5G Venture Opportunities & Challenges Ahead
By Linus Liang, Kevin Wu, Signia Venture Partners
The recent release of Apple’s iPhone 12 with 5G capability has renewed consumer interest in 5G. Though the technology has been touted for years by wireless carriers and device manufacturers, its exact benefits are often still unclear to mass-market consumers. In fact, some products themselves are misleading — AT&T’s ‘5GE’ products, in reality, are just enhanced 4G LTE products rebranded.
More importantly, however, the significance of nationwide 5G has implications far beyond cellular data speed on iPhones. I help teach a course at Stanford on frontier technologies and recently brought in two telecom experts, Milo Medin (VP of Wireless Services, Alphabet) and Gilman Louie (Alsop Louie), to share their perspectives on the future of 5G.
Venture Opportunities
As compared to its predecessors, 5G is a network with higher bandwidth and lower latency, enabling faster performance and a greater set of capabilities. According to Gilman, one of the most exciting opportunities enabled by this technology includes remote control and automation at scale. Specifically, 5G allows for a fast control loop between a device and the cloud, such that systems can now compute locally instead of remotely. This opens doors for applications in mobility and industrial manufacturing (i.e. fleets of robots), as well as in interactive entertainment (i.e. AR headsets), where latency has traditionally been an impediment. In a nutshell, 5G provides you with portable gigabit technology that is just as fast as a fixed network (today’s gold standard for speed and quality).
However, deploying 5G networks alone is not enough to unlock unlimited and instantaneous connectivity; innovation in edge computing hardware is required as well. Though 5G has decreased latency substantially from 4G, slight lags in response time in many systems, such as a fleet of centrally-controlled autonomous vehicles, are dangerous and can mean the difference between life and death. The impetus is still on developers of the ‘distributed intelligence’ backbone — sensors, circuits, cloud networks, and more — to drive up power and performance on hardware and ensure that the overall system is improving its resiliency to failure.
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Challenges
As 5G coverage begins to expand across the states, it has faced barriers from both public safety concerns and infrastructure challenges. The safety concerns primarily center around radiation from 5G’s millimeter waves, which are unfounded as the human body can absorb close to 100% of the waves with no biological effect. However, the new infrastructure investment required to operate 5G at scale still remains an obstacle. While the transition from 3G to 4G allowed telecom operators to use many of the same cellular sites, 5G’s demands for higher frequency and spectrum will require far more new construction, with over 1 million sites needed to effectively serve 70% of the American population (only half have been built today).
The construction of 5G’s new mobile base stations also comes saddled with security risks, as the largest international telecom providers today — Huawei, Ericsson, Nokia — are all foreign companies who answer to foreign states. Typically, the provider that installs a tower or bay station also retains access for maintenance purposes (the service providers are the OEMs). If the United States relies on Huawei, for instance, foreign engineers and technicians would be responsible for configuring cryptographic systems, law enforcement intercept, and other functions on cellular sites that are critical to national security.
This worst-case scenario is particularly concerning for two reasons. First, forced reliance on the OEM kicks the door wide open for nefarious foreign actors to install software and hardware that may intercept, alter, or block data flowing through U.S. networks. Second, as history has shown (i.e. Russia’s actions towards Ukraine), nation-states have traditionally been willing to seize control of adversarial states’ networks to flex power in a time of crisis. Though the speed of rollout may be hindered, U.S. public officials must remain vigilant in limiting risk by maintaining domestic control over a national 5G network.
Investing in 5G
For venture investors, investing directly into 5G technologies may still be premature. There is little rationale for deploying venture capital dollars into low-margin, high capital-intensity towers and base stations; similarly, the lack of a complete, robust infrastructure renders it difficult to invest in automation or hardware that are solely 5G-enabled. However, opportunity still exists with technologies such as virtual reality that are already undergoing adoption, but whose scalability will be accelerated via 5G. At Signia, we are proud to be early backers of companies leveraging VR to enhance work place training such a Strivr.
While 5G can be the catalyst for the next generation of robotics, mobility, entertainment, and more, its successful rollout will undoubtedly require the careful collaboration of American citizens, the entrepreneurial community, and government.
Linus Liang is a Partner at Signia Venture Partners, an early-stage venture capital fund in Silicon Valley and Los Angeles. He serves as a Lecturer at Stanford University, where he co-teaches courses on technology and entrepreneurship in the GSB and School of Engineering.
Special acknowledgement to Signia’s Kevin Wu for co-authoring this article.
