5G and Rural America

In a blog post on February 27th touting the value of the T-Mobile-Sprint merger for rural areas, T-Mobile CEO John Legere said:

We won’t do fake 5G. We won’t do 5G for a few. And, in 2020, with the New T-Mobile, we plan to light up the country’s first truly nationwide, real 5G network – from big cities to rural America. By 2024, for rural America, the network translates into better coverage (increased outdoor wireless coverage to reach 59.4 million rural residents, or 95.8 percent of the estimated 62 million rural residents!); improved signal quality and reliability; speed; and in-home service (at least 25/3 Mbps to 52.2 million rural residents over 2.4 million square miles, approximately 84.2 percent of rural residents!)

What’s to be made of Mr. Legere’s post? Is 5G with 100+ Mbps service on rural America’s doorstep? Not from this post, and not from any other release by T-Mobile. The reasons are twofold. First, T-Mobile largely has low-band spectrum, which is excellent for wide area coverage and building penetration but not for bandwidth capacity. And, even if you assume its merger is approved and T-Mobile can use Sprint’s mid-band spectrum, it does not change this equation much. Second, while T-Mobile may get better spectrum, building a small cell network in rural areas is very expensive. That’s why Mr. Legere promises to deliver only relatively low speed broadband to rural areas, far below the 300+ Mbps service that Verizon is delivering in select markets today.

As for Verizon and AT&T, they are targeting gigabit-speed 5G service in urban areas where they are creating dense, small cell networks using their millimeter wave spectrum (in the 24-52 GHz range), which enables high bandwith throughput over short distances. For both operators, it is imperative that they take the lead on 5G, but they also understand that small cell deployments are costly and that the 5G revenue model is unproven.

In sum, “real” high-speed 5G requires lots of access to high capacity spectrum, lots of small cell sites, and lots of fiber, all of which will require enormous investment. In addition, the business case is still uncertain, and so it is better to rollout where the revenue opportunity is the greatest – first in urban areas, then in suburbia, and finally, someday, in rural areas. In the meantime, mobile coverage and speeds in rural areas will certainly improve and may even pose a competitive threat for the “value” subscriber that can afford only one broadband service and wants mobility.

Broadband providers in rural markets thus face less of an immediate competitive threat from 5G, but they should not be complacent. I was just with the COO of Cable One, which operates in many rural areas, and 100 percent of the company’s systems will deliver 1 Gbps service this year. Moreover, Cable One is not unique. Cable operators along with FTTH operators are offering gig service to most customers today. Rightfully so, broadband providers continue to invest enormous sums annually as they rush to deliver higher performance service and beat the competition. You have a choice: join in and inoculate yourself or take your chances with the many threats around you. 

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