Museletter: 5G - The Next Frontier
Over the last week, Telstra began switching on the 5G network in Australia. The introduction of 5G represents a monumental leap in internet technology - a likely catalyst for major technological advancements.
The Basics
There are three key areas of differentiation with 5G:
Faster Network Speed: The fastest home internet the NBN can achieve is 100Mbps. Initial testing of Telstra's 5G capability on the Gold Coast has seen average speeds of 3Gbps (approx 30x faster). This will eventually scale up to 20Gbps, not to mention the distinct advantage of being wireless technology vs fixed line.
Lower Latency: Latency is the time it takes information to get from your phone to the internet and back. On a typical 4G network, this is 60 milliseconds, whereas 5G will be as low as 1 millisecond. This is a vital advancement for the introduction of technology such as self-driving cars where every millisecond matters.
More Simultaneous Connections: In simple terms, more devices can connect at the same time, particularly important when you start to consider self-driving cars, connected machinery, and more consumer products connecting to the internet.
Why Do We Need It?
Other than the obvious advantages listed above, it's about what technology can be developed as a result of faster wireless connectivity.
We saw the same story unfold with 4G, which allowed companies like Uber to revolutionise the Taxi industry, Music Streaming services like Spotify and Pandora become the most dominant way people consume music, and UberEats which is currently disrupting the Food & Beverage industry.
Potential Implications for Property
Network Towers
One of the key limiting factors of 5G is that to reach optimum speeds, you need to be in close proximity to a network tower. It is only powerful over short distances. This is likely to spur the need to install thousands more mobile phone towers in our buildings.
Under the Telecommunications Act, the telco's have the legal authority to install towers on private property. Legal channels are generally used as a last resort, with telco's preferring to negotiate commercial outcomes with owners.
With a significant increase in the number of sites required, pressure on costs are beginning to be felt on owners who have towers on their properties. We expect this trend to continue and for valuers to heavily discount income attributed from towers.
Traditional Business Disruption
Whilst currently difficult to predict, it is likely that traditional bricks and mortar businesses in the retail sector will continue to be adversely impacted.
We have seen the likes of Uber Eats and Deliveroo significantly impact the Food & Beverage sector, which is ultimately negatively impacting rental growth in most retail strip shops and shopping centres.
We will continue to monitor future developments and potential impacts in any asset class we review for our investments, as well as any new opportunities that could be created.
Michael Skarparis
Partner
Muse Capital