5G Fight With China: Politicization Leads to Suboptimal US Outcome

Journal of Political Risk, Vol. 7, No. 4, April 2019

By Anders Corr

A customer wearing a headset plays a virtual reality (VR) game at a 5G experience hall on April 8, 2019 in Hangzhou, Zhejiang Province of China. Photo: Long Wei/VCG via Getty Images

The Federal Communications Commission (FCC) announced a national 5G auction of large slices (up to 3.4 gigahertz) of the millimeter wave (mmWave) spectrum, along with $20.4 billion in subsidies over 10 years for rural connections, on April 12. The plan ignores expert cyber-security advice, has major security, timing, strategic and financial problems, and will not facilitate new competitors in the telecommunications market. The announcement by President Trump and FCC Chairman Ajit Pai, likely under the influence of telecommunications lobbyists, was a surprise to most experts and took place with no real public input. The auction of the mmWave spectrum is set for December 10. At the press conference announcing the decision, Chairman Pai thanked Director of the National Economic Council Larry Kudlow and Ivanka Trump for their assistance, with Ms. Trump giving a speech in support of the plan.

According to Chairman Pai at the April 12 press conference, “We finished our first 5G spectrum auction in January, and we’re holding a second, right now, that has already generated almost $2 billion in bids.” That isn’t much for a North American telecommunications industry expected to reap $294 billion in 2019 revenues.

The mmWave part of the spectrum, which is the part Chairman Pai plans to chop up for sale, does allow more connections and higher speeds, compared to sub-6 5G, in high-density areas like stadiums and major urban areas. The mmWave will likely be an important part of the 5G future. However, chopping the mmWave up leads to slower 5G speeds in this potentially ultra-fast part of the 5G spectrum. It is also drawing away attention from sub-6 5G, which requires less infrastructure, start-up costs, and has longer ranges. Virtual division of a unified sub-6 spectrum would yield equivalent speeds, up to several gigabytes per second (Gbps), to the current plan of chopping up the mmWave spectrum. The rest of the world is proceeding down the sub-6 5G path as a first step towards 5G speeds, and will likely only get to ultrafast mmWave 5G (over 20 Gbps, if not chopped apart by auctions) in the more distant future. A focus on mmWave 5G today will make U.S. companies globally uncompetitive in the short and long-run. In the short run, they will be slower in providing broad geographic coverage through sub-6 5G. In the long run, they will be unable to provide ultrafast mmWave speeds because they will have already chopped up that part of the spectrum.

The FCC has not advanced a comprehensive plan for 5G, and its hasty auction of three approximately 1.1 Ghz slices of the mmWave to three different companies may constrain future options for ultra-fast mmWave. There are major economies of scale to keeping the 3.4 Ghz total as a single spectrum, which if kept together and divided virtually is faster than spectrum that is divided ex ante. Spectrum sharing, or virtual division, yields faster speeds, given a certain amount of spectrum, than physically divided spectrum as the upcoming FCC auction will require. Virtual division and sale of spectrum is not “nationalization” as its detractors claim, but rather the only way the laws of physics allow us to get the fastest 5G speeds. Virtual spectrum division also has the market-friendly effect of encouraging small businesses and entrepreneurs to innovate and get involved in the 5G competition. Small businesses will be able to afford short-term virtual leases of shared (and therefore ultrafast) 5G spectrum, but will be unable to afford bidding for chunks of a physically chopped up (and therefore slower) 5G spectrum.  

Dividing up and concentrating on the mmWave has major strategic and practical weaknesses that could undercut U.S. national security. It addition to stifling American competition and innovation by pricing out small business and entrepreneurs, it will distract large American telecommunications companies, like AT&T and Verizon, from the international competition for sub-6 5G, which is longer-range and therefore cheaper from an infrastructure perspective. Telecommunications is also known as telecom or telco.

Chinese telecom companies like Huawei and ZTE, which are planning to first supply sub-6 5G services globally, before they enter the more rarefied mmWave space, have adopted the more competitive sequencing strategy. Most global cities will want the cheaper sub-6 5G, which is still blazing fast at several Gbps, before they proceed to the benefits of higher-cost ultra-fast mmWave spectrum at over 20 Gbps.

Lastly, an American focus on mmWave 5G will leave U.S. rural customers without effective 5G speeds for upcoming innovations in smart agriculture, like utilization of networked drones. The U.S. plan to provide rural subsidies of $20.4 billion over 10 years is woefully insufficient to bridge the infrastructure gap, which would require hundreds of billions of dollars to get mmWave 5G to all rural Americans. As 5G requires base stations every 200 meters in urban areas, and can only be marginally more spaced out in rural areas, rural mmWave 5G will probably never happen. Utilizing the sub-6 spectrum for 5G would require far fewer base stations, at one every few miles.

What then explains this lack of a coherent 5G strategy on the part of President Trump and the FCC? I would argue that they are influenced by the major telecom companies, like Verizon and AT&T, which are seeking an mmWave spectrum giveaway well in advance of demand for such spectrum. Auctioning the mmWave now, when only a few large companies could possibly bid, will drive bids to rock bottom prices. That is essentially giving away this valuable commodity, currently in the hands of taxpayers, without most citizens even realizing what they are losing. This may make sense in order to get telecom support for President Trump in the short-term, but in the long-term it comes at the expense of taxpayers and small telecom companies trying to get into the market but barred by large and unnecessary investments in mmWave infrastructure and spectrum auctions. As such, it rewards countries with more coherent strategies, most importantly China, who will win the global 5G race and as a result have access to all future information flows over global 5G networks. The power that such a future data windfall will give to China cannot be understated.

The optimal U.S. 5G strategy is to first clear and unify as much sub-6 spectrum as possible. Second, virtually lease bandwidth on this spectrum to large and small telcos, providing average consumers and companies with several Gbps speeds. And third, virtually lease a unified mmWave spectrum for special use, such as in high density urban areas, and for ultra-fast requirements of over 20 Gbps.

Use of current infrastructure for sub-6 spectrum, and shorter term leases of that spectrum, would better allow large telcos to deploy their scarce capital for sub-6 network infrastructure and devices, and facilitate entrepreneurs and small businesses in the telecom space, ultimately creating a quicker and smoother transition to 5G speeds of several Gbps, and more small business competition that would increase innovation and lower costs for American consumers. Shorter-term leases would also get top dollar for use of both sub-6 and mmWave spectrum, which would contribute to taxpayer relief, paying down the national debt, and social and defense expenditures. A quick (over 3 years) international success in the sub-6 5G space would springboard U.S. telcos into the mmWave, which can be achieved in parallel where necessary.

Security Risks of a Divided 5G

According to Air Force Brigadier General Robert Spalding, who authored a 2018 report on 5G for the U.S. government during his time as a strategist for the National Security Council, “I think there are two problems with the FCC’s announcement. 1) it’s mmWave and thus will take years to build out because of the density required. 2) It’s not secure. We are going to bring countries like China even deeper into our lives because we cannot stop them with the current way we build networks.”

There are increased cyber security risks with multiple companies handling their own slices of mmWave spectrum at 5G speeds. The mmWave also requires more base stations than sub-6 5G, which allows more access points that malign actors can exploit. More companies and more base stations mean an exponentially greater number of entry points.

This is an increasingly serious issue with 5G, which will expand and revolutionize the Internet of Things (IoT). According to General Spalding, “I fully expect weaponized IoT.” Without a secure 5G network, China and Russia could, in worst case scenarios, take control of 5G-enabled autonomous vehicles or planes, for example, and crash them into U.S. targets.

Cybersecurity expert David Schroeder, an information technology strategist at the University of Wisconsin-Madison, confirmed the security benefits of a unified 5G block of spectrum. According to Schroeder, “A single ‘domain’, so to speak, whether wireless spectrum or any other kind of network or medium, is always going to be easier to provision, manage, and secure than many disparate networks with different ownership/administrative structures and management regimes.” Schroeder said that is one advantage to a Unified 5G, “in no small part because of how pervasive it is likely to be.” He said, “It doesn’t change the way the network in question fundamentally transports the 1s and 0s of information, but it dramatically changes how it is managed, effectively centralizing control at a single higher level. Lesser levels of control would be delegated to the operators.”

In a Unified approach to 5G, “All of the available capacity could be managed and shared — and protected — holistically, instead of having thousands of disparate entities responsible for security controls, network defense, configuration, and so on,” wrote Schroeder in an email.

The Spalding Plan for Unified 5G

“I don’t believe auctions are the best way to allocate spectrum. After spending billions in spectrum there’s no money to build. It’s better to give the licenses and then require the build out to certain standards in a specified time. Revenue on the spectrum used should then be charged a fee by the government,” wrote General Spalding, who also has a Ph.D. in economics. “I think leases should be tied to certain performance parameters like speed and security and geographic territory covered.”

Recent reports written for the U.S. Government by General Spalding in 2018 and the Defense Innovation Board in 2019 call not for an mmWave 5G, but rather for a large amount of sub-6 spectrum that will also deliver several Gbps to the entire country with minimal new infrastructure. This can be done within 3 years according to General Spalding. Sub-6 spectrum is where the rest of the world is going for 5G,  and where China is leading. For the U.S. to compete globally on sub-6 5G, the U.S. government needs to support our telcos, including smaller businesses and entrepreneurs, to focus on this sub-6 5G world.

That government support to small and large telcos in sub-6 5G has been mischaracterized as “nationalization” by its detractors, which is a red herring. Whether the mmWave spectrum is auctioned by the government to the big players today, or short-term leased to the small and big players over time, both include government involvement. The difference is that big auctions today play to the advantage of large telcos who have the greatest capital now, while more flexible virtual leasing for shorter time periods allows easier access to new business entrants. The latter approach is mischaracterized as nationalization by big telecom lobbyists who want to keep out new competitors.

U.S. telcos are not unique in wanting to keep out competitors. Canadian telcos also sought to keep out new entrants after laws were passed on spectrum sharing in 2015 and 2016. The telcos followed the laws, but limited speeds to 100 Mbps for smaller companies and cost-prohibitively required small companies to each install up to 1,000 fiber access connection points.

Creating a sub-6 5G that is several Gbps for the U.S. as a whole within 3 years gives all U.S. companies, large and small, a globally competitive edge. If we do this in sequence, the U.S. can beat China’s Huawei in both sub-6 5G and mmWave 5G application to dense urban areas and wherever ultrafast 5G of over 20 Gbps is required. If not, China will use its sub-6 5G advantage to beat us in the mmWave globally. Large U.S. telcos may have won the battle against small competitors at home, but at the cost of losing the global war for both sub-6 and mmWave 5G.

The U.S. National Security Strategy of December 2017 has a single potent sentence on the next generation internet: “We will improve America’s digital infrastructure by deploying a secure 5G Internet capability nationwide.” The sentence is preceded by a sentence that implies that 5G provision will be a public-private partnership between government and industry. It is followed by a sentence that suggests that 5G will improve national competitiveness and our quality of life. 5G mobile data speeds of over 1 Gbps will facilitate technologies like driverless cars and aircraft, remote surgery, the Massive Internet of Things (MIoT), enhanced networked combat, and artificial intelligence.

President Trump has indicated support of a powerful American 5G. In a series of tweets on 21 February 2019, he said that, “I want 5G, and even 6G, technology in the United States as soon as possible. It is far more powerful, faster, and smarter than the current standard. American companies must step up their efforts, or get left behind. There is no reason that we should be lagging behind on something that is so obviously the future. I want the United States to win through competition, not by blocking out currently more advanced technologies. We must always be the leader in everything we do, especially when it comes to the very exciting world of technology.”

A major proposal was put forward to implement 5G by General Spalding, in his former role as senior director for Strategic Planning on the National Security Council. Details of the proposal were leaked in January 2018 and published by Axios. The plan includes a secure and ultra-fast 5G network that could be implemented on a nationwide scale, including in rural areas, within 3 years. Spalding’s 5G, which can also be called “Unified 5G”, would be “faster than anyone is currently predicting”, according to Spalding. He predicts that through a robust public-private partnership, it could be fully implemented within three years. Urban areas would reach full 5G capabilities within a year.

According to Spalding’s NSC proposal, “Whoever leads in technology and market share for 5G deployment will have a tremendous advantage towards ushering in the Massive Internet of Things, machine learning, artificial intelligence, and thus the commanding heights of the information domain.” The NSC plan, which utilizes sub-6 spectrum for the broadest coverage with the least new infrastructure costs, would enable internet speeds of up to several Gbps (100x current speeds), extraordinary and global leadership and innovation in the tech space, and 3% GDP growth.

Unified 5G would also be more secure. “This network would not only encrypt data, but monitor devices in [] case they were compromised in order to prevent the widespread data theft we currently experience,” wrote Spalding in an email. According to the plan, Unified 5G could be made resilient from physical attack or natural disasters, would counter China’s One Belt One Road (OBOR) program in the information domain, and provide the military with seamless command and control in case of necessity.

In multiple communications with Spalding, he indicated that the optimal approach to speed and security in 5G would be a single large block of spectrum hosted on a single new infrastructure. According to Spalding, this would be “a single physical network with as much spectrum [as] the FCC can clear.”  Costs, including of the esthetic variety, could be decreased as only a single new 5G physical infrastructure would be shared. There would be no need for each company to have its own infrastructure. Use of sub-6 spectrum rather than mmWave spectrum would decrease the number of new physical 5G sub stations, typically planned for utility poles.

The speed and cost benefits of a single large block of spectrum, as opposed to dividing the spectrum up, were confirmed by the Defense Innovation Board in their April 2019 report, which stated that “5G functions most optimally on large amounts of consecutive bandwidth”.

Spalding’s plan is entirely consistent with market principles. Private industry would compete to install the new network and individual telcos like AT&T and Verizon would sell access to individual users, as currently. The network operator would lease wholesale access to these telcos, as well as to new market entrants, including small businesses and 5G entrepreneurs.

A single-block or Unified 5G has the advantage of the fastest speeds. According to the NSC plan, “For example, in the 3.7 to 4.2 GHz frequency range there is 500 MHz of spectrum available… if all or most of this spectrum is used as a single block, then the peak and average speeds achieved on such a network … would be in the several Gbps range, while in the multi block scenario it would [only] be in the several hundred Mbps range.”

Utilization of a single 3.4 Ghz block of mmWave could achieve even higher speeds than sub-6 spectrum, of over 20 Gbps in urban areas if supplied with enough towers and bandwidth at the right range. The increased performance and bandwidth of the mmWave, likely only achievable after implementation of sub-6 5G, will be in the portion of spectrum above 24 GHz. “These [high band] frequency ranges are less busy and can provide both chunks of continuous spectrum and greater bandwidths for speeds over 20 Gbps,” according to Schroeder. That would not be achievable in rural areas.

The plan promoted by Spalding and the Defense Innovation Board is for the sub-6 Ghz part of the spectrum, which he says “gives the best combination of capacity (speed) and coverage (geography).” That would result in several Gbps speeds, which are unlikely if telcos divide the available spectrum. Those speeds in sub-6 would be possible if the telcos virtually lease bandwidth access to a single unified section of the spectrum.

Spalding’s unified  plan has the market-friendly aspect of making new entrance to the telecom industry easier, as the infinitely divisible 5G bandwidth could be auctioned or rented to as many companies and entrepreneurs as had an interest and could compete at market rates. This would be good for economic growth, consumers, and innovation, but could impinge on the market share of large existing telcos.

According to Spalding, a single-block sub-6 5G network could cost as little as $20-30 billion. Existing carriers would be accomodated, as they would share the single 5G network, which “allows for infinite virtual network operators on the same physical network”.

The Defense Innovation Board argues that the US 5G industry requires subsidies and protection, including in the form of tariffs, from cheap and high quality Chinese 5G equipment. “DoD should encourage other government agencies to incentivize industry to adopt a common 5G network for sub-6 deployment. Incentives can include: accelerated depreciation, tax incentives, low interest loans and government purchase of equipment and services.”

Telecom Lobbyists, Campaign Donations, and the Revolving Door

What explains the disconnect between U.S. national interests and U.S. policy on 5G? The telecom industry likely influences Federal officials who seek campaign donations, other individual benefits, or payback for past favors. In 2018, the telecom industry spent $93 million on lobbying. Comcast Corporation spent $15.1 million, the National Cable and Telecommunications Association (NCTA) spent $13.2 million, the Cellular Telecommunications Industry Association (CTIA) spent $11.4 million, Charter Communications spent $9.4 million, Deutsche Telecom spent $8.1 million, and ZTE spent $3.8 million. Between 1989 and 2017, U.S. congressional representatives and their leadership political action committees (PACs) got $19.8 million in donations from AT&T, $14.9 million from Comcast, and $11.2 million from Verizon. According to registration documents required of lobbyists, CTIA and NCTA have been lobbying since at least 2005 and 2007 respectively.

The telecom industry is powerful, and seeks to increase its profitability by litigating and influencing politicians, officials, and regulators on a host of issues. It has a long history of lobbying that led to sub-optimal outcomes for consumers. Leading up to and following the Telecommunications Act of 1996, the incumbent telecom industry resisted, through lobbying and litigation,  measures like local loop unbundling that were meant to increase competition for internet access markets in the retail space. The established telecom industry resisted through lobbying and litigation the attempt by new entrants like Vonage to provide cheaper international calls through voice over internet protocol (VoIP) after its widespread introduction in the early 2000s. VoIP has at times been banned or severely restricted in Belize, Brazil, the Caribbean region, China, Cuba, Egypt, Iran, Jordan, Mexico, Pakistan, South Korea, Kuwait, UAE, Oman, Morocco, Paraguay, Jordan, Israel, and Qatar. Competition between two types of 2G telecommunications, CDMA and GSM, ended in successful lobbying by operators for the more expensive of the two. GSM resulted in high roaming revenues and an attractive, for industry, business model for pre-paid plans.

In March 2017 the telecom lobby overturned a national-level bill to protect consumer privacy from ISPs that can now sell customer data and browsing histories to advertisers. That privacy fight in 2018 moved to state legislatures, where telecom lobbyists stalled 70 similar privacy bills. The telecom industry has also lobbied against cyber-security regulations. Experts like Bruce Schneier have argued that regulations are needed to correct cyber-security market failures that risk vulnerabilities to technologies like botnets that could take down the entire global internet. India’s telecom lobby in November tried to shut down the Bollywood action movie “2.0”, which depicts cellphones negatively. In California’s 2018 net neutrality controversy, advocacy groups with financial links to AT&T and Verizon funded robocalls that appeared to target seniors with misinformation.

Telecom’s lobbying power and questionable methods against privacy, cyber-security regulations, net neutrality, and even free speech in India are now likely being used to convince the U.S. government, against expert recommendations, to prioritize mmWave 5G.

AT&T donated $7.9 million to U.S. campaigns in the 2018 election cycle, and spent $18.5 million on lobbying. Verizon donated $2.9 million to campaigns during the same period, and spent $12.1 million on lobbying. The NCTA PAC spent $1.4 million on Federal candidates in the 2018 cycle. The CTIA PAC spent $371,000 on federal candidates in the 2018 cycle.

There is a revolving door between government and industry that likely leads relatively low-paid government officials to seek to please relatively high-paid industry executives. Doing so can lead to lucrative jobs in the private sector after officials leave office, and can be a way of rewarding industry for campaign donations. Current FCC Chairman Ajit Pai (2017-, Republican) worked for Verizon between 2001 and 2003. FCC Chairman Tom Wheeler (Democrat, 2013-17) was previously a lobbyist for the wireless industry as President of NCTA and CEO of CTIA. FCC Chairman Julius Genachowski (Democrat, 2009-13) previously worked for IAC/InterActiveCorp in the mass media and internet space, and afterwards worked for Carlyle Group in the U.S. buyout team of the Global Telecommunications, Media and Technology group.

NATE Chairman Jimmy Miller said at President Trump’s auction announcement, “Mr. President, Chairman Pai, on behalf of the National Association of Tower Erectors, our 900-member companies, we build, deploy, and maintain the wireless infrastructure of this nation. And you all are fixing to put us to work, and we appreciate it.” This was followed by laughter and applause from the room. NATE spent 7.6% of its membership dues on lobbying in 2018 (approximately $150,000). They got a lot of bang for their buck, and were likely put on the President’s stage to symbolize the jobs that would supposedly be fostered by the mmWave auction.

But the real winners from the auction in the short term are AT&T, Verizon, and other major telecom companies that will likely buy spectrum cheaply and keep out the competition. The long-term winners will be China’s leading telcos, Huawei and ZTE, which will be cleaning up the biggest global markets for sub-6 5G with little American competition. ZTE hired former Democratic Senator and Vice Presidential candidate Joseph Lieberman as a lobbyist in January, and Huawei hired Samir Jain, President Obama’s  National Security Council senior director for cybersecurity policy, as a lobbyist in March.

Telcos did not take the threat from Spalding’s unified 5G plan, to their special interests and market share, lying down. Lobbyists and telecom promoters in Washington reacted against the plan, calling it “nationalization” of the internet. They did not publicly argue against the technical merits of the plan as promoted by Spalding. But the scare tactics were heavy-handed, including a farcical comparison of the NSC plan to Venezuela. Spalding was removed from his position, and he told me over email that the plan “wasn’t rejected in so much as the issue itself was not taken up.” He said, “I was told that the telecom industry found out about the study and worked to have it squashed.” Spalding said in an email that,

I was told subsequently by a telecom veteran in the industry that they had never seen the industry come together so quickly to defend their turf. I was told on a Wednesday I would be leaving the NSC. That Friday the report was leaked with the statement that “this was a dumb idea and we are getting rid of Spalding.” On the following Friday, the same week I left the NSC Josh Rogin of the Washington Post wrote an article saying that the WH [White House] said I had gotten out in front of policy decisions. That said, the briefing and report were never intended as policy,  but rather a strategy that could be implemented and a call to arms. I only briefed government officials, so it was clear this had been leaked by government insiders to the telecom lobby.”

After his Secure 5G proposal was not taken up, Spalding left the NSC to the Hudson Institute, where he is now a senior fellow. Spalding wrote in an email that President Trump never saw the single-block 5G proposal. “They buried it,” he said.

China’s Threat to Unified 5G

Since General Spalding was removed from the NSC, there has been no viable plan or demonstration of a 5G network of greater than 1 Gbps speeds. If nothing is done to encourage a U.S. lead in the 5G space, we are most likely to get continued balkanization of US spectrum in the future, resulting in low security and slow speeds in U.S. mobile telecommunications for the next 7-10 years, according to the NSC plan. The US is also likely to yield the global 5G lead to China’s Huawei, which has the advantage of the Chinese government’s protection and credit line. According to the NSC, Huawei has a $100 billion line of government credit for work abroad, and the Chinese government has reserved 70% of China’s market for Huawei. The company has also been implicated bribery, including “suspected payments to local officials”, according to the NSC presentation.

Huawei will promote their own vision of 5G in the power vacuum provided by US inaction. That lead will give Huawei easy access to all the data that then flows over their 5G network, and increased capabilities in artificial intelligence, economic espionage, and potential weaponization of the internet of things. Without a Unified 5G solution in the US, according to the leaked NSC presentation, “China would win, politically, economically, militarily.”

Supporters of Unified 5G

Members of the Trump 2020 campaign briefly and publicly supported Spalding’s 5G plan, including campaign manager Brad Parscale, advisor Newt Gingrich and press secretary Kayleigh McEnany. That makes sense, as unified sub-6 5G will appeal to a broad spectrum of US voters, including those who value more jobs and an economy likely to grow at 3% from the introduction and follow-on effects of next-generation internet. The introduction of 4G reportedly grew the US economy by $100 billion. Rural voters are likely to welcome the idea too, as they are not currently well served by industry high-speed internet. Their geographic dispersion makes coverage too costly.

When controversy erupted over the unified sub-6 5G proposal in January 2018, White House spokesperson Sarah Huckabee Sanders arguably supported a central element of the idea when she said, “there’s been absolutely no decision made other than … the need for a secure network.”

US allies would also benefit from unified sub-6 5G according to the NSC presentation, which stated that Japan was “all in”.

Rivada Networks, a wireless company backed by venture capitalist and Trump ally Peter Thiel, is also encouraging the concept. That company wants to take Defense Department wireless spectrum and market it to users on a rolling wholesale basis. Republican strategist Karl Rove advises Rivada Networks and is developing an informal network to advocate the Rivada project. Former governors Jeb Bush and Martin O’Malley serve on the board. Rivada sought meetings with Michael Kratsios, who previously worked for Thiel and is now deputy assistant to the president for technology policy. Kratsios reportedly declined the meetings.

Spalding, however, has said that any proposal to auction off Defense Department spectrum is likely to be met with resistance from the Pentagon. There is no real need to do this when existing commercial spectrum is sufficient for sub-6 5G purposes, if utilized in a single block.

Opponents of Unified 5G

The lobby against Spalding’s 5G plan is powerful. Director of the National Economic Council Larry Kudlow, and all commissioners of the FCC, voiced their opposition to Spalding’s plan in February. The Trump administration held a conference on 5G after quashing his proposal to calm the telecom industry down, where Kudlow said, “the White House is officially behind this free-enterprise, free-market approach.” This was misleading as the Unified 5G proposal is arguably closer to free market principles by removing barriers to entry for new companies. Opponents of the plan tarred it with the idea of “nationalization”.

The Defense Innovation Board has criticized the Department of Defense and the Federal Communications Commission for not making US 5G globally competitive by using the sub-6 spectrum. “Both DoD and the FCC are currently prioritizing mmWave over sub-6 mid-band spectrum with a particular focus on the 28 and 37 GHz bands, but this is a fundamentally flawed focus due to the impracticality of mmWave deployment. DoD must prepare to operate in a sub-6 5G ecosystem, which will require a shift in strategy and a consideration of where DoD is willing to share bandwidth in the sub-6 realm.”

Use of the mmWave and currently divided telecom slices of sub-6 spectrum was politically easiest, but yields a suboptimal outcome.

According to Schroeder, “I believe the industry was startled at the prospect of nationalizing a 5G network instead of the existing spectrum auction model, which certainly gives owners control and advantage with their spectrum allocations. When you look at the 4G and legacy wireless space, there is incredible scarcity in those frequencies, and the management of the spectrum and networks is all over the place. The spectrum is dominated by the major wireless operators and some regional carriers. The smaller ‘carriers’ aren’t really carriers at all; they’re what are called Mobile Virtual Network Operators (MVNOs), which rent bulk network access from the large carriers and operate on their networks and infrastructure. But there’s still a cost here, and consumers only save with MVNOs because of no-frills service. In the nationalized 5G model, everyone essentially becomes a ‘virtual network operator’ of sorts, but instead of competing for spectrum or buying access at rates set by the spectrum owners, you would have a single rate system where network services are available to any operator who can pay for the amount of services needed, which certainly makes it easier for innovators and startups to get access.”

Opponents of Unified 5G tarred the plan with not only the “nationalization” concept, but with allusions to chaos created by authoritarian regimes. Representative Greg Walden (R-Ore.), chairman of the House Energy & Commerce Committee, said, “We’re not Venezuela, we don’t need to have the government run everything as the only choice.” This was misleading, as Spalding’s proposal was to allow private telecom companies to continue to compete for and serve individual consumers.

Spalding clarified that all five of the FCC leadership team were against the Unified 5G proposal. These include Chairman Ajit Pai, and commissioners Michael O’Rielly, Brendan Carr, Jessica Rosenworcel, and Geoffrey Starks. Chairman Pai called Spalding’s 5G proposal “a costly and counterproductive distraction”. O’Rielly called it “nonsensical” and Carr called it a “non-starter”. None of them offered a technical rebuttal to Spalding’s claim.

Kudlow and the FCC commissioners likely followed the lead of CTIA, which is an association that represents Verizon, AT&T, and other large wireless providers. In a February 22 blog post, CTIA Executive Vice President Brad Gillen commended Kudlow and the FCC, downplayed the global competition for 5G, and larded his prose with free market buzz words. “Instead of trying to ‘out-China, China’, as some proponents of a nationalized ‘wholesale’ network monopoly suggested, we reaffirmed our faith in that most American of principles – competition in a free and open market,” Gillen wrote. “Today, the global race to 5G has taken a back seat to the race here at home as America’s competitive wireless carriers strive to one-up each other. They’re pouring money into building these networks as fast as they can. In fact, Accenture estimates that, taken together, the industry will invest $275 billion and create 3 million new jobs as each carrier tries to out-build, out-market and out-perform the other.”

That cost estimate of $275 billion, likely for three separate mmWave 5G networks, is more than nine times the expense that Spalding estimated for a single sub-6 5G network that would have been more secure and equally fast for consumers and government alike. Gillen did not address the lack of competition that his approach would cause due to higher barriers to entry for new telecom companies and entrepreneurs. CTIA did not respond to multiple inquiries for comment.

One former Republican FCC commissioner, Robert McDowell, chimed in against Spalding’s 5G proposal in his current role as policy adviser to wireless group Mobile Future. “Every single Republican thinks it’s a supremely bad idea to have a taxpayer-owned and -run 5G network,” he said.

Some Democrats also took a position against Spalding’s unified sub-6 5G. Brett Bruen, former director of global engagement for the National Security Council under President Obama, said “There are some legitimate security concerns, but this is not in the best interest of taxpayers.” Mark Warner (D-Va) was against it as well, along with Democratic FCC commissioner Jessica Rosenworcel.

It appears likely that someone in government leaked the NSC report in order to discredit General Spalding and his plan. According to Spalding, “The version of the report leaked to [A]xios was never shared with industry. Nor was the PowerPoint briefing. I only shared the portion of the report that dealt with the wireless design recommendations to solicit feedback, and to ensure I had their recommendations to me correct.” He wrote in an email, “There is a narrative that I had shared the report and briefing with industry and that is why it was leaked. Not true, because I know who received the version that is out there and it was only internal to government.”

Telecom’s Fake 5G

The telecom industry has bent over backwards to make it appear that they are already making great strides towards implementing a 5G world. A CTIA blog post by Tom Sawanobori, CTIA’s Chief Technology Officer, claims as a headline, “2019: The 5G Era Has Arrived”. He lists and provides links to supposed 5G demonstrations in 2018 by AT&T, Verizon, US Cellular, Ericsson, Motorola, Samsung, Qualcomm, Nokia, T-Mobile, and Intel. 2018 was a “banner year” for the industry, according to Mr. Sawanobori.

But the industry version of 5G, according to Spalding, is not actually 5G. “None of the carriers are truly building 5G networks,” he wrote. I checked and found that true enough, the telecom industry is claiming to make huge strides in 5G, but there is little demonstration of high-speed transmissions at greater than 1 Gbps, much less the several Gbps that might be expected from Spalding’s plan.

None of the links provided by CTIA’s Sawanobori to supposed 5G demonstrations had information on the internet speeds so achieved. 5G is above all about data transmission speeds, but hard information on transmission speeds of any sort, much less >1 Gbps (Cisco’s definition of 5G) or >20 Gbps (the International Telecommunication Union draft standard) was missing from the linked articles for each and every one of the demonstrations in 2018.

Mr. Sawanobori did not respond to a request for comment.

Spalding calls this false advertising. It is not true 5G, and so should not be labeled as a demonstration of 5G. Spalding explained the lack of speed in the 2018 demonstrations as a result of capital scarcity. “They don’t have the money right now – too much debt. Instead they are focused on buying entertainment content.” He wrote, “and only Sprint has the necessary spectrum for a nationwide network. Furthermore, if you build 4 nationwide networks that’s 4 times the expense, or $120 billion.”

The Defense Innovation Board confirmed that the U.S. telecom industry may be too burdened with debt for the capital expenditures (capex) required for the expensive infrastructure required by an mmWave 5G network. “There is the risk that these carriers will not even be able to commit the necessary capex to scale [beyond urban areas] those mmWave networks, given the large number of base stations required. At the end of 2018, Verizon held ~$120B in debt with ~4% dividend yields, while AT&T held ~$175B in debt with over 6% dividend yields,” according to its report. “T-Mobile holds ~$25B in debt, and Sprint holds ~$40B in debt. These companies are at the forefront of the U.S. effort to develop 5G, but their balance sheets suggest that they may struggle with the cost of a full mmWave network roll-out and the infrastructure it would require.”

4G spectrum is currently split among the top telecom carriers, which if transferred to 5G, will yield much slower speeds than a single block of spectrum virtually shared. According to the NSC proposal, “the framework under which access and services are [currently] allocated is suboptimal, yielding incomplete and redundant competing networks. Without a concerted effort to reframe and reimagine the information space, America will continue on the same trajectory — chasing cyber adversaries in an information environment where security is a scarcity.”

Unified 5G is the Best Option for the Free Market

Until the Defense Innovation Board report was published in April, Newt Gingrich had written one of the most technical reactions to Spalding’s proposal, in a Newsweek op-ed on February 22. That says something about how there was virtually no public discussion of the proposal on its technical merits. Rather, the proposal was politicized and spun as “nationalization” in order to discredit it and General Spalding.

Gingrich called out those who argued against the proposal using free market buzz words, saying, “Our own laissez-faire tendencies and preferences are being used to defeat us.” He charged the telecom industry with the same argument found in President Trump’s tweet, that the industry was being left behind. Gingrich said that, “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.”

Gingrich generally supported Spalding’s vision of a public-private partnership to build a nationwide network with shared spectrum on a carrier-neutral and wholesale-only basis. Gingrich mirrored Spalding’s argument that the 5G network would take 2-3 years for full rollout, and would spur microelectronics manufacturing in the US, accelerate deployment of 6G networks, and show the world a US technological win against China.

The network would be open access (not limited to a few companies), allowing entrepreneurial, new and existing industry players to “get in the game.” According to Gingrich, the open access nature of the network would increase utilization, expand “the economically viable edge of the network,” and avoid oligopoly by allowing price competition between providers. “This will increase return on new investment and accelerate investment in American 5G.”

Gingrich argues that the project should be nationwide, “with broad geographic coverage—in contrast to current operators’ plans for targeted, urban-specific 5G rollouts, which leave rural America in a 3G or 4G world.” The nationwide network will increase innovation in every part of US industry, he argues, including for example through precision agriculture, telemedicine, and vehicular telemetry.

As Spalding and the Defense Innovation Board argued, a secure and fast American 5G will require the leadership of government to free up sub-6 spectrum, protect the telecom industry at home, and subsidize 5G to effectively compete with China abroad. China is protecting and subsidizing its 5G industry, including Huawei and ZTE, so the U.S. doing the same just levels the playing field.

But we shouldn’t leave the 5G game to chance. China is not a friend or a competitor in the 5G space, it is an enemy that cheats, building insecure backdoors into its devices and bribing heads of state globally to adopt Chinese technology. If China wins, it will use its 5G advantage to vacuum up data, stealing yet more technology from the world. It will threaten the ability of the U.S. and allied militaries to operate 5G technologies, including hypersonics and artificial intelligence, abroad. Those are the military technologies of the future, so an inability to use them will mean ceding territory and influence to China. The fight over 5G dominance today, will determine who leads the international system tomorrow.

Anders Corr has a Ph.D. in Government (Harvard University, 2008) and a B.A./M.A. from Yale University in Political Science (Summa cum laude, 2001). He has five years of experience in military intelligence, including in nuclear and cyber-security issues, at USPACOM, and in Afghanistan. JPR status: working paper. Updated on 23 April 2019.