Government spectrum delays are fueling Chinese dominance in 5G

Government spectrum delays are fueling Chinese dominance in 5G
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The Justice Department has detailed its corporate espionage and other charges against Huawei, the Chinese wireless equipment company. Greater than concerns about Huawei espionage should be whether the Chinese government, through centralized planning, can transform the wireless network equipment industry into one dominated by Huawei.

The United States has unwittingly helped Huawei achieve this global dominance by delaying the reallocation of government spectrum for commercial use, thus reducing competition for 5G services. Such delays in turn benefit Huawei, which is already is capable of serving millions of customers. Huawei is also one of a small number of Chinese technology companies that are spearheading the drive for new wireless technology.

The latest 5G network promises to provide consumers with faster wireless speeds, greater capacity, and lower latency. The Chinese government helped deploy 5G services in China using mostly Huawei 5G network equipment. It provided access to government rights of way and cleared major swaths of spectrum, which is the life blood of wireless services.

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In contrast to the United States, China is far ahead of the rest of the world in the deployment of new 5G networks. The country has paid for hundreds of engineers to travel to standards setting bodies to promote the Huawei 5G standards. China has also subsidized the sale of Huawei 5G network equipment abroad. The wireless carriers in many if not most countries have agreed to purchase Huawei 5G network equipment.

While other foreign manufacturers such as Ericsson of Sweden, Nokia of Finland, and Samsung of South Korea provide competition for 5G network equipment, none of them have reached the scale of production in China. Huawei equipment is now practically banned from deployment in the United States. Based on national security concerns, other countries are reconsidering their own commitments to purchase Huawei equipment.

One of the biggest beneficiaries of current 5G technology is the Chinese government. The greater wireless capacity makes it easier for China to monitor citizens there and elsewhere. Moreover, the Chinese government uses 5G as a planned strategic initiative without competition. Centralized planning to dominate a technology without competition is a novel idea in this industry. The first four generations of wireless services were marked by competition, deregulation, and governments getting out of the way.

But not so for 5G in China. Rather than following the innovative leads of private technology companies, the Chinese government took the lead through centralized planning with a national champion and now enjoys associated benefits in a global economy. Part of the success of China is the inadvertent assistance from the United States such as at the Federal Trade Commission. Similar unintended help to Huawei comes from delays in transferring spectrum from the federal inventory to commercial use.

The federal officials at the National Telecommunications and Information Administration are working hard to reallocate government spectrum to private sector development, but it is a long and arduous process. The mmWave Coalition and other groups have written the agency to complain about the slow pace. The slow transfer of government spectrum delays the deployment of 5G wireless services in the United States to the benefit of Huawei, the company that has implemented the most 5G elsewhere.

The slow growth of 5G in the United States helps China, its top economic rival and the same country that is using centralized planning to establish a dominant position in new technology such as 5G. The federal government should not help one company dominate the market for the development of 5G services, especially not Huawei, which is so closely allied with the Chinese government. The stakes are high. American consumers lose with delays and with government misallocation of spectrum resources, while centralized planning from China abetted by American bureaucracy wins.

Harold Furchtgott Roth is a senior fellow and the director of the Center for the Economics of the Internet at the Hudson Institute. He is an economist who has served as a member of the Federal Communications Commission.