The 5G revolution is upon us and with the recent launch of 5G by AT & T and Verizon in the US, we are starting to hear a lot more about the global roll-out of 5G. Canada itself is not far away from a preliminary launch of 5G as well. Rogers, Bell, Telus and Freedom Mobile have all said they are currently conducting 5G testing and we should see a commercial rollout in 2020. With 5G on the horizon, what does this really mean? Yes, the new standard will allow you to download an HD movie to your phone in seconds but there is more going on than just simply that. These faster speeds will up new technological advancements, most particularly in the internet of things. It also has the potential for reducing the differences in service between rural and urban areas, a potential game changer. LTE and 700 Mhz spectrum made significant advancements towards providing more reliable service in rural areas and this new standard has the potential to do the same.

Consumer Importance

Other than 5G hotspots like the ones AT & T and Verizon have launched, the first impact of the 5G revolution will be seen in smartphones. Last year I conducted research in the UK about what consumers were expecting from 5G. Only 40% of the respondents answered saying they would be willing to pay more for 5G services. 50% of them would be willing to pay an extra 15% for 5G services and the remaining 50% would be willing to pay an extra 30%. The respondents that were willing to pay 15% extra were full-time students and the respondents that were willing to pay 30% were working full-time.

Part of the research focussed on what features of their smartphone were most important to them. Messaging apps, internet browsing, and the camera were the top three. Although faster speeds may help you download that video your friend just sent you in a shorter period of time, it is not a top priority. Because of diminishing returns, as speeds continue to rise the increased benefit is minimal. Whether that video downloads in 5 minutes or 30 seconds makes a big difference but whether it downloads 30 seconds or 5 seconds does not make as much of a difference. Thus when focussing on a pure smartphone application for 5G it makes sense why not many consumers were willing to pay more. However, when benefits of 5G beyond just faster video downloads are understood by people, that willingness to pay seems to increase.

In August of 2017, Gartner conducted a similar study in an attempt to determine if end-users were willing to pay more for 5G mobile capabilities or not. This study, however, was primarily focused on end-user organizations rather than regular consumers or all end-users. This study found that not only did 92% of these organizations expect to pay more for 5G but just over 75% of these organizations would be willing to pay more for 5G. 31% of these respondents were willing to pay up to 10% more for 5G than 4G, 22% were willing to pay between 10 and 20% more, 14% of them between 20 and 30% more and 8% were willing to pay more than 30% over current 4G prices for 5G mobile capabilities.

 

Internet of Things (IoT)

It is said by many experts that just like how 4G pushed the rapid increase of smartphones and the on-demand economy, 5G will do the same for IoT. When thinking of IoT, the first thought that comes to mind for many is smart homes. However, IoT is more than just smart homes but it is about smart cities and much more. It is a world where everything is connected to the internet and thus is able to communicate to one another. Your car, your phone, your thermostat, your house lights, the street lights, your office building, the train signal and much more. According to Bain & Company, by 2022 IoT spending will reach up to $1.2 trillion (USD). IoT paired with 5G will bring great benefits to corporations. A sensor in every freezer at the Amazon Fresh warehouse sending a notification to the employee at 3:00 am because ten of those freezers just malfunctioned. Luckily the cameras on the inside of the freezers show these freezers are actually empty. The employee places an order for new freezers in order to handle the new incoming product and goes back to sleep. Corporations are not the only ones that should be excited about the benefits of 5g and IoT but so should consumers.

Imagine a world where your alarm rings at 6:45 am instead of 7:30 am because there is an accident causing a 45-minute delay on your route to work. You look outside and see it is snowing and are glad to see your closet has your warm clothes out front. You get ready for work and arrive in your kitchen with your robot handing you breakfast as well as a snack for the longer than usual car ride. As you step out your front door, your car pulls up and the door closest to you opens. As the car drives away, your home alarm arms itself, turns down the heat, turns off all the lights and sends you a notification. The car screen pulls up the latest news related to your job for you to read while it drives you to work. As a consultant, it is very important for you to stay up to date on the daily happenings of the world. Your boss texts you and says he needs you to get to the client site as soon as possible rather than the office. The car automatically detects the new address that your boss has added to your calendar and asks you if you would like to re-route. At the end of the day, as you get in your car, your car talks to your house and lets it know you are 30 minutes away. That is how long the house needs to make you dinner as well as warm up the house to your preferred temperature. Since work finished late today, you missed the start of your favourite show. Your DVR at home begins to stream it in 4k UHD to the large screen in your car.

Huawei

This talk about 5G has been further exacerbated by the recent arrest of Meng Wanzhou, the CFO of Huawei. Although the arrest is unrelated to the issues causing global bans on Huawei 5G equipment, it is still putting more spotlight on the issue. The US is lobbying other countries to ban Huawei equipment because of its close connection to the Chinese government. Three of five “Five Eyes” nations have already banned Huawei from supplying 5G equipment to carriers in their respective countries. Leaving just Canada and the UK as holdouts. Germany’s Deutsche Telekom, which is the largest European telecommunications company has said it is reviewing its relationship with Huawei. In addition, carriers in Japan, France, South Korea, and the UK have independently said they would not be continuing relations with the company.

In Canada, Telus and Bell rely heavily on Huawei for their telecom equipment. Both companies have been conducting their 5G trials with Huawei equipment. It is reported that it would cost the two companies more than $1 billion to rip out and replace all Huawei equipment. Rogers, on the other hand, has partnered with Ericsson so would actually be impacted positively if Canada were to ban Huawei for 5G. Not only would it’s main competitors have to spend over $1 billion changing their equipment but also be delayed in their rollout of 5G which is otherwise expected to begin in 2020.

It’s Coming

Whether you like it or not, the 5G revolution is upon us. Just as when 4G launched, it will take some time before it is fully rolled out and before utilized. In fact, some IoT devices still use a 2G connection even today. Although it will take time, we should still expect an increase in prices. Just like when the transition from 3G to 4G began, special dedicated higher price plans should be expected.

Sources: Primary Research; CIC; The Globe and Mail; Mobilesyrup; Forbes; Forbes; Ericsson; Network World; Accenture; 5GCC; Newswire; Android Central; McKinsey; Bain & Company; Gartner;