5G won’t be a financial cash cow for wireless carriers, report says

The spread of superfast 5G wireless networks will provide a boon to the economy, although the revenue generated by wireless carriers from the emerging technology could be modest, according to a new report.

Companies in manufacturing, health care, transportation, environmental monitoring, and gaming will get major financial benefits from 5G’s speedier connections, according to consulting firm KPMG. Increased spending on connectivity, hardware, software, and services could drive more than $140 billion of new annual revenue in those sectors worldwide by 2023.

But for telecommunications carriers like Verizon, AT&T, and T-Mobile, which are spending tens of billions of dollars to build 5G networks, KPMG’s forecast was less generous. Only about 11% of spending from the introduction of 5G will go to connectivity. “It’s a sobering prospect for telcos,” the report notes. “The dire economic impact of becoming a ‘dumb-pipe’ is real and requires immediate action for those not already positioned to benefit.”

The carriers have already struggled to charge consumers more for 5G, with Verizon eliminating an extra charge for 5G last year and T-Mobile pledging not to charge for the faster service for at least three years as part of its deal to gain approval for merging with rival Sprint.

At the same time, the carriers have also tried to take advantage of 5G, which provides connections that are 10 to 100 times as fast as current 4G LTE, in new ways. With the help of its 2018 acquisition of Time Warner, AT&T will be able to offer video streaming and other entertainment over its 5G network. Meanwhile, Verizon runs a large digital media unit which is designing programming specially for 5G. Verizon is also partnering with Amazon to create small cloud computing data centers to host 5G apps and services. And T-Mobile plans to offer wireless home Internet service nationwide via its 5G network.

Among the five business sectors analyzed in the report, manufacturing will gain the most new revenue as a result of 5G, with robots and other autonomous machines helping factories become more efficient with higher-quality output and reduced maintenance costs. Gaming will also produce considerable additional revenue thanks to 5G, as both virtual reality and cloud-based gaming get a boost, the report noted.

The software industry will also be a big winner from 5G, as manufacturers buy apps that use A.I. To run automated factories, hospitals use programs to gather and analyze wireless sensor data, and video gamers opt for the latest titles to play via streaming, the report noted.

(Correction: This story was updated on June 10, 2020 to correct the percentage of spending on 5G connectivity after KPMG corrected the figure in its report.)