AT&T 5G Launch Illustrates Demand-Creation Issue

AT&T plans to launch consumer 5G services in the first half of 2020, after a year of selling only to businesses. For mass market customers, AT&T plans to rely on low-band spectrum, using millimeter wave high-band spectrum for capacity reinforcement at large venues. 

AT&T initially is focusing on coverage, rather than capacity, so although consumers in the new markets might see 5G speed boosts over 4G levels, they will not see the highest speeds available on the millimeter wave networks. 

In fact, AT&T executives downplay the speed differences. “You’re going to see some marginal differences,” says Igal Elbaz, AT&T SVP. 

So one of the emerging angles on 5G is that 5G using low-band should not be expected to offer speeds much faster than advanced 4G. 5G using mid-band or millimeter wave spectrum potentially can boost speeds far above 4G, but few consumer use cases exist. 

It all adds up to a demand stimulation issue. Service providers will have to convince customers there are reasons to switch to 5G, even when the value proposition is questionable. On low-band networks, speed is not very different from advanced 4G. On mid-band and millimeter wave networks, speed is much higher, but few use cases now exist. 

If I had to guess right now, I’d predict that much early consumer adoption of mobile 5G will be driven indirectly, the result of choices made about service plans and high-end phones, not 5G service specifically. 

There are, of course, value drivers unrelated to technical performance, namely the early adopter desire to first use a new product with the best specs. 

In fact, in some markets, where 5G is based on low-band spectrum, the speed advantage of 5G might be quite muted and hardly better than 4G.

In the United Kingdom and Spain, where 5G initially was launched using low-band spectrum, there was only a slight improvement in experienced internet access speeds. Under those conditions, it is hard to say what the direct value proposition might be. 

source: Opensignal

In markets where 5G initially is launched using mid-band spectrum, consumers might have a relatively straightforward value proposition: slightly higher cost, significantly-higher bandwidth, even if the use cases remain few. 

The point is that, in all markets, most consumers might struggle to find a direct value proposition unrelated to status or bragging rights, in the early going, as there are very-few consumer mobile applications or use cases that benefit from near-gigabit-per-second speeds, or even average speeds in the 100-Mbps range. 

Consumers who do lots of downloading on their mobiles are about the only users who will--at first--be able to take advantage of higher 5G speeds on mid-band or millimeter wave networks. 

Ignoring for the moment the few use cases where 5G speeds in the 100-Mbps to near-gigabit range are relevant, indirect drivers are likely going to be more important than direct value propositions, for most customers. 

The consumer direct value proposition might be low-band 5G, which offers slight or possibly even no real advantage over 4G; mid-band 5G, which offers quantifiable speed advantages, but few experience advantages; or high-band 5G, which offers huge speed advantages, but few experience benefits over 4G. 

Beyond that, some customers, including those in the U.S. market, will have to choose between 5G phones supporting low-band 5G or millimeter wave 5G. The early devices will not support both low-band and high-band. That requires a device using the Qualcomm X55 modem, expected to be available in late 2019, but not available in the first generation of 5G devices. 

All of that suggests to me that indirect value will drive most 5G subscriptions. Customers will get 5G as a byproduct of their service plan or device choices.