WSJ: U.S. Wireless Carriers Are Winning 5G Customers for the Wrong Reason

AT&T and Verizon’s heavy promotions lead to booming growth, but value of next-gen networks to users still unclear, by Dan Gallagher

Even before the country’s two largest wireless carriers reported strong quarterly results this week, Morgan Stanley (MS) had a bit of cold water to splash on those carriers.

The investment bank published the results of its ninth annual broadband and wireless survey on Monday. Among the findings were that only 4% of respondents cited “innovative technology” such as 5G as an important factor in their choice of service. That number was unchanged from the previous year’s survey—despite an unremitting onslaught of marketing from wireless carriers and device makers for the next-gen wireless standard.  [IEEE Techblog reported the results of the MS survey here]

That would appear inconsistent with the strong growth in wireless services reported by AT&T and Verizon VZ  this week. On Wednesday, Verizon reported adding 429,000 postpaid wireless subscribers during the third quarter, which is up 52% from the number added in the same period last year. On Thursday morning, AT&T said it added 928,000 such users to its rolls in the same period—up 44% from the same period last year and the highest number of net new additions in more than a decade of what are considered the industry’s most valuable base of customers.

The two carriers have been selling 5G hard over the past couple of years. That picked up significantly last fall, when Apple Inc. launched its first iPhones compatible with the next-generation wireless technology. Those phones have been in hot demand. Analysts estimate total iPhone sales jumped 25% to a record of 237 million units in Apple’s fiscal year that ended last month, according to consensus estimates on Visible Alpha. The 5G-compatible iPhone 12 and 13 models are expected to account for more than 80% of that number.

But customers appear to be driven more by old-fashion promotions than cutting-edge technology. AT&T, Verizon and T-Mobile —which reports its results on Nov. 2—offered heavy discounts last year for iPhone 12 models paired with new 5G plans. That appears to have continued with the newest crop; wireless analyst Craig Moffett of MoffettNathanson notes that “promotions tied to premium unlimited plans have gotten richer” with the introduction of the iPhone 13 family this year. Indeed, the Morgan Stanley survey found price to be the most compelling driver in choice of a wireless plan, with 44% of respondents citing it as their top factor.

That leaves 5G itself as an uncertain selling point—but one with some big bills attached. The major carriers bid up a total of around $95 billion earlier this year for wireless spectrum licenses auctioned off by the Federal Communications Commission, and Walter Piecyk of Lightshed Partners estimates that a new auction of 3.45 GHz spectrum that kicked off earlier this month will draw total bids of around $30 billion.

These high expenses, coupled with doubts over the consumer appeal of the technology, have helped make AT&T, Verizon and T-Mobile some of the worst-performing large-cap stocks in the S&P 500 this year. All three fell Thursday even after AT&T’s strong report, and they have averaged a decline of 11% so far this year compared with a 21% rise for the main index. This 5G call is still not clear.

Verizon 5G advertisement in New York. PHOTO: John Nacion of ZUMA PRESS 

(In the editor’s opinion, it should state “5G built WRONG”)

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Editor’s Opinion:

We’ve often referred to 5G as “the greatest tech train wreck of all time.”  That is because the technology (as it now exists) has over promised and under delivered.  The major problems for 5G are the following:

  1. No ITU recommendations/standard/guidelines or 3GPP implementation specs for 5G SA Core network. That leads to many different carrier implementations, prevents roaming and interoperability.  Indeed, <5% of 5G deployed networks are 5G SA.  Yet ALL the 5G features and benefits, (e.g. network slicing, automation, MEC, enhanced security, etc) depend on 5G SA core network which separates the data and control planes.
  2. URLLC (ultra high reliability, ultra low latency) as specified by ITU-R M.2150 (previously known as IMT 2020.specs) and 3GPP release 15 (URLLC is still not complete in 3GPP release 16) do not meet the minimum performance requirements as specified in ITU-R M.2410 +.
  3. No standard for terrestrial frequencies or frequency arrangements, in particular the three sets of mmWave frequencies approved at the WRC 19 conference.  Also, regulatory agencies like the FCC plan to license mmWave frequencies NOT approved by WRC 19 (e.g. 12 GHz).  That defeats the goal of global frequency harmonization/roaming.
  4.  Few demonstrated use cases other than Fixed Wireless Access (FWA) and massive machine to machine communication/Internet of Things (but even here URLLC (especially ultra high reliability) is needed.

+ Minimum URLLC requirements:

  • Latency:   <=1ms latency in the data plane and <=10ms latency in the control plane.
  • Reliability:  The minimum requirement for the reliability is 1-10−5 success probability of transmitting a layer 2 PDU (protocol data unit) of 32 bytes within 1 ms in channel quality of coverage edge for the Urban Macro-URLLC test environment, assuming small application data (e.g. 20 bytes application data + protocol overhead). Proponents are encouraged to consider larger packet sizes, e.g. layer 2 PDU size of up to 100 bytes.

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References:

https://www.wsj.com/articles/wireless-carriers-are-winning-5g-customers-for-the-wrong-reason-11634837502

https://techblog.comsoc.org/2021/10/20/morgan-stanley-finds-little-interest-in-5g-finlands-oulu-says-5g-wont-mature-till-2027/

https://techblog.comsoc.org/2021/10/20/morgan-stanley-finds-little-interest-in-5g-finlands-oulu-says-5g-wont-mature-till-2027/

https://techblog.comsoc.org/2021/10/21/1058476/

https://www.itu.int/dms_pub/itu-r/opb/rep/R-REP-M.2410-2017-PDF-E.pdf

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