Tomorrow’s Cellular Networks Will Generate $3.5 Trillion in Economic Output

5G will be great for streaming video but will also enable a new world of connected cars, drones, and robots.

Today’s cellular networks can guide you to a destination in an unknown city; tomorrow’s will transport you there.

The wireless standard known as 4G has untethered us from our living rooms and offices, allowing us to navigate unfamiliar roads and streets using voice directions from Google Maps, stream movies on Netflix while commuting to work, and interview a prospective hire on FaceTime during a flight layover. The next iteration promises to be even more transformative, because it will support communication among objects, as well as people. In a report released in January, IHS Markit, a London-based research firm, says the arrival of 5G, sometime around 2020, will elevate wireless to an elite category economists call general purpose technologies that includes the printing press and the steam engine. The study estimates that 5G will generate $3.5 trillion in economic output and 22 million jobs worldwide by 2035.

When Verizon Wireless rolled out 4G service in the U.S. in 2011, the term “mobile device” described handsets, tablets, and laptops. Cisco Systems estimates that by 2021 there will be 12 billion connected devices globally and approximately one-quarter of them will be cars, aerial drones, industrial robots, and other types of machines.

The leap will require giant increases in network capacity and data transmission speeds. Today, 4G speeds in the U.S. typically max out at about 1 gigabit per second under ideal conditions; 5G will dial that up to 10 gigabits per second. You’ll be able to download a high-definition movie in less than a second, a task that takes several minutes nowadays. “For consumers, it will mean gobs of capacity and create a truly unlimited data environment,” says Roger Entner, the founder of Recon Analytics.

Perhaps the biggest advance will be a vast reduction in latency—that is, communication lag times. Low latency is more or less a prerequisite for the commercialization of a slew of new technologies, including driverless cars, which need to ping one another multiple times per second to avoid collisions, as well as telesurgery and robotics. To shorten delays, 5G networks will have built-in processing power, store data closer to where it’s needed, and run on a new swath of radio-frequency spectrum.

The changeover won’t happen with the flip of a switch. An umbrella group of standard-setting agencies, 3GPP, is supposed to publish a set of draft specifications by late 2019. The U.S. and South Korea will probably launch prestandard 5G networks sooner than that. “We are moving out of PowerPoint presentations to products,” says Michael Murphy, chief technology officer for North America at telecom equipment vendor Nokia, who predicts there’ll be what he calls “precommercial” deployments by the end of this year.

This summer, AT&T and Verizon will each begin trials in select cities using 5G to beam movies and TV channels into homes wirelessly, competing with cable and satellite TV operators head-on. Australia and South Korea will demo their own 5G networks next year, the latter during the Winter Olympics. But the bulk of deployments will start in 2020, with carriers prioritizing cities.

In the transition, carriers, equipment makers, and others will invest a cumulative $200 billion a year, according to IHS estimates. Some operators will be tempted to tag features onto 4G networks and slap on a new label, which will create confusion for consumers, says Tim Farrar, an analyst with researcher Telecom, Media & Finance Associates: “Operators will be incentivized to use 5G as a marketing term rather than being technically correct.”

Germany’s luxury automakers announced in September that they were teaming up with Ericsson, Huawei Technologies, Intel, Nokia, and Qualcomm to form the 5G Automotive Association, whose mission is to help set standards and define uses for next-gen networks. Daimler, one of the association’s founding members, envisions a future in which its car-sharing subsidiary, Car2go, could dispatch a driverless vehicle to pick up a customer at her home. “Connectivity is important, and we are looking forward to getting more and more information into the cars,” says Bernhard Weidemann, a spokesman for Daimler. He cautions that a network delivering consistently good coverage as you travel from one city to another “is unlikely to come into being for a long time.”

In Aachen, Germany, Ericsson is testing 5G at a prototype factory where robots work at lightning speed. “You need a very fast control loop in order for the feedback of how the robot moves to be processed,” says Hakan Andersson, director of 5G strategy.

The fast-growing drone industry is also eagerly awaiting the advent of 5G. Most unmanned craft store video-and-mapping data from their flights onboard, then download it after landing. With 5G, drones will be able to beam high-definition video while in flight. That would allow fire departments, for instance, to dispatch a drone to the scene of a blaze to gauge the situation. “We are moving from a world where there’s thousands of aircraft with sensors on them to a world where there are millions of aircraft with data on them,” says David Yoel, chief executive officer of drone maker American Aerospace Technologies. “And that data needs to be transmitted in real time or near real time.”

For wireless carriers, many of which have seen annual revenue growth dip into the single digits, 5G can’t come soon enough. “We have a tough market in Europe, and we really want to change the game,” says Arnaud Vamparys, a senior vice president at France’s Orange, which is gearing up for a 2020 deployment.

Given the huge investments Orange and its peers will have to make to upgrade their networks, there are bound to be clashes over access. Wireless operators have been powerless to stop services such as Netflix and YouTube from building profitable businesses atop their infrastructure. Will they stand by as makers of driverless cars and drones do the same, or will they press for a cut of the revenue? No doubt, governments and consumer groups will weigh in with their own proposals. Stay tuned for the tussle.

The bottom line: The next-generation mobile standard will support $3.5 trillion in economic output by 2035, according to forecasts.

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