Why the U.S. is Losing the 5G War. How it Can Win this War.

The coming telecommunications war is upon us, and the Chinese company Huawei has quickly taken the lead in establishing 5G networks worldwide. With Huawei being supported by the Chinese government, in particular Chinese intelligence, Huawei has an incredible advantage of being much more inexpensive to install and implement than other telecom companies attempting to establish and sell their 5G technology.

Huawei’s advantage lies in the $75 billion worth of subsidies granted to the company by the Chinese government. With its huge subsidies, Huawei is able to construct a 5G network at below-market cost and so is able to force out other companies, particularly Western companies, from the 5G network building market. With its ability to win foreign contracts from Western nations, the Chinese government will receive a payoff with the ability to infiltrate Western intelligence agencies, as well as political and business entities. This gives China a priceless opportunity to gain access to modern Western technology by stealing private company development secrets, gain access to Western nation’s intelligence infrastructure and to gain political intelligence from various political parties throughout the world.

5G is the fifth generation of wireless technology that eventually will have 100 times the speed of current 4G technology. The 5G frequency spectrum is divided into three classes: millimeter waves, mid-band, and low-band. The low-band range is similar to the frequency range of 4G. 5G millimeter waves are not the preferred method of utilizing the new 5G technology due to its limitations. 5G millimeter waves are very short-ranged and have difficulty in traversing through walls and windows so reception indoors is minimal at best. The mid-band range is the frequency spectrum that is most preferred due to its being able to penetrate walls and windows and making indoor reception possible, but at a higher performance rate than the low-band frequency spectrum.

The rollout of 5G will require the construction of new cell towers, as while 4G cell towers can broadcast up to two kilometers, 5G technology needs to have cell towers every 500 to 800 meters. 5G also requires a line of sight for cell phones to be able to utilize the 5G networks. The amount of investment for these new cell towers and new batteries for cell phones represent a tremendous increase in capital terms, making the new technology much more expensive to implement than the implementation costs of the 4G network.

The United States has banned U.S. tech companies from selling to Huawei some of the components that are necessary for Huawei to expand its network, but with private companies fighting the ban, the Trump administration has not achieved a full ban. Worse, from the viewpoint of the Trump administration, the U.S. has attempted to persuade its allies to refrain from buying Huawei technology, but this has been too little or no avail. Particularly galling to the Trump administration was the decision by the United Kingdom to allow Huawei to be part of the 5G network that Boris Johnson wants to set up. The UK needs to modernize its Internet system to give it every advantage to survive in a post-Brexit world.

How to Combat Huawei, and Win

The decisive advantage that Huawei has is not in the technology itself; the technology was motivated by the ITU-R and in 2015 ITU-R issued the requirements for the standards of 5G technology. While Huawei did lead the world in the development of 5G, in 2009 Huawei developed the first network splicer router and secured polar coding before any other firm, this technology was inspired by 3PGG and research by its member nations. Huawei’s decisive advantage lies in the tremendous financial assistance the company receives from the Chinese government. The principal attraction with Huawei is not in its technological advantage but from its ability to construct and align the cells necessary for a successful 5G network. As noted above this is tremendously expensive and without the subsidies Huawei receives from the Chinese government Huawei would not have this financial advantage.

Unless the United States and the other nations of the world are willing to match the subsidies that Huawei’s receives from their own governments, then the fight over 5G and its development will go to Huawei by default. While the United States cannot legally subsidize other country’s business firms, it can subsidize the 5G technology in the United States and allow U.S. companies to match the financial advantage currently enjoyed by Huawei. Current American based companies that would be the recipients of this subsidy, based on U.S. national security concerns, are Verizon, AT&T, Apple, and Sprint.

It would be a waste of funds and effort to provide each of these companies with a separate subsidy. In order for any type of subsidy to be successful, the four above-named companies would need to form a consortium and pool their resources for the establishment of 5G networks throughout the world and compete with Huawei on a solid financial basis.

These four companies would have to form a holding company. Each company would invest in the holding company. The assistance from the federal government would then be distributed to the holding company.

With the U.S. consortium being able to match the price structure of Huawei, the United States would be able to prevent Huawei from infiltrating allied intelligence services and provide for the security of Western companies, as well as preventing the spread of Beijing’s influence in traditional economic, political and military allies.