Anybody who expected early 5G to yield massive upside in the form of innovative use cases and value has not been paying attention to history. Since 3G, promised futuristic applications and use cases have inevitably disappointed, in the short term.
In part, that is because some observers mistakenly believe complicated new ecosystems can be developed rapidly to match the features enabled by the new next-generation mobile platform. That is never the case.
Consider the analogy of information technology advances and the harnessing of such innovations by enterprises. There always has been a lag between technology availability and the retooling of business processes to take advantage of those advances.
Many innovations expected during the 3G era did not happen until 4G. Some 4G innovations might not appear until 5G is near the end of its adoption cycle. The point is that it takes time to create the ubiquitous networks that allow application developers to incorporate the new capabilities into their products and for users to figure out how to take advantage of the changes.
Construction of the new networks also takes time, especially in continent-sized countries. It easily can take three years to cover sufficient potential users so that app developers have a critical mass of users and customers.
And that is just the start. Once a baseline of performance is created, the task of creating new use cases and revenue models can begin. Phone-based ride hailing did develop during the 4G era.
But that was built on ubiquity of mapping and turn-by-turn directions, payment methods and other innovations such as social media and messaging.
Support for mobile entertainment video also flourished in 4G, built on the advent of ubiquitous streaming platforms. But that required new services to be built, content being assembled and revenue models created.
The lag between technology introduction and new use cases is likely just as clear for business use cases.
The productivity paradox remains the clearest example of the lag time. Most of us assume that higher investment and use of technology improves productivity. That might not be true, or true only under some circumstances.
Investing in more information technology has often and consistently failed to boost productivity. Others would argue the gains are there; just hard to measure. There is evidence to support either conclusion.
Most of us likely assume quality broadband “must” boost productivity. Except when it does not. The consensus view on broadband access for business is that it leads to higher productivity.
But a study by Ireland’s Economic and Social Research Institute finds “small positive associations between broadband and firms’ productivity levels, none of these effects are statistically significant.”
“We also find no significant effect looking across all service sector firms taken together,” ESRI notes. “These results are consistent with those of other recent research that suggests the benefits of broadband for productivity depend heavily upon sectoral and firm characteristics rather than representing a generalised effect.”
“Overall, it seems that the benefits of broadband to particular local areas may vary substantially depending upon the sectoral mix of local firms and the availability of related inputs such as highly educated labour and appropriate management,” says ESRI.
Before investment in IT became widespread, the expected return on investment in terms of productivity was three percent to four percent, in line with what was seen in mechanization and automation of the farm and factory sectors.
When IT was applied over two decades from 1970 to 1990, the normal return on investment was only one percent.
This productivity paradox is not new. Information technology investments did not measurably help improve white collar job productivity for decades. In fact, it can be argued that researchers have failed to measure any improvement in productivity. So some might argue nearly all the investment has been wasted.
Some now argue there is a lag between the massive introduction of new information technology and measurable productivity results, and that this lag might conceivably take a decade or two decades to emerge.
Work from home trends were catalyzed by the pandemic, to be sure. Many underlying rates of change were accelerated. But the underlying remote work trends were there for decades, and always have been expected to grow sharply.
Whether that is good, bad or indifferent for productivity remains to be seen. The Solow productivity paradox suggests that applied technology can boost--or lower--productivity. Though perhaps shocking, it appears that technology adoption productivity impact can be negative.
All of that should always temper our expectations. 5G is nowhere near delivering change. It takes time.
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