strategy hasn’t gotten broad traction (or, frankly, much traction) because the great majority of IoT uses fixed installations for their devices, and WiFi, a custom protocol like Z-Wave or Zigbee, or even wiring will serve at least as well and cost less. Network slicing and private 5G have also been pushed to the business community, with highly publicized but very minimal success. In fact, my contacts tell me that the majority of private 5G really going in is simply modernizing private LTE.

Anyone who looked realistically at 5G from the first (as I’ve tried to do) would conclude that it was going to succeed as an orderly evolution of wireless, which is what it really was. There was never any good chance that it would open new markets in the near term, meaning that new stuff wouldn’t drive 5G adoption and that operators couldn’t expect to earn new 5G revenues. The Verizon/T-Mobile comparison in the Light Reading article, to me, demonstrates that operators who didn’t depend much on the hype did better in the long run.

The interesting thing is that there almost certainly are new applications that would require or at least benefit from 5G, and that these applications could boost 5G operator revenues. Why aren’t we seeing anything about this? Two reasons.

First, the media process is always driven by the insatiable desire for clicks and ad eyeballs. Bulls**t has no inertia, unlike real markets, so there’s a tendency for the media to jump way out in front of any tech trend because it’s a new path to those desired clicks and eyeballs. Often the slant that’s taken early on is a slant that’s easy and sensational, which is rarely the case with real-world stuff. Thus, when the right one comes along, application-wise, it sounds pedestrian compared to the hype, so it’s not news.

Second, networking is still trying to get over the Problem of the Twentieth Century, which was that we had more stuff to deliver than we had effective delivery mechanisms. It’s not that it’s trying to solve that problem—we’ve largely solved it—but that it’s still behaving as though the problem existed. When the network was the limiting factor, network technology unlocked a lot of pent-up stuff and never had to give a single thought to how to develop an application. Now it does, and the industry still clings to that Field of Dreams.

These two factors are why hype is destructive to value, and they are both operating in some form or another in pretty much all of tech. We live in an age of ecosystems but we think and plan like we’re in an age of products. No vendor, no operator, can hope to succeed on a large scale without a technology advance on a fairly broad front, but few if any can get their heads and wallets around such an advance. Tech needs to look forward enough, and broadly enough, to secure its own optimum future.

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