Verizon (NYSE:VZ) will start launching its 5G network by the end of this year, ushering in a new era for the internet. The network will boast faster speeds and lower latency (the time it takes for data to travel from one point to another), and could be the key to commercializing fast-growing technology like autonomous cars, connected health, and smart cities.
However, as with past advances in mobile networks, 5G will take time to become the standard. To help explain what that will look like for consumers, Verizon's Vice President of Network Engineering, Mike Haberman, took time to answer some of my questions.
When can I get it?
It's been four or five years in the making for 5G, and Verizon says that four markets in the U.S. are ready to make the jump by the end of 2018. Indianapolis was the most recently announced location, joining Sacramento, Los Angeles, and Houston. All four cities have been involved with helping Verizon test and build out the network.
Haberman said comments on 2019 deployment will be forthcoming, but he had this to add:
We've seen enough to go ahead aggressively [with deployment], because the technology works. It propagates better than we thought. We were pleasantly surprised that it was getting to locations we thought it might not. Some of the examples we use were it got higher up buildings, up to the 19th floor of buildings, when we didn't think it would reach that high. We were seeing locations 2,000 feet from the cell site and still having good speeds. So we've seen enough to go aggressive at it in 2019, and we'll take it from there.
How can I get it?
Regarding the first package 5G will come in, Haberman said:
The first application will be broadband access. To get that broadband connection, a 5G connection from a router will get converted to existing ethernet or WiFi, which means all the devices in the home that use ethernet or WiFi will immediately be able to use 5G. The only difference is a 5G radio with an antenna. You could argue to a certain extent we do this already with 4G. You can get a router in a store that uses 4G at this point. But this [new 5G equipment for the home] enables a high-performance 5G connection that you get to your home via the air, and it can offer tremendous speeds that can enable all the devices in your house.
Verizon already offers internet access in some markets via its Fios division, and some consumers may already be using 4G wireless for the same purpose. However, 5G puts the company in better position to compete directly with traditional internet service providers (ISPs). The new network will be initially used for in-home service. Look for wireless devices to get access to 5G later, as it will take time for manufacturers like Qualcomm and Skyworks Solutions to develop new chips for 5G-ready smartphones.
Beyond broadband internet and smartphones, Haberman expects 5G will take a little longer to become available for higher bandwidth applications (think ultra-high-definition 4K surveillance cameras, autonomous cars, etc.).
How much does it cost?
Haberman says the cost to consumers isn't quite ready to be unveiled. However, it was recently announced that for 5G subscribers in the four initial markets, the service will include Apple TV 4K as well as Alphabet's YouTube TV. Thus, 5G could be a quick boost for companies other than Verizon.
As for Verizon's costs, Haberman couldn't disclose that at this time. However, company CFO Matt Ellis has said that capital expenditures in 2018 will be $17.0 billion to $17.8 billion, which includes spending on 5G deployment. It's also worth noting that all of the wireless company's work to improve its existing network over the years also feeds into the equation. For example, there was Verizon's $3.1 billion takeover of 5G spectrum holder Straight Path Communications after beating out AT&T in a bidding war in the spring of 2017. The acquisition of XO Communications' fiber optic network for $1.8 billion last year also played a key role in getting the new service ready.
In short, 5G has been a big project. The cost to consumers should be forthcoming, though, as it will be available in the first cities by year-end.
What will the network look like?
Leveraging existing cell tower locations has been key, so 5G won't look that much different from 4G. Think of this more as an existing network upgrade. Haberman had this to say:
Millimeter wave [the wireless spectrum on which 5G data travels] will give you true 5G connection. In most cases, we will be upgrading existing 4G nodes to 5G, a box or two on the top of a pole, as the 5G equipment is fairly small. In some cases, you will see 5G antennas appear on utility poles, city furniture, and fiber [optic cable] going to all those sites. All the work we've been doing on 4G to densify the network, we've had an eye toward 5G. All the work to get fiber and power to 4G sites makes it a lot easier to deploy 5G sites.
So not much will appear to change for consumers. However, Verizon needs some help, specifically from cities. Permitting projects, even if it's installation of new equipment at existing 4G sites, takes time. Cities that can deal with extra permitting volume are therefore going to get prioritized. Access to "city furniture" like street lights, traffic signals, and utility poles is also helpful in getting the job done.
What does a city get from all of this? Besides revenue for the city, its residents get access to 5G and the new technology that it enables. The city itself also gets a shout-out for being a leader in tech, as Verizon has done for the previously mentioned municipalities. Smart city capabilities like connected cameras, along with traffic monitoring and management, could also get a boost from 5G. Verizon, by the way, offers those types of services, too.
There are still lots of questions, including how Verizon will report financial results of its 5G broadband service to investors each quarter and how much it will cost. However, with 5G readying for launch within the next few months, many of those questions should get an answer in short order. Either way, it's an exciting time to be a Verizon shareholder.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Nicholas Rossolillo owns shares of Alphabet (A shares), Alphabet (C shares), Apple, Skyworks Solutions, and Verizon Communications. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, and Skyworks Solutions. The Motley Fool owns shares of Qualcomm and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.