By Byungwook Kim

SEOUL (Reuters – South Korea launched a fifth-generation network of mobile phones in 2019 and is now leading a technological revolution to smart cities and self-driving vehicles.

Three years later, these giddy promises have not been kept.

After spending $20 billion on network upgrades, which have increased connection speeds by fivefold, approximately 45% of country’s population is now using 5G. Telecommunications companies are not willing to spend on the fancy technology that could increase speeds 20 times more than 4G.

Because the demand has not yet been met. App companies haven’t brought mass market services to the masses like autonomous driving. This would take more firepower. Netflix customers can still watch Netflix (NASDAQ) and surf the internet with 5G technology.

Telcos have diversified to adapt. The rollout of services essential to 5G speed will help make this quantum leap.

Kim Hyun-yong is an analyst with Hyundai Motor Securities.

Other countries may learn from the experience of 5G: Be cautious about your excitement. Although the new technology is promising, there won’t be any revolutions in high-speed Internet future.

In April 2019, South Korea’s three mobile carriers – with a PR campaign featuring K-pop stars and an Olympic gold medallist – as well as Verizon Communications The United States (NYSE:) rushed 5G commercial launches in advance of their scheduled dates, eager to be the first on the highly-publicized wireless technology.

Asia’s fourth-largest economy remains the pioneer of 5G. However, the hype around 5G had already begun to fade long before COVID-19 began to stoke demand. Investments of the $370 billion necessary to create the fastest 5G have been frowned upon by many companies. Revenue growth has stagnated.

“Rolling out 5G that is 20 times faster is nearly impossible, even in Seoul,” said Ku Hyun-mo, CEO of South Korea’s top telecoms operator, KT (NYSE:) Corp.

“Establishing nationwide coverage just can’t be done – 5G frequency travels straight and it can’t go around obstacles,” Ku told Reuters. “It can’t deliver the same speed once it travels a few hundred metres.”

A McKinsey study found that the fastest version using ultra-shortwave and a high band spectrum called millimetrewave (mmWave), requires 15 to 20 base station per square kilometre (40-50 for 4G)

NO KILLER APP

South Korean telecom companies have constructed around 215,000 5G stations. But only 2% of these can support mmWave. China and the United States are two other countries to have 5G. They mainly rely on slower middle-band spectrum.

South Korea has 22.9 millions 5G subscribers as of March. This is less than half its 4G users. 4G, however, had nearly twice the number of subscribers when it celebrated its third anniversary.

Analyst Kim said that 4G users switched from 3G to 4G when it was launched in 2011. Kim said that telcos do not have a “killer service” capable of generating more data demand that could justify spending on 5G.

The average revenue per user of 4G carriers grew from 5% to 12 percent annually in the initial two-three years. KT’s ARPU increased 3.7% from a year ago, while SK Telecom Co saw an increase of 0.6%, and LG Uplus Corp, which was third, experienced a 4.2 decrease.

Ku, KT’s director of communications said that if telcos continue to stick with their current connectivity business they will plateau.

More mobile carriers are looking at new business opportunities. KT plans to use artificial intelligence in call centres and hopes it will increase its business by doubling this year. Meanwhile, SK Telecom reported a significant jump in cloud service revenues.

Investors are seeing the benefits of diversification so far. SK Telecom’s and KT shares have risen 26% each since 5G was launched, outperforming the wider market’s 18% rise, despite slower ARPU growth.

Data demand has increased dramatically from 3G to 4. Kim, from Hyundai, said that data demand at present is increasing linearly. “Midband5G could help 5G become more popular and be a bridge to next generation.”

($1 = 1,275.6400 won)