By E.B. Tucker, editor, Strategic Investor
Today, 5G (fifth-generation) technology is set for its rollout phase.
Or so we’re being told…
Apple and Samsung have timed their new phone launches around it. Verizon, AT&T, and other telecoms have invested hundreds of billions of dollars to install thousands of antennas to make 5G happen.
And millions of Americans plan to upgrade their phone to tap into this exciting new technology.
If you’re one of them, I’ve got some bad news.
5G has an epic problem.
It just doesn’t work as promised.
There’s a fatal flaw preventing 5G from rolling out across the country.
I talked about this flaw yesterday. And if it isn’t fixed, it could take years for American cities to see true 5G speeds…
But there’s a lot more at stake than your phone’s download speeds.
Because trillions of investment dollars hang in the balance. Groundbreaking technologies like traffic lights… smart homes… self-driving cars… airplanes… life-saving remote surgeries… and cutting-edge military innovations… all depend on seamless 5G connectivity… at lightning speed, in real time.
But before 5G can transform our lives… that one major flaw needs to get fixed.
Today, I’ll explain the big obstacle holding 5G back… and the radical solution that some companies are using…
But first, let me get you up to speed on the 5G revolution…
A Big Step Forward
5G stands for “fifth generation.” Your smartphone likely shows a 4G icon on its screen.
Until recently, 4G was a freeway compared to the three generations that preceded it. But 5G will leave it in the dust.
5G will increase download speeds by 10 to 100 times what 4G offers today. Your 4G phone may display a spinning icon while you wait for YouTube to show you a video. Your 5G phone could download a full-length, high-definition movie in seconds.
5G signals are not the same as 4G, because of something called spectrum – the length of the wave where information travels. The longer the wave, the lower its power.
Think of CB radios. They operate on a very low spectrum, less than one gigahertz (GHz). The signal sent and received from a CB is effective but crude. There’s not much power behind it.
Existing cellular signals operate on a roughly 1.8 GHz spectrum.
5G needs a spectrum as high as 39 GHz on average.
The graphic below shows the 4G, and needed 5G, mobile spectrums.
A higher spectrum means faster data transmission
Simply put, 5G connectivity is not possible on the existing 4G cellular network. The two services operate on different spectrums.
That means a radical increase in connection speed can’t happen without a massive investment.
That’s why China announced its intention to spend $400 billion on 5G connectivity by 2023. U.S. mobile carriers intend to spend roughly $275 billion on 5G connectivity.
And we’re already seeing the rollout. 5G smartphones are available now.
But like I said before, there’s a catch. The service barely works…
By our count, more than 30 major cities, including Chicago, Denver, and Atlanta, have some level of 5G coverage today. Take Chicago, for example. If you’re standing next to the famous Bean in Millennium Park, you’re connected to 5G. But walk a few blocks west, and you’re back on 4G… the same service you currently have.
Drive through any major city, and you’ll see small, white antennas mounted on the sides of buildings. These are “cells.” They provide increased 4G cellular network penetration. That’s what makes your current smartphone work so well compared to the one you had in 2005.
Mounting these cells on buildings, towers, and other tall structures helped cover cities with 4G networks. Similar infrastructure is still needed in order to cover cities with 5G networks.
So while you can theoretically walk into a Verizon store, buy a 5G-enabled phone, and get connected, you’ll drive across town and realize the service doesn’t work. You’ll be back on 4G, wondering why you spent $1,300 on a 5G-enabled phone.
But even as the major U.S. phone carriers deploy upwards of $275 billion bolting 5G antennas onto anything they can find, the cell service still won’t work as well as what you have today.
As explained in the box above, the 5G signal operates on a higher spectrum than its predecessor. As you move up the spectrum scale, more data travels at faster speeds. That’s good. The problem is, the signal is not as powerful.
A low-band spectrum CB radio signal isn’t very complex, but it travels well through most buildings, trees, and natural landscapes.
However, the higher bands of spectrum needed for 5G don’t penetrate structures very well.
5G service is a double-edged sword. You can download a movie almost instantly, but you’ll need to have a mostly clear line of sight to a 5G tower.
That means more and more 5G towers need to be built to provide quality 5G coverage.
But this solution won’t work for everybody… especially customers in rural areas, who don’t stand a chance waiting for traditional cell towers to pop up.
But there’s a more radical solution underway to bring 5G to the masses… and it’s taking place in space…
Going to Space
Satellites can help facilitate the 5G network. This is how the Amazon rainforest gets cell coverage. Same for the Wi-Fi available on planes. And soon, these satellites will carry 5G signals to areas that can’t afford the cost of a huge 5G infrastructure rollout.
There are upwards of 5,000 satellites circling the Earth. About a third of those are active.
That’s a drop in the bucket compared to what’s on the horizon.
There are tens of thousands more planned. SpaceX’s Starlink aims to build an autonomous communications network powered from space. It recently launched 60 low-Earth-orbiting (LEO) satellites.
SpaceX needs 400 LEO satellites for its network to begin functioning. It has approval to launch 12,000.
Amazon’s Project Kuiper aims for a network of 3,200 LEO satellites.
And OneWeb, a venture backed by SoftBank, Coca-Cola, and other investors, has Federal Communications Commission permission to launch 1,980 satellites. The company wants to provide internet to everyone on Earth by 2027.
But the current number of satellites orbiting Earth more than meets the world’s military, commercial, and civil demand. Some analysts even argue the skies have more satellite capacity than the world needs.
Regardless, the satellite network already in place makes up the core satellite system. But there’s an opportunity in the fringe network.
Turning to the Fringe Network
Fringe satellite capacity refers to the connections offered to users away from the core demands of military and industrial users. The governments and militaries of the world paid huge development costs to get those networks online. Now the technology exists, and it can be delivered downstream to customers who couldn’t previously afford it.
The official name for this type of service is “cellular backhaul.” In laymen’s terms, it’s selling surplus satellite capacity to fringe network users.
For instance, this can take the form of in-flight internet connections on U.S. airlines or traditional communication services to aircraft.
The number of connected planes was 6,500 in 2016. Consulting firm Euroconsult says that will nearly triple to 17,000 by 2026.
And of course, internet service will be provided to rural customers who live too far from town to connect to conventional internet service providers.
Industry analysts expect the backhaul market to grow at 14.9% per year between now and 2023. And plenty of companies will benefit from this trend.
But not every company in the space is worth investing in.
Remember, these satellites need communications equipment in order to function as a network accessible to devices on Earth. That’s why instead of focusing on the big-name companies building out the 5G network, you should look at the “picks and shovels” of the 5G revolution.
That means companies that build the parts that make the 5G network functional. Big telecommunication companies may get all the headlines in the press, but it’s the device makers that will make the 5G rollout possible.
Editor, Strategic Investor
P.S. Like I said above, it’s the overlooked companies – the “picks and shovels” – that will make 5G a reality. And one of them is my No. 1 stock of 2020.
This company developed a device – a “Master Key” – that unlocks the true potential of 5G. In fact, the 5G revolution can’t happen without this company’s technology.
That’s why telecom giants are already making multimillion-dollar deals to get their hands on this “Master Key.” Even the Pentagon is getting involved.
This tiny company is still flying under every investor’s radar. But that won’t last much longer. Shares are still cheap, so go right here to find out how you can get in before they surge higher.