The development of 5G technologies has long transcended competition between companies and evolved into an international arms race. China has gained the edge thus far, bolstered by strong state-sponsored coordination and funding, leaving the US behind. The Chinese 5-year plan aims for broad commercial 5G launch by 2020, and all the major wireless providers have conducted extensive 5G trials. The government has already opened up significant amounts of mid- and high-band spectrum. However, to counter the Chinese influence in America, the US has now deployed a slew of new public policy to protect and bolster its own telecom infrastructure.
The Federal Communications Committee (FCC) has voted unanimously to bar any telecoms from using US federal subsidies to buy technology deemed a national security risk. While this seems like a pretty broad measure, its intended target is undoubtedly China. Coinciding with the FCC’s decision, the U.S. Commerce Department has specifically banned American companies from selling products to Huawei rival, ZTE Corp, for 7 years, clamping down on Chinese 5G ambitions for the foreseeable future.
Huawei had already been largely locked out of the US market since 2012. The U.S. government has called Huawei, the world’s largest provider of telecom equipment such as base stations and routers, a national-security threat and has cited its potential dominance of next-generation 5G technologies. American telecom space is especially sensitive to Chinese influence because of China’s aforementioned state-corporation relationship. Giving Huawei or ZTE even limited access to US airwaves means the Chinese government could potentially access Americans’ data. National-security fears were also behind the U.S. decision in March to block the takeover of chip maker Qualcomm Inc. by then Singapore-based Broadcom Ltd. on grounds that the deal could endanger American technological prowess.
With these new protections, sentiment for US telecoms should remain positive. On Wednesday, the FCC proposed the initiation of the nation’s first 5G spectrum auction. The commission will be freeing up airwaves in the 28 GHz band on November 14 of this year. A 24 GHz auction would also commence as soon as the 28 GHz auction is completed. Both spectrum bands are considered well suited for fifth-generation 5G wireless deployments, and the FCC expects to free up spectrum in other GHz bands as well. All of this comes on the back of a $600 million allocation to the U.S. Department of Agriculture for rural broadband grants and loans, included in March’s Omnibus spending bill.
AT&T intends to offer mobile 5G in a dozen cities in the U.S. by the end of 2018. 5G ties into the company’s larger aspirations of IoT across tomorrow’s smart city deployments. The mobile carrier asked the FCC for permission to demo 5G in the 28 GHz band in Los Angeles this June. AT&T’s plan is to use a “puck” as a mobile hotspot device, with millimeter wave connectivity back to their network. This is a significant move because the first 5G devices to go on sale won’t be phones or similar devices at all, but rather mobile hotspots. Verizon also plans on deploying experimental hotspot “pucks”, but when it comes to fixed 5G, Verizon is expected to deploy the tech in 3 to 5 markets this year with an overall goal of reaching 30 million homes.
A unique opportunity for smaller US telecoms is also present. Sprint, notoriously 3rd chair to the former two firms, announced last month that it will be the first carrier to deliver mobile 5G starting this coming April in Chicago, Dallas, and Los Angeles, followed by three additional metro areas later this year. Unlike AT&T and Verizon, Sprint will forgo fixed 5G, aspiring to deploy mobile 5G only. T-Mobile aims to build out 5G in 30 cities this year via the deployment of 25,000 small cells to manage the network across the country. They are also taking an innovative approach by allocating $500 million to outfit US military bases with their 5G-ready infrastructure.
Although the new US regulatory measures risk slowing global deployment of 5G, US telecoms should benefit from better positioning in the race to 5G proliferation. Chinese firms needed the US more than the US needed them for 5G, considering ZTE was a huge buyer of US-made equipment from firms like Intel, Qualcomm, and Acacia. American telecoms have plenty of ambitious plans on deck, facing a friendlier regulatory environment as the FCC continues to work on streamlining wireless infrastructure deployment.
Investors can gain exposure to US telecoms via the US telecoms ETF (IYZ).