5G vs. 4G: 4 Things Investors Should Know Before 2020 (VZ,T)

In September 2015, Verizon Communications Inc. (NYSE: VZ) surprised the wireless telecommunications industry when it announced plans to accelerate its development program for fifth-generation wireless communication technology, known as 5G. The company's updated development roadmap detailed an initial commercial deployment target of 2017, at least three years before most industry analysts expected the technology to be ready for operational testing. Verizon competitor AT&T Inc. (NYSE: T) expressed skepticism at the time due to the immaturity of the technology and the lack of industry standards. However, by February 2016, AT&T had jumped on the accelerating 5G bandwagon by announcing its own updated development roadmap, including non-commercial field trials by year-end 2016. As of June 2016, Verizon remains on target to deploy the first commercial 5G network in 2017, a localized implementation designed to deliver wireless broadband internet access into a minimum of several hundred homes.

Verizon and its technology partners began 5G field trials in locations across the country in early 2016, successfully demonstrating the viability and power of 5G technology in real-world environments and scenarios. Work by AT&T and other 5G developers offers similarly positive results. Despite these developmental successes, it is still unclear when 5G technology might be ready for wide-scale deployment in a mobile network. Industry analysts expect initial commercial mobile implementations to appear in 2019 at the earliest, with wide-scale deployment rolling out in later years.

Given this timeline, the dominant mobile communication technology in the United States, known as fourth-generation Long Term Evolution (4G LTE), is certain to retain its position in the market for some years to come. However, 5G promises several substantial technological improvements over this incumbent technology.

5G mobile technology promises transformational speed improvements over 4G LTE technology. Verizon expects to deliver mobile download speeds in the range of multiple gigabits per second, around 50 times faster than 4G LTE technology. That is enough bandwidth to download a full-length HD movie in seconds. In its own testing, AT&T reports 5G speeds ranging between 10 and 100 times that of a 4G LTE connection. With these speeds, 5G could become a competitive alternative for cable and other high-speed fixed broadband solutions currently serving the market.

In addition to faster download speeds, 5G technology will also provide much faster response to user inputs. Both Verizon and AT&T report network latency in the low single milliseconds, a time span imperceptible to human senses. Low network latency improves the user experience across all kinds of mobile and desktop applications and other network-connected devices. It is especially important to technological applications that require high precision, such as telemedicine and remote equipment operation.

Perhaps the most transformative aspect of 5G mobile technology is its ability to handle simultaneous connections from billions of independent devices and embedded sensors across the network, from cellphones to home appliances to clothing, thus creating the internet of things (IoT). Long discussed by futurists and technologists, the IoT is the basis of a truly connected world in which electronic devices, machinery and all kinds of inanimate objects collect and share data across the network to make life more efficient, safer and smarter.

As connected devices and embedded sensors continue to proliferate in all aspects of life and business, 5G is being designed to accommodate an explosion of many billions of smart objects. In the near term, the number of internet-connected objects in the world is expected to reach 38.5 billion in 2020, a 187% increase from 13.4 billion objects connected in 2015. Deployment of 5G technology is a key part of supporting the vast increase in bandwidth-hungry smart objects expected to come online in the decades that follow.