The 5G opportunity
With 5G network rollouts just beginning around the world, it’s still early days in terms of monetization opportunities. While certain infrastructure suppliers, such as tower, network equipment and semiconductor companies, have already benefitted from 5G network build-out activity, 5G “killer apps” are still under development.
In comparison to 4G, 5G networks promise speed enhancements (10 to 20 times faster than 4G), latency improvements (a 90% reduction in transmission delay) and capacity expansion (100 times more traffic capacity per square meter).1 5G is expected to enable ubiquitous connectivity and exponential growth in data transmission. Previously uncaptured data will be stored and analyzed. The companies able to harness this data and use it to build new businesses stand to benefit enormously. Similar to the 3G and 4G eras, we believe that much of the economic value will accrue to the companies best able to exploit the deluge of new data to gain unique insights and build previously unimagined businesses, not to the companies solely involved in data transmission.
On the consumer side, the initial 5G telco-supplied use cases of 5G wireless service and fixed wireless service appear incremental. While 5G wireless service will be faster than 4G, it’s unlikely to meaningfully enhance the typical consumer mobile internet experience. Bandwidth-heavy activities, such as watching videos, already work sufficiently well on existing 4G networks. As for fixed wireless service, that technology is expected to be on par with cable broadband, a service already available to most US consumers. By analogy, we view these initial 5G consumer use cases akin to digital wallets in the US. Like 5G mobile wireless and fixed wireless service, digital wallets are nice to have, but they’re somewhat of a “solution in search of a problem” since the physical credit cards that digital wallets aim to replace already work well and are easy to use.
Future 5G applications that lie outside of core communication services are far more exciting and have the potential to be revolutionary. Vehicle-to-everything communication seeks to usher in self-driving cars for fully autonomous transportation. Within healthcare, 5G hopes to enable better health outcomes through remote robotic surgery, continuous health tracking and medical implants that adjust drug delivery in real time. The data captured by the transportation and health care industries should interest insurance companies, which can potentially use it to adjust customers’ premiums. In digital gaming, 5G aims to untether gamers from their consoles and PCs, and stream graphic-intensive and multi-player games directly to consumers’ phones. On the enterprise side, widespread sensors connected to 5G networks are expected to enable “smart” cities, factories and agriculture. The list of potential applications goes on and on.