The Big #5GShort

In a podcast with two Mckinsey senior telecom partners the telecom industry dirty little secrets are outed: 5G has financial and technology challenges that are magnitudes bigger than any previous network roll outs but more importantly these massive costs are not matched by massive new revenues. So 5G is going to cost exponentially more to deploy and run BUT customers are unlikely going to see any big improvements on their mobile phones that would warrant paying more for 5G than 3 or 4G.

The magic word seems to be IoT or Internet of Things. The salvation for 5G. The fountain of new telecom revenues. With Mobile World Congress happening everybody will be talking about IoT and more clearly autonomous cars. As somebody who won IoT awards (e.g. best technology innovation of 2015) I can only disagree with IoT being this “secret money fountain". Most devices in IoT are battery powered and need very low powered radio communications. For years there have been multiple competing LPWAN technologies that solved this use case but unfortunately none has really made a dent in the industry. Deployment costs for these LPWAN technologies are super cheap compared to 5G but still there are enormous notspots in many countries and as such the millions or even billions of connected devices have not happened yet. More expensive 5G deployments will not solve this problem. It will take 5 to 15 years before 95% coverage of 5G can be achieved if 4G deployments are anything to go by.

Let's look specifically at autonomous cars as a way to create a 5G money fountain. True these computers on wheels will spit out massive amounts of data and will need to communicate with others, road infrastructure, high tech giants and their manufacturers. However in cities 5G is not the most important component to enable autonomous driving. Autonomous cars will have detailed maps, lidar, cameras, radar, microphones and another set of sensors to move around. Autonomous cars will not be able to rely on 100% connectivity to drive around and as such manufacturers will use 5G as a secondary channel to move around, not as a primary necessity. It will take 15 to 20 years before all humans are removed from driving vehicles so crossings without traffic lights will not be a reality soon enough to solve the 5G financial puzzle.

If we leave the city and drive around in the rest of the country we currently find that 2 and 3G coverage is often spotty, let alone 4G. So how can these cars rely on 5G being present everywhere. 5G is actually in a great disadvantage over SpaceX's Starlink which plans to cover the world by launching just shy of 15,000 low flying satellites in the next years. Every Tesla will just connect to Starlink and have global coverage. Very likely others will follow.

Let's assume there is some big innovation invented by a startup that is yet to be launched but is the big reason billions of people and devices all of a sudden need 5G. If history is a guidance, Android & YouTube were bought by Google and WhatsApp by Facebook. No telecom operator has bought Netflix (yet). So why would the future all of a sudden see telecom corporate investors outsmarting VCs and high tech giants? High tech giants are actually more likely to enter the telecom market with innovative price eroding offerings instead of the other way round.

So no new 5G money fountains can be expected in the next 5 years but the industry will have to put a base station in every second house and in each floor inside an office building to make 5G mobile broadband a reality. No telecom operator has the financial clout to make this happen. No business case will survive the hard reality of doubtful new 5G revenues. So there is only one question left!

How do you short an industry that will spend billions on deploying a new technology in the 5 next years and have no gold at the end of the rainbow? The Big #5GShort! Enjoy Mobile World Congress while it lasts...