The new decade promises some fundamental shifts and disruption for the mobile market, offering both opportunities and threats to the status quo. Indeed, we don’t even need to look that far out to see some of the most pressing changes that will impact the business. While there are many unknowns, will the T-Mobile/Sprint deal pass its final hurdle? Will this mean the creation of a new carrier through Dish? How will 5G impact Smart City development? Below is our take on some of the most important.
5G is going to dominate the news cycle this year as the mobile carriers are jostling for position as the leading, most innovative carrier for the new decade. But beneath the veneer of marketing gloss, the reality will continue to be more confusing. The three-tier spectrum approach to 5G (low at 600 MHz, mid at sub 2.6 GHz, and the dream of millimeter wave) will lead to significant consumer confusion and could present a challenge for smartphone manufacturers (do they include millimeter wave or skip it, for example).
At this point, the consumer has been sold the dream of millimeter wave 5G benefits (super high speed, low latency), but the latest carrier push is in the low and mid-band areas. Both of these lower spectrum options have their benefits and, indeed, I would argue are far more useful than millimeter wave due to the signal challenges that it brings (effectively line-of sight coverage only). To put it simplistically, mid-spectrum sub 2.6 GHz will deliver realistic 5G capabilities (significantly faster than 4G) while the low-band solution will deliver “5G” to a far greater audience.
Importantly, low-band 5G will deliver broadband speeds to rural America: it may not be that much faster than 4G, but it will offer 25 Mbps or greater downloads to the 31% of American households that are currently using DSL or wireless line-of-site that is typically in the 1-5 Mbps range. That, in turn, will increase the market opportunity for mobile carriers to offer newer services such as streaming TV.
Build it and they will come?
Every previous iteration of wireless innovation (the “G”) has come with clear benefits for consumers. 3G brought us the web and 4G delivered on the dream of mobile video, but 5G has yet to offer an obvious consumer benefit beyond just faster downloads, which is less useful in a world of streaming.
Pundits have claimed that Virtual Reality (VR) and Augmented Reality (AR) will be the true beneficiaries from 5G, but both of these solutions are possible in a 4G world and have failed to gain traction. Does this matter? Perhaps not. 5G will hit mainstream in the next year or two despite the lack of a clear consumer use case and as long as carriers don’t charge an additional fee for this enhanced speed it will be adopted by the masses as they upgrade their smartphones. However, without a clear-cut benefit, 5G will not cause consumers to upgrade their current device more quickly, which is not good news for the OEMs.
The most obvious advantage of 5G will be in delivering broadband to homes in rural America. To be clear, we do not see 5G being an effective competitor to high speed fixed broadband (fiber) solutions, but in markets where that’s not available, 5G will shine. Carriers will benefit from the opportunity to broaden revenue streams by adding a new connection per home, as well as layering on content services.
2019 has been a tough year for smartphone makers as they have continued to suffer from consumers holding onto their smartphones longer. While 5G has not been a catalyst for reversing that trend, we do expect to see 5G adoption grow this year, as many of the flagships are expected to boast 5G as a standard option, not at a premium. This will be the main catalyst pushing (somewhat incidental) 5G adoption because consumers in general are not seeking 5G smartphones (33% cited interest in purchasing a 5G device), but they do want flagship devices (three quarters express interest in purchasing a flagship phone). And while not everyone can afford $1000+ 5G phones, we expect U.S. carriers will merchandise “affordable” ($700 - $800) mid-tier 5G smartphones from alternative OEMs – some potential examples were recently announced at CES.
Beyond the 5G trend, the biggest device shift in 2020 will be the foldable opportunity. Are these just a marketing tool to highlight OEM innovation or will consumers really want to buy them? The reinforced Samsung Galaxy Fold is allegedly doing well around the globe, but the U.S. activations based on NPD’s Mobile Phone Tracking data are low. Motorola’s upcoming RAZR clamshell foldable is a unique device that should drive a lot of consumer interest and demand, but it is missing key features and carries a hefty price tag. Then there are the alternative dual-screen solutions like the Android-powered Microsoft Surface Duo, which promise a different use case then a typical smartphone.
All in all, 2020 should be an extraordinary year where we finally see the design and form factor innovation we’ve been missing since the launch of the initial iPhone more than ten years ago.