Politics & Policy

To Win in 5G, We Must Break Government Monopolies

A response to FCC commissioner Brendan Carr

I  read with great interest Federal Communications Commissioner Brendan Carr’s March 5 column titled, “Nationalizing 5G Is Not the Way to Beat China.”

Commissioner Carr is incredibly knowledgeable about 5G technology — and the importance of American leadership in this zone — but his interpretation of my own position on the subject was puzzling to say the least.

In his column, Carr cited my syndicated newsletter from February 21 and said I supported a Chinese-style “command and control policy” that would skirt free markets and nationalize the American 5G network. Specifically, he said I “argued for the government to choose one company to build a single, wholesale network.”

After reading Carr’s piece, I reread my own (three times), and I can’t understand how he reached his conclusion.

It’s true, I think we should change the rules for allocating spectrum to a wholesale regime so that there can be more companies offering 5G service, more competition in this zone, and more coverage nationwide. However, at no point have I ever suggested this job should be left to one hand-picked company — or that the government should own the final product.

With regard to his assertion that I wanted the U.S. to adopt a Chinese approach, I specifically said:

The solution is not, as some have put it, to “become like China to beat China.” . . . To counter this, we should play to our own strengths in turn: A culture of innovation, the power of price discovery, and deep and liquid financial markets. Our incumbent carriers are moving too slowly on 5G, content to deceptively rebrand their existing 4G networks as suddenly ‘5G’ rather than deploy the networks of the future.

Decisive action building a public-private partnership in the near term demands that we make shared spectrum available for a carrier-neutral, wholesale-only, nationwide 5G network to be built in the next two to three years across the entire country. This could be a kind of wireless moonshot (but with private capital) that will spur microelectronics manufacturing here at home, accelerate the deployment of next-generation networks, and show the world that Chinese wireless dominance is not inevitable.

Many companies could build this network. The government’s involvement might be through competitive grants or some other pro-market, pro-business mechanism. The 5G issue is similar to the electric co-ops that were developed in the 1920s when big electric companies didn’t want to “waste” money serving rural areas that wouldn’t bring them profit.

The current regulatory system is outmoded, broken, and incapable of allowing private companies to bring the United States to global leadership in 5G. It is also a clear impediment to new companies who want to get in the game — and is not the right system for creating full coverage to rural America.

Presently, we have a government-created oligopoly in which companies spend so much money purchasing spectrum from the government that they are left with no money to invest in new infrastructure or expanded coverage. Companies buy pieces of the spectrum at an auction for incredible amounts of cash. Sometimes they use the spectrum for their services. Sometimes they simply hold on to it and keep it out of the market, doing nothing. Spectrum has been traditionally treated like real estate, and the FCC has been the auctioneer and broker. Indeed, spectrum has brought a ton of money to the government. The high demand for it has meant startup carriers need tremendous capital even to try to compete at auction with the likes of AT&T, T-Mobile, and other major carriers.

Yes, as Carr mentioned, these major carriers successfully launched and led the world to 4G — but they had government stimulus money and took on tremendous debt to do so. Because of this debt and market realities, they have only focused on urban and suburban areas as a result.

Now, we can see the current system has prevented these companies from leading in 5G — and allowed China’s ZTE and Huawei to get a tremendous head start globally. The easy way to prove that the current system has failed domestically is to drive across the United States and note every time you don’t have cell-phone service. The evidence of our failure internationally is clear in the fact that American carriers picked up no international clients for 5G deployment at the annual Mobile World Congress in Barcelona, Spain, this month. Meanwhile, Huawei has landed more than two dozen international contracts to build 5G networks across the world.

This is not merely a missed business opportunity, and the consequences are not purely economic. In a fully connected 5G world, virtually everything we use will touch the network. From our phones, to our cars, to our refrigerators, all the devices we use will become storehouses and generators of data. Should Huawei and China win in their bid to dominate this space, they will have and use all that data to their benefit.

Importantly, businesses in China don’t operate like Western businesses. In order to exist, they must fully cooperate with Chinese intelligence officials. If the Communist Party wants to monitor a Chinese company’s server, they do it. There is no warrant and no hearing. The company hands over its intelligence or its leaders go to prison. Consider how much intelligence and power China could gain by syphoning the 5G data collected by Huawei’s potentially global network.

We know China will do this. It already has a massive surveillance data-collection program in its own boundaries. It currently monitors Chinese citizens and assigns each one a social-credit score, which can determine their eligibility to ride public transportation, shop at certain stores, rent property, and participate in other parts of society. This isn’t a score based on their finances or creditworthiness. It’s based on their patriotism, their public statements about the Communist Party, and their daily habits. China has turned big data into a tool of tyranny and authoritarianism. This is why we can’t let Huawei win.

Now, here are the impediments to our success.

The regulatory environment for our spectrum allocation — which was originally built for radio — has led American companies to instead focus entirely on bolstering their own profit margins, protecting their government-granted monopolies, and eliminating competition.

In a company-neutral, wholesale regime, a company that builds a 5G tower or site could sell access to the spectrum within range to multiple companies at a market rate. This would reduce the cost of accessing and using spectrum — and make it financially viable to bring high-speed, low-latency connectivity to even the most remote parts of the country.

One point on which Carr and I agree is that China isn’t simply trying to win the race to cover itself domestically. China is trying to gain global dominance in the 5G zone.

I simply believe that we must change our outdated approach to parceling the spectrum if we are going to win.

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