U.S. 5G outlook remains strong despite uncertainty surrounding COVID-19 pandemic

5g outlook

Wireless networks have never been as critical as they are today. People around the world are trying to prevent the spread of the COVID-19 pandemic by staying at home and avoiding unnecessary contact with others. This has resulted in a higher reliance on wireless networks for work, education and entertainment. 

Wireless operators are trying to accommodate the increased usage on their networks but at the same time they are pursuing their 5G deployment goals. The uncertainty surrounding the pandemic is creating some short-term problems but in the long-term wireless operators believe the 5G will flourish because it promises faster speeds and improved network reliability. In addition, some 5G use cases could prove to be beneficial if they can enhance worker productivity or advance digital healthcare. 

For example, analyst firm 451 Research said in an April research note that it believes there will be stronger demand for 5G because it will be viewed as a better solution than cable or fiber for rural broadband connectivity because it’s faster to deploy.  

In addition, in suburbs and urban areas where working from home may become a long-term strategy for some companies, many will want a reliable 5G wireless connection as a backup should their existing connectivity fail. 

Already 5G is being used to provide some relief in China where Huawei installed a 5G network at a hospital and 5G-enabled robots were used to deliver meals and clean the rooms of coronavirus patients — tasks that had previously been done by medical staff. 

The research firm also believes that certain manufacturing use cases, such as using 5G-enabled robots to automate warehouse procedures and make workers safer might be accelerated because of the virus. 

a robotic are packaging boxes in a warehouse

Although the outlook remains strong for 5G networks in the long-term, in the short-term there will be disruptions caused by COVID-19 that create some obstacles for wireless operators. 

Deployment obstacles

Perhaps the most pressing issue facing wireless operators are the potential hiccups that COVID-19 is creating for their 5G deployments. 2020 was supposed to be a critical year for 5G network expansion. In the U.S. AT&T has said it will have a nationwide 5G footprint by mid-year, Verizon has said it will expand 5G to more than 60 markets, and T-Mobile is working to integrate Sprint’s network and expand its 5G deployments now that its merger has closed. 

However, there are some signs that COVID-19 is putting strains on local governments and infrastructure companies that are building 5G cell sites. Wireless operators and tower companies need local governments to approve any new cell sites that need to be built. But many municipalities have sent their non-essential workers home resulting in delays to 5G infrastructure siting permits. 

Because 5G is a higher speed network that offers more bandwidth and lower latency, it requires more cell sites than previous generations of wireless networking technology.  Plus, some wireless operators are using high-band millimeter wave (mmWave) spectrum for 5G. In higher spectrum bands the wireless signal travels shorter distances and that means more cell sites are required to provide consistent wireless coverage.

The Wireless Infrastructure Association is working with municipalities to try to accelerate cell site permits and remove any obstacles. But it’s not any easy workaround because local governments have different processes. Some still rely on signed documents and embossed engineering drawings to approve permits. Others require any request for a new tower site be discussed in an open meeting and those currently aren’t happening. Some municipalities have electronic filing systems but not all city officials have the statutory authority to approve permits remotely. 

T-Mobile’s new CEO Mike Sievert hinted at possible cell site permitting problems because of coronavirus in an interview with CNBC after it was announced that T-Mobile’s acquisition of Sprint was finally complete. Likewise, John Stankey, AT&T’s President and COO, said in the company’s first quarter earnings call with investors that AT&T is having to navigate permitting delays as well as deal with some workforce issues creating because some cities are issuing stop work orders, which are preventing tower companies from continuing deploying their work crews. 

Device delays and supply-chain disruptions

a female warehouse worker doing inventory of packages

Although mobile operators remain committed to their 2020 5G deployment goals, consumers may not be ready to make the leap. With the U.S. unemployment rate at 14.7 percent and an estimated 20.5 million people without jobs, it is likely that many consumers will not be interested in upgrading to a pricey 5G smartphone. Market research firm Ipsos said its research indicates that 37 percent of U.S. consumers believe the coronavirus will impact their personal finances. 

And GSMA Intelligence, the research division of the industry trade group, reduced its global forecast for 5G in 2020 by 25 percent. The group now estimates 150 million 5G connections globally by year-end with the majority of the 5G devices in East Asia and the U.S.

However, consumers that are willing to purchase a 5G smartphone may find some delays in getting those devices because of supply chain troubles. According to ABI Research, smartphone production in the first half of the year could decline as much as 30 percent. “The ripples from China will be felt globally,” says David McQueen, 5G devices research director at ABI Research, adding that China is the world’s manufacturing center for most of these devices. 

He also expects there to be a delay in the introduction of lower-priced 5G devices because shipment volumes of 5G smartphones in 2020 will be lower than expected. Lower priced 5G devices are key to getting more consumer uptake of 5G. 

Standards postponements and auction issues 

Not surprisingly, the Third Generation Partnership Project (3GPP), which is responsible for developing the 5G technology standards, has delayed the timeline for the completion of the Release 16 and Release 17 specifications. The group, which relies upon face-to-face meetings with participants from all over the world, said that Release 16 Stage 3 freeze will occur in June, instead of March as planned. Release 17 is now scheduled for September 2021. 

The delays in Release 16 and Release 17 shouldn’t impact Release 15 equipment, which is already being produced. But it will cause some delays to the next phase of 5G. Release 16 covers industrial Internet of Things (IoT) specifications and the vehicle to everything (V2X) application layer. Release 17 includes further 5G enhancements such as integrated access and backhaul, multicast broadcasting and enhanced network slicing.

But 5G standards aren’t the only delays caused by the COVID-19 pandemic. In the U.S., the Federal Communications Commission (FCC) postponed the auction of 70MHz of the 3.5 GHz spectrum, which is known as the Citizens Broadband Radio (CBRS) service, from June 25 to July 23. FCC Chairman Ajit Pai said the delay is intended to give companies more time to prepare for the auction. 

However, the FCC is still planning to hold its auction of 280 MHz of C-band spectrum (spectrum between the 3.7 GHz and 4.2 GHz bands) on December 8. The spectrum is currently being used by satellite providers to deliver video programming to cable firms.  Both the CBRS and the C-Band spectrum auctions are considered critical for 5G deployments in the U.S. 

5G investment outlook still looking strong

an engineer holding up a mobile phone, testing the surrounding communications tower

Despite the short-term 5G issues, long-term investment in the technology appears on track, at least for now. Although many companies, including the wireless operators, are declining to give specific guidance for the rest of 2020 because of the uncertainty surrounding the Covid-19 pandemic, there are signs that 5G investment is still strong. 

During its first quarter 2020 earnings call with investors, AT&T CEO Randall Stephenson reassured investors and said that the company’s cash position and cash flow will enable it to adjust capital allocation plans and invest in 5G and broadband as well as other things like its upcoming launch of HBO Max. 

Likewise, T-Mobile executives told investors during its first quarter earnings call that the company was continuing to push ahead with its 5G deployment and using Sprint’s 2.5 GHz spectrum that was acquired when it merged with T-Mobile to launch 5G in new markets and add capacity in existing markets.  

According to Neville Ray, president of technology at T-Mobile, the company built 1,000 sites in April in the 2.5 GHZ spectrum.  Ray added that he believes the company will have enough capacity with that 2.5GHz spectrum that it can offer customers not just mobile services but also fixed wireless broadband service. 

Verizon also was bullish on 5G.  During that company’s first quarter call with investors, CEO Hans Vestberg said that COVID-19 will not impact the operator’s 5G deployment or its fiber build. The company said its capital expenditures in the first quarter were $5.3 billion and it expects more capital spending in the beginning of the year rather than later in the year. In March Verizon increased its capital spending guidance from $17.5 billion for the year to $18.5 billion. 

Vestberg also said that the company continues to focus its 5G deployments in dense urban areas and it isn’t altering that strategy despite the fact that many people are working at home rather than in their offices in city centers. 

Another sign that 5G investment remains strong in the U.S. is that Dish Network, which is planning to build a 5G network from scratch, is beginning to sign agreements with 5G vendors. The company announced in April that Mavenir will supply Dish’s cloud-native open radio access network (RAN) software, which fits with the company’s plan to deploy a virtualized network instead of relying on established infrastructure vendors. 

Dish had previously said that it expects the cost of building a new 5G network to be $10 billion. 

Long-term gains

The Covid-19 pandemic is certainly not an opportunity for 5G but the struggles created by the pandemic are causing enterprises, government agencies and educators to rethink how they currently operate. Perhaps this disruption provides wireless operators with a chance to not just showcase 5G’s capabilities, but also offer some solutions that are greatly needed right now.

“COVID-19 is not an ‘opportunity’ to be exploited, but it is causing many businesses to accelerate their plans for digital transformation and 5G has an important role to play in creating positive outcomes from current disruptions,” said Phil Kendall, executive director of the service provider group at Strategy Analytics in a blog post.

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