The race to 5G is over — now it’s time to pay the bill

At CES in 2021, 5G was just about everywhere you looked. It was the future of mobile communications that would propel autonomous vehicles, remote surgery, and AR into reality. The low latency! The capacity! It’ll change everything, we were told. Verizon and AT&T wrote massive checks for new spectrum licenses, and T-Mobile swallowed another network whole because it was very important to make the 5G future happen as quickly as possible and win the race.

CES 2024 is just around the corner, and while telecom executives were eager to shout about 5G to the rafters just a few years ago, you’ll probably be lucky to hear so much as a whisper about it this time around. While it’s true that 5G has actually arrived, the fantastic use cases we heard about years ago haven’t materialized. Instead, we have happy Swifties streaming concert footage and a new way to get internet to your home router. These aren’t bad things! But deploying 5G at the breakneck speeds required to win an imaginary race resulted in one fewer major wireless carrier to choose from and lots of debt to repay. Now, network operators are looking high and low for every bit of profit they can drum up — including our wallets.

If there’s a poster child for the whole 5G situation in the US, it’s Verizon: the loudest and biggest spender in the room. The company committed $45.5 billion to new spectrum in 2021’s FCC license auction — almost twice as much as AT&T. And we don’t have to guess whether investors are asking questions about when they’ll see a return — they asked point blank in the company’s most recent earnings call. CEO Hans Vestberg fielded the question, balancing the phrases “having the right offers for our customers” and “generating the bottom line for ourselves,” while nodding to “price adjustments” that also “included new value” for customers. It was a show of verbal gymnastics that meant precisely nothing. 

But in an indirect way, the whole rest of Verizon’s earnings update gives us a good picture of exactly how 5G is going for the carrier. There’s no talk of robot surgery or fleets of autonomous cars. As it turns out, you need a standalone 5G network to deploy a lot of those things — something carriers are still building out gradually. Verizon in particular is guilty of crying 5G wolf more than once. First, it tried to tell us that mmWave was the real 5G, which is fast but way too range-limited for any of those use cases. Then, it tried to sell us on low-band 5G, which actually turned out to be slower than 4G in some cases. The company is now slowly converting its existing network into standalone 5G as it lights up mid-band spectrum, but that’s a yearslong effort.  

On that earnings call, Vestberg did point to a pillar of Verizon’s current 5G strategy that doesn’t require a complete overhaul of the company’s nationwide network: selling private networks, or secure, high-bandwidth networks, for industrial and manufacturing businesses. But as another investor on the recent earnings call notes, it was hardly mentioned outside of some passing remarks about its potential. What gives?

Vestberg says that this is coming along slowly. One problem standing in the company’s way, RCR Wireless News editor-in-chief Sean Kinney explains to The Verge, is that carriers aren’t really set up to sell their services to specific industries. “If you’re going to sell 5G and edge computing services to a hospital, you need a sales organization that understands healthcare. That knows exactly how hospitals run, knows what their problems are. You need that for every vertical industry — for transportation, logistics, healthcare, and manufacturing and hospitality. And that’s just a hard thing to do.”

Bringing 5G to sectors like manufacturing isn’t exactly a snap of the fingers, either. Not every kind of manufacturer even needs or wants 5G, for starters. Kinney says there’s potential in certain kinds of manufacturing like automotive, but lots of factories tend to be, well, old and don’t lend themselves well to fast upgrades. “How do I put a SIM card in a robotic arm that I bought in 1982? You can do it, but was it worth it? Did it actually deliver?” 

Instead, there’s one 5G use case where the big three networks are finding traction, and it comes up over and over again in their earnings reports: fixed wireless access, or FWA. If you’re keeping score at home, that’s internet that comes to your house over radio waves rather than a cable. T-Mobile and Verizon have aggressively expanded their FWA offerings over the past couple of years, and even “fiber is everything” AT&T is getting in on the action with Internet Air. It’s nice for people to have more than one option for high-speed internet, but it’s hardly robot surgery — it’s not even necessarily the best way to improve the dismal state of home broadband.

If there’s a real, transformative benefit to 5G, it will likely be a combination of network advances and changes in behavior. People will start to see 5G working in situations where they wouldn’t expect to have a reliable data connection — just ask any of the Taylor Swift fans who moved a collective 29 terabytes of data on AT&T’s network in a single day on her Arlington, Texas, Eras Tour stop. Those kinds of crowded stadium events are where 5G’s extra capacity really outshines LTE. 

AT&T spokesperson Jim Greer points out that the company has also seen a 30 percent annual increase in traffic on its network overall and said in an emailed statement to The Verge that “the 5G network is the ‘killer app’ that will change how we live and work.” Maybe 5G wasn’t a destination, it was a journey, etc. There’s something to that — when you realize you actually can stream video from a packed stadium or that you don’t have to wait until you’re at home on Wi-Fi to download something, your thinking changes about what you can expect from your connection.

Jeff Fieldhack, a director at Counterpoint Research, also sees real potential in network slicing, where carriers can give priority to certain kinds of network traffic. That’s important for safety-critical applications, like autonomous cars. Fieldhack says that slicing would allow networks to “prioritize the car going in through the intersection and not the YouTuber in the backseat.” Right now, they can’t distinguish between the two. There’s just one catch: as mentioned previously, you need a standalone 5G network to make that work. That’s something that only T-Mobile has achieved on a nationwide scale. AT&T and Verizon’s 5G networks still rely largely on 4G cores, and the switch to standalone 5G is a slow, yearslong project that is ongoing. 

Maybe 5G isn’t entirely smoke and mirrors. But by rolling it out with a breakneck “race,” networks backed themselves into a corner. They took on piles of debt; on that recent earnings call, a Verizon exec talked about the company’s desire to return to pre-spectrum-auction levels of debt. In the meantime, there are few returns to show for those investments — not helped by the fact that interest levels are high and smartphone sales are down. The networks thought they had a golden goose with 5G, but so far, it’s just laying regular old eggs — expensively, at that. And while they’re waiting for their efforts to bear fruit, they’re looking for other ways to boost their bottom line.

The simplest way to make more money is what Verizon calls “pricing actions.” That’s a nice way of saying “charging customers more.” The company boasted about implementing “over one billion dollars of annualized pricing actions in 2023” and pats itself on the back for keeping churn — that would be customers ditching Verizon — low in spite of it. 

Maybe that’s because switching carriers is a chore that most people don’t want to undertake or that we’re all just numb to inflation-related price increases. But it probably doesn’t help that most of us have just two other networks to choose from even if we were determined to jump ship. And that’s one more piece of the 5G puzzle that’s missing: the fourth wireless carrier that was supposed to materialize from T-Mobile’s Sprint acquisition deal.  

We know the story: T-Mobile was allowed to gobble up Sprint by selling Boost to Dish Network, which would use it as a springboard to become the country’s fourth wireless carrier while building its own standalone 5G network from scratch. One in, one out. How’s that going? Well, Dish has hit the coverage requirements set by the FCC as part of the deal. But it’s not as simple as “if you build it, they will come.” When it was sold to Dish, Boost had 9 million subscribers; now it has 7.5 million. And according to founder Charlie Ergen on the company’s last earnings call, of those 7.5 million people, the “vast majority” don’t have a phone that works on Dish’s own network. Instead, they run on AT&T or T-Mobile’s networks, which Dish contracts with as an MVNO. 

More phones are starting to support Dish’s network bands, including the iPhone 15. But according to Ergen, the timing of T-Mobile’s shutdown of Sprint’s legacy CDMA network meant that Dish had to hurry up and replace a lot of phones for customers at a time when most new phones didn’t support the new network. Those customers likely aren’t ready to replace their phones just yet. Dish will next face its steepest challenge yet: covering 70 percent — and 75 percent, in some cases — of the population in each economic area where it holds certain spectrum licenses. In its Q3 earnings filings, the company said it “may need to make significant additional investments or partner with others” to hit that target. Doesn’t exactly inspire confidence.

5G will improve as time marches on as it tends to, particularly when the networks have fully deployed standalone 5G. But we can probably stop holding our breath for that killer app and make peace with the fact that technological progress is often slow and boring — moving forward cell tower by cell tower, not by leaps and bounds. In the short term, its greatest effect might be a more consolidated, more expensive wireless broadband market. If it’s any consolation, you can take some comfort in the fact that we probably won’t be seeing commercials for 6G anytime soon.