Friday, August 7, 2020

Why 5G Matters

In fairness, I am not at all competent to explain why 5G matters. Thus, I will quote, without commentary, some passages from Michael Auslin’s column from today’s Financial Times. 

While our educational establishment is whining about diversity and cannot figure out why 2 + 2 = 4, China is taking the lead in 5G-- with the only real competition coming from Western Europe.

So, here is Auslin:

If nothing changes, America is poised to lose the race for 5G telecommunications technology to China. Perhaps not since the emergence of the automobile has the US risked failing to be among the leaders in creating the world’s next great technology. Shortsighted decisions and the lack of private sector leadership are causing a crisis of confidence. Without a modern-day Morgan to take charge, a poor response to 5G may well permanently weaken the American economy.

The telecoms revolution that 5G promises has largely been misunderstood in the US. This isn’t just about faster streaming of movies and video games. Rather, the enhanced capacity will fundamentally change digital economic activity, leading to far greater efficiencies and innovation. When combined with more sophisticated artificial intelligence programmes, 5G could revolutionise medicine, manufacturing, finance, commerce and basic science.

Yet there are no US 5G companies. The field is dominated by China’s Huawei, with Sweden’s Ericsson and Finland’s Nokia trailing behind. The Trump administration has so far found little interest among US tech companies and private-equity firms in investing in the sector. That is probably because 5G’s hardware systems are not themselves major profit producers.

But that narrow perspective gets it backwards. As noted by David Goldman, author of You Will Be Assimilated, 5G technology today is the equivalent of American railroads in the 19th century. Building a national rail network led to a vast expansion of farms and factories, moving goods and people — and by extension, ideas — across the continent, unleashing undreamt of productivity advances.

Properly used, 5G will do the same, which is why it threatens to upend the global economy. If Huawei dominates the world’s 5G systems, it will set digital standards for decades and put Chinese companies in pole position in fintech, telemedicine, manufacturing and autonomous systems.

Donald Trump’s administration understands the stakes, which is why it barred Huawei from US 5G systems and is pushing software-based alternatives such as “open radio access networks” to get around China’s hardware lead. Australia, Japan and now the UK have joined Washington’s ban on Huawei. So far, these governments are focused on data security and privacy, but they should also be worried about economic subordination.


David Foster said...

5G is not a single thing, it is a combination of multiple capabilities interacting at various layers. These capabilities don't all have to come from the same vendor, any more than your operating system and your laptop have to come from the same vendor. That point is what the Open Radio Access Network recognizes.

The author's statement that "yet there are no US 5G companies" is IMO an's true IF you mean there is nobody that you ('you' being a telecom carrier) can buy a complete set of 5G components from, but there are certainly important components available from US vendor, Cisco for one:

David Foster said...

re the railroad analogy...the US did NOT build a "national rail network" as some kind of top-down effort, individual railroads funded by different investors and with different managements did that. (although there was some government involvement in the form of land grants and subsidization, particularly on the transcontinental route) The railroads interconnected, eventually moving to a standard gauge to facilitate this, and later with other standards, such as those for car couplers.

Actually, the railroad analogy applies better to the communications carriers--Verizon, AT&T, etc--than it does to the equipment and software suppliers, which are more analogous to the locomotive and railcar builders.

Random Chance said...

The Trump administration has so far found little interest among US tech companies and private-equity firms in investing in the sector.

Could this be another example of egotistical suicide by the tech companies? Is the idea of being seen as cooperating with the Orangemanbad administration a bigger disincentive than the potential prestige and profit of the being the national and perhaps global leader in this emergent technology field? If so, then they deserve to become the dogs cleaning up the crumbs left by those who put progress ahead of politics.

Freddo said...

"If Huawei dominates the world’s 5G systems, it will set digital standards for decades".

That is not how setting standards works in modern society. In the heyday of Silicon Valley the giants of the day could create their own standards and try to maintain their competitive advantage through careful licensing or patent lawfare.
These days are long gone, any new technology must interact with vast layers of existing infrastructure, as well as many business partners. Having learned from past mistakes, industry players will insist that all participants share their patents and other IP in a reasonable way or it will not get included.
The idea of technology companies as well as various governments blindly surrendering standard setting to China is ridiculous. Accepting that assertion at face value by both the writer and editor reduces the FT to the level of click-bait journalism.

That being said, China being in the lead on G5 technology is significant. I think a better parallel to draw would be with the introduction of Japanese cars on the American market. There are parallels in the complaints about broad theft of IP, the same assumption that Asian technology would never be a match for American marketing, both management and workforce occupied with their own privileges rather than building a quality product. Once the dust settled America was left with the rust belt states. Looking at the news recently the Democrats are making sure that the collapse of the technology sector will be faster.

trigger warning said...

"If Huawei dominates the world’s 5G systems, it will set digital standards for decades and put Chinese companies in pole position in fintech, telemedicine, manufacturing and autonomous systems."

I participated in the ANSI and ITU standards bodies for a couple of decades. This is not, quite candidly, how they work. Sounds scary, though! :-D

And Foster is right: "the railroad analogy applies better to the communications [common] carriers".

If I were personally inclined to invest directly in 5G technology equities, glittering Gartner Group visions of The Glorious Revolution accompanied by the obligatory exponential revenue growth charts are not where I would put my money. I would invest in transmission (tower, satellite, etc) equipment vendors with extensive political (i.e., "pitchforks and torches" tested) and MIMO expertise. But that is not investment advice.

As far as government involvement goes, maybe after they get FirstNet (stimulated twenty years ago by 9/11/2001) lurching forward on square wheels, I might be interested in another Information Superhighway proposal to absorb excess borrowed money by funding Beltway Bandits.