When you work in tech and data, much of the job is just making sure that nothing breaks and trying to keep those on the business side of the organization as happy as possible. My dad built and ran data centers for four decades, and much of that time was just hoping to not get that 2 a.m. phone call alerting him that something burned down. For a man that served in the US Marine Corps, he seemingly has an equal number of war stories about gearing up for Y2K.

This is all to say that it’s easy to be laser-focused on what’s in front of you and not worry about hypotheticals. Yet, it’s important for firms to start taking stock of what 5G networks—in combination with the Internet of Things (IoT)—will mean for them going forward.

Last January, I wrote a feature looking at 5G, which, at that point, was still in the experimental stage. While companies were touting their advanced networks, they were (are) relatively rudimentary when compared with what’s to come. While 5G is slowly starting to bed in, we’re still at least two, three, or four years away before its true power is unleashed. Just think about 4G: It arrived in 2008, but LTE networks didn’t come around until 2011, and then it still took about three more years—so six years from the initial rollout—before mobile devices became the powerful tools we see today.

“It’s going to open up more opportunity for us in terms of data availability. Our business is totally data dependent, so our growth is either stimulated or not by data availability, and 5G is poised to really increase data availability dramatically.”

Michael Marrale, M Science

It’s also important to remember that 5G is not merely the next evolution of 4G LTE. Connection density will increase from 100,000 connections per square kilometer to over 1 million—the IoT effect. LTE is limited in terms of how many devices they can connect to within a square kilometer. As Dan Littmann, principal at Deloitte, told me, “for all practical purposes, that limitation goes away with 5G.”

A recent Opensignal report stated that in the US, the highest maximum speeds for 5G users (again, in limited cities, as of now) was approximately three times as fast as that of 4G users’ maximum speeds. And, again, these early networks are not what’s to hold for the future. AT&T—which, like Verizon, Sprint, and T-Mobile, is one of the biggest US wireless carriers competing for smart-device network supremacy—says latency will be cut from 10 milliseconds for 4G networks to less than one millisecond for 5G networks. By 2021, data traffic will jump from 7.2 exabytes per month to 50 exabytes. Peak data rates will grow from one gigabyte per second to 20. And available spectrum will rise from three gigahertz to 30.

All of that is great, but why should the capital markets care? Well, it’s all about the data that’s going to be created.

Think about all the challenges that firms are currently facing when trying to incorporate newer and denser alternative datasets. Suvrat Bansal, chief data officer and head of innovation at UBS Asset Management, recently told WatersTechnology that when incorporating alt data, it’s a delicate balancing act where firms need to be able to adjust and try new things on the fly. Recalling alt data’s countless hype cycles, he laughed. “It’s the ‘here-we-go-again’ [moment]. We know for sure in traditional asset management, it’s near impossible to use one source or, collectively, all sources. …There’s something within there, but our view is you need the data, but not all the data all the time for all the investments,” Bansal says.

5G, when combined with IoT devices, is where the revolution sits, Adrian Scrase, CTO at the European Telecommunications Standards Institute (Etsi), told me last year; that’s where the new alt data opportunities will be created. “Once you get to that stage of having massive IoT, you then have massive data [which is inherently noisy], but the value is the information you could extract from these massive datasets,” he says. “So you can convert technology into business and enterprise [solutions] by having the clever people who can find the value in information from the data you’ve collected.”

Data Collection

In mid-December, I spoke with Michael Marrale, CEO of M Science, which collects numerous alternative datasets to create reports and analytics. At the time, the company was just beginning the rollout of a 5G mobile handset measurement service, providing weekly updates on adoption. It will analyze sales trends among different phone models, and estimate 5G market share among handset manufacturers.

The offering will first look at devices running on Android software and will stretch to iOS devices as new iPhones enter the market.

Marrale acknowledges that adoption is “still very nascent”—5G technology is only available in less than 1% of cell phones currently on the market. But M Science already sees more than 10% of all smartphone transactions in the US and Canada—make, model, some specifics about each device—and more than 90% of all smartphone activations across China, and those are the two key 5G markets, according to Marrale. So the company anticipates that it will be able to provide unique insights into the rollout and adoption of 5G as it spreads over the next few years.

“We felt that we have the data, we wanted to put it out there because we think that 2020 is going to be all about 5G,” he says. “I mean, I personally have been involved in technology investing for 20 years and I think that 5G is the biggest investment theme that we’ve seen probably since the inception of the smartphone. We know that that is going to be a critical part of any technology and really any investor’s outlook for the next year or couple of years.”

Marrale expects that adoption of 5G will ramp up “very quickly,” so they wanted to start getting information in front of clients earlier to be ahead of the curve.

But just as importantly for M Science, Marrale wants to make sure that the company is ready for new opportunities that arise from the increase of data available to be incorporated and analyzed.

“It’s going to open up more opportunity for us in terms of data availability,” Marrale says. “Our business is totally data dependent, so our growth is either stimulated or not by data availability, and 5G is poised to really increase data availability dramatically.”

In Theory

I’m not sure that firms truly grasp just how much data is going to be created by 5G and IoT. According to consultancy IoT Analytics, there are currently more than eight billion connected IoT devices—and that does not include any computers, laptops, fixed phones, cellphones or tablets—and that number is expected to balloon to over 21 million by 2025. And 5G on its own will exponentially increase the amount of data being created. Verizon CEO Hans Vestberg, while speaking at CES 2019, had this to say: “When we think about 5G, we think about 10 gigabits per second throughput, we talk about 10x battery life, we think about 1000 times more data volumes in the networks. It’s just radically different. I would say it’s a quantum leap compared to 4G.”

According to IoT Analytics, there will be more than 40 use cases for 5G and IoT by 2025. Included in that estimate are vehicle telematics (vehicle diagnostics, location tracking); smart-grid automation (renewables into the power grid, messaging between micro-grids); mobile and collaborative robots (autonomous vehicles, industrial robots); and cooperative intelligent mobility (sharing of real-time information about traffic and road conditions among cars and other road users).

Another area that is likely to be supercharged is that of geolocation data, which hedge funds have been using for years to inform investment decisions. A mobile phone’s location sensor is largely dependent on GPS, which is a technology from the 1980s, Wei Pan, cofounder and chief scientist at alternative data provider Thasos Group, told me earlier last year. The phone is looking around for a cell tower to connect to, or a Wi-Fi signal to estimate where the phone is currently located—that won’t be necessary anymore because of the increased connection density. 

Similarly, satellite imagery relies heavily on very big, expensive satellites taking pictures from space of the ground. But what if cameras closer to the ground could improve that process?

“With 5G you can imagine that signal will be achieved by deploying a lot of very small, low-flying drones, or even some fixed cameras from tall buildings. And those cameras take pictures of small regions at a very high frequency to make up this big image of the land,” said Pan, adding that this can create more real-time data, rather than relying on a satellite flyby.  Now, take it a step further. You have a city saturated with cameras, monitoring traffic and people. This kind of surveillance isn’t easily done with 4G because of those aforementioned connection overload issues. With 5G, that’s not a problem.

“You can have as many video cameras as you want and you collect data effortlessly,” Pan said.

The Genie’s Out

While the ball is certainly rolling, people should remember that despite the advertising efforts of the phone carriers, true 5G technology is still two to four years away, depending on the estimate. However, 2020 will see the first full-year push of 5G in the US, Canada, China, and several countries in Europe. And while this article has been positive toward this technology, there are serious privacy concerns to be answered and there are worries that 5G could create unforeseen health risks for humans and animals alike.

But, there’s also too much money involved to stop—in 2016, Accenture estimated that “telecom operators [in the US] are expected to invest approximately $275 billion in infrastructure, which could create up to 3 million jobs and boost GDP by $500 billion.” The simple fact is that countries are not going to look back.

So what does that mean for the capital markets? Well, alt data companies (M Science, Quandl, 7Park Data, YipitData), specialists (Thasos, SpaceKnow, Four Twenty Seven), and data giants (Bloomberg, Refinitiv, S&P Global, FactSet), will need to start to think about how to monetize this new sea of data. Banks and asset managers, on the other hand, will have to learn how to more efficiently incorporate alternative data to develop unique investment insights from this new wealth of information.

Once 5G and IoT fully connect, the dam of data will break quickly. While there are certainly more pressing projects that capital markets firms need to stay focused on, now is the time for planning.