Too Early to Panic in the Race for 5G

April 29, 2019

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The blending of economic policy analysis and national security concerns regarding next-generation 5G wireless infrastructure is leading to some sloppy, if not downright loopy, thinking. 5G is anticipated to play a critical role in enabling a far broader set of applications for all kinds of organizations than previous technology, and seeing a successful, relatively early adoption of the platform may be key for generating the next decade’s worth of innovations that will leverage its capabilities. As such, it is surely in the interest of the United States to have a robust deployment of 5G sooner rather than later, but it is important we not overreact to the race with China or lose sight of America’s strengths.

The clearest example of loopy 5G thinking is the White House memo that leaked in January calling for “nationalizing” a wholesale 5G network and standing up a U.S. wireless equipment manufacturer within three years. The thinking was that 5G is so important, and the wireless network is so intimately integrated into commerce and communications, that it must be built with secure, trusted components—that national security demands the United States engage in full-scale industrial policy to have the government deploy a secure nationwide 5G network with not a five-year plan, but a three-year plan!

This idea was rightly panned by experts. But that didn’t stop a small company called Rivada from trying to capitalize on the situation (with help from cheerleaders like Newt Gingrich). Rivada’s pitch stars them as middleman, facilitating access to Department of Defense (DOD) spectrum. The company has developed some specialized spectrum sharing technology, but that’s about it. This was, and is, rent-seeking pure and simple. They have no spectrum, and even if they could get buy-in from DOD to share its spectrum largess, those bands are highly unlikely to be in the current 5G New Radio standard. So, no equipment or device ecosystem either. And when Rivada’s chairman calls for “ruthless preemption” rights to DOD, you can probably count out any private sector entity willing to risk their capital on the infrastructure.

Thankfully, President Trump made a clear statement that the U.S. approach to 5G “is private sector driven and private sector led,” rather than go the route of a government-directed wholesale network. Ajit Pai, chairman of the Federal Communications Commission, agrees this is the way to go.

But like most bad ideas that die hard, there is a kernel of truth in all this swirl. The United States is out in front in deploying early 5G systems, and it has a jump in utilizing new technology with extremely high-frequency spectrum. However, America is behind other countries in terms of opening up the best 5G spectrum, the so-called “mid-band” spectrum that is best leveraged by the new technology and hits the sweet spot between coverage and capacity. The United States desperately needs to get more mid-band spectrum out into commercial hands.

But it is not an either-or proposition. For example, Josh Rogin gets it wrong when he writes that, when it comes to 5G, “the United States is building Betamax while China builds VHS.” We need a good mix of low-, mid-, and high-band spectrum. And while, yes, we need more mid-band to be available for commercial use, the quickest way to get there is through market forces clearing a portion of mid-band satellite spectrum—a proposition already on the table.

The federal government can also do more to streamline 5G deployment at the local level by limiting high fees and onerous regulations to access poles and rights-of-way. And subsidies to support deploying 5G to more high cost, remote areas will be needed soon after the technology is deployed.

There also is a legitimate security concern about maintaining diverse supply chain options, most notably in the market for base station equipment, as the federal government claims firms like Huawei are not secure. But rather than standing up a U.S. equipment company from scratch—something that likely cannot be done, given that Huawei is now the largest spender of R&D in the world on a purchasing power parity basis—we need to consider other options. One is enabling existing firms to get the scale and scope they need to take on Huawei. This means that the Trump administration should be discussing with European counterparts the prospects of enabling mergers between existing U.S. firms and EU equipment providers. While traditional antitrust officials may recoil at this thought, it may be the only alternative to a global Chinese monopoly in the 6G networks to come. A second option is to play to America’s strengths and support more innovation in U.S.-based software and software-defined networking equipment. It is much easier to manage cybersecurity risks on hardware than in software, and we could diminish the risk if U.S. firms (or firms from other trusted nations) ran the software for 5G networks.

In short, the race for 5G is important, but it is way too early to panic.