AT&T is launching the mobile 5G era with a curiously conservative offering. The lucky folks to get AT&T's first 5G hotspot will have free service for at least three months, but after that they'll pay $70 for 15GB. That's only $5 less than AT&T currently charges for standalone, no-contract 4G mobile hotspot service.

If you've been steeped in rhetoric about how 5G will be much cheaper per gigabyte than 4G, this can be perplexing. But you have to take this service plan in context—and understand how, and when, it's likely to change.

I anticipate 5G service plans to look a lot like 4G plans at least through mid-2019. They might even be more expensive, as carriers decide to make an extra buck out of eager early adopters. The savings come down the road. Let me explain why.

This 5G Plan Is Basically a 4G Service Plan

AT&T admits freely that its 5G coverage is very, very limited right now. It's just dense areas of 12 cities. So the service plan is probably being calculated knowing that much of the usage is going to be on 4G. It's like steak with some shaved truffles on top: you hear a lot about the truffles, but your meal is still mostly steak.

Because AT&T felt it had to make a deadline, it threw a service plan out there that made sense with the current state of its network. The current state of its network is, mostly 4G.

AT&T Can't Support Capacity Improvements (Yet)

The much lower prices we imagine for 5G gigabytes are dependent on massively greater capacity, and AT&T doesn't have that capacity yet. 5G isn't magic: one estimate says that it can encode 23 bits/hertz/second as opposed to 4G's 15 bits/hertz/second. 5G's advantage comes in using a lot more hertz—bigger channels in new bands.

Right now, many Americans' phones roll along using something like 60MHz of 4G spectrum at any given time. I've heard from several reliable sources right now that AT&T's Ericsson base stations can currently only use 100MHz of millimeter-wave 5G spectrum, and that they can't combine 5G and 4G data transfers. They will be able to use more spectrum, and to combine 4G and 5G in the future; they just can't do it yet. Both things greatly increase network capacity.

AT&T has an average of 375MHz of millimeter-wave spectrum in many major cities, so once Ericsson works its issues out, you'll see more capacity and therefore lower prices (probably). But lots of the spectrum potentially used for 5G hasn't even been auctioned off yet. The FCC is currently running two auctions for a total of 1.55GHz of millimeter-wave. AT&T is bidding in both, and there are three more auctions coming in 2019. The FCC is also working on making 1.2GHz more available for shared usage in the 6GHz band.

You're driving your car on the road as the road is being built here. Everyone's squeezed into one lane because there are backhoes in the other five.

The Economics Differ From Verizon's 5G Home

Verizon's 5G Home service currently charges $70/month, but for truly unlimited data. Verizon can pull that off because its network isn't mobile, and it's using very different equipment from AT&T. Verizon is currently using 400MHz channels—four times AT&T's capacity—and it can choose its stationary customers so it knows it won't overload its cells. Since AT&T customers are on the move, network planning is much harder for AT&T (as it will be for any mobile 5G network.)

There's No Competition

And they aren't trying to attract a crowd anyway. Competition drives down prices, and there's no price war for mobile 5G (yet.) Also, AT&T has said publicly that it has a very small number of devices and is deploying them using what sounds like an invite-only basis. I remember seeing this with Verizon's early 4G hotspot rollout. If you don't particularly care about attracting a lot of customers right now, because your network is super-early and fragile and this is all really a trial for die hards, you charge high rates so only the very passionate will sign up. There will always be a small number of passionate people who want to sign up.

AT&T Was on a Deadline

Sometimes you go to war with the 5G army you have. AT&T had pledged to release its 5G mobile device by the end of the year, and it wanted to be a company that lived up to its promises.

Bragging rights are important. AT&T will now, and until the end of time, be the first mobile 5G network in the US. It can put that on billboards and take it to the bank. But we've only just started on the road to 5G.