The Internet of Things (IoT) is widely considered the next big thing in technology. Research firm IDC expects worldwide spending on the IoT to reach $1.4 trillion by 2021. Overall, networking communications provider Cisco expects the IoT to be a $19 trillion opportunity.
Unsurprisingly, the Internet of Things requires an internet connection, and not just any internet connection. The sheer volume of devices that will now be connected to the internet will require lightning-fast data transfer, especially as the number of internet-connected devices proliferates.
To accomplish this, wireless service providers will need to build out their networks to fifth-generation (5G) technology to provide the data-transfer speeds needed to fully support the IoT.
A broken backbone?
Morgan Stanley notes telecommunication providers like Verizon Communications (NYSE: VZ) and AT&T (NYSE: T) are somewhat lukewarm on building out their 5G capability. This is significant because 5G is considered the backbone of the IoT. As Asha Keddy, general manager of mobile standards of Intel said:
The report noted that telcos are somewhat apprehensive to move quickly on a 5G buildout because of 4G -- after spending a combined $275 billion on a rollout and densification of the current transfer standard, the industry has not seen significant returns on the investment. Instead, under pressure from T-Mobile, mobile continues to adopt policies like unlimited data and voice with strong price competition. While these policies are great for consumers, they are decidedly less so for wireless providers.
Morgan Stanley notes that 5G will be different. First, the industry will spend less on the build-out and the rollout will take longer. From 2019 to 2040 the industry is estimated to spend $225 billion on 5G capital expenditures with the larger spend coming in the outer years. Additionally, Morgan Stanley expects the first 5G enabled smartphone will come to market as early as 2020, but real adoption and spending could take decades.