Today, the big buzzword in the tech industry is 5G. For years, we have heard about this technology as the next big thing in wireless connectivity, and now, what for so long been nothing more than an idea is quickly becoming a reality.
Verizon and AT&T have already rolled out 5G networks in some cities, and smartphone manufacturers are finally starting to release phones capable of using this technology. The latest installment of the iPhone, the iPhone 12, is the first of Apple's signature devices to be compatible with 5G.
For most people, this is exciting news. Faster connections capable of doing so much more are on the way. Yet, what does this mean for the cable TV companies? For many years, they have been doubling down on high-speed internet as their primary revenue source, particularly as people turn away from them for TV and phone service. Some say 5G could bring about the end of cable TV, whereas others think it won't have much of an impact.
To try and answer this question, we've done a deep dive into the issue, and here's what we found.
Before determining if 5G is a serious threat to cable TV, it's important first to understand what 5G even is.
Essentially, 5G is the next generation in wireless broadband networks. It follows 4G LTE, which is the current standard in most places.
Without getting into too many technical details, the primary difference between 5G and 4G is that 5G is both faster and has higher bandwidth. This means more devices can connect to it without sacrificing the quality of the connection.
The growth in smartphone and tablet use has been the big driver behind the development and implementation of 5G. Essentially, as more and more people (devices, really) connect to 4G, it crowds the network's bandwidth, which slows things down for everyone.
In addition, the tech industry is constantly coming out with new gadgets and devices that can be connected wireless. Appliances, light bulbs, cars, and so much more are entering the market with wireless connectivity, a trend known as the Internet of Things (IoT).
Currently, many of these devices still use WiFi to connect to the internet, especially those meant for the home. The idea is that, in the future, more and more of these devices will connect to wireless broadband networks. The current infrastructure – 4G – just can't do this, which is why so much money and attention has gone into developing and rolling out 5G.
At first glance, all of this sounds good: faster connections for more devices. There are other reasons to like 5G, too, which we will discuss in a moment.
There are also some downsides to 5G that are important to remember, especially considering whether or not 5G is a legitimate threat to cable TV and cable internet.
Here are some of the positive and negative aspects of 5G:
The main advantages of 5G include:
These improvements to wireless broadband technology can threaten cable TV companies because they can compete in speed. Up until now, while 4G LTE delivers excellent speeds, its capabilities are nothing compared to what a cable connection can give you. Many companies routinely offer connections of 200 Mbps or more, with Gigabit internet now also available in most places.
This means that 5G can replace cable internet in some places, which would be detrimental to the cable TV business model. However, things aren't as black and white. There are some significant disadvantages to 5G that might help keep cable TV companies and their wired internet connections.
The main disadvantages of 5G are:
As you can see, while 5G is an exciting technology, there are quite a few downsides that must be overcome if it is to become the dominant form of wireless broadband service.
For cable companies, this is good news. The infrastructure for cable TV is already well-established across the entire country, which allows the cable companies to deliver service to people living in rural and remote areas.
Due to using lower frequency waves, cable internet does not suffer from the same limitations that 5G does. This may continue to make it a more viable option, even for those living in urban areas where 5G is more readily accessible.
Of course, 5G is still new. The telecommunications companies are aware of its limitations, meaning they are likely to try and implement solutions to make it more viable, threatening cable. In the meantime, these specific limitations of 5G make it so that cable will likely remain a viable option for the foreseeable future.
Based on what we know about 5G and its advantages and disadvantages, it doesn't seem like 5G poses a significant threat to cable companies. However, to truly understand if this is the case, we should look at the current cable TV industry.
The first thing we need to look at is the business model that cable TV companies use. For decades, they relied on three services: home phone, television, and internet.
As you know, home phone service (landlines) is all but dead. Few people sign up for these unless included in bundles with other services that make them basically free. So, this is no longer a genuine source of revenue for cable companies.
Their next revenue stream is television. While still going strong, the reality is that cable companies are hemorrhaging TV customers. This trend is known as cord-cutting, and it's emerged because of the many alternatives people now have to watch TV, mainly streaming services such as YouTube TV, Hulu, Netflix, etc. Plus, the cost of cable TV has been going up year after year for some time, which has left many customers frustrated and driven them to explore alternatives.
All of this means that cable TV companies must rely heavily on their broadband internet service for revenue. Up until now, this has been a very viable strategy. People still need internet service, whether they have cable TV or not, especially if they've decided to cut the cord and rely solely on streaming. The result has been continuously rising profits and stock prices.
To give you a little better idea of what's going on in the cable TV industry, here are some stats:
Therefore, while cable companies may no longer look and act like cable companies of the past, they still exist. Generally speaking, they are thriving despite dramatic changes to their business model. Many are simply selling more internet subscriptions and creating revenue that way.
The only way in which 5G might pose a threat to cable companies is if the companies that offer 5G, mainly the big mobile carriers (Verizon, AT&T, and T-Mobile), begin offering a home internet service using 5G networks that can compete with cable internet in terms of price and effectiveness.
As it turns out, this is precisely what they are planning to do. At the moment, cable TV executives don't seem too concerned, but we're going to detail these proposed plans for you so that you can see for yourself if their confidence is wise or not.
For 5G to pose a significant threat to cable companies, wireless companies need to offer a competitive product. They hope to do this by bringing 5G networks into people's homes, which would provide users with more options for network providers and lower prices.
Verizon has already started doing this in select markets. It can offer home internet connections between 300 and 800 Mbps for just $50 per month, which is considerably lower than what most cable companies are currently doing.
Such a plan poses a serious threat to cable companies, for it offers users better internet at lower prices. However, for this to work, Verizon and AT&T have to rely on their existing fiber-optic networks, something that will dramatically limit their ability to reach a significant number of users.
The reason for this is that this is the infrastructure that does not currently exist. Yes, fiber optic internet is available in some areas, but only really in large cities. Laying these cables is extremely expensive and time-consuming. Verizon and AT&T are massive companies capable of borrowing lots of money to implement this plan, but the question remains if they want to do this.
They have set a goal of getting this service to most of the US within ten years, though many experts doubt if this is realistic.
So, while this product is a dire threat to cable, it's unlikely to become widely available enough in the coming years to cut into cable companies' profits and market share significantly.
Over the past few years, T-Mobile has been working to acquire Sprint, the third-largest wireless carrier in the US. Part of the reason T-Mobile wanted to do this was to take advantage of Sprint's existing infrastructure to offer consumers a completely wireless home internet connection.
Currently, it can do this, though it has altered the 5G technology slightly, using medium-length waves to send out its signals so that they can travel further and reach more people. This lowers speeds slightly, but T-Mobile can still offer in-home wireless broadband services of 100 Mbps, even in rural areas with little infrastructure.
The difference between T-Mobile's approach and Verizon and AT&T is that it's relying on and leveraging existing technology to bring high-speed wireless internet to people's homes. They do not have to install new infrastructure, meaning they can offer the service starting now, not years in the future.
However, the main drawback to this approach is that bandwidth is limited. This is the consequence of using a wireless-only network. It works in some cases, but when installed in a home where dozens of devices are connected, and people are streaming movies and video calling, the connection degrades and is no longer useful.
Therefore, while this plan promises to bring high-speed internet to more people, the connection quality is unlikely to match that of cable internet, which means it is less viable an alternative and not a serious threat to cable companies.
At the moment, 5G does not seem to pose a tremendous threat to cable TV companies. While 5G promises higher speeds and more bandwidth for mobile devices, bringing it into people's homes will be difficult, especially considering the limitations of 5G, mainly the need to be close to and directly aligned with the 5G towers.
However, in the long-term, if mobile carriers such as Verizon and AT&T do succeed in amplifying their networks to provide 5G connections to more homes, particularly outside of cities, then cable companies may indeed be in trouble. This is unlikely to be a big concern for at least another decade.
Cable companies are actively taking steps to improve their service and remain competitive in this market. More specifically, the entire industry has created and agreed to the "10G Pledge." Here, the "G" does not refer to generation but rather gigabit; the goal is to offer wired internet connections of up to 10GB, which is ten times faster than what is currently offered.
At the moment, such capacity is not necessary for most people. Yet the COVID-19 pandemic meant the world realized how many more things could happen online (school, work, doctors appointments, etc.), so increased speeds may be necessary.
If this upgrade does go ahead, then cable internet will once again be vastly superior to anything being offered by the mobile carriers. The threat 5G poses will be all but gone.
In the end, while 5G does pose a potential threat to cable TV companies, the actual danger is currently very low.
However, as we know, things in this industry can change on a dime. Innovations are emerging all the time, flipping things upside down seemingly overnight. In the meantime, despite losing lots of television and phone customers, cable companies can rest easy knowing their internet business is not in any immediate danger.
