FORMER Google boss Eric Schmidt, who is now serving on the United States Defence Department's innovation board, in a blistering opinion piece for Financial Times, derided last month's record breaking 5G spectrum auction of about US$81 billion by the US Federal Communications Commission (FCC), calling it a "digital setback" for the country's technology future.
Affronting celebrations of 107 Auction that issued 280MHz in C-band spectrum for 5G, the chairman of the US National Security Commission on Artificial Intelligence warned that investing in 5G mobile telecommunications networks should be America's "urgent priority" to catch up with China, which is "already far ahead".
More than two decades earlier, 3G auctions in Europe ruined European operators after they spent US$129 billion to buy licences for third-generation networks. The high amount created crushing debt for the companies, eventually bankrupting a few and sapping research spending.
Schmidt drew a parallel between the FCC and the European 3G auctions and warned that higher prices and weaker digital services as a result of "over the odds" payments could push the country toward a "lost digital decade", as Europe had yet to recover, while China would soon have a national network with speeds of up to 1 gigabit a second.
His worries aren't unfounded. Even though the auction transferred big bucks to the US' coffers, massive capital outflow from the sector could stall deployment of 5G in the country since US telcos would have US$81 billion less to spend on 5G infrastructure, probably leading into "disinvestment and downsizing".
The US will likely fall behind China in fifth-generation technology as the auction lacked provisions to build crucial digital infrastructure, and because a true 5G network requires more than the 280MHz spectrum, as Schmidt said. What's more, the industry will inevitably shift this huge cost onto American 5G users, which would further complicate 5G deployment.
With China's head start, Schmidt said, the next generation of technology giants — and the products and services they build — will not be European or American, but Chinese. Estimating that a C-band network covering 80 per cent of Americans will require one million new cell sites and US$70 billion, he said "there will be no 5G and no base on which to build 6G. America's digital economy will become an also-ran".
AT&T, Verizon and T-Mobile are top US wireless companies that are in the process of building 5G networks in the US. Stocks for the first two companies, which have been dominating America's industry, have been chronic long-term underperformers. Former US president Donald Trump's ban on Chinese companies caused delays in 5G rollout as domestic service providers had to find replacements and arrange funds for expensive substitutes.
Analysts estimate that the C-band auction would cost the three companies US$10 billion to US$35 billion. The staggering outlays will ironically limit the ability of cash-strapped operators to deploy equipment quickly, which Nokia head of sales in North America, Ed Cholerton, says would put the US at a disadvantage to China and others who do not seek to pad their treasury with licence fees.
Beijing, in the meantime, continues to make a mark in 5G. China is not only leading the US in fifth-generation technology, it has outsmarted America with more 5G subscribers not just in total, but per capita, as well as more 5G smartphone sales at lower prices and more widespread 5G coverage with faster connections than in the US.
Within a year or so, China has built more than 700,000 5G base stations — surpassing the original target of half a million, with more than twice the number of base stations outside the country — compared with the US, which is expected to have merely 50,000 base stations at the close of last year.
US companies have been building 5G networks nationwide, but they are only incrementally faster than 4G or super limited and face jurisdiction issues. Compared with China, which has installed thousands of large cell towers and tens of thousands small cell antennas in local communities and cities for 5G service delivery. While the US is clearing its 280MHz spectrum, China is projected to assign on the average of 660MHz of spectrum by the end of next year.
Trump singled out China's technology companies to stop Chinese 5G growth and global expansion, but his decisions could hobble the worldwide 5G global supply chain, slow down deployment in the US and possibly shatter the market. But in the end, tech experts see the auction as "the penultimate nail in the coffin of US global technology leadership".
Last year, Schmidt asked the White House to figure out a strategy for the China-US relationship. He called the relationship a "rivalry partnership" where both parties could collaborate and compete with each other without inciting tension or inviting retaliation. While Biden is keen to cooperate with Beijing on climate change and North Korea, he needs to add 5G to his the list to fix Washington's fifth-generation conundrum.
The writer writes on economy, geopolitical issues and regional conflicts and is an opinion contributor to CGTN, News24, The Mail & Guardian and The Express Tribune (partner of The International New York Times)