2020 outlook: Communication services

The promise of 5G technology: bringing the "internet of things" to life.

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Key takeaways

  • With the rollout of 5G networks in 2020, wireless functionality will improve dramatically for consumers.
  • As mobile users spend more time online with the benefits of 5G's faster and more-capable connectivity, demand for wireless bandwidth is poised to increase.
  • 5G's superior network will improve battery life and allow more devices to be connected—and more data to be collected, which could prove to be transformative for many industries.

The initial iterations of 5G wireless networks will emerge in 2020. Wireless networks have evolved incrementally and have reshaped the world of connectivity, commerce, and entertainment on the go. 2G enabled mobile voice capabilities for consumers. With 3G, data texting and the ability to send low-resolution photos became possible, while 4G launched the mobile broadband revolution that essentially put connected computers in the palms of our hands. 4G also enabled speeds allowing for rich media, video calling and streaming, social networking, and new business opportunities such as ride-sharing and mobile payments.

Many of the bellwether companies in the communication services sector gave power to 4G, and others showed us truly world-changing use cases for mobile broadband. I believe the same will be true of 5G. From a consumer standpoint, 5G will be dramatically faster but less of an improvement over the last generational shift, which introduced mobile broadband to the world. So, what is revolutionary about 5G? The answer lies with the proliferation of connected devices, appliances, systems, and more—also known as the internet of things—and where that collected data can take us.

Initially, 5G is poised to improve wireless functionality by an order of magnitude for consumers. Videos will stream with less buffering, and consumers will be able to play higher-end video games on their mobile devices. Better-performing networks will drive growing engagement in video calls and augmented-reality applications. Because the wireless market has already largely shifted to unlimited usage plans—very different from something like fuel or electricity—users will likely consume more wireless bandwidth on 5G phones. As such, we expect the demand environment for wireless broadband to remain robust, but we don't expect 5G to result in higher wireless prices. We anticipate quite the opposite: As consumption grows, the price per connection will likely fall.

Further, the more revolutionary result of 5G will be the potential for faster and more-capable connectivity that will allow for more connections, better battery life, and ultra-low latency (i.e., the time it takes for devices to respond to each other over a wireless network). These features will result in more devices connected to one another, and thus more data collected. When we pair this ability with machine learning and other types of artificial intelligence, 5G could have a profound impact on many industries. To say the least, there will be experimentation with how 5G can improve a business, such as with innovative software solutions that can manage this new, more-connected environment and capture or automate insights derived from the data collected.

The most immediate impact of 5G will be increased consumer engagement with mobile devices. Take, for example, the ability to download a movie on a mobile device. Ten years ago, it would have taken an entire day to download a 2-hour movie, but with 5G, it will take seconds. In short, 5G will allow consumers to engage with richer mobile content, stoking demand for devices and applications that can deliver 5G capabilities.

As 5G networks proliferate, a number of companies will be poised to take advantage of this growth opportunity. Communication services companies that have densified their wireless broadband networks—as well as those developing innovative applications to collect, analyze, and translate data—will be among those best positioned to pull ahead. Digital media firms such as those offering gaming and mobile-native services are also well positioned to prosper from 5G's adoption as the potential for new businesses and new forms of engagement emerge. Additionally, businesses on the forefront of artificial intelligence and augmented reality are entering the 5G era positioned to accelerate from a running start.

Next steps to consider

Research the Fidelity® Select Communication Services (FBMPX).

Get the details on the lineup of mutual funds.

Go back to the full 2020 sector outlook.

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