What 5G actually is?

It’s the next (fifth) generation of cellular technology, and it promises to greatly enhance the speed, coverage and responsiveness of wireless networks. Just like its predecessors, 5G networks are cellular networks, in which the service area is divided into small geographical areas called cells. All 5G wireless devices in a cell are connected to the Internet and telephone network by radio waves through a local antenna in the cell. The main advantage of the new networks is that they will have greater bandwidth, giving faster download speeds. How fast are we talking? In theory, 5G is likely to reach speeds that are 20 times faster than 4G LTE as 4G LTE has a peak speed of 1GB per second whereas 5G could theoretically achieve speeds of 20GB per second.

Why is 5G important and how will it change the world?

The new revolutionary 5G networks will radically improve the speeds with which data is being transferred, which in turn will instigate major changes to an array of products and services from self-driving cars to “telemedicine”. One of the key technical improvements that 5G will introduce is something called low latency. Latency is the response time between when you click on a link or start streaming a video on your phone, which sends the request up to the network, and when the network responds, delivering you the website or playing your video. That lag time can last around 20 milliseconds with the 4G networks and while it may not seem like much, with 5G that latency gets reduced to as little as 1 millisecond, or about the time it takes for a housefly to flap its wings.

The responsiveness of the network is critical for things like telemedicine where you have a surgeon in London controlling a pair of robotic arms and performing a procedure on a patient lying in Paris. As you can understand, there is no-room for mistakes, lags or network failures in a situation like that, as each and every one of the above-mentioned problems could be deadly. The virtually lag-free connection will also allow self-driving cars to have a way of communicating with each other in real time if of course there’s enough 5G coverage to connect those vehicles.

Additionally, the market for streaming video games, which is a rapidly growing area, will get a huge boost as 5G will enable Virtual and Augmented Reality in ways that no one has seen before. The “Internet of Things” is also another important segment that will quickly emerge with the wide-spread implementation of the 5G networks. This will allow for domestic appliances, lighting and other at-home technologies to be connected and operated remotely at all times.

Many people would say, yeah right, but why do we need to make the networks faster, aren’t they fast enough now. The answer to this question is simple and is embedded in the word “evolution”. We need to continue to evolve and progress as a society, because that is the only way for us to ensure that the world that we live in continues to get better, more efficient and more connected.

The 5G revolution is more about unlocking the true potential of the Internet, rather than being just a fancy and unnecessary upgrade to the current networks. We are still far away from utilizing the full capabilities of the globally connected computer networks that use the Internet Protocol to communicate between different networks and devices, called the Internet. While many narrow-minded people could question the need for this new technology at first, it is important to note that 5G will create the platform for us to build a much more technologically advanced society in the coming years, which will be founded on significantly improved communication processes, business operations, daily living improvements, Cybersecurity, productivity efficiencies etc.

What are the challenges associated with the widespread adoption of 5G?

The newly improved 5G networks will be founded on the usage of millimeter waves, which are a lot shorter than the wavelengths that the current 4G network uses. The shorter wavelength is actually the main reason for one of the major advantages of 5G over its earlier counterpart, as it means that 5G can carry a lot of data much faster using these shorter waves.

However, this has also been pointed out as probably one of the biggest risks for the widespread implementation of the 5G networks, as the shorter wavelength also means a much shorter range – 5G wavelengths have a range of about 500-800 meters, not even 2% of 4G’s range. To bring the promised speeds to the masses, 5G requires a whole new infrastructure of masts, base stations, antennas and receivers, which will need to have the so-called “line of sight” between them as this is a mandatory requirement for the functionality of the network.

Thus, ultimately latency will still be affected by the overall range of the connection. So to ensure a reliable 5G signal, there needs to be a lot of 5G cell towers and antennas everywhere. We’re talking on every lamppost, traffic light, etc. because even trees can block 5G signals. As you could imagine this will be a significant burden for all major Telecommunication companies out there like Verizon, AT&T, Sprint, T-Mobile as they will be on the front line of this difficult, complex and very expensive network upgrade process.

Additionally there has been a very strong and vocal opposition from local governments and communities who don’t want these carriers to build towers or antennas all over the place. The possible health risks of increased radiation in places with a large number of antenn as some are concerned that 5G radiation may cause cancer. The FCC so far has said that there aren’t any problems or concerns with 5G radiation, but they have said they still need to do more research.

What’s the current timeline?

The short answer is that it depends on the region of the world that you are in, as different countries have undertaken different steps, policies and overall approach in the adoption of the newest network upgrade. The important thing for you to understand is that 5G will become an important part of everyone’s lives in the coming years.

Asia

For example, 5G has been operating as a commercialized network in South Korea for almost a year now and the country has reached the impressive 5.36 million 5G subscribers as of February, 2020 which in turn represents an increase of 8.1% from the previous month’s 4.95 million figure.

However, the biggest 5G player not only in Asia, but also in the world is going to be undoubtedly China. Chinese operators are forecasted to have 143 million subscribers at the end of 2020, which will represent an overwhelming 70% of total connections worldwide. In contrast, U.S. operators will reach approximately 28 million in 2020.

Despite the challenges faced by early adopters and the relatively high prices of 5G-capable smartphones in 2019, ABI Research expects 5G to reach the mass market mid-2020, by which time China will start to dominate in terms of connections, and as a result, market interest and technology expertise,” says Dimitris Mavrakis, Research Director at ABI Research.

Let’s also not forget that China is the #1 country in the world terms of overall population with the staggering 1.44 billion people living there. This creates a tremendous potential for China to acquire a massive 5G subscription base and establish a dominant position in this important market.

Europe

The number of 5G trials in Europe has been growing in the last 12-18 months as the region’s mobile operators were focused on gearing up for a commercial rollout of the next-generation wireless network technology in at least one major city in each European Union member state by 2020, according to a report from the European Commission’s 5G Observatory. It is currently available in parts of Estonia, Finland and Switzerland.

The 3.4-GHz to 3.8-GHz band or the so-called midband spectrum has been the most used frequency band, according to the European Commission’s findings. The main reason for that is associated with the fact that the midband spectrum combines qualities of both – low and high-band spectrums – and it is seen across the globe as obvious anchor spectrum for the 5G networks to come.

USA

We have seen a very strong push for a broader 5G acceleration and implementation in the US in the last few years, as the country has been trying to desperately win the 5G race against its main rival, China. Carriers including AT&T, Verizon and T-Mobile began deploying it in 2019, with a lot of limitations, restrictions and set-backs. However, some big claims were made last year by Verizon’s CEO Hans Vestberg stating that half of the U.S. will have access to 5G by the end of 2020. In order, for that to happen though we must first see a large number of available 5G phone options and that is not the case at the moment. There are only 8 different available 5G phone options in the US at the moment – Samsung Galaxy S20 Plus, OnePlus 8 Pro, Samsung Galaxy S20, One Plus 8, Samsung Galaxy S20 Ultra, Motorola Edge Plus, LG V60 ThinQ 5G, Samsung Galaxy Note 10 Plus 5G. We expect the industry’s most iconic brand, Apple, to announce its first 5G phones later this year, which will help not only the company’s growth projections, but also the whole market.

The US government has been trying to do everything that it can in recent years in order to position the US as a leader in the 5G race, but has had very little to no success so far. One of the initial projects and programs focused on facilitating the U.S.’s leadership in 5G, was rolled out by the FCC in 2016 and ws called the 5G Fast plan. This aimed to accelerate deployment of high-speed broadband in rural America and held its third auction for 5G spectrum in late 2019. FCC Chairman Ajit Pai said last December that he will propose $9 billion in funding to bring rural parts of America to parity with urban segments.

In addition, the U.S. government is paying around $10 billion to satellite providers to fast-track the auction of 5G C-band spectrum by 2023. C-band spectrum is sought after because it combines the ability to deliver download speeds in excess of 1 Gbps with much improved propagation ranges, compared to higher-frequency spectrums.

However, the United States is expected to have a total of 318 million 5G subscribers by the end of 2025, while China’s numbers are projected to go up to 1.1 billion 5G subscribers in the same time frame. As you can see, this is an unevenly matched fight as China’s population allows it to establish a much more dominant and influential position in this market for the years to come.

How can you as an investor benefit from this emerging and powerful trend?

The best thing for you to do as an investor if you really want to participate in this technological revolution is to look for companies that are poised to see substantial revenue and earnings growth by the widespread adoption of the 5G networks. We at DowExperts would prefer to focus more closely on companies that participate in the industry but are not going to find themselves on the front line of building the extremely expensive infrastructure for this network to function. In other words, we will be adding to our 5G exposure in companies like Apple, Ericsson, Keysight Technologies, Applied Materials, Broadcom, Qualcomm etc. as they will be riding these very powerful secular growth trends in the coming years. At the same time, we will stay away from the large telecommunication stocks as we believe that the large infrastructure expenses that will fall on their shoulders in the coming years will put some downward pressure on their profitability and overall financial strength.

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