In February, the Italian government promised to ban Huawei and ZTE from the country’s 5G infrastructure, per a U.S. request. In June, Vodafone announced the launch of 5G in five Italian cities. Despite the earlier promise, those new 5G networks are Huawei-supported and built on Huawei equipment.
As of May 17, U.S. companies need official permission to do business with Huawei and its affiliates. Washington calls for American allies and partners to follow suit, arguing that Chinese equipment grants Beijing a backdoor into critical networks. But other states resist. They can manage their own security concerns. They don’t want to be forced into a new Cold War. And they do want 5G: the PRC’s prices can’t be beat; other options are limited; the U.S. does not offer an alternative.
5G is shaping up to be the next geopolitical great game, designed for a world where information rather than geography is the battlespace. However, every competitor seems to envision a different goal. South Korea, Japan, and to an extent Finland and Sweden vie for the 5G market as the conduit to direct economic advantage. For European states, 5G is yet another hurdle to maintain global relevance — and yet another front in a great power battle that reduces them to satellite status. For China, 5G is a national grand-strategic mission; part of a network-driven offensive for the China’s “national great rejuvenation.” And the U.S. has come to frame the contest as a simple question of espionage.
So What Is 5G?
5G refers broadly to the set of rules and standards that define the fifth generation of wireless communications. This generation is projected to catalyze and undergird the long-awaited “Internet of Things” (IoT): a world where not just everyone, but also every physical object, connects and communicates constantly. The international standards body 3GPP completed the first phase of 5G specifications in 2018. It plans to establish the second set by March 2020. Telecommunications companies are rapidly implementing those standards: AT&T, Verizon, and Sprint have already launched 5G in select U.S.cities. South Korea claimed a nationwide 5G network in April. China says it will commercialize 5G by 2020.
5G operates on three sets of radio frequencies — millimeter wave (24.25-29.5 GHz), mid-band (3.3-4.2 GHz), and low-band (600MHz-700MHz). Millimeter wave (or mmWave) permits multi-gigabit speeds. But higher frequencies penetrate less well and carry data less far: mmWave systems will require a new infrastructure of many, small base stations in close proximity. Slightly slower, mid-band is often called the “Goldilocks” of digital spectrum, combining high speeds and good distance penetration.
5G differentiates itself along three dimensions. First, and most obvious, are faster operating speeds. The high-resolution video that takes minutes to download today will be available in seconds with 5G. It also provides low latency: devices will communicate amongst themselves some 50 times more quickly than with 4G. Third, 5G’s capacity, or bandwidth, will be some 100 times higher than 4G LTE. That allows the network to host more human users. It also allows the network to host more machines — including the millions of devices and sensors that, linked together, will comprise IoT ecosystems.
In the short term, most consumers will only directly notice that first improvement, called enhanced mobile broadband (eMBB). The change will likely be incremental at best. A video will download more quickly and with better quality. Virtual reality technologies will become more widespread and functional. But in the longer term, the second two measures — known as Ultra Reliable Low Latency Communications (URLLC) and massive Machine Type Communications (mMTC) — could revolutionize society. 3G allowed mobile devices to operate at computer-like speeds, thus launching the smartphone era. 4G’s advances opened the door to the world of mobile-first; the age of Uber, AirBNB, Spotify. And with them, the individual’s constant mobile connection to a network of other individuals.
URLLC and mMTC promise to take that one step farther: they will not just connect people to each other, but machines to machines. We talk about a burgeoning world of smart cities, self-driving cars, autonomous everything. The technologies behind many of those already exist. But they still need to be institutionalized, scaled, and integrated. That requires a network with immense bandwidth on which they can communicate seamlessly and without delay. 5G offers precisely that.
Or at least, that’s the hypothesis. The basic 5G capabilities and test sites that do exist are just the beginning. 5G is not a simple technology or a straightforward objective. Rather, it is a technological ecosystem: networks that operate on three different sets of spectrum; the infrastructures for those networks; the hardware that uses them; and all of the associated technologies — self-driving cars, smart cities, industrial robots — as well as their own infrastructures and hardware.
The true transformative power of 5G lies in the integration of those, horizontally and vertically, to scale.
That is where the real contest looms.
U.S. operators have launched more than 90 commercial 5G networks; South Korean ones more than 50. These networks, however, operate on existing 4G LTE networks rather than 5G-specific ones. That translates into evolutionary advances, chiefly in speed, without 5G’s (theoretical) revolutionary macro effects. Those networks have been established without the infrastructure investments necessary for a scalable 5G foundation. By contrast, Beijing focuses on commercializing “standalone” 5G — i.e. 5G networks operating without previous-generation hardware by 2020. Beijing has built some 350,000 5G-operable base stations over the past five years. That’s about ten times the number operating in the U.S.
The race is to build a 5G infrastructure that covers broad geographies and user bases; to build and connect the smart cities, industrial robots, and self-driving car systems that take advantage of that infrastructure’s potential. This will be expensive. And there is less direct market demand than was the case for 4G LTE. 5G deployment requires not only revamping technological architectures but also building an entirely new physical infrastructure. That’s particularly true of mmWave systems. There’s a real question as to where that money will come from — at least in the free-market system. The consumer will have little incentive to foot the bill. After all, he’ll see only marginal immediate improvements.
Those problems compound at the application level. The 5G bet rests on a host of unexplored, nascent technological modes coming together at the right time on the right network. That requires the right alignment of technology, but also of regulatory, social, commercial forces.
The trendlines are good. But the uncertainty is high.
State of Play
This is a contest for global scale and standards. Only the U.S. and China have both the market size and the technological sophistication really to engage on that front and to compete for 5G rule-setting power. Companies from a handful of other countries — Japan, South Korea, Sweden, Finland, and, to a lesser extent, other E.U. member states — vie for the 5G hardware, infrastructure, and equipment markets or to operate 5G enabled networks. They seek a profitable niche in the larger ecosystem.
3GPP selects from competing patents to form its international 5G standards. That selection determines whose technology will be licensed as the global norm — and who shapes the profile that connecting systems have to fit. Over the past two years, the PRC has rapidly caught up to, perhaps even drawn ahead of, an early U.S. lead in global standards. In 2018, 3GPP released a first complete set of 5G specifications. Those backtracked from early support of the U.S. coding scheme LDPC, instead endorsing a Solomon-like combination of LDPC and Huawei’s Polar. “China has won half of 5G standards,” crowed Beijing’s media.
The balance risks shifting farther in China’s favor. U.S. systems are increasingly disconnected from the global norm. The U.S.leads in allocating, and using, mmWave spectrum. But it has historically cordoned mid-band off from commercial use. There, China leads. And mid-band increasingly represents the global standard. That means that Beijing’s systems and patents are the ones positioned to take off globally.
China’s dominance in 5G’s hardware and equipment further supports its bid for standards — especially as the U.S. has no entrant in that game. There are six primary global players: Sweden’s Ericsson, Finland’s Nokia, South Korea’s Samsung, Japan’s newly engaged Rakuten, and China’s Huawei and ZTE. Beijing’s state-supported companies offer the best prices and boast the broadest footprint. They offer a platform through which to promote PRC standards. And even if Beijing loses the rule-setting contest, it will retain a keystone role in the global 5G ecosystem. Meanwhile, when Washington tells its partners not to buy Huawei equipment, it does so without proposing an American alternative.
This matters because the 5G competition is fundamentally one for global scale. The entire developed world is trying to set up 5G networks at home. Most countries do so by purchasing foreign equipment that conforms to a foreign standard, and, often, assisted by a foreign network operator. For them, this is about keeping up as efficiently as possible — in terms of price, time and political capital. To claim any part of the equipment market is to play an integral, scalable role in a profitable global industry. To claim the standard is to decide the rules, hierarchies, and resource flows in a backbone global network — one that, should the IoT bet come to fruition, will affect the physical as well as virtual worlds.
An Asymmetric Competition
Beijing has chosen this playing field for a reason. Network and standards grant rule-making power, and with it governance over resource flows and value. They grant that in an enduring, universal fashion: Since 2008, PRC strategic texts have framed standards as “winner-take-all” fields in which the victor locks in a protected monopoly. Moreover, 5G — and the broader contest for networks and standards — plays perfectly to the PRC’s strengths; its scale, centralization, and narrative control.
That means three critical things. First, Beijing games the standard-setting process. 3GPP will approve nothing that the PRC opposes. The CEO of Lenovo, Yuang Yuanqing, was publicly shamed for not voting the party line at 3GPP’s standard-setting meetings in 2016. The government runs a dedicated task force — the Ministry of Information and Industry Technology’s IMT-2020 5G Promotion Group — to craft the proposals for and influence those meetings.
Second, Beijing’s regulatory arbitrage lets it seize standards and foundations from the bottom up. CCP support means that China can build and export its 5G infrastructure without concern for market forces. This is a state project: The PRC consumer does not have to foot the bill. Chinese telecommunications companies aggressively undercut global prices, suffocating competitors bound to market forces. Huawei has already signed more than 40 contracts to sell 5G equipment internationally.
Third, Beijing moves deliberately. It is not just racing for the first, shiny single-city network or the first 5G phone. It carefully builds full industry value chains and supporting infrastructure, both for 5G itself and for the systems that will link into it. The central government cooperates with industry to ensure “vertical deployment.” National-level science and technology (S&T) prizes reveal a disproportionate focus on the antennae and base station hardware that undergirds 5G, as well as on the smart sensors, meters, road, and grid systems necessary for the industrial IoT and smart city infrastructures on which the 5G gamble is based. Horizontally, local governments have been tasked with installing base stations and fiber optic cables nation-wide.
Huawei began work on 5G in 2009, before 4G had even been implemented. Within China’s twelve National Key S&T projects — the most prestigious and best-funded items on the CCP’s tech agenda — one is dedicated exclusively to “broadband mobile communication,” one to the chips that power it, and one to the core infrastructures that deploy it. They were launched in 2006, 2011, and 2008, respectively.
“You can go fast,” writes Lin Zhenhui, Executive Director of CITIC International Telecommunications Group Co., Ltd., “and win the first prize in a specific industry or city.” Then, you “will enter the 5G era in 2020. But scale coverage needs a huge investment.”
Speed, sadly, drives the U.S. approach. Driven by short-term market forces and an inherent proclivity toward hype, domestic giants compete for the best basic technology or for the quickest returns and easiest wins rather than for scope or scale.
They deploy non-standalone networks in select areas, ignoring larger infrastructure concerns. In October 2018, Verizon debuted what it called “the first commercial 5G network on the globe.” It may have been first. But as T-Mobile CEO John Legere put it, the technology didn’t “use global industry standards or cover whole blocks and will never scale.” Racing against its national competition, AT&T takes a similar tack. Chinese sources put it succinctly: “the U.S. operators are making a big deal of 5G. But they’re not doing enough to create actual coverage. Because U.S. operators only recognize money.”
President Trump has called for extending broadband access across America. He floated the idea of national 5G networks. But those proposals have yet to take form. And they speak to only one element of the 5G competition. They do nothing about global infrastructure, cooperation, or standards.
Those blind spots stem in large part from an outdated framing of 5G as a traditional geopolitical or technological game rather than a techno-economic contest for application. Washington has realized that this is a national-level competition. Some allies and partners have too. But they focus on narrow security concerns — on Chinese equipment as a potential backdoor for PRC espionage or sabotage — rather than the grand strategic scale of Beijing’s 5G plan.
Washington focuses simply on removing China’s presence from 5G networks; on banning Huawei and ZTE. That tack may help to mitigate the espionage concern domestically. It might even handicap Huawei, if temporarily.
But 5G is a contest to construct a global infrastructure, not to play domestic defense. Without a unified vision, the U.S. can neither rival the PRC’s scale nor genuinely impede its 5G advance.
Beijing’s 5G vision is as much an existential threat to U.S. partners as it is to the United States. They won’t, or can’t be concerned if the danger is presented simply as an espionage one, however. They will resist a bipolar world that threatens to force them into a proxy status. And they will need a compelling, price-sensitive alternative — or a forum in which they might cooperate to craft one.