Technical standards for the next generation of wireless services aren’t even finalized, yet the US and China are already locked in a crucial race to be the first country to deploy a so-called 5G network.
Or at least that’s what both the US government and the wireless industry say. “The United States will not get a second chance to win the global 5G race,” Meredith Attwell Baker, president and CEO of the wireless industry group CTIA, warned in April, when the group released a report concluding that the US trails China and South Korea in preparing for 5G (fifth generation) networks. If that doesn’t change, the report warns, the US economy will suffer.
The report echoed a leaked National Security Council document that suggested the US government consider building a 5G network. If China dominates the telecommunications network industry, the document said, it “will win politically, economically, and militarily.”
Democrats are worried too. The Federal Communications Commission’s lone Democrat, Jessica Rosenworcel, penned an op-ed for TechCrunch earlier this year calling for a renewed 5G strategy to head off China.
The first specifications for the 5G standard were released last year, but the rest of the standard isn’t expected until later this month. Carriers don’t expect national availability in the US until 2020. The wireless industry promises that 5G will bring enormous boosts in speed and reliability to mobile devices, bridge the gap between wireline and wireless broadband speeds, and enable a new wave of technologies and applications that we can’t even imagine yet.
But why exactly is it so important for the US to build 5G networks before China? The benefits of 5G are obvious, but today the US doesn’t have the fastest home broadband speeds, nor the fastest or most widely available 4G networks, and often lags countries such as Finland, Japan, and South Korea in such metrics. Why would the US’s economic strength erode if it’s a bit late to the 5G party?
A widely cited 2016 report by consulting firm Accenture estimates that the construction and maintenance of 5G networks in the US could result in 3 million jobs and a $500 billion boost to GDP. But would all those jobs end up overseas if China is the first country with a nationwide 5G network?
Not necessarily says Sanjay Dhar, a managing director at Accenture who worked on the report. “Even if China wins the race to build various 5G technologies, it won’t be a zero-sum game,” he says.
Telecommunications industry analyst Jeff Kagan says the competition between the US and China keeps the US motivated to push 5G forward, but he doesn’t believe that it will make a big difference to the US economy in the long term if the US is second or third. “I don’t think it’s ever been more than a battle over the ego over which country is first,” he says.
For one thing, the two countries’ economies remain dependent on one another. Chinese telecommunications company ZTE nearly collapsed after the US barred American companies from selling components to it. Even if China “wins,” US companies will benefit by selling technology to China.
Roger Entner, a founder of Recon Analytics and coauthor of the CTIA report, concedes that it might not matter much if the US introduces 5G a few months later than China. Europe was quicker to roll out 2G, and Japan was the first with 3G, but that hardly deterred Apple and Google from dominating the smartphone market. But Entner argues that if China beats the US by a year or two, it could damage the US’s ability to compete in the global technology market.
3G, which began rolling out in the US in 2002, made possible the iPhone, which debuted in 2007, and the app market, which drove enormous investment in mobile computing, says mobile industry consultant Chetan Sharma. 4G, which made its commercial debut in the US in 2011, made smartphones and mobile apps even more appealing. Apps like Instagram, Uber, and Lyft were able to reach critical mass before competitors from other countries, giving the US an edge.
Ultimately, it’s the decisions of consumers and the private sector that determine the winners and losers in technology. The US “beat” Europe and Japan because Apple created a product that took smartphones mainstream, Google built a popular mobile operating system and gave it away for free, and Facebook built a platform that keeps people glued to their phones. The concern is that if China delivers widespread access to 5G first, its companies will get a head start on creating the next generation of high-tech products and services.
That’s less of a concern with smaller countries such as South Korea, Entner says, because Korean companies won’t have as large a market to test and refine ideas. But China’s 1.4 billion population provides the perfect place for a company to grow a business before exporting to other countries. Consider the WeChat instant messaging app, which offers mobile payments, online banking, car services, and more. Western companies have been trying to emulate its success and functionality for years. Huawei, now the world’s largest provider of telecommunications infrastructure equipment, initially grew by serving the domestic market.
Gaining a lead in 5G could have other benefits for Chinese tech as well. 5G enables not just increased speeds, but the increased capacity that could help support growth of the Internet of Things. All those connected cars and other gadgets will produce data. Lots of it. That could help put China ahead in cutting-edge developments, like self-driving cars and artificial intelligence. “The massive amounts of data that 5G will enable will also be critical for training AI algorithms,” says Paul Triolo, who focuses on technology for the political risk consulting firm Eurasia Group. “So being a leader in both developing equipment and applications will be a major economic advantage to the country or countries that seize the baton.”
Providing Wireless Spectrum
The odds of China beating the US by more than a year are real, Entner says, because the US hasn’t yet allocated enough wireless spectrum for the new networks. Thus far, most development of 5G technologies has focused on “millimeter wave spectrum,” a very high frequency range that enables extremely fast speeds, but only over a very short range. That would require carriers to deploy an enormous number of small cellular antennas to blanket the US with 5G.
Carriers are pushing the FCC to open more of what’s known as the midband of the spectrum for 5G, which would allow them to use large cell towers, much as they do now. That could make it faster to deploy 5G. The fear is that if enough of this midband spectrum isn’t made available to carriers, the 5G networks launched by the 2020 start date won’t actually cover the whole country. The FCC plans an auction to sell access to some of the midband spectrum to carriers in November, and last month it formally began the process to make another big chunk available.
But the longer this takes, the longer it will take US carriers to build real 5G networks. Entner says that in the US, it has historically taken years to launch the first networks after a new portion of spectrum has been identified for a particular use.
By contrast, the Chinese government has opened up more midband spectrum for use with 5G. That’s a big part of why the CTIA report suggests that China, along with South Korea, are “ahead” of the US.
National Security Concerns
Concerns about China’s lead in 5G spill into national security. Huawei’s products are now used by carriers around the world. But the US government has long worried that Huawei could help the Chinese government spy on US citizens, businesses, or political leaders. Huawei is effectively blocked from the US market. But if telecommunications equipment companies in the US and allied countries exit the market, US carriers might be left without any option.
Security experts say the government is right to be concerned. Although there would be serious political fallout if Huawei or another Chinese company were caught spying, equipment makers are in a position to deliberately build vulnerabilities into their products and hand the details of those problems to the Chinese government, says Ryan Kalember, senior vice president of cybersecurity strategy of the security company Proofpoint. Alternately, the companies could hand over the details of newly discovered security flaws to the Chinese government before fixing them.
US buyers will almost certainly continue to shun Huawei products in favor of equipment from US companies such as Cisco and Juniper, or Europe’s Ericsson and Nokia. But that won’t do much to challenge Huawei’s role globally.
Much the same can be said of the whole race to 5G. Even if the US wins the 5G race, it won’t stop China.