Less 5G Risk, Fewer Hurdles, Than Many Think

As we get closer to actual 5G deployments, there will be an increase in speculation about the “great things that will happen” and “the downside to 5G” sort. One “downside” is that consumers will have to buy new handsets.

That actually should not be too big a hurdle, as most phone “purchases” arguably are similar to “subscriptions,” as no particular device keeps getting software support for much more than three years.

By some estimates the typical consumer replace their devices every 32 months. The point is that consumers have to replace their devices, even if battery life or damage were not issues, about every three years. Higher top-end device prices are also contributing to a slower pace of phone replacement.

That suggests that the installed base of devices able to benefit from mobile 5G could take a decade to reach ubiquity or near ubiquity.

So in the early going, less change will happen around 5G than all that speculation might suggest, whether the expectation is for big changes in use cases or user experience disruption.

That is a reasonable expectation for any big new technology change (less change than expected early on, more change than expected later), but also reflects provider strategy and end user demand.

For starters, it appears that major suppliers--including AT&T and Verizon--will introduce the service in a rather controlled way.  

One takeaway from AT&T’s insistence that it “5G investment will not increase capital intensity” is that deployment will be phased. The logical deployment is urban areas with high capacity demands, and the logical use cases are for customers who live and work in such areas.

Likewise, Verizon says its 5G spend will occur within levels already being spent annually on capital investment. Both those assertions suggest a very-wide deployment nationwide is not expected.

The value of 5G will be less obvious for consumers who do not live and work in the urban areas where 5G is introduced, and they will have to buy new handsets. Also, as 4G networks continue to get faster, many consumers will conclude that their needs can be met that way.

As a practical matter, if only about five percent of AT&T customers buy new phones every quarter, that means the installed base of 5G device owners will grow slowly, at first. In principle, it could take five years (20 percent of devices per year) to replace the current installed base of handsets, if every new phone purchased was 5G capable, and if every buyer chose to get such a device.

The point is that 5G introduction is going to occur more gradually than many might predict.