What is 5G and Why is It a Big Deal?
One of our biggest complaints – outside of HR recruiters, crappy data research firms and overhyped marijuana markets – is the lack of reliable, high-speed internet everywhere around the world. Some of our MBAs are keen travelers, donating as much plasma as humanly possible to fund those cheap AI-predicted airfares on sketchy airlines that employ decommissioned Russian jetliners. We often find that it’s still not possible to work while cruising down the Mekong River or even flopped into a two-star hotel in Manila because of unreliable WiFi. While companies like Google and SpaceX promise to launch balloons or satellites to bring the internet to every corner of the world, those schemes are still in the works, and would support speeds closer to the medieval days of dial-up. That’s why we’re excited that the hyper-fast world of 5G is about to begin.
What is 5G?
While we could geek out on the history of wireless communication and start our story back in the days of ham radio, let’s focus on some of the more salient bits about 5G technology before we talk about why retail investors should be paying attention to this development. Most of us are probably familiar with 4G, in as far as those little letters sometimes appear on the top right or left of our smartphones. Or maybe you see the letters “LTE” instead. (If your phone reads “3G,” then you need an upgrade.) The G simply stands for generation, meaning 4G is the fourth generation of wireless technology. (LTE is sort of 4G.) So, class, that means 5G is what? Right, the latest (and possibly last) generation of wireless communication.
This generational thing has been on a roughly decadal time frame, when 2G hit the scene around 1991, followed by 3G in 2001 and 4G by 2009. There’s a whole story there about esoteric acronyms, regulating bodies, international standards and air interfaces that we won’t get into. (PC Magazine dives into the nuts and bolts of the thing here.) What is relevant is that 5G promises higher speeds, higher capacity, and far lower latency than 4G. How fast? Experts expect internet speeds to be as much as 20 times as fast as 4G. The latency – the time between you hit “enter” and the data starts to stream in – should be nearly zero.
Why is 5G Faster and Better?
What’s behind this new warp drive in wireless communication? While the new 5G worldwide standard will still make use of existing radio frequencies, it is also pushing into the millimeter-wave band on the electromagnetic spectrum. Those radio frequencies (from about 30 to 300 gigahertz) are much higher than current cellular networks, which top out at less than 6 gigahertz. Those higher frequencies have a huge capacity for faster data speeds, in part, because currently there is little competition for large swaths of those frequencies.
There are other advantages to using millimeter-wave frequencies, according to Lifewire. For example, they are highly directional, meaning less chance of interfering with other signals or wasting power beaming radio waves in a scattershot manner like current 4G towers. 5G can also support more devices, about a thousand more per meter than 4G.
Of course, there are downsides: Speed comes at the cost of range. Millimeter-wave cellular towers have to be about 500 feet apart, Scientific American reported, meaning 5G will need a lot of infrastructure, such as more cell transceivers and probably repeater stations to boost signals. These ultra-high frequencies are also stopped short by humidity and rain, and usually, require a direct line-of-sight for devices to receive the signal. In other words, cell reception paddling down the Mekong will probably still be pretty spotty for the foreseeable future.
When Will 5G be Available?
5G is available now. Sort of. Verizon (VZ) was technically the first out of the gate on Oct. 1 when it released a 5G home internet service for Houston, Indianapolis, Los Angeles, and Sacramento. That’s obviously different from mobile services that we normally associate with cell towers and smartphones, and the broadband service requires special equipment to be installed by professionals for it to work. AT&T (T) is widely expected to be the first carrier to roll out true 5G mobile service by the end of the year to about a dozen cities. Of course, no one yet even owns a phone that is compatible with the new service, so AT&T will sell a hotspot device called a puck that connects devices to the 5G signal via WiFi, according to the Motley Fool. Compatible smartphones are expected to hit the market by next year.
Why is 5G Important?
Think of the most congested city on the planet. Then imagine it had an expressway a hundred lanes across with access to anywhere you wanted to go. That’s a bit of what it might be like as 5G coverage begins to expand around the world. But the impact goes far beyond being able to stream Netflix seamlessly while stuck in real-world traffic in Bangkok or New York. 5G will enable autonomous cars to operate, connect trillions of devices and eventually turn your own handheld computer into a supercomputer, because all of the heavy processing can be done remotely.
We dreamed of a world without buffering, and here it comes.
Who Benefits from 5G?
The short answer is everyone – but obviously, there will be bigger winners than others. The major telecom carriers like AT&T, Verizon, Sprint (S) and T-Mobile (TMUS) should certainly reap the benefits. In fact, Sprint and T-Mobile have argued that their proposed merger is essential for a successful transition to 5G. Another big winner should be Qualcomm (QCOM), which has led the charge into the 5G future. Its revenues largely come from smartphone chips and related mobile technologies, and the company has been preaching for quite some time how important a 5G ecosystem will be to grow the Internet of Things. Meanwhile, a company like Cisco (CSCO) is pivoting away from its traditional hardware of switches and routers to cloud services and software, including solutions that will provide 5G functionality without hardware upgrades.
We anticipate – in fact, it’s already happening – a whole industry of products and services to evolve around 5G communications. There are even some startups popping up that are building business models around the anticipation of 5G arriving.
Some 5G Startups
We just came across a startup out of Tucson, Arizona called Lunewave that has raised $5.5 million for its radar sensor and antenna technology for autonomous vehicles and 5G communications, most of it from a Seed round last month that included Baidu and BMW as investors. Lunewave manufactures specialized Luneburg lens antenna and radar sensors that can act as the “eyes” of self-driving cars with a 360-degree field of view. The antenna operates in both the millimeter and microwave frequency, so the customizable devices also have applications in aerospace and wireless telecommunications.
Another startup, Cohere Technologies out of Silicon Valley, has raised $35 million in disclosed funding since it was founded in 2009. The company claims it can “dramatically increase the performance, reliability and coverage of wireless communications” with its Orthogonal Time Frequency and Space (OTFS) technology, which we understand to be different from Time And Relative Dimension In Space (TARDIS), as the latter is a fictional time machine operated by a dapperly dressed alien with a British accent.
OTFS implements a “two-dimensional representation of the wireless channel making all wireless transmission under any conditions resilient to channel dynamics.” Yeah, we’re not entirely sure what that means either except that it helps keep the little bars on your smartphone from dropping and rising all the time, as illustrated above with current 4G radio signals. And OTFS is designed with 5G in mind.
Don’t Forget About China
Few discussions about emerging technology can take place without mentioning China, which has made it a goal to take over the world through leading in technological development like AI by 2025. The country is home to a reported 1.1 billion 4G mobile subscribers, according to the South China Morning Post, which went on to write about how China plans to set the pace for the 5G revolution. The first country to roll out a nationwide 5G network will undoubtedly gain a competitive advantage in everything from autonomous vehicles and IoT to AR/VR and artificial intelligence. China’s Belt and Road Initiative is a strategy to build and connect its markets on a grand scale. A 5G network would do the same virtually.
There is a lot to be excited about in a 5G future, but it won’t happen overnight. Still, it’s encouraging that some of the first 5G networks are starting to emerge a couple of years earlier than first projected. The speed and power of this new wireless network is as important as technologies like big data or AI, in that it will enable other advancements in autonomous cars, IoT, telemedicine and who knows what else. And everyone will need a new phone, which is probably not lost on companies like Samsung (KS) and Apple (AAPL). It’s something we talk about in our Guide to Investing in 5G Stocks.