Telecoms face many hurdles to overcome in 5G network expansion efforts.
Even after massive investment, the rollout of 5G in North America has been decidedly rocky. In addition to the logistical difficulties of implementing 5G, telecoms have also faced a variety of market-based obstacles that have impeded their ability to fully monetize their 5G investments, to the point that many in telecom have notably lost enthusiasm for research into 6G.
Despite these challenges, a recent report from Ericsson suggested that 5G operators should continue investing in 5G, citing a 7% increase in revenue in the top 20 5G market. This recommendation is unsurprising, however, when you consider how much of the Swedish giant’s profits are tied up in 5G; in April, Ericsson’s stock fell sharply after posting disappointing Q1 results, including a 2% decrease in sales of network hardware.
The decrease in spending isn’t surprising when you consider the hurdles 5G operators are facing. What do those challenges include?
1. Unlicensed 6Ghz Wi-Fi causes interference with 5G operations.
Recently, T-Mobile had to issue an FCC filing against a Pennsylvania homeowner due to ongoing interference with the homeowner’s security system with local 5G operations, in which months of back-and-forth with the owners and in-person visits from both FCC officials, the homeowners declined to make the changes to their security cameras that would stop the problem.
And this is far from an isolated incident.
In 2021, AT&T took the FCC to court over the Trump-era FCC’s decision to open up the 6GHz spectrum to unlicensed Wi-Fi, in a court case that saw telecoms squaring off against Apple, Google, and Cisco (among others). In their filing, AT&T argued that “very likely to result in harmful interference at unpredictable places and times”.
Ultimately, however, the FCC decision was upheld by the courts.
2. Regulatory hold on expansion in C-band continue to drag on.
At the same time as telecoms are squabbling over use of the 6GHz band by unlicensed Wi-Fi, they are also coming under fire for interference concerns from expanded use of 5G in the C-band. In January, the FAA gave airlines another year to fix or replace about 1000 altimeters that would experience interference from C-band 5G signals.
3. 5G notoriously loses signal strength indoors.
One of the technical limitations of 5G is that its shorter wavelengths are less able to penetrate doors and windows, leading to loss of signal strength indoors. This makes universal 5G coverage a challenge, especially since the majority of 5G infrastructure investments have focused on outdoor coverage. It’s possible to get around this problem by installing private 5G equipment in buildings and venues, but it requires tackling the problem one building at a time.
Additionally, venues often aren’t in a hurry to make these upgrades, which are often expensive and disruptive, because customers are already used to switching to Wifi — especially at locations they visit frequently.
4. Competition from satellite companies will only continue to heat up.
We’ve written previously about the escalating competition 5G operators face from satellite. While current implementations of satellite for D2D (direct-to-device) service still face severe technical limitations, satellite companies are already picking up telecom’s slack in providing rural broadband service to historically underserved communities. Satellite also offers a compelling use case for IoT deployments, offering seamless connectivity regardless of location.
In addition to competing for market share, satellite companies are also competing with telecoms for spectrum rights in the 12GHz band. Telecoms want 12GHz to be opened up for auction, something which Intelsat VP Peter Davidson has described as an existential threat “to the space economy”.
5. Enterprise companies have lost faith in 5G’s ability to deliver profits.
Take-up of 5G still very low, because difficulty in scaling 5G networks have weakened the value proposition for 5G implementation in enterprise companies. In a November 2022 survey of 1325 enterprise companies worldwide, only 21% of companies surveyed said they were currently investing in 5G — compared with 64% that were currently investing in analytics and AI. Further, interest in 5G deployments varies greatly by industry. Only two of the eight verticals identified in the survey (consumer and energy) reported significant increases in 5G investments from 2022 to 2023. Automotive, financial services, and healthcare saw only modest increases, while 5G investments by manufacturing and technology companies actually decreased.
One possible reason for this: the complexity of 5G integration with existing technology and processes — which was cited as the top internal challenges informing the approach to 5G. That complexity seems to be acting as a barrier to deployment, as only 11% of companies surveyed reporting that 5G deployments were currently operational within their organizations.
Even if operators are facing an uphill battle, 5G will continue to grow.
Despite all these technical and market challenges, 5G is still expected to experience massive growth in the coming years. Analysts are varyingly bullish about the future of 5G operators, but all predict massive growth in the 5G market through 2030.