A respected UK-based investment advisory has thrown cold water on the promise of 5G mobile technology, finding that it is coming up short of the hype it is generating.
The technology promises gigabit mobile broadband capacity, but New Street research on Tuesday night warned Australian telco operators, investors and regional broadcasting authorities to ignore the breathless excitement coming from vendors and their lobbyists.
The technology has generated excitement because it has the potential to unlock vast tracts of higher frequency spectrum bands for commercial use bringing down license costs for carrier and thereby increasing mobile broadband capacity.
It also has the potential to do something engineers once thought impossible — give a mobile phone its own dedicated beam of spectrum capacity making dizzying speeds faster than 1Gbps a potential reality regardless of how many others are nearby at the same time. It would only be a factor of the spectrum capacity dedicated to the tower equipment.
However, at an event hosted by Australia's communications regulator, ACMA, in Sydney last night New Street senior analyst Andrew Entwistle laid down a long list of 5G technical limits threatening its economic viability.
He said that 5G wasn't a genuine generational step change in mobile technology as 2G, 3G and 4G had been. Furthermore, he said 5G was only likely to share the stage with them in a supporting role, even if it were to meet the most realistic expectations of radio spectrum boffins.
Perhaps 5G's greatest obstacle of all was that, if it succeeded, New Street expected it to kill off the traditional cellular model bringing a world of pain to carriers that have remained safely insulated from the need to cooperate with rivals.
The problem, Mr Entwistle said, was not the technical strides that wireless engineers were making — even though 5G commercial services were still at least five years away. Rather, he said, it was 5G's endemic economic resistance to fitting into current carrier business models.
"This was put very nicely just a couple of weeks ago at a conference we ran in the US. A wireless engineer said that he visualises the 4G (spectrum bands) as farmland that we know how to farm, we know how to use productively, we've been there for a while and its possible to make a good living with that.
"However, the higher frequency bands are essentially uninhabited desert stretching off into the distance. We don't know how to grow stuff there ... At the moment we don't have the tools and techniques for bringing that desert into productive use," Mr Entwistle explained.
At least part of the mystery unsolved is that the high frequency bands are not capable of delivering services over the long distances that lower frequency 3G and 4G bands can. That would increase the amount of investment that carriers would be require to bring their networks up to a level of density capable of accommodating 5G without compromising customer reach.
Possibly worse still, as the "knowns and unknowns" about the technology started to crystallise, he described 5G's capability for "outdoor-to-indoor service" — which includes anywhere without direct line of sight to a tower such as football stadiums and train stations — as "perhaps terminally poor". That would mean that carriers would need to invest in a lot of additional customer premise equipment to get across those membranes making sticking with sunk investment in 3G, 4G and Wi-Fi-supported fixed line broadband far more economically attractive.
"We're not just talking about 5G in the meeting room there. It's complex environments as well," Mr Entwistle said.
The technology's credibility was given one of its strongest boosts in April when Verizon Communications US announced it would deploy a 5G network by 2017 vindicating the wider view that it could act as a super fast successor to current fixed wireless technology and provide an able competitor to fixed line broadband.
However, even here New Street was able to hose down the enthusiasm pointing that Verizon was describing a development path that would initially be 4G and that it had used the 5G terminology without any kind of firm time-frame.
Mr Entwistle said that while it provided a promising alternative the Verizon example highlighted structural resistance to 5G when it came to the balance sheet for wireless-only players.
These companies, he said, were already struggling to compete with rivals operating fixed and wireless infrastructure, particularly when it came to knowing how to absorb backhaul costs associated with short range and Wi-Fi services against revenue from their core mobile services.
The advent of 5G would only increase that disadvantage with the potential for consumers to blow their monthly broadband caps too high.
"At the moment we just about survive mixing paid (mobile) usage and free Wi-Fi usage because we know what we did in the last month and why we're paying more, because we didn't turn on the Wi-Fi or whatever. In the 5G era you will have no idea what your phone has been connected to… Inadvertent usage at 1Gbps you can blow your entire bundle in eight seconds," Mr Entwistle explained.
In the UK Mr Entwistle envisaged a number of forced marriages between fixed infrastructure and wireless-only operators. There, he pointed out, there were enough mating pairs to overcome the challenge.
That was less certain in other markets like the US, he said. Arguably, in Australia, where the federal government has created the NBN to nationalise broadband infrastructure and sell it via single wholesaler the challenge of finding such pairs would be acute.
The same challenges applied to selling what he described as "5G to the rooftop" as an alternative to fixed wireless technology in markets where there was little fixed line broadband competition.
The pain of investing in backhaul to serve 5G nodes would be accentuated by technical challenges — not least the need for customers to be within their line-of-sight and the added cost of sending technicians to install on-premise equipment which would most likely need to be placed on most elevated point on their homes and businesses possible.
"This isn't a simple technical challenge and certainly involves some sort of engineering visit to install. You don't want customers going on their own roof to install it from a number of points of view," Entwistle said.
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