The ingredients are in place for something the wireless industry has not seen for a long time. A new network. That was one of the messages Alex Gellman, Vertical Bridge CEO, imparted during a keynote address on the final day of the South Wireless Summit yesterday in Nashville.
“There is a real potential for new participants going forward and that is super exciting. We haven’t had that type of opportunity in years and years,” Gellman said.
From an economics standpoint, the cable companies have a big incentive to build out a 5G network, he said, and the repeal of net neutrality may also play a role the creation of a new market entrant.
He noted that Comcast, which resells cellular service, added more customers in a recent quarter than Sprint but lost $1.2 billion in the same quarter. “They are not going to stop selling wireless, but they are going to have to figure out a way to stop losing money at it,” Gellman said. “At some point they have to get owner economics. They have to build a network, so they can capture the revenues without the expense.” Additionally, carriers are going to be pressuring cable’s bottom line by offering video over 5G.
The tower industry would be a big winner in the event of a new network. When the Mexican government authorized a new pay-as-you-go, non-carrier, network last year, Mexico Tower Partners logged more leases than the entire six previous years combined.
Another possible entrant is one of the internet/social media communications giants: Facebook, Amazon, Netflix and Google, known collectively as the “FANGs,” A lot of their data traffic is coming via wireless. The incentive for the FANGs comes from the repeal of Net Neutrality, which kept the wireless carriers from charging websites additional money for heavy data use.
“Since there is no net neutrality outlawing discrimination, there will put a lot of pressure on the FANGs to do something,” Gellman said. “AT&T is saying [to Netflix] ‘pay me. My data traffic going up and my revenue is flat.’ Wireless may also be seen as tool by Google to access customers directly.
There are other ingredients that may work together making a new network possible. The availability of DISH’s spectrum, the rise of autonomous vehicle companies, and opportunities in agribusiness, according to Gellman.
“There is growing pressure to get to wireless customers without going through the existing carriers,” he said. “We will have a new entrant in the United States market. It may be by buying an existing company, but it is easier to build a high-speed, low-latency network from scratch than upgrading an existing network.”
No Carrier Revenues, No 5G
Gellman chronicled the major shifts in the communications industry from the introduction of the landline telephone to the internet and then video. The first two shifts were lucrative for the carriers, but video, on the other hand, has not monetized very well because of the large data buckets and unlimited plans. He emphasized the importance of ROI to deployment of the next generation of cellular.
“Unlimited data plans will stifle the carriers’ desire to deploy 5G. We are the only industry where increased use of our networks by our customers is a bad thing,” Gellman said. “The pace of 5G investment in the United States is directly related to our revenue the carriers can generate.”
Providing video programming over fixed 5G networks will only shift revenues from cable and satellite providers to the wireless carriers. Mobile 5G, however, will create business cases that produce new revenue, providing services such as virtual reality, augmented reality, telemedicine and smart cities.
“The real promise of 5G Mobility is the use cases are not in existence today and provide new revenue,” Gellman said. “This is important because the revenue will allow the carriers to invest in the 5G infrastructure, which is super expensive. The speed of the 5G rollout will be a function of the prospective revenue.”