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Telecom's Next New Thing: Connecting Things, Not People – Barron's – Barron's

Telecom's Next New Thing: Connecting Things, Not People – Barron's – Barron's

In the elegant seaside city of Barcelona last week, the telecom industry outlined a plan for a world of wireless that will have less and less to do with humans and more to do with machines.

The setting was the Mobile World Congress, the biggest annual trade show for mobile phones and the phone networks they run on. The cause of the excitement was the sudden maturation of plans for a standard called 5G. It’s the next bump up in speed for wireless, promising handset and tablet connections will someday be faster than most home Internet connections.

Verizon CommunicationsVZ 0.22008803521408563%Verizon Communications Inc.U.S.: NYSEUSD50.09
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(ticker: VZ) said it will be testing the new technology in 11 cities in the U.S. this year, early proof the stuff is almost ready for prime time. Full-scale deployment by many phone companies is expected in the next two years.

That should be a boon for companies that sell the radio equipment that powers 5G, such as Ericsson (ERIC) and

NokiaNOK 1.1494252873563218%Nokia Corp. ADRU.S.: NYSEUSD5.28
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(NOK) and for a whole host of networking companies, including

CienaCIEN -1.098901098901099%Ciena Corp.U.S.: NYSEUSD26.1
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(CIEN) and

Juniper NetworksJNPR 0.10615711252653928%Juniper Networks Inc.U.S.: NYSEUSD28.29
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(JNPR), whose gear is needed to boost the transmission of data inside the network.

It could be a less-momentous development for the human race. While phones will get faster, the real emphasis of 5G is to connect all sorts of things that aren’t human: self-driving cars, industrial equipment on factory floors, oil rigs, parking meters, even freight tankers with no human crew.

All this was explained by Ericsson’s chief strategy and technology officer, Ulf Ewaldsson, a witty, dapper-looking fellow relaxing in a conference room after days of meetings at the show.

He recalls that 5G got its start in 2013 at a dinner at a marina somewhere that he attended with a group of other big thinkers in telecom. And the inspiring first idea for 5G was that it should “create a performance that is amazing for connecting things, not just people.”

Unlike humans talking on their phones, machines have a very prickly requirement for latency—the time it takes for bits and bytes in a data stream to go from one machine to another. Machines, like connected cars, will require very low latency as they do things like navigate the highways, assisted by constant navigational input from computers far away.

More important, says Ewaldsson, was that the dinner was the first time the industry decided to focus their efforts on machines, not humans. Indeed, this new network, arriving in the next couple of years, will be built for machines first, with smartphone-toting humans coming along for the ride.

Ewaldsson likens it to Albert Einstein’s theory of relativity. First came “special relativity,” and only later was it broadened to what Einstein called “general relativity.” Ewaldsson means that humans were telecom’s special case for years, but now it’s looking to a broader future in which humans are just one of the many things that happen in the world.

The immediate implication is that if Ericsson, Nokia, and others help

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(T) and Verizon get it right, the volume of business for the telcos will increase dramatically as everything becomes connected.

Some people at the show were less optimistic, pondering, for example, completely unmanned tankers crossing the seas guided by wireless communications, with only an occasional visit by helicopter from a human crew. What would be the consequence if such a ghost ship was hacked into via its wireless connection and sent on a rogue mission to a foreign port?

Not all of the grand plans will come together, says Ewaldsson. “Sure, there’s a lot of stuff that will be built that will just be a mess. But that’s okay,” he says with a smile, “because it all requires connectivity, and we will sell connectivity to anyone who drinks it.”

Time for the machines to belly up to the bar. 

TIERNAN RAY can be reached at: tiernan.ray@barrons.com, www.blogs.barrons.com/techtraderdaily or @barronstechblog

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