It’s official. The world’s first commercial 5G networks are now up and running, put into place by telecom giant Verizon Communications (NYSE:VZ). Though technically speaking Verizon’s entry into the race is neither the first 5G network nor the version of 5G connectivity that will become the industry standard, owners of Verizon stock need not be discouraged. \
Verizon is still the pace-setter, leaving rivals ranging from AT&T (NYSE:T) to Charter Communications (NASDAQ:CHTR) scrambling to play catch-up.
The $64,000 question is: Now what?
Above all else, while the launch of the company’s 5G networks puts Verizon at the top of the heap of 5G stocks, shareholders may not want to hold their breath waiting for the Verizon stock price to be catapulted. It’s going to be a lengthy rollout, measured in years.
On the flip side, Verizon’s leadership within the 5G market and CEO Hans Vestberg’s vision of what 5G can do and how it should be marketed is very, very compelling.
A Dubious Victory, But Still a Victory
Good news for residents of Indianapolis, Houston, Los Angeles and Sacramento: you can now sign up for wireless 5G broadband internet service to your house. Everyone else will have to wait, and it could be a bit of a lengthy wait. Nevertheless, every company has to start somewhere.
Whatever the case, if you were hoping for 5G speed on your mobile device (your smartphone) you’re still waiting. In fact, you still will have to wait for awhile, albeit for slightly different reasons. Most phones on consumers’ hands aren’t equipped for 5G connections anyway and may not be anytime soon.
It’s a technology-based bottleneck that isn’t unique to the smartphone arena though.
Verizon’s in-home 5G service requires modems specially built for that purpose, and further requires custom-built transmitters attached atop utility poles every few hundred feet.
It’s not even the agreed-upon standard 5G that will become the norm once 5G becomes commonplace. The version of 5G that others like AT&T and T-Mobile US (NASDAQ:TMUS) are developing is called 5G NR, versus the version called 5G TF that Verizon just began deploying on Monday.
Once 5G NR begins being deployed by other providers, Verizon crews will have to physically replace all of its 5G TF transmitters and modems. It’s one reason it may not feel terribly rushed to roll out its new service.
Regardless, as company spokesperson Howie Waterman pointed out, “The TF standard provided the foundation for what became the NR standard globally.” It won’t be a huge stretch to utilize NR when the time comes.
In other words, to the extent being first matters, and to the extent Verizon and its customers need a proving ground, the company just scored a significant win.
5G and Verizon Stock
The higher-speed connections will be utilized in the same ways current 4G technologies are. That is, mobile internet, fixed (at-home) internet service, and enterprise-related functions will still be its core use, and on the surface things won’t look all that different.
The sheer speed improvements, however, will be a game-changer of what one can do with these connections.
Federal Communications Commission Chairman Ajit Pai recently reiterated that 5G connections could be up to 100 times faster than the current standard 4G connectivity, which means, according to him, “Wireless networks that today support 1,000 connected devices per square kilometer could instead support 1 million.”
That’s enough speed to use 5G as a means of performing remote medical procedures, usher in the full potential of the Internet of Things, make autonomous cars safe and more.
Vestberg is well aware of the opportunity at hand too, and repeatedly laid out the company’s three-stage plan to expand its 5G NR networks. First is 5G connectivity to the home beginning this year, but as it becomes more available, businesses will soon be able to plug into the same 5G network and wirelessly send and receive data.
It’s even the same network that smartphone users will be connecting to, as Verizon is wisely keeping things simple by establishing one high-powered platform that can be used in a myriad of ways.
And it works. Signals Research Group independently tested Houston’s network, and found download speeds in the 600 Mbps to 800 Mbps range, with upload speeds on the order of 250 Mbps. Those are the numbers Verizon’s been touting, and leaps and bounds faster than the download speed of around 25 Mbps the typical 4G connection can offer.
As for the impact to the bottom line, Vestberg believes 5G revenue may start to become apparent in 2019, but meaningfully measurable in 2020. Even by 2020 though, most of the growth opportunity for 5G will be ahead of it. It could take years to install the necessary 800,000 transmitters on top of utility poles to bring 5G connectivity to the bulk of the country.
Bottom Line for Verizon Stock
It’s a rarity that a single technological development is a reason to buy a stock, as most companies are simply too multi-faceted to treat them one-dimensionally. And, Verizon stock is no exception to that rule of thumb.
If there was ever a name that pushes the boundaries of that discipline though, it’s Verizon stock.
The global 5G service market is projected to be worth a little more than $250 billion by 2025, as comfort with the idea of a wireless world finally catches up with technology.
While Verizon’s early launch of its 5G machine will eventually be undone and replaced by tech based on a different standard, the fact that it was first to the market with a commercial product means it gets to help shape more than its fair share of future standards. Again, the eventual NR standard has a lot of Verizon’s proprietary TF standard already packed into it.
Versions, standards and suffixes aside though, given this week’s launch it’s simply too difficult to say Verizon isn’t better positioned than any other player to capitalize on the advent of a 5G market. It may well earn its way to a “Buy” if it can remain the pace-setter.
As of this writing, James Brumley held a long position in AT&T. You can follow him on Twitter, at @jbrumley.
