In recent weeks several major developments affecting the roll out of 5G systems in the United States highlight the promise and the difficulties for near-term deployment of this transformative technology. signaling its deep suspicions about the security of Huawei’s 5G system, which reinforces the view in the U.S. that the Chinese company should not play a role in providing equipment for commercial wireless systems. The that any commercial 5G system would be the province of the principle, private sector wireless carriers now operating in the U.S. Finally, , which was necessary if Apple is going to succeed in offering competitive 5G-capable mobile devices by 2020. Apple’s reliance on other semiconductor firms, notably Intel and its own research units, had not kept pace with Qualcomm and threatened to put the iPhone juggernaut in danger of a significant technology deficit with rivals.
Although these developments show the path for the 5G future in the U.S.—a private sector system primarily using domestic and legacy European technology—they do not erase some serious problems with the rapid construction of the new wireless networks, nor do they suggest an economically compelling alternative in the rest of the world to the increasingly sophistical and state-supported competitor, Huawei.
A major issue in the next few years will be the capital costs of installing the needed 5G infrastructure and software upgrades in the U.S. Effective deployment will require hundreds of thousands of new cell sites, new or upgraded connective nodes and central switches, new software and redesigned mobile devices. run into the hundreds of billions of dollars for the full transition. Since the Federal Communications Commission (FCC) has decided to auction the needed electro-magnetic spectrum competing companies will bid up the price of that spectrum. Large wireless providers like AT&T and Verizon are already saddled by large debt burdens. and management complexity of buying and integrating Time Warner as well. If Sprint and T-Mobile succeed in merging, that transaction will add to already high debt levels in those firms. High costs and debt levels will at a minimum slow deployment, with the result, among others, of allowing the subsidized Huawei systems in China and countries in Europe and Asia which adopt its products, to establish a lead in practical applications of the new technology. The first company to market often ensures lasting dominance.
The likely path of installing 5G in the U.S., given the high cost of building entirely new infrastructure, is to retrofit existing 4G systems, locking the major wireless operators into existing hardware providers (mostly Nokia and Ericsson). These providers are not as advanced as Huawei which is able to offer entirely new, integrated systems at reasonable (often subsidized) prices. This dynamic too will slow the deployment of the most advanced new 5G technologies and features in the U.S.
In this emerging scenario it is also important to recall that the leading U.S. innovator in wireless communications is Qualcomm, which is facing an If the San Diego company loses this case its business model will be severely jeopardized and it could deprive the firm of the profits needed to plow back into its world-leading research position. of its revenues in research and development. The U.S. has only limited capability in providing the hardware backbone of the installed wireless base, which will be the framework for 5G systems in the emerging roll-out plan. The April Apple-Qualcomm settlement is strong confirmation of the importance of the latter’s fundamental core 5G technology. As Huawei moves ahead with the newer 5G infrastructure in China and around the world, the superior scale of its business and China’s non-market economy incentives are allowing it to outcompete and move ahead of Nokia, Ericsson, Samsung and others in perfecting new technologies. Huawei is able to channel significant new funds into the research narrowing the Qualcomm lead and powering it ahead of the infrastructure firms.
There is however a newer approach to the 5G deployment story that could offer an alternative to the current U.S. plan and allow American providers to better compete with Huawei: The new scenario, now being and smaller operators in Mexico City and even Alaska, and by the U.S. military, involves replacing most of the point-to-point connectivity based on hardware, with direct connection of wireless signals to the internet. In and powered by central computers instead of expensive switching equipment. This system could obviate the need for each wireless operator to maintain a proprietary system. A key element would be advanced computers and cloud systems for which the U.S. has leading suppliers such as Microsoft, Oracle, Amazon, Cisco, HP, Juniper Networks, and Micron. The U.S. is the leading software provider as well, with companies like Microsoft, Red Hat, Nvidia, Oracle and others. Qualcomm, Intel and AMD are among the leading semiconductor and related communications software suppliers which would be important to this approach. Samsung and Japanese wireless and semiconductor firms also would be competitive suppliers. In contrast to the evolution of the installed base as a model for 5G deployment, this arrangement gives wireless operators many choices of vendors and promotes faster adoption of new technologies. It is also less capital intensive. All told, such a system could provide an effective and economic alternative to Huawei and help blunt its emerging dominance in the worldwide race to dominate 5G.
Virtual networks are well worth exploring before the U.S. gets locked into the slow-moving rollout of a solution which extends reliance on the currently installed base. Buy-in would have to come from the major wireless providers and new thinking from the FCC, Congress and the White House. Given the national security implications of not having an effective alternative to compete with Huawei, and the pure commercial implications for not only 5G but related new technologies like artificial intelligence and the Internet of Things which are powered and enabled by 5G, this idea is worth a good look.