With the global economy in a slump, the question on the minds of many investors is: What will it take to spur more robust growth? As with many things, finding answers is a matter of following the money. In doing so, it’s hard to overlook the billions that big telecom and tech firms are pouring into the development and deployment of the fifth generation of mobile network technology, or 5G.

According to Accenture, U.S. telecom companies are expected to collectively spend $275 billion to develop and deploy 5G networks, and they have already made inroads in many American cities. Meanwhile, China has earmarked $400 billion for investment in 5G under a five-year plan, reports Cohen & Steers.

Data firm IHS Markit describes 5G as a catalyst that will put mobile technology in the same league as the printing press, electricity, the internet and other game-changing innovations known as general purpose technologies (GPTs).

“Established through pervasive adoption across multiple industries, GPTs are often catalysts for transformative changes that redefine work processes and rewrite the rules of competitive economic advantage,” notes IHS in a 2019 report on the so-called 5G economy. The firm expects 5G to contribute about $2 trillion annually to real global GDP through 2035. That figure, notes IHS, is roughly equivalent to the current size of Italy’s economy, the eighth largest in the world.

IHS also estimates that in 2035 5G will enable more than $13 trillion of global economic output — a figure that’s comparable to the combined spending of consumers in China, Japan, Germany, the United Kingdom and France in 2018.

BRICKS TO DIGITAL DATA

Mobile technology has been evolving for decades, so why is 5G considered a game changer? A bit of history: First-generation wireless networks were deployed in the 1980s, when the brick-sized analog cell phone was considered avant-garde. Second-generation networks brought digital voice to the cell phone market, and the third generation of networks enabled digital data and the era of apps.

Today’s 4G long-term evolution (LTE) networks were rolled out nearly a decade ago and, according to Cohen & Steers, paved the way for smartphones that could access the web at high speeds, resulting in a surge in data consumption. 5G technology represents a huge leap forward on several critical fronts — speed, capacity and latency. The networks work in tandem with existing 4G networks to deliver speeds similar to wired fiber connections and all but eliminate the lag time between a user request and an action taken by an application or machine. What’s more, a 5G network can support up to 100 times as many connected devices as a 4G network.

REVOLUTION NEXT

With greater capacity, higher speed and ultra-low latency, 5G networks are not only paving the way for smarter smartphones but also commercial applications that promise to reshape many industries and give rise to new sectors.

Some experts say 5G will usher in a fourth industrial revolution, one that finally delivers on the promise of the so-called Internet of Things, or IoT. According to Intel, IoT is a broad term that refers to billions of “smart” devices — from tiny chips to huge machines — that use wireless technology to communicate with each other and with humans. Intel estimates that by 2025 the global worth of IoT technology could be as much as $6.2 trillion, much of that representing the value of devices in the healthcare and manufacturing sectors.

“The amount of change to be brought about by 5G is expected to rival the first three industrial revolutions,” says Jerry Sullivan, CEO of Strategic Wireless, the wireless infrastructure division of Strategic Capital Fund Management. “5G is expected to change the way people live, work and play. It will enable devices like virtual reality, self-driving cars, wearables and new technologies to come.”

FROM HYPERBOLE TO REALITY

Driverless cars have long been the subject of headlines and hyperbole. As The New York Times recently pointed out, the future of self-driving cars was supposed to be, well, now. But perfecting the technology has taken longer than anticipated.

5G is expected to address certain pain points. According to Cohen & Steers, high data speeds, reliable connections and low lag times will be critical to enabling driverless cars, buses, trains and ambulances to communicate with one another and with “smart” city infrastructure, such as roads, bridges and traffic lights equipped with sensors to direct and reroute traffic.

Such connected infrastructure may someday form the “backbone” of so-called smart cities that provide targeted, highly efficient services (from public transportation to snow removal) based on granular, real-time information, reports Cohen & Steers.

“5G networks will be an enormous enabler for autonomous vehicles due to dramatically reduced latency,” explains Sullivan of Strategic Wireless. “Vehicles will be able to communicate in real time with each other and respond 100 times faster than they could over current cellular networks.”

SCIENCE FICTION ON THE FACTORY FLOOR

5G is also helping to enhance and enable augmented reality and virtual reality applications, which has implications for healthcare, retail, entertainment, education and numerous other sectors.

Using 5G-enhanced virtual reality technology and 3D imaging, surgeons have already begun to remotely assist in procedures taking place thousands of miles away, notes Sullivan. Indeed, futurist Steve Brown has said he believes 5G will bring about a new era of remote care, one in which simple home-based devices monitor and help manage the health of people living with chronic conditions, wearable devices alert users to potential health problems and 3D X-rays are commonplace.

5G is also expected to bring the stuff of science fiction to the factory floor. A recent McKinsey & Co. report argues that 5G is paving the way for a future in which smart robots assemble products from multiple manufacturing lines by physically reconfiguring themselves on the factory floor, security drones oversee “tedious tasks” (such as monitoring for intruders and validating parking), autonomous vehicles move parts between buildings and factory inspections are performed remotely.

“Just a few years ago, these were impossible dreams reserved for the realms of science fiction,” says the McKinsey report. “But with the arrival of 5G connectivity, combined with advances in artificial intelligence (AI) and cloud computing, these dreams are becoming increasingly attainable for today’s manufacturing organizations.”

GATEWAY TO THE CLOUD

Interestingly, some experts argue the rise of cloud computing is, to put it simply, an even bigger deal than 5G.

“5G is one extremely important part of the food chain that’s enabling a once-in-a-century general purpose technology, the cloud,” explains Timothy Horan, a managing director and senior analyst at Oppenheimer Co. Horan oversees the firm’s communication and cloud services research team.

The cloud isn’t a physical entity. Rather, it’s a vast network of remote servers that function as a single ecosystem, according to Microsoft. The servers store and manage data, run applications or deliver content or a service, such as video streaming, email, office-productivity software or social media.

“Electricity wouldn’t work without the electric line connected to your home that delivers the electricity,” says Horan, who sees parallels between the infrastructure of electricity and that of cloud computing. “The cloud,” he adds, “would not work without the broadband, either wired or wireless,” that enables high-speed internet access.

ROME WASN’T BUILT IN A DAY

5G may be a game changer in many regards, but the technology is still in its early innings, experts say. Verizon, AT&T and T-Mobile (which earlier this year merged with Sprint) are furiously expanding their 5G networks but, in spite of some advertising claims, still have a long road ahead. They have focused initially on rolling out 5G networks in major U.S. cities.

“It will require significant expansion of cell sites and existing infrastructure over the next several years to make 5G a reality,” says Sullivan. Small-cell antennas are expected to be a significant component of 5G, he explains. A small cell is a radio access point (about the size of a briefcase) that’s often hidden in plain sight, say on a streetlamp, telephone pole or traffic light. Small cells complement large cell towers to improve coverage, add capacity in congested areas and provide a better customer experience.

According to Brendan Carr, head of the Federal Communications Commission, there are some 300,000 cell sites across the country, and the rollout of 5G will require a 10- to 100-fold increase in cell sites.

Meanwhile, smartphone manufacturers must convince consumers (in the midst of a recession) to pony up for new 5G-compatible smartphones, and industry representatives and regulators are still working through a variety of issues, including how to make additional spectrum available for 5G service.

“Rome wasn’t built in a day,” quips Matt Sandoval, a managing director in Barings’ private equity and real assets team. “With 5G, all these whizbang things are going to happen, but they’re not going to happen overnight. We probably won’t hit the midstride of the capabilities of 5G for another five years or so,” adds Sandoval, who oversees his team’s telecom investment strategy.

THE INFRASTRUCTURE FOCUS

Given the uncertainty surrounding the future killer applications tied to 5G, Sandoval’s group prefers to focus on what he calls the infrastructure side of telecom. Last year, for instance, it invested on behalf of clients in the parent company of GigaMonster Networks, one of the largest fiber-based communications service providers to apartment and condominium properties and commercial buildings.

“I don’t know what software will be riding over the network, but I do know there’s going to be a network,” Sandoval says.

Strategic Wireless has taken a similar investment approach. “We prefer to invest in the underlying infrastructure that makes it all possible and is critical to network service providers, such as cell towers, fiber networks and small cells,” explains Sullivan. “Those types of real assets offer some unique investment characteristics, and there are options in both the public and private markets for investors to gain access.”

Already a darling among investors, data centers are also expected to benefit, albeit indirectly, from the rollout of 5G networks.

“We think of 5G as another thing that will create more demand for internet usage,” which ultimately benefits data centers, explains Darob Malek-Mandani, head of research and analysis at National Real Estate Advisors, a subsidiary of the National Electrical Benefit Fund, a Taft-Hartley, multi-employer pension plan.

After selling a large portion of its retail real estate holdings, National Real Estate Advisors made its first investment in data centers in 2010. Today, it owns one of the country’s largest privately held portfolios of data centers. The nearly 3 million-square-foot portfolio is comprised of six campuses in three states.

Malek-Mandani adds: “Anything that allows you to have a smaller, faster device in your hand that’s sending information through a data center is ultimately going to boost demand for our data centers.”

Anna Robaton is a freelance business journalist based in Portland, Ore.