<![CDATA[Forget the hype: why 5G is about to disappoint you]>

In case you hadn't noticed, media commentators and industry analysts are locked in a fierce competition to come up with ever more extreme hyperboles to describe the importance of fifth generation " or 5G " mobile telecommunications technology.

Just last week, an article in the South China Morning Post told us that "5G will change the way we live forever".

A couple of weeks earlier, Foreign Policy magazine declared that "5G will be, simply put, the central nervous system of the 21st-century economy".

Meanwhile, a report from one UK-based financial services company hailed 5G as "a multitrillion-dollar communications revolution that will profoundly change every aspect of our lives".

These are big claims. But there's a problem: they betray a startling ignorance of how technological advances actually work.

History, mathematics and economics all suggest that the effects of 5G will be a lot less impressive than its enthusiasts insist.

Doubtless it will find some novel and interesting uses. But those remain years away, and they will barely be apparent to most of us. Like it or not, 5G isn't going to change the world any time soon.

Among the promises of 5G is that it can deliver fixed-line broadband levels of speed and responsiveness to vast numbers of mobile devices, no matter how densely packed. Advocates say 5G will make self-driving cars feasible for the first time, and that it will accelerate automation, allowing thousands of autonomous robots to operate on factory or warehouse floors.

But it's hard to get excited. Truly self-driving cars will not be coming to a road near you for years, even decades. That's not because there are insurmountable obstacles with the technology. The problems are legal.

No matter how sophisticated safety systems get, accidents will still happen. And in a litigious society, when they do happen, the liabilities faced by manufacturers and network operators will be ruinous. In short, without far-reaching changes to the law, self-driving cars are simply a non-starter.

And while 5G will have important applications in industrial automation, these will have no impact on most people.

They may not even affect many factory workers. In recent years, companies have often preferred to hire new employees rather than invest in robots. After all, with increased labour market flexibility, it is easy to lay off workers when business turns down. But investment in automation is a sunk cost. Once you've bought a robot, you cannot sack it if orders hit a soft patch.

But what about all the claims that 5G will be a game-changer for ordinary mobile phone users?

No it won't. Like other incremental technological advances, new generations of mobile phone networks are subject to diminishing marginal utility. Each time, the gains get smaller.

If you doubt that, consider another technology people said would change the world: the internet.

The development of the internet might have seemed like a revolution, but in reality it was an evolution. In a nutshell it just made communication faster.

Today, thanks to the internet, we can send, say, a 30,000 word document to someone on the other side of the world in just a few seconds.

5G masts on a rooftop overlooking St. Paul's in London. Photo: Bloomberg

That's fast, but in truth it's not all that much faster than communication speeds before the internet. Sending that 30,000 word document by fax would have taken around 16 minutes, which means the internet has sped things up by 100 times.

In this sense, the development of the electric telegraph in the mid-19th century was a much bigger deal. Before the telegraph, it took at least two weeks to send a letter across the Atlantic. The introduction of undersea cables and Morse code cut that time to just 10 minutes. That was an improvement of 2,000 times " an advance 20 greater than the internet.

When it comes to mobile telephony, 5G will suffer from the same diminished gains. Telecom engineers say that at its best, 5G will be 100 times as fast as 4G. That might sound like a big leap, until you consider that 4G was 250 times as fast as 3G. For all the hype, the incremental gain will be less than half as great. To most ordinary users, the transition will hardly seem worthwhile.

Sure, over time, new applications that exploit 5G's enhanced capacity should develop. Augmented reality is often mentioned.

But before that can happen, network operators will have to invest in building the necessary infrastructure.

That will not come cheap. Because 5G is intended to operate at higher frequencies than existing networks, it requires a much higher density of base stations than 4G. For optimum service, 5G will need 10 times as many base stations as 4G to cover the same area.

5G: you're about to feel disappointed. Photo: Reuters

The capital investments needed will be enormous. China is planning to spend as much as US$50 billion a year over the next decade building 5G infrastructure. Another estimate puts the necessary investment at US$2 trillion to US$3 trillion for developed economies.

Overwhelmingly, that investment would have to be funded by debt. Globally, this would mean an increase of around 20 per cent in the amount of corporate debt outstanding, at a time when the Organisation for Economic Cooperation and Development is already warning that record levels of corporate debt pose a threat to financial stability and economic growth around the world.

As a result, it's small wonder that network operators are balking at the size of the investments needed to roll out 5G. Stung by the vast cash costs of building 3G and 4G infrastructure over the last two decades, many are reluctant to make a fresh commitment, especially when the potential pay-off is so uncertain.

Surveyed last year by management consultancy Bain, a 53 per cent majority of senior executives at the world's largest mobile network operators saw no near-term business case for investing in the technology.

All this suggests that although 5G will gain some niche industrial users, it will be many, many years before operators build out extensive mass market networks. And without those networks, there will be little incentive to develop the new applications needed to give the technology critical mass.

This article originally appeared on the South China Morning Post (SCMP).

Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.