5G nationalization will leave America behind

The Department of Defense (DOD) is currently considering a proposal that’ll effectively nationalize 5G technology and networks in the United States. By abandoning the market-driven strategy that won the 4G race for the nation, America would merely be undermining its own progress — and losing to China.

This is especially concerning since China sees itself as a rival to U.S. hegemony and is increasingly exerting its diplomatic and military influence in a brazen way. It has launched cyberattacks and attempted to acquire sensitive military secrets and intelligence. It has already made strides in the 5G race and is rapidly acquiring key 5G patents. Its flagship telecommunications giant is propped-up by $75 billion in subsidies and was slated to build the UK’s 5G network this year. The British government only reneged after U.S. diplomatic pressure.

Concerningly, Chinese laws effectively compel Huawei to hand over user data and to assist it in industrial espionage and state surveillance. If the world becomes increasingly reliant on Chinese government-controlled and operated telecommunications infrastructure, then that will leave U.S. manufacturers and innovators at an ever-increasing disadvantage. With 5G technology expected to contribute $2.2 trillion, roughly 5 percent of global GDP, to the world economy within 15 years, this is a race America must win.

Troublingly enough, the DOD suggests a move that mirrors China in many ways. It’d replace the existing Federal Communications Commission (FCC) plan to auction off frequency ranges within the mid-band spectrum to private companies who can then develop the necessary infrastructure networks, which is ideal for 5G development. Instead, a network built and deployed by the U.S. government would act as a wholesaler to telecommunications companies who could turn around and sell 5G plans to retail consumers.

But national 5G networks are already being built across the country with private investment totaling billions of dollars. Why would taxpayers pay such a hefty sum for something that American companies are already developing? Conversely, government agencies have already compromised the nation’s position in the 5G race by allocating mainly less-than-ideal low-band and high-band frequencies for 5G development. Unlike the mid-band spectrum that the U.S. military largely monopolizes, low-band frequencies mean slow connections. High-band frequencies are localized and require significantly more infrastructure investment to cover the same range. By contrast, China has utilized its mid-band spectrum for 5G deployment.

This is why a lone Chinese cellular tower now covers the same range as 100 high-speed American towers.

The U.S. should be auctioning frequency ranges within the mid-band spectrum to companies that are already equipped to build infrastructure. If the U.S. wants to “catch-up” with China, then it should be taking advantage of the already robust American private sector instead of adopting China’s strategy of state control, debt-funded subsidies and loans.

A federal government 5G network could take decades to build and could be replete with setbacks — at the expense of consumers and taxpayers.

Take a look at South Africa and Mexico for proof. Those are two countries where nationalized telecommunications networks failed. 

Or look to Australia, where the “National Broadband Network” turned into a financial disaster. Originally projected to cost $29.5 billion in 2013, it was completed only this year, with the final cost running past $51 billion. And that’s not counting a recently announced $4.5 billion upgrade since the technology is out of date already. But it’s not politicians and bureaucrats’ own money they’re playing around with. It’s taxpayers’ dollars on the line.

Conversely, proponents of a nationalized 5G network claim that auctioning off spectrum to private network builders could leave consumers worse off, since there’s theoretically nothing stopping them from charging high prices once they own the network. After all, American mobile services are relatively more expensive than those in many European nations.

Yet, this can hardly be blamed on privately owned network infrastructure when infrastructure in European countries with significantly cheaper mobile service is also privately owned. After all, American prices are influenced by the relatively higher costs of extending coverage across a nation that’s so vast, unevenly populated and geographically diverse.

Moreover, European regulations that are designed to lower prices for consumers by boosting retail competition (such as the UK rule requiring network owners to sell access to competitors at cost) come at the expense of decreased network investment that left Europe years behind the United States in 4G development. This trade-off may be undesirable, given how important fast, reliable and expansive 5G networks are for keeping innovative companies and industries in the United States competitive.

Nationalization also won’t uphold security since a single nationwide network, government-owned or otherwise, is even more vulnerable to hacking. Furthermore, infrastructure builders and equipment providers who raise national security concerns are already prohibited from purchasing spectrum licenses.

America needs a national strategy that focuses on leveraging private investment to foster leadership and innovation in the 5G race. That the DOD continues to hoard invaluable mid-band spectrum for no commercial or national defense benefit, while considering a costly, nationalized 5G network model, shows how far we have to go. This nation should and could be a world leader in secure, cutting-edge telecommunications technology, and can get there before China. But if the government gets in the way, then America’s chances at that are slim-to-none.

Satya Marar is a policy analyst at Reason Foundation and a Young Voices tech policy fellow. Follow him on Twitter @MisterJEET.