By Shaina Mishkin
June 19, 2020 5:30 am ET
Telecommunication companies are setting the stage for 5G’s long-awaited rollout—but it could take time for consumers to notice a difference, said Craig Moffett, founding partner at New York media and telecom research boutique MoffettNathanson.
“If you stripped away the marketing buzz around it, my guess is the value proposition for consumers is still quite a few years away before it reaches the level of relevance,” Moffett said during Wednesday’s Barron’sInvesting In Tech conference.
While the concept of 5G can be “used as a shorthand for a series of spectrum bands,” the term actually refers to a set of standards for equipment that facilitates low latency, a large number of simultaneous connections, and, he said, ”potentially, at least, very, very high speeds. There’s really three different flavors of 5G, which has to do with their different spectrum bands” that affect speed.
When 5G began, he noted, “the standard-setting bodies wanted it to be an order of magnitude faster than prior generations,” such as LTE, or long-term evolution, and 4G. However, because of the challenge of combining speed and coverage, 5G is currently a trade off, he said. “If you’re going to use an 800 megahertz-wide block of spectrum in superhigh frequency, you’ll get extraordinarily high speeds. The problem is it won’t propagate very far, and so you’ll get it only over very short distances,” like stadiums, arenas, airports, and other urban places.
In rural America, he says, “you’re going to go to very low frequency spectrum. But when you do that, you’re dealing with pedestrian-size blocks of spectrum and the speeds are going to be no better than LTE.”
No company has yet reached the perfect combination of high speeds and broad coverage. “You can either get very good coverage from networks like T-Mobile (ticker: TMUS), but speeds that really aren’t any better yet than LTE, or you can get very high speeds like Verizon (VZ), but with almost no coverage,” he said.
“Neither one is a terribly useful value proposition yet for consumers.” However, when it comes to prospects, he thinks “T-Mobile is likely to leapfrog everyone else. The Sprint deal that they did brought them a lot of mid-band spectrum, and it’s really going to be mid-band spectrum that defines the user experience of 5G.”
However, it could be take awhile. “It’s a chicken-or-egg problem where there aren’t a lot of applications, and you’ve got to figure out what those applications will be,” he said. “Before those applications evolve, you’ve got to have a network that’s deployed—and we’re years away from a network that’s dense enough.”
Moffett compares the wait for 5G to the years leading up to widespread adoption of HDTV, which debuted two decades after standards were set. “I’m not suggesting it’s going to take 20 years for 5G to matter in wireless,” he said. “When the challenge for carriers is as capital intensive as true 5G will be, then you’re going to have to just be patient about waiting for some use cases to develop so the revenue they generate with 5G can grow along with the capital investment required.”