When fourth generation (4G) services launched early this decade, the U.S. led the way. The Federal Communications Commission (FCC) unlocked valuable spectrum, and carriers responded by accommodating a radical, 20-fold growth in global mobile data traffic. The massive investment in wireless network infrastructure rewarded American consumers with faster wireless speeds at affordable prices. In addition to speeding up smartphones in our pockets, the U.S. economy saw an estimated increase in GDP between $73–$151 billion and up to 700,000 new jobs as a result and America was established as the test bed for innovation in the global digital economy.
Now our country faces a similar opportunity and challenge with fifth generation (5G) mobile networks, and it warrants the attention of consumers, the mobile industry, and policymakers. The economic stakes for 5G may be significantly higher than for 4G, led by large-scale job creation and incubation of new devices, applications, and business models that could dramatically stimulate the U.S. economy.
However, the U.S. is not as well-prepared to capitalize on this opportunity. The U.S does not currently have sufficient fiber to densify the network with thousands of new small cells and hot spots, increase network capacity, and accommodate the projected four-fold growth in data traffic through 2021. Investment in “deep fiber” pushed closer to the customer could help the U.S. continue to lead in wireless innovation and foster the economic boost generated by 5G.
Investing in deep fiber as we upgrade our nation’s communications infrastructure creates an opportunity to increase broadband competition and create more options for consumers. Only 39% of U.S. households have access to more than one broadband provider that offers 25 megabits per second (Mbps) or greater.
Deep fiber investment also offers an opportunity to help close the digital divide in choice, affordability, and performance that exists between rural and urban geographies. Currently, only 60% of rural communities have access to fixed broadband, whereas 90% of Americans nationwide have broadband access.
A recent Deloitte study estimates that the U.S. requires $130–$150 billion of investment over the next five to seven years to adequately support broadband competition, rural coverage, and wireless densification. Fiber infrastructure investment can enable the U.S. digital economy similar to how national highway investments did for the traditional economy in the 1950s (more than $200 billion in today’s dollars). Private investment can be the primary source of funds for deep fiber, including communications service providers, financial investors, and public-private partnerships.
Federal, state, and local governments have policy and regulatory levers that can hasten investment, including reduction of regulatory challenges, legacy technology retirement, and reforms to the Universal Services Administrative Company (USAC), so that it more efficiently coordinates and encourages deep fiber programs.
The convergence of business-friendly regulation and national infrastructure initiatives could create the right environment for a wireline transformation that enables the U.S. to more fully realize the economic and technological benefits offered by 5G networks. Failing to act quickly by incentivizing deep fiber rollout risks yielding the opportunity to global competitors, potentially undermining America’s role as the epicenter of innovation and job creation.
Craig Wigginton is the vice chairman and telecommunications sector leader at Deloitte & Touche LLP. Dan Littmann is a principal at Deloitte Consulting LLP.
