Home The Washington Diplomat February 2020 U.S. Hammers Huawei, But Struggles to Catch Up to China in ‘Race’ to Dominate 5G

U.S. Hammers Huawei, But Struggles to Catch Up to China in ‘Race’ to Dominate 5G

U.S. Hammers Huawei, But Struggles to Catch Up to China in ‘Race’ to Dominate 5G

5G will be the fastest internet speed achieved to date, delivering data such as video content up to 100 times faster than any technology available today and enabling wireless devices to communicate with each other instantaneously. This fifth generation of wireless networks is set to revolutionize our daily lives — and the world as we know it — so the development and deployment of 5G has become a hotly contested geopolitical race.

The low “latency,” or lag time, of 5G will boost burgeoning industries such as the “internet of things,” artificial intelligence and virtual reality. It will allow autonomous vehicles to traverse roads more safely, enable a surgeon to perform life-saving work remotely, transform factories through improved automation and even help build entire smart cities.

a3.5G.huawei.expo.berlin.story“The advent of 5G could contribute trillions to the world economy over the next couple of decades, setting the stage for new advances in productivity and innovation,” according to a Nov. 7, 2019, report by the Center for a New American Security (CNAS).

The darker side of 5G are the security and privacy concerns it poses, potentially leaving governments, militaries, businesses and individuals exposed to spying and hacking.

So whoever controls 5G’s super-fast connectivity — and the information that flows from it — will inevitably become a dominant global power for decades to come.

But the U.S. — and much of the West — lag behind China in building the network infrastructure necessary to implement the next stage of internet speed.

While the U.S. has been at the forefront of technological innovation for decades, from the space race to the advent of the internet, it stands to lose its tech supremacy to China — much like it lost its manufacturing edge to China years ago.

Unlike China, which has mobilized a massive, whole-of-government effort to invest in 5G technology — to the tune of $400 billion over five years — the U.S. lacks any such nationwide campaign. Instead, the U.S. is largely relying on the four major wireless carriers — AT&T, Verizon, Sprint and T-Mobile — to build the infrastructure necessary to deploy 5G service, as well as the private sector to develop 5G technology.

America’s Spotty 5G Record

Reed Hundt, former chairman of the Federal Communications Commission, recently told CNBC that catching up to China in deploying 5G technology is a “national imperative.”

Hundt, who chaired the FCC from 1993 to 1997, suggested that the agency should cut red tape and free up additional 5G spectrum that wireless companies need to purchase so they build out their networks. He also said federal lawsuits are preventing larger U.S. telecom companies from establishing a nationwide 5G broadband network, arguing that the potential merger of T-Mobile and Sprint, currently held up by a federal trial brought on by 14 state attorneys general, should be approved.

The Department of Justice and the FCC approved the merger, but some state leaders are concerned that another merger in the telecom industry could severely reduce consumers’ service options. On the other hand, a bigger company with such a large service area could have better capacity to implement the upgrades needed to reach 5G speed.

U.S. cities pose another hurdle for wireless companies, which must negotiate with municipalities “for permission to install antennas on buildings, street lights, lamp posts and bus shelters,” wrote Mike Allen in a December 2018 report for Axios.

To make this patchwork of laws more consistent, the FCC voted to limit how much local governments can charge wireless carriers to attach small radios to utility poles that are used to deploy 5G service. But local officials, who are likely to challenge the FCC rule in court, have complained that the federal government is trying to apply a one-size-fits-all approach that will weaken their power to negotiate with the big carriers.

Meanwhile, the FCC is pursuing what it calls a “5G FAST Plan” that, among other things, would auction off more high-band 5G spectrum and invest billions in expanding high-speed wireless service to rural areas. Rep. Rob Wittman (R-Va.) praised the FCC’s “focus on ensuring rural connectivity,” he wrote in a recent tweet. “We must focus on narrowing the digital divide that hinders rural communities and win the race to 5G with China.”

But China appears to be leading that race, launching its 5G commercial service plans ahead of schedule in November 2019. Besides China, South Korea is now the only other country to have a nationwide rollout of 5G. In the U.S., 5G service is only available in a few select cities.

Experts say that China has an inherent advantage over other countries because its government can devote massive state resources to support industry in developing 5G on a large scale.

“The Chinese government has been actively mobilizing to contest global leadership in 5G … while the U.S. government has only recently started to concentrate on 5G,” wrote Elsa B. Kania in the CNAS report, which noted that, among other things, the Chinese government has invested heavily in building 5G infrastructure such as fiber optic networks; reallocated spectrum to prepare for widespread 5G deployment; and directed universities, companies and the military to spearhead 5G research and development.

a3.5G.shanghai.commercial.story“There are [no] comparable efforts in the United States,” Kania wrote. “As a rising power, China has prioritized efforts to challenge American leadership in innovation. If successful in realizing its 5G ambitions, China could be poised to reshape the international technological ecosystem and capture major strategic dividends that will enhance its global power and influence.”

This was likely the reasoning behind a plan floated in the first year of the Trump presidency to nationalize a portion of the country’s mobile network to better compete against China. According to documents obtained by Axios in early 2018, the administration debated whether the U.S. government should pay for and build a single, centralized network — “which would be an unprecedented nationalization of a historically private infrastructure.”

The plan, widely seen as unrealistic, was quickly shelved after it was leaked and drew pushback from the wireless industry, which is already investing heavily in 5G.

In April 2019, President Trump dismissed the notion that the government would nationalize its 5G network, instead calling on private industry to lead the way.

Yet the original impetus behind the White House’s idea — to counter a rising China — is still an urgent priority. So the administration has shifted gears, launching a global campaign to prevent China from deploying the telecommunications equipment that will lay the groundwork for 5G.

Trump’s Hard Line on Huawei

Despite the pressure to implement 5G as quickly as possible, the U.S. and its allies are wary of partnering with one of the world’s best-positioned companies to build the infrastructure that underpins 5G: China’s Huawei.

Over the last year, the Trump administration has zeroed in on the Chinese telecom equipment giant as a national security threat, arguing that it could serve as a Trojan horse for Beijing to monitor and spy on communications not only in the U.S., but around the world.

Those fears stem from Huawei’s alleged links to the Chinese Communist Party and its intelligence apparatus. Huawei’s founder and CEO, Ren Zhengfei, joined the People’s Liberation Army’s research institute after college as a military technologist and later founded Huawei in 1987. The tiny startup has since gone on to become the world’s biggest seller of telecommunications equipment — a feat some in Washington say was made possible not by entrepreneurship, but by government funding and Ren’s ties to Chinese intelligence, according to an April, 10, 2019, report in the Los Angeles Times.

“The United States has been attacking Huawei for over 10 years, no matter how minor the issue,” Ren told the LA Times, arguing that the U.S. has failed to produce any tangible evidence to back up its claims and that Huawei is being used as a pawn in Trump’s broader trade war against China.

But the administration says the battle is about both preserving national security and preventing China from gaining an unfair economic edge. To that end, the administration has severely restricted the ability of U.S. companies to trade with Huawei (a ban that some reports speculate may be tightened even further in the coming weeks).

Last May, Trump signed an executive order that prohibited U.S. companies from doing business with technology companies supplied or controlled by foreign adversaries. As part of that order, the Commerce Department added Huawei, Chinese-owned ZTE and a number of other companies to a blacklist that banned them from acquiring component parts from U.S. companies without obtaining approval from the U.S. government. (Full implementation of the ban, however, has been repeatedly delayed and the Commerce Department recently said it would grant some U.S. companies licenses to sell goods to Huawei.)

The perceived threat from Huawei is, in fact, one of the few policy areas on which both parties agree. In November, a bipartisan group of top-ranking senators sent a letter to White House national security adviser Robert O’Brien urging the administration to appoint a czar to coordinate on 5G policy.

And on Dec. 16, the Democratic-controlled House passed a bill that bars the U.S. government from using subsidies to help U.S. telecom companies buy equipment from Huawei. (The company is challenging the legislation in U.S. federal court.)

The U.S. offensive has had a “pretty big impact” on Huawei, Ren told The Washington Post in a Dec. 12, 2019, article. For example, the component ban stopped Google from selling its Android apps to Huawei — meaning that the latest Huawei smartphones were missing popular apps like Gmail, Google Maps and YouTube.

Ren told The Post that Huawei has had to scramble to redesign its telecom network without U.S. chips or components and that his company may need two to three years to recover from the U.S. trade ban.

a3.5G.trump.fcc.china.storyYet Ren sounded optimistic, telling the newspaper that if U.S. companies won’t supply Huawei, “I’m sure suppliers in other countries will gladly offer their own products to fill that void.”

Indeed, despite the political turmoil, Huawei ended 2019 with a record $122 billion in revenue. Nevertheless, the U.S. ban is expected to take a toll on the company in 2020. Perhaps with that in mind, Ren made a surprise announcement last September that Huawei would be willing to sell its 5G technology to a Western buyer to assuage fears about the security risks posed by the company.

Under the deal, described by The Economist in a Sept. 12, 2019, article, a one-time purchase of Huawei’s 5G technology, including patents, licenses and code, would allow the purchaser to change the source code — meaning it could remove any bugs Western security officials fear it might contain.

But market analysts do not expect any major company, such as Ericsson, Nokia or Samsung, to actually take Ren up on his offer, according to The Economist.

Still, Ren’s olive branch was the cap on his year-long charm offensive that included hours-long sit-down interviews with media outlets including The Economist, LA Times and The Washington Post.

U.S. Pressure Campaign

But the U.S. has countered with its own offensive — one that relies less on charm and more on coercion, as it warns allies against partnering with the Chinese equipment provider to construct their 5G networks.

National security adviser O’Brien recently criticized Canada’s consideration of a deal with Huawei to deploy high-speed internet to the country’s remote regions, announced in July.

“The technology allows China to put together profiles of the most intimate details, intimate personal details, of every single man, woman and child in China. When they get Huawei into Canada or other Western countries, they’re going to know every health record, every banking record, every social media post; they’re going to know everything about every single Canadian,” O’Brien warned at the Halifax International Security Forum in November.

He even suggested that U.S.-Canadian intelligence sharing could be jeopardized if Canada moves forward with the arrangement. (Canada also became ensnared in the U.S.-Huawei showdown when it arrested Meng Wanzhou, Huawei’s chief financial officer and Ren’s daughter, at the request of the United States, which accused her of violating U.S. sanctions by trading with Iran. Meng is currently fighting extradition to the U.S.; China has since detained two Canadians and sentenced a third to death.)

The Canada warning is not the first time the U.S. has implied that a member of Five Eyes — the intelligence-sharing alliance among the U.S., U.K., Canada, Australia and New Zealand — could be removed from the group if it uses Huawei equipment to build its 5G network. Besides the U.S., Australia is the only Five Eyes member to enact a complete ban of Huawei technology.

Most recently, however, British Prime Minister Boris Johnson said that adopting Huawei technology might “prejudice” the Five Eyes intelligence relationship, suggesting that the U.K. may bow to U.S. pressure and shut Huawei out of its 5G network (the government previously said it might allow Chinese involvement in “non-essential” parts of its 5G infrastructure).

In addition, Secretary of State Michael Pompeo warned his NATO counterparts last April that the U.S. may stop sharing some information with NATO allies if they incorporate Chinese technology into their networks, as reported by Nick Wadhams in Bloomberg.

U.S. tech experts believe that the risks of allowing Chinese telecommunications equipment anywhere in the 5G networks of key allies “cannot be mitigated,” a State Department spokesperson told The Washington Diplomat.

“Given how interconnected we are and how much we depend upon each other, if our allies’ networks are vulnerable, those vulnerabilities pose a security threat to the United States as well. As we will not expose sensitive information to unacceptable levels of risk, that means we will need to reassess how we share such information with our allies and partners if there are untrusted vendors in their networks,” the spokesperson said.

“Allowing [Chinese] telecommunications equipment into any part of a 5G network therefore creates unacceptable risks to national security, critical infrastructure, privacy and human rights,” the spokesperson added.

As 2019 came to a close, the U.S. pressure campaign seemed to have had its intended effect. In mid-December, Norwegian telecom company Telenor chose Ericsson, a Swedish company, over Huawei to build its 5G network infrastructure — despite having partnered with Huawei to build its 4G network.

In Germany, members of Chancellor Angela Merkel’s governing coalition have introduced a bill that would impose its own U.S.-style blockade on “untrustworthy” 5G vendors. Passing such a ban would mark a significant break from Merkel’s previously cautious approach to upsetting relations with China, Germany’s single largest trading partner.

“The Chinese government will not stand idly by,” Wu Ken, China’s ambassador in Berlin, said in response to the development. “Could we say one day that these German cars are no longer safe because we’re in a position to manufacture our own cars?” Wu added in an apparent threat to the German automobile industry (China is the biggest single market for German automakers Volkswagen, BMW and Daimler).

Too Big to Ignore

a3.5G.technology.user.storyOn that note, while the Trump administration has successfully ramped up pressure on allies to freeze out Huawei, fears of losing access to China’s vast consumer market — and pressure by their publics to deploy 5G speeds as soon as possible — are likely to prevent some countries from abandoning the Chinese firm.

And Huawei, a dominant player in the telecom equipment market, is still key to realizing the 5G revolution. The firm has invested heavily over the years to become a center of innovation that produces high-quality, lower-cost technology, and many countries simply cannot afford to shun Huawei if they want to possess 5G technology. Rivals such as Sweden’s Ericsson, Finland’s Nokia and South Korea’s Samsung have yet to take over Huawei’s market share, and the U.S. doesn’t even have any major cellular network equipment makers (chipmaker Qualcomm is the biggest American player in 5G tech).

In fact, roughly half the world’s networks are still expected to rely on Huawei technology.

Huawei’s market dominance “owes as much to technology as its low prices and the speed at which it can roll products out,” according to the September 2019 Economist’s report. It has also invested $2 billion over the last decade in research and development, which has given it arguably the most advanced 5G technology in the industry.

The magazine also notes that Huawei is unique among tech companies in that it has served some of the most remote digital markets in the world. For example, the company has taken on ambitious projects to set up base stations in the mountains of Colombia, and Huawei is the internet provider for more than half of Africa — the fastest-growing market in the world.

Shut out of American and European markets, Huawei is also actively looking to cultivate new partnerships. For example, it has begun offering grants and signing joint agreements with universities in Russia that are eager to expand research and development of artificial intelligence and data processing, as reported by Simone McCarthy in the South China Morning Post.

The Huawei Innovation Research Programme once served as a pipeline for Huawei to engage with U.S. universities as well. But, as previously reported by The Washington Diplomat in May 2019, U.S. universities have increasingly terminated joint research projects with Huawei and ZTE in response to threats from U.S. policymakers to withhold government contracts from universities that collaborate with Chinese tech companies.

The growing global divide over 5G between the U.S. and China is likely to splinter countries into two camps, according to a November 2018 white paper by the Eurasia Group. The report said that efforts by the U.S. and its allies to exclude Chinese equipment suppliers from Western 5G networks will create a “bifurcated 5G ecosystem” that will give way to two tech spheres of influence — “one led by the U.S. and supported by technology developed in Silicon Valley; another led by China and supported by its cadre of highly capable digital platform companies.”

“In a bifurcated world, third countries wishing to gain access to this virtuous cycle will face difficult choices about whose 5G network technologies and related application ecosystems to adopt,” according to the report, titled “The Geopolitics of 5G.”

“Governments are likely to come under pressure from the U.S. and allies to avoid dependence on China for 5G,” it said. “At the same time, developing countries that are more sensitive to cost will find Chinese technology and related enticements — for example, infrastructure and project financing available through the Belt and Road Initiative — hard to pass up, particularly if China gains an edge in related technology applications.”

Overblown Threat?

Some experts warn that this zero-sum mindset could stifle the international collaboration needed to advance innovations like 5G.

Companies like Verizon, for instance, worry that a technological “cold war” might create a fractured global network that prevents standardization and ultimately hinders growth in the very industries that 5G will make possible.

Some experts also say claims that Huawei is a vehicle for malign Chinese activities are exaggerated. Many British and German officials, in fact, have said the threats aren’t nearly as dire as the U.S. claims.

And, as The New York Times pointed out in a Jan. 26, 2019, article, “So far, the fear swirling around Huawei is almost entirely theoretical. Current and former American officials whisper that classified reports implicate the company in possible Chinese espionage but have produced none publicly. Others familiar with the secret case against the company say there is no smoking gun — just a heightened concern about the firm’s rising technological dominance and the new Chinese laws that require Huawei to submit to requests from Beijing,” wrote David E. Sanger, Julian E. Barnes, Raymond Zhong and Marc Santora.

Others say all the heated rhetoric around the 5G “race” is advancing more rapidly than the race itself. For example, while U.S. carriers expect to roll out some 5G services this year, this won’t dramatically reinvent your smartphone overnight because the technology is still being developed.

Tom Wheeler, chairman of the FCC from 2013 to 2017, wrote in a January 2019 brief for the Brookings Institution that 5G implementation is not so much a race as a long-term, “piece-by-piece, area-by-area” effort to expand high-speed internet coverage to as much of a country’s population as possible.

He argues that the debate — and hyperbole — over 5G is being shaped by different actors with different agendas, whether it be politicians like Trump looking to “gin up” nationalism or telecom companies looking to expand business. (He has criticized merger efforts by telecom giants like Sprint and T-Mobile, writing that blocking such mergers generally benefits consumers by preserving competition and lowering prices.)

Wheeler says the real crux of the issue comes down to securing America’s cyber network and expanding access to the country’s underserved rural communities. “Rural America was the last to see 4G wireless; unless something proactive occurs, the same fate will be true for 5G,” he wrote.

Huawei, in fact, has been key to expanding phone and internet service in these traditionally overlooked American communities by offering lower-cost equipment to rural carriers, which have purchased them with “U.S. government subsidies intended to help bring internet service to sparsely populated areas that larger telecom companies deemed unprofitable,” wrote Jeanne Whalen in an Oct. 10, 2019, article for The Washington Post. Now that those subsidies are gone, so might be this expanded wireless service.

To tackle the problem, in December the FCC announced a $9 billion fund to to expand 5G coverage into rural areas. But the plan, which would scrap an ongoing $4.5 billion program to expand 4G cell service to areas that still have spotty reception, has been criticized by state officials who say it makes little economic and technological sense to leapfrog to 5G without even having 4G in place, according to a Dec. 5, 2019, article in StateScoop by Ryan Johnston.

The question of how fast the U.S. should move to achieve the lightening-fast speed of 5G is one that now hangs over policymakers at both the local and national levels.

Kania of the Center for a New American Security argues that the need for speed should not come at the expense of security, and that the U.S. should focus more on “establishing a durable foundation for 5G’s future.”

“Although there are encouraging indications the U.S. government is starting to concentrate more on 5G, the policies to date have not yet proved commensurate with what is at stake. The Trump administration must also reframe and reorient its approach to competition in 5G, because the notion of ‘America first in the race to 5G’ is not a winning strategy, nor should the aim of the United States be to deploy 5G as quickly as possible,” she wrote in the “Securing Our 5G Future” report.

“U.S. policy should focus on promoting the security, collaboration and healthy competition that are so vital to the future of 5G, in close collaboration with allies and partners,” she recommended. “Such a strategy should recognize that the U.S. government can and must play a critical role in promoting innovation through investing in 5G as a new foundation for American competitiveness in the fourth industrial revolution.”

About the Author

Ryan R. Migeed (@RyanMigeed) is a freelance writer based in the greater Washington, D.C. area. Anna Gawel (@diplomatnews) is managing editor of The Washington Diplomat.