Hans Vestberg: Liar of the month for false latency claims

Nope

Verizon’s “low latency” 5G Edge network is specified at 20-35 ms. Its 4G network averages ~32 ms. That’s an insignificant difference that makes almost no difference to any application. It is not “low latency” nor does it improve the user experience.

For example, I and many others get dizzy in Virtual Reality unless the latency is close to 10 ms. 20-35 ms doesn’t cut it.

Vestberg claimed in 2022 “You cannot do Metaverse without the network that Verizon is building today with low latency.” 20-35 ms doesn’t improve the Metaverse.

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Moffett’s Remarkable Insight: Low marginal cost means nothing if you can’t sell it

The low cost per bit of 5G means almost nothing if you can’t sell the bandwidth.  I’ve been warning for at least five years that telcos’ biggest problem is overcapacity. In 95% of locations, most of the time, major telcos have excess capacity. The tech is moving incredibly fast, driving cost per bit down at 40%-50% per year.

Hans Vestberg at Verizon discovered this the hard way. He told an interviewer his 5G network would cost 90% less per bit. He would use that cost advantage to create profitable new products. When asked which products Verizon would offer, he said he didn’t want to tip off the competition.

A year and a half later, Verizon has no significant new products or revenue sources. None.

(The network also isn’t performing. Open Signal connected to 5G 4/10ths of 1% of the time.)

Craig Moffett, the best on Wall Street, warns of “The Fallacy of Marginal Cost Advantage.”

All of us are taught from our earliest studies of microeconomics that marginal cost advantage is… well, everything. The cost-advantaged widget maker will always win…

It’s not true with telecom.

Years ago, I was asked by one of the legacy long-distance networks whether the spate of next-generation fiber long-distance networks … would indeed have an “order of magnitude” advantage in marginal costs … We concluded the “next-gen” networks would indeed have marginal costs that were an order of magnitude lower than those of the legacy providers.

But that wasn’t the bad news. The real problem wasn’t the marginal cost disadvantage. It was excess capacity. The capacity of long haul fiber networks had exploded in 1997 and 1998, driven by technology advances.

We are regularly asked whether we buy the thesis that Dish Network can build a next-generation virtualized ORAN network that will have a significant marginal cost advantage,,,

Sure they can. The cost of a network is almost entirely fixed; there’s the cost of network construction, and there’s the ongoing cost of powering, infrastructure rental, repair, and maintenance. Sending more or fewer pulses of light doesn’t change any of those.

Any self-respecting network engineer will tell you that one of the first things they ever learned about network economics is that networks are built to handle the moment of peak demand. It therefore follows that the cost of a unit of capacity at any moment other than the moment of peak demand is zero. It is excess, it is not recoverable, and it is therefore valueless (a unit of capacity one second ago that expired unused isn’t helpful to anyone, and is lost forever).

In the end, there are only three things that matter: what does the network cost to build? What does it cost to operate? And how much revenue can it generate? What Dish is planning in the U.S., is a reminder that building and operating networks is hard. And earning a return on them is even harder.

The key question for Dish, Rakuten, 1+1 Drillisch, and other new networks is not whether their costs are low. It’s whether that can be turned into sales. Jio in India proved it was possible, reaching ~400 million subscribers in 4 years. It won’t be easy.

Early results on Open Ran, SDN, NFV, and the like don’t match the hype.

Alex Choi of Deutsche Telekom is enthusiastic about Open RAN and the other buzzwords as near-future technologies, still with challenges. That’s the near-universal consensus of the top network engineers. That doesn’t mean the new networks shouldn’t pioneer, but I’ve been seeing some unfortunate datapoints”

AT&T, Verizon Praying People Won’t Switch to T-Mobile’s Better 5G

The U.S. 5G market is T-Mobile’s to lose. The golden 2.5 GHz Sprint spectrum will give T-Mobile the best network in 40-60% of the U.S. over the next 4-9 months. Speeds will typically be 100-300 Mbps, occasionally higher. Verizon may have triple the speed in their millimeter wave network, but that’s only in about 10% of the U.S.

Currently, most U.S. 5G networks are lousy, but 3.4 million 5G Samsung Galaxy phones sold in Q1. That’s far more than I expected. Verizon expects explosive sales when the iPhone 5G ships. 30 million U.S. 5G phones in 2020 are possible, but I don’t have enough data.

DT CEO Timotheus Höttges just said he wants to be #1 in the U.S. If he gives Neville Ray the budget to build and Mike Sievert the marketing budget, his chances are good.  

Verizon and AT&T in most of the country will be using low band spectrum. AT&T has already deployed “low-band 5G” (850 MHz) which AT&T VP Gordon Mansfield confirms is often no better than their 4G. Open Signal found actual speeds of 62 Mbps, slower than most of AT&T’s own upgraded 4G cells. (Chart below.) That can quickly be deployed using dynamic spectrum sharing, which is reaching the field.

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Does Korea Slowdown Mean 5G Demand is Falling?

Korea added only 313,000 5G users in December, half the August total. It missed the 5 million year end 2019 goal. The 15 million projection for 5G users in Korea at the end of 2020 is now uncertain.

Phone subsidies have been cut sharply from the $400-600 earlier in the year. Coverage, at over 80%, is the highest in the world but the 90% target for yearend has been missed. The Korean press has been reporting reliability problems, even in Seoul.

One month is not enough to prove a trend. However, I have a few other data points that are making me wonder about demand.

Verizon has delayed its 5G buildout by 1-3 years. Last year, it predicted significant 5G revenue in 2020. Hans Vestberg on the financial call put that off until 2021. The build is also slowing. Verizon’s original plan was to cover about a quarter of the U.S. with mmWave by 2022. It has now pushed that back to 2024-2025. Viavi, whose test equipment is used in most 5G networks, sees very limited growth in 5G networks in 2020 outside of Asia.

5G offers few benefits to consumers, who may be becoming disillusioned. Alternatively, these holdbacks may be an exception. It’s reasonable to reduce the surprise-free projection from 210 million to 195 million because of Korea and coronavirus, but the data is not yet clear.

Millimeter Wave: What’s Goin’ On

Verizon has the only substantial mmWave network on the planet. They may have already covered 5% of the US, but most is not yet turned on. The company refuses to release any figures other than 30 million passed one day, about a quarter of the US. The majority of Verizon’s “5G” will be low or midband, which will cover about 40% of the US next summer.*

At Verizon, business areas and some neighborhoods will get mmWave, the good stuff designed for a gig or so. The rest will get low and mid-band, details pending CBRS and C-Band auctions. It will mostly be 70%-90% slower. Guess which neighborhoods will get the slow stuff.

KT was one of the early pioneers in mmWave, supported by Samsung research. Jerry Pi at Samsung was one of the first in 5G mmWave research and Samsung the first to put a large team of engineers to work building actual equipment. KT nows talks vaguely of sometime in the future, probably highly limited for the next several years.

NTT DOCOMO has similar plans. CTO Seizo Onoe has been involved in mmWave since the beginning. For now, DOCOMO is only talking about limited trials for several years. It may try for a splash at Olympic venues. Telefonica Deutsche had plans but seem to have set them aside.

Few are building mmWave. Most telcos believe they have more capacity than they can sell until the middle of the decade or later

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