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US-China 5G competition hinges on enterprise apps, services

In the U.S.-China competition over 5G, the infrastructure deployment race sets the stage for a larger struggle over the application layer. Here's why enterprise IT teams should care.

The global race to deploy 5G infrastructure is part of a broader power struggle over the application layer, with high stakes for American businesses. Both the U.S. and China want to lead the world in developing 5G apps and services that will revolutionize the enterprise and generate data to fuel the AI systems of tomorrow.

Experts say IT teams should pay close attention to what happens next because fifth-generation mobile networks could one day power virtually all economic activity worldwide. Advanced AI systems require high volumes of data delivered at fast speeds, with near-ubiquitous connectivity and negligible delays, and many believe 5G fits the bill. Proponents point to possible use cases across every industry and sector, including smart manufacturing, remote surgery, autonomous vehicles, predictive policing, virtual reality and the like.

"Whoever has access to 5G network data can build their services on it and dominate the application layer," said Lindsay Gorman, emerging tech fellow at the Alliance for Securing Democracy, a nonpartisan foreign policy group based in Washington, D.C. "They will have an enormous leg up."

CTIA, the trade group that represents the U.S. wireless industry, claims 5G will connect 100 times as many devices as 4G up to 100 times faster and with nearly zero latency. Skeptics suggest this adds up to a lot of carrier marketing hype and anticipate the technology, when subject to the limitations of real-world implementations, will offer more modest improvements in wireless performance. Others argue 5G amounts to a looming paradigm shift for enterprise IT, one that could even make Wi-Fi obsolete.

"We don't know what 5G's killer app will be," said Nicol Turner Lee, senior fellow at the Brookings Institution and director of its Center for Technology Innovation, based in Washington, D.C. "But we do know that the United States has historically led in the innovation of the kinds of applications and cloud-based services that ride on mobile networks."

Turner Lee pointed to the impact of 4G, which gave rise to the "app economy" and American tech startups, such as Uber, Airbnb and Instagram, to illustrate the potential cost of missing the 5G boat. If the United States falls behind in deploying next-generation cellular infrastructure and services, the country may find its application innovation stagnates in turn. The nation that leads the U.S.-China 5G competition, on the other hand, will have meaningful leverage when it comes to international standards, device interoperability and intellectual property, she said.

5G business use cases

Some experts argue the stakes of the so-called 5G arms race are overstated or, at least, misrepresented. Telecom analyst Jeff Kagan chalked up much of the U.S.-China 5G tension to national egos and political posturing. Should the U.S. lag China slightly in 5G deployments, he said, he doubts the American economy, with its strong software sector, would suffer in the long run.

Others worry the ubiquitous 5G "race" metaphor oversimplifies a nuanced technological power struggle. "It is often unclear who is ahead in a complex technology that is made up of many different components," wrote Adam Segal, chair in emerging technologies and national security at the Washington, D.C.-based Council on Foreign Relations, in a recent blog post. "The idea of 'ahead' may distract more than it illuminates."

The real race is in the nascent competition over who will write the 5G industrial and service apps for the global economy.
James Andrew LewisSenior vice president, Center for Strategic and International Studies

How enterprises apply the technology will ultimately matter more than how much of it they have or how fast carriers deploy it, according to James Andrew Lewis, senior vice president at the Center for Strategic and International Studies. "What counts is how people use 5G to make money," he wrote in a June 2020 report. "The real race is in the nascent competition over who will write the 5G industrial and service apps for the global economy."

5G security concerns

Where carriers buy the equipment that enables their 5G infrastructure also matters. Just a handful of manufacturers worldwide sell the gear to build out next-generation cellular networks: Sweden's Ericsson, Finland's Nokia Corporation, South Korea's Samsung Group and -- what Gorman called "the elephant in the room" -- China's Huawei Technologies Co. Ltd.

While Huawei and fellow Chinese telecom firm ZTE Corporation are private companies, American policymakers say they have disquietingly close relationships with the Chinese government. "These are state-owned enterprises," said David Stilwell, assistant secretary of state for East Asian and Pacific affairs, during a podcast interview at the Hoover Institution, based in Stanford, Calif.

Stilwell warned that a Chinese law stating the country's enterprises must "support, cooperate with and collaborate in national intelligence work" could compel civilian employees to engage in espionage. Also, American lawmakers from both parties have voiced concerns that Huawei could secretly install backdoor access points in its hardware for use in surveillance or even cyberwarfare. The telecom supplier strongly disputes those claims.

"We absolutely never install backdoors," said Huawei founder and President Ren Zhengfei, during an interview with CBS This Morning. "Even if we were required by Chinese law, we would firmly reject that."

On a technical level, 5G architecture may be more vulnerable to outside interference than 3G or 4G, as it's harder to separate the core from the periphery, according to Segal. "You have to trust the [supplier] much more," he said in a recent research note.

In May 2019, President Donald Trump issued an executive order barring carriers from deploying technology from foreign suppliers the U.S. considers security risks, which, in effect, means Huawei and ZTE. He later also banned American IT manufacturers from exporting components to those companies, a move experts say seriously hurts Huawei's supply chain. A number of other nations have similarly moved to bar or strictly limit the use of Chinese gear in their 5G infrastructure, including Australia, Canada, France, India, Japan, New Zealand, Singapore, Taiwan, the United Kingdom and Vietnam. Gorman said China's efforts to control information in the COVID-19 pandemic has increased global wariness of Huawei.

"More policymakers are seeing that a country that doesn't prize transparency poses a risk," she said.

Telecom analysts such as Kagan conclude American allies' growing reluctance to do business with China's telecom firms has substantively affected the 5G competition landscape. "Huawei has been taken down a few notches and is struggling in markets worldwide," Kagan said. "Meanwhile, the U.S. has been growing stronger."

US 5G deployments

Turner Lee warned the White House's ban on Huawei equipment could also hamper ongoing 5G rollouts in the U.S. by disrupting the global supply chain and upending carriers' deployment budgets. She worries providers could find themselves scrambling to line up affordable replacements for Huawei products, which are relatively inexpensive thanks to heavy subsidies from the Chinese government.

"The U.S. has cause to be suspicious of Huawei," Turner Lee said. "But what is the alternative, and will it get in the way of the types of expedited deployments that we've been aiming for? None of this happens in a vacuum."

The federal government should work to facilitate pivotal relationships with other suppliers, while also coordinating efforts to advance 5G initiatives at the federal, state and local levels, Turner Lee suggested. American telecom providers can't afford any more deployment delays, she added, having already fallen behind their Chinese counterparts in the early days of the 5G competition. U.S. carriers have previously grappled with a variety of legislative and regulatory deployment barriers, such as pole-attachment permissions and electromagnetic spectrum allocation.

In the U.S., the Federal Communications Commission (FCC) manages spectrum -- radio frequencies that determine the speed, latency and volume of data transfers in wireless networks. Because the federal government largely reserves midband spectrum for military and other uses, American carriers relied heavily on high-frequency millimeter wave (MM wave) in early 5G deployments. MM wave has fast speeds and low latency but limited range and reliability; it struggles, for example, to penetrate physical barriers, like walls, foliage and even precipitation. Chinese carriers, meanwhile, focused mostly on spectrum below 6 GHz (sub-6), which offers slower speeds but better coverage than MM wave.

In April 2019, the Defense Innovation Board, a civilian advisory board that provides technological recommendations to the U.S. Department of Defense, concluded that American carriers would need to deploy an impractically dense and costly population of base stations to achieve decent 5G coverage with MM wave. Instead, the board recommended the federal government open low-band and midband spectrum to carriers, enabling them to adopt multiband 5G strategies like their Chinese counterparts. Accordingly, the FCC has since moved to open sub-6 spectrum, removing or relocating existing users and systems and auctioning it off to carriers for commercial use.

"I think the U.S. has gotten wiser: We're now seeing low-band, midband and C-band spectrum released much more expeditiously," Turner Lee said.

The United States must build on this momentum, she added, and avoid ceding further ground to China. Otherwise, it risks losing both the battle, over 5G deployment, and the war, over the application layer. "It is very important that we keep up the pace," she said.

This was last published in October 2020

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