Deciphering the Hype and Nonsense Surrounding 5G
I don’t own a television, but if I did, I’m pretty sure it would never occur to me that what I really need in my life are crime dramas or sitcoms made by my telephone company, or even my cable internet provider. There is no particular reason to expect a firm that excels at providing bandwidth, should also excel at story telling. It’s a little like the prospect of going to a variety show staged by a bunch of engineers.
I have long argued that mixing content and conduit, combining the making of movies with building the fiber optic and wireless networks to deliver them, makes little sense as a business.
Despite my admonitions, for many decades content and conduit have been pretty thoroughly entangled.
This entanglement came about largely because the government originally regarded almost all communications networks — radio, television, telephone, and later cable TV — as natural monopolies. It was on that theory that the government got into the business of allocating bandwidth to TV and radio broadcasters, and later wireless companies, and regulating telephone and cable companies (including by giving them exclusive franchises).
Government Enforced-Monopoly Crushes Creativity
Cable TV was born entangled; franchised access to customers made it seem like good business to decide what entertainment people could get from their cable box and charge or overcharge them accordingly.
The tangle has gotten a little looser over the past few years. Cable and telephone companies got into each other’s business. The internet broke down old categories. Netflix came along with the quite brilliant idea that with enough bandwidth to support streaming video over the internet, you could beat the competition not only without owning the network, but without even owning the entertainment.
It was always the self-fulfilling myth of scarce bandwidth that supported the mix up of content with conduit. The advent of near infinite bandwidth at near zero latency, which is what 5G really means (if it means anything), will finally separate them altogether.
In the next few years two things will become clear:
- The demand for nearly infinite bandwidth at zero latency will be so great that it will create huge profits for some — though not all — of the companies that provide it.
- And the fierce technology challenges of providing that bandwidth will be sufficient to absorb not only all the capital those companies can provide, but all their management attention as well.
AT&T will sell Time Warner, relieve itself of debt and focus on bandwidth; or it will go down. Comcast will sell its TV network, its movie studio, and its theme park because it will be more profitable to reinvest in its network. Augmented reality will kill theme parks anyway. The other cable companies will similarly realize that the their “fiber to the node” networks are suddenly worth far more than the distractions of having to find material to send across them.
Supply creates its own demand. Over the next few years, upload speeds — the speed at which ordinary consumers can contribute content to the network — will grow relatively faster even then the rapidly accelerating download speeds that deliver content to them. Live streaming video without stutter or stalls will be first universally demanded and then ubiquitous.
As I predicted in Life After Television more than 30 years ago, what we now call “user created content” will continue to multiply and steal viewers from Hollywood.
The providers of bandwidth will decisively give up the “gotcha” business of trying to control what customers can view, and see the attractions of the “letcha” business of enabling and multiplying their choices.
Throughout the economy, in healthcare, education, finance, retail, gaming, the supply of bandwidth will only whet appetites for more. The near universal demand for business applications of artificial intelligence will absorb more bandwidth than the entire internet provides today.
In this environment sitcom, re-runs or even sexy Scandinavian crime dramas complete with comely blondes underdressed for the weather, will look decidedly less enthralling as business propositions.
Not every bandwidth provider will thrive. Some will realize too late that their networks are more valuable to their customers than their tired TV offerings. But some companies that today look old and tired, with stock prices long in the doldrums even before the coronavirus, will find themselves suddenly rich along with their investors. And a host of new firms — some enablers of bandwidth, others brilliantly exploiting it — will enrich investors even more dramatically. I feature several in upcoming issues of George Gilder’s Moonshots, which you can learn more about here.
There is an awful lot of hype and nonsense circulating about 5G. The reality though is far more exciting than the hype. A true internet economy, not possible even a decade ago, is being born all around us. The markets may be having a coronary, but this is a great time to be an investor.
Editor, Gilder’s Daily Prophecy