5G competition is critical for America’s post-Covid economy
Concerns about concentrated corporate power tend to focus on industries and technologies that can transform society. Telecommunications is such an industry, and 5G such a technology.
As you have undoubtedly read, 5G-enabled technology is working its way into every corner of the modern economy, from connected vehicles on the highway to remote surgery in hospitals to more efficient manufacturing.
But to function, 5G needs equipment, such as base stations, that connect smartphones and devices to other parts of the network.
Only five 5G equipment providers in the world compete in this industry: Huawei, Ericsson, Nokia, ZTE and Samsung. Why is America letting competition diminish in a technology as transformative as 5G – and what can be done to fix the problem
First, let global technology leaders compete in the U.S. market. With just five companies in the industry, barring a leading equipment supplier shrinks the number of providers by 20%. Less competition drives up costs and slows economic growth. A report by Oxford Economics estimates that U.S. GDP could shrink by up to $21.9 billion by 2035 if higher costs force carriers to delay the deployment of 5G. Higher costs also reduce companies’ ability to invest in R&D, potentially harming America’s position as a technology leader.
Second, stop thinking that tariffs are the solution. In a 2018 op-ed, FCC Commissioner Jessica Rosenworcel wrote that “levying new tariffs on everything from semiconductors to modems to routers is not going to make it any easier to deploy 5G wireless service. In fact, it will make it much more expensive.” Rosenworcel pointed out that lots of 5G network equipment used in the U.S. is made or assembled in China. Tariffs of up to 25% constitute a major tax on America’s 5G infrastructure – one that will increase the cost of building new networks, while slowing 5G roll-out and the innovations that come with it.
Third, explore alternatives to “rip and replace” legislation. America’s rural and remote areas are chronically underserved by large operators and ISPs, which cannot build network capacity profitably in sparsely populated regions of the country. Small wireless operators have stepped in to fill the void. But now, Congress wants them to tear out the equipment they have spent years deploying and replace it with more expensive gear.
U.S. lawmakers recently passed the “rip and replace’ bill with the putative goal of making U.S. networks more secure. The cost will be in excess of $2 billion and will probably take much longer than any government estimates. There are alternatives that would enhance the security of all networks at less than 10% of the cost of the rip-and-place approach, while making it easy for rural operators to upgrade and expand their networks. The U.S. should explore these alternatives seriously before putting an ill-conceived law into effect.
Fourth, release more spectrum for commercial use. Much of America’s mid-band spectrum is allocated to the U.S. military and remains off-limits for companies. So far, 5G deployment in the U.S. has focused mainly on a higher-frequency spectrum band called millimeter-wave. But a report last April by the U.S. Defense Innovation Board said that “spectrum allocation is at the heart of the 5G competition,” and pointed out that “spectrum bands in the 3 and 4 Ghz range dominate global 5G activity because of improved propagation (range) over mmWave spectrum, resulting in far fewer base stations needed to be deployed to deliver the same coverage and performance.” The ideal solution would be for the U.S. to enable multiple users to share spectrum. Congress and the FCC have begun to address this issue, but they should move faster to allocate the spectrum needed to enable widespread 5G coverage and its attendant benefits.
Industries and services enabled by 5G will be a key element of America’s post-Covid 19 economic recovery. As the U.S. economy faces historic job losses caused by the pandemic, the U.S. government should encourage competition by letting all 5G equipment vendors compete in the market and taking the other steps outlined above. Allowing current conditions to fester will prove costly in the long run.
A version of this article previously appeared in Forbes magazine on the 27th May 2020 titled “Four Ways America Can