Wireless Carriers Embracing 5G, Figuring Out How to Monetize Investments
The business case for 5G investment is still being made, said speakers at a Georgetown Center for Business and Public Policy conference Wednesday. There's huge interest among investors, said Wells Fargo analyst Jennifer Fritzsche. “Wall Street is all in,” she said. “We’re trying to learn as much as we can because many of the companies we follow are very invested.”
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
Based on CTIA numbers, the wireless industry invested about $500 billion in its networks over its history, said Anna-Maria Kovacs, visiting senior scholar at the center. Industry has spent another $115 billion on spectrum licenses, she said. The big advantages for 5G are a lot more capacity and a lot less latency, she said. “The challenge is going to be to monetize that.”
Carriers are finding consumers want to use more and more data but aren't willing to pay more, Kovacs said. “Voluntarily or not, this industry has been a great bargain for consumers.” It won't be easy for carriers to recover costs of building 5G, she said.
“Capital debt markets are quite frothy,” said Mark Stodden of Moody’s Investor Service. “There’s record demand.” The credit environment is “quite supportive of continuing investment,” but the credit quality of the telecom sector has “steadily deteriorated” over the past five years, he said. AT&T and Verizon used to carry “A” debt ratings and now they’re at “triple B,” he said. There’s a lot of interest in broadband and 5G, Stodden said. Money is coming in from nontraditional telecom investors, he said: “I don’t know if it’s smart money.”
The communications industry is likely “mid-ballgame” on fiber deployment, said Aaron Blazar, senior partner at Atlantic-ACM. Returns for fiber builds are falling sharply relative to five years ago due to competitive pressure, he said. The problem is 5G will require more fiber deployment, deeper in the network, he said. Companies like AT&T and Verizon are building their own fiber, Blazar said. The cost of capital is lower and construction costs are likely cheaper for the big ISPs, which gives them an advantage, but the big carrier networks won’t cover everywhere and others will have opportunities, he said.
The big question for carriers is how to make money selling connectivity even if millions or billions of things are connected through the IoT, Blazar asked. That’s part of the reason Verizon invested in AOL and AT&T is buying Time Warner, he said. “You need to make big plays into huge addressable markets and we really struggle … in the connectivity market on the IoT front.”
Fiber deployment is essential to 5G, said Patrick Brogan, USTelecom vice president-industry analysis. Fiber will be rolled out in part as part of wireless competition and also to bring wired connections closer to consumers, he said.
On a second panel, speakers said there's lots of interest in the 3.5 GHz shared band, the subject of a new FCC NPRM (see 1710240050). Jason Caliento, Mobilitie senior vice president-network strategy, said a lot of new “use cases” will emerge due to 3.5.
“Nirvana” for a lot of business is one system where “no matter who you come in the building with as far as your mobile operator, you can connect to the network in the building and go back to the correct local core,” said Art King, SpiderCloud Wireless director-enterprise services and technologies. “People don’t want to install four networks in a building right now, but that’s kind of the state of affairs.” Use of the 3.5 GHz band will improve the economics of connecting in a building, he said. The 3.5 GHz band also will support unlicensed use though “that may not be the priority right now,” said David Wolter, AT&T assistant vice president-radio technology and architecture.
Industry is just rolling out LTE-unlicensed in 4G, said Mark Cudak, fellow at Nokia Bell Labs. Carriers are using all “assets” available to them to deal with “compounding demand” from customers, he said. Fifth generation is just getting started, he said. “We expect to have 5G evolve and grow and deploy out through 2030.”