What will 5G mean for the Tower REITs in the future?

All of the major wireless carriers are investing now to test 5G systems in the 28 GHz and 39 GHz bands authorized by the FCC in 2016. Some of the carriers are testing other bands as well to see how they will perform. Without a doubt the four (ATT, VERIZON, Sprint and T-Mobile) will have some 5G services available by 2020 or sooner.

5G5G signals at these high band frequencies won’t travel as far as 4G signals, due to use of much higher spectrum. Delivery of 5G service will require wireless carriers to invest in more cell towers, as well as in small cell and fiber networks to broadcast 5G signals into specific areas. It is  clear that implementation of 5G should be a massive homerun for Cell Tower REITs and expected to buoy revenue growth for the better part of the next decade. Companies with a specific focus on small cells may benefit the most.

There are tests of 5G networks in certain markets going on at  this time, but standards are still being developed. There are no 5G handsets or chips commercially available yet.

Qualcomm has announced its first 5G modem chip, Snapdragon X50, worked well in a recent test in San Diego in October 2017.

Specifications for 5G have not yet been firmly set by 3GPP, (Third Generation Partnership Project, a collaboration of telecom rule makers in Japan, US, China, Europe, India, and Korea) Release 15 came out in early 2017, with rules now accepted for standard 5G silicon manufacturing. Qualcomm’s Snapdragon X50 are now produced in small volumes, with handset vendors such as Samsung  and Apple expecting to ship their first 5G devices for use by commercial accounts by the end of 2018.

The first commercial use of 5G is likely to be fixed wireless service from Verizon in 11 metropolitan markets planned for the end of 2018. Verizon has already indicating 5G will deliver Internet data downlink above 5-6 Gbps, making 5G potentially better than the best fiber broadband networks available today. With the latest and fastest chips in 5G devices, the experience of 5G is likely be far superior to current broadband offerings.

Office parks and urban areas with clear line of sight will be the first market for fixed 5G potentially in 2019. 5G really won’t be a mobile wireless service until the densification of the  networks is completed probably by the end of the decade. Small cell must be a part of this process. For investors in Cell Tower REITs, the most important implication of the transition to 5G is the need for densification of the networks.  True MIMO (multi in multi out) experience will require dense antenna arrays. This densification and development means that  every 5G base station, becomes a small data center. This means not only more processing but also more electrical power requirements in more locations. In other words, more lease revenue for the Cell Tower REITs. Of course, it is also great news for server manufacturers. Watch for more information from Connected Real Estate on “digital electricity” to handle these needs.

Your car, your HVAC system, your washing machine, your smart home system  will all have 5G chips. Don’t be surprised if your carrier begins to charge a few cents a month to monitor all of these chips as a service. 5G can’t be everywhere right away and wireless carriers will focus on the new markets first, competing with fixed broadband and aiming to replace the cable companies for your TV service and your alarm devices.

The transition from 4G service should happen first in the densest urban areas, starting in 2019, but won’t reach full national scale for at least a few years after that.

Capital spending for 5G is going to be a significant challenge for the 4 major US carriers so watch for a potential deterioration of your basic cell service as their spend moves to 5G.

AT&T and Verizon, have chosen some new competitors to build more towers as a way to pressure the Cell Tower REITs. Good luck to them in zoning!

Connected Real Estate will continue to update you on all 5G related information

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