5G is supposed to be the next big thing to hit the cell phone market, but what if it's just too expensive?That's the theory analysts at UBS proposed in a recent note to investors. Richard Dineen, an analyst at UBS, says the range and strength of 5G technology just don't make financial sense. Here's Dineen:
"We modelled how many 5G sites would be required to cover the NY-NJ-PA Metropolitan Statistical Area (MSA), an area of ~8,300sq/mi with >20m population (6% of US total). Using FCC tower data, terrain, street and vertical elevation models, our analysis suggests over 600,000 5G cells (each at 100m radius) would be required for contiguous 5G coverage - more than a 500-fold increase from today's 3G/4G cell footprint. Clearly this would not make economic sense for operators, adding conviction to our view that 5G at mmW frequencies could only be deployed as a WiFi-like "hotzone" service in densely-populated, wealthy areas."
To break it down into simple English, Dineen is saying the hype around 5G coverage is overblown. The technology uses millimeter waves that simply don't travel far enough, and are too easily disrupted, to make sense for a large-scale cell phone network.
The 5G technology does work. It promises speeds that are much faster than the current 4G systems allow, but only if you can get that signal to reach between a cell tower and a phone. Dineen says providers would need to build nearly 500 times as many towers as are currently in use for 4G technology in order to make 5G work.
There are some upsides to 5G. Faster speeds, of course, but also more space in the spectrum. Because the waves are smaller, in a sense, they take up less of the allocated spectrum, meaning more users are able to use 5G at one time than current 4G technology.
One use case for the new technology might be fixed wireless internet. Imagine beaming high-speed internet from a central tower to a fixed antenna on a rural household. You wouldn't have to run wires underground to the home, and because the tower and home antenna wouldn't move, the 5G signal could be pointed and focused between the two points.
While this could be one use case for 5G, Dineen says it is a small market that doesn't justify the hype around the new technology.
Rumors that the new iPhone won't have the next generation of 5G antennas aren't as important if Dineen is right. Cell phone providers have said they will start rolling out 5G service later this year, but it might not matter if the technology takes years to reach the mass market or is throttled to 4G speeds to make it practical across longer distances.
"If 5G coverage at [millimeter wavelengths] is patchy we remain skeptical of its ability to generate returns given that users will continue to value 4G's ubiquity (on-demand, time-sensitive), location-awareness and mobility support over a 5G raw speed advantage that is only sporadically available (i.e. same as why we all pay for cellular 4G, but few pay for public WiFi)," Dineen concludes.