5G Service From Verizon, AT&T, and T-Mobile Is Here. The Networks Look Very Different. - Barron's

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5G won’t make or break this year or next for U.S. wireless carriers —or 2022 for that matter. Network buildout and customer adoption will be slow, meaning that 5G’s impact will take years to show up in the carriers’ financial results.

They’re bullish on the 5G opportunity, nonetheless. “Frankly this is all one big ecosystem, and a rising tide lifts all boats,” says Kyle Malady, chief technology officer of Verizon Communications (ticker: VZ). “In terms of how we monetize that thesis, time will tell. But it all starts with the connectivity and the capabilities that leveraging those brings— the devices and our network.”

Verizon, AT&T (T), and T-Mobile US (TMUS) have begun to roll out 5G in markets across the U.S., but the carriers are planning their 5G strategies without massive increases to their capital spending, another reason that the transition from 4G will be a gradual one.

The greatest user benefits from 5G networks are significantly faster upload and download speeds, lower latency, and better performance in high-density areas. Much of that comes from using a wider range of radio waves, or spectrum, which are licensed for commercial use by the Federal Communications Commission. Each of the carriers is taking a different approach to 5G spectrum, which is likely to have an impact on the services they offer.

Verizon has bet on high frequencies known as millimeter wave, or mmWave, which require a dense network of small cells. The idea works best in crowded places, like stadiums, airports, and shopping malls—exactly where nobody is today. As long as the coronavirus pandemic wears on, wireless carriers pushing 5G will have a tough sell.

One use of 5G that may get a lift from coronavirus is fixed wireless broadband—essentially home internet delivered over the air—as consumers stuck indoors look to upgrade their connections.

Verizon is the only U.S. carrier offering 5G home internet. It’s currently in Los Angeles, Chicago, Houston, Indianapolis, and Sacramento.

Ultimately, the carriers will need a mix of bands for 5G. Lower frequencies enable broader geographic coverage, albeit at slower connection speeds. Midband spectrum offers fast coverage with a radius of more than a mile, making it the Goldilocks zone for 5G.

Gaining access to midband spectrum was a key motivation for T-Mobile’s Sprint acquisition, which closed last month. The combined company now has the largest midband portfolio, with more licensed spectrum than Verizon and AT&T combined. Both of them are likely to be bidders in a pair of upcoming midband auctions.