Why All the Fuss About 5G?
It was more than 25 years ago when the internet started being called the “information superhighway” and was destined to transform the world of business and so much of our daily lives. Today, the world’s great powers and myriad companies are jockeying for the lead in a race to the fifth generation of wireless communication. In fact, Apple will be releasing its first 5G enabled phones this fall, bringing focus and attention to this next generation mobile network.
With transmission speeds from 10 to 100 times the current 4G standard, 5G will support dynamic real time synchronization for a world of connected devices as well as the rapidly expanding demand for streaming entertainment and information. One salient lesson of the Internet era is that such foundational advances can have remarkably far-reaching effects, some easily anticipated and others barely imaginable.
Each generation of the cellular network has moved the ball forward. The second generation facilitated text messages and eventually photos on our phones. The third improved speed and reliability. The fourth generation, rolled out barely a decade ago, converted nearly all cell networks to digital streams, making possible much of today’s ecosystem of smartphone apps, including social networking, streaming music and video, and portable gaming.
The big gain expected from 5G is reduced latency – the time lag it takes two devices to communicate. When we make cell calls, that familiar moment of silence before the other phone rings may not seem like a big deal. But those milliseconds can be critical for such applications as industrial robots executing tightly synchronized tasks, remote surgery, driverless vehicles, and all manner of streaming services. Today’s 4G networks typically take about 50 milliseconds to transmit a request from your phone. 5G may cut that to a single millisecond.
The global 5G competition has economic and national security implications. Countries that most broadly and effectively implement the new standard are expected to reap an innovation windfall spanning business, government, public infrastructure, and people’s personal lives. Military considerations are also paramount, with high-tech weaponry and communications already critical to the major powers’ defense and warfare capabilities.
Of course, the race to 5G must contend with its own latency in working through the growing pains and competing interests in such a grand rollout. Technological standards are still in flux, and major infrastructure investments hang in the balance. On the investment front there are bound to be both winners and losers as 5G creates openings for business models and processes that do not exist today. As usual, forward looking portfolio managers will try to deploy cautious yet opportunistic diversification to achieve prudent, positive participation in that dynamic future.
Written By Lynn Snyder, CFA