We are approaching a critical part of the conversion to 5G. T-Mobile has jumped out aggressively, promoting its belief that it will get there first, and Qualcomm has been moving the bar with relation to both wireless ends, but the part we don’t talk about much is the massive effect this will have on the backhaul. Well, apparently, Verizon has not so quietly been engaging in a massive upgrade of its backhaul, and it has garnered an interesting partner to do this: Corning, the folks famous for the Gorilla Glass on your smartphone.
The interesting pivot point is this: When we flip to 5G, we are going to likely see bottlenecks of massive proportions unless the backhaul from the cell sites is upgraded, and the only way to reasonably do that is with fiber. That means a giant spike in fiber cable demand, and Verizon just locked up a whopping $1.05B of Corning’s capacity to make sure it isn’t hit with this problem.
Looking ahead, this suggests folks at Verizon who are anticipating this should be able to provide 5G speeds at scale when they upgrade the radios and 5G phones are available. Companies that are thinking tactically and aren’t upgrading their backhauls, and particularly haven’t locked down fiber cable supplies, will have to more heavily throttle, which will upset users. In the end, this is an example of strategic thinking. Let’s look at strategic thinking and contrast this deal between Verizon and Corning with the British Airways collapse this week.
Tactical vs. Strategic Thinking
One of the big problems with most companies right now is that they tend to live quarter by quarter and don’t anticipate known problems or issues out more than a year. That really defines the difference between tactical and strategic thinking, and it’s one of the big reasons I think we are seeing a lot of CEOs lose their jobs.
We are in the midst of massive movements, ranging from applied deep and machine learning which, when mature, will devastate firms that haven’t made the flip, to advanced robotics, which will create employee and customer turmoil the world hasn’t seen since the industrial revolution. Few firms are even remotely aware of this.
As I watched the British Airlines outage this week, I was again reminded how pronounced this problem was. There should be no way a power spike, which is localized, could take down a multi-national company like it did. Yet in a world where threats ranging from major weather events to terrorist attacks are ever more common, BA hadn’t invested properly in redundancy to protect against the kind of outage, unlikely in any given quarter, but virtually certain over a five- or 10-year span (it actually looks like this may have resulted from cost cutting to hit quarterly numbers). That is tactical thinking in spades.
5G Verizon and Corning
5G potentially provides a five-times improvement in bandwidth, however, people are also using their phones for high-bandwidth data like video more and more often. This is both on their cell phones and because there is a concerted effort to get everything from laptops to cars to use WAN wireless. This means that the actual increase on network demand will be massively higher. Autonomous cars alone are expected to require up to 10 times what a first-generation 5G solution will provide. This will aggregate in the cell sites, and if the cars’ data streams bottleneck their access to remote deep learning systems, repair diagnostics and intervehicle communications will degrade, likely making them less safe.
The result would place the carriers that can maintain bandwidth ahead of those that can’t; it might even force the government to regulate which carriers can be used for some applications, like autonomous cars.
In the end, bottlenecking in a 5G world could take down a dominant carrier, and not having those bottlenecks could vault a marginal carrier into market leadership.
Wrapping Up: The Importance of Thinking Strategically
I think about the British Airways CIO and wonder where he is going to work next, because when you have an outage like BA had, everyone tends to agree on one thing and that is that the firm needs a new IT department. You might wonder, “who in their right mind would take that kind of risk,” and you’d find that, sadly, the answer would be most public company executives. Thinking tactically can be a career-ending mistake for every top executive. This Corning-Verizon deal, and the BA collapse, should provide strong examples of the advantages of thinking strategically and the disadvantages of thinking tactically.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+