Are autonomous cars the killer application for 5G? Morgan Stanley's analyst team thinks the answer could be yes. The firm's telecom analysts have combined their forecasting models with those of its automotive team, and the results show connected cars driving huge increases in mobile traffic.
"AV data could increase global wireless traffic 40x over current levels, delivering a boost for Telcos comparable to the iPhone in 2007," the analysts wrote in a research note. "In our Base Case, 300 million AVs pay an average revenue per user of $25/month for data services (today's consumer average for mobile), driving a new $200 billion annual revenue stream for Global Telcos. In our Bull Case, we assume Telcos can capture a portion of the value created in the AV ecosystem, equating to $1.3 trillion annually from AV data – a sea change for Telco services, much like the arrival of the smartphone."
Of course, this additional revenue will not come to telecom companies without significant upfront investment. Morgan Stanley estimates that the cost of one citywide 5G network to support autonomous vehicles would be as much as $3.3 billion, broken down as follows: $2.8 billion for small cells, $300 million for fiber, and $150 million for core network and other investments. The firm also predicts that each major city will have just one or two 5G networks capable of supporting autonomous vehicles.
Vehicle connectivity can address line-of-sight limitations and prevent crashes that cameras and sensors can't, according to the analysts. Morgan Stanley does not foresee cars connecting to wireless networks in order to make driving decisions. Those decisions will require vehicle-to-vehicle connectivity. Nonetheless, the analysts predict that each connected vehicle will generate as much network data as a smartphone.
"AVs will connect to the grid and transmit data using three technologies: Vehicle-to-Vehicle (V2V), Vehicle-to-Infrastructure (V2I), and Vehicle to Network (V2N), which can transmit via 5G," the analysts wrote. "Importantly, AVs are hitting the streets without 5G, giving early fleets a chance to prove their commercial and social value."
Indeed, ride-sharing services in California have now been cleared to transport passengers in self-driving cars. The California Public Utilities Commission approved a rule that allows these vehicles to carry passengers, but denied companies' request to charge passengers for rides in self-driving cars.
According to Lyft, self-driving cars have the potential to save up to 86 lives per year in the United States and reduce the number of traffic accidents by 90%.
Along with increased safety and efficiency, self-driving cars could yield big returns for wireless carriers and the companies that support them. According to Morgan Stanley, the North American companies poised to profit from autonomous vehicles include Verizon, Crown Castle, American Tower, Equinix, CommScope, Corning, Zayo, Qualcomm and Cisco.