NETWORKS RACE

The flood of news about the Iran-American confrontation intensified at the beginning of this year, as well as the disturbing news from Syria, Britain’s withdrawal from the EU and Donald Trump’s controversial peace plan, reports about the U.S. and China’s struggle for primacy in building 5G networks remain almost invisible to a wider public audience. Perhaps, this battle will help to better navigate the current international geopolitical situation for the next generation of mobile networks. After all, the stakes are unusually high. It is the question of technological advantage in the near future, and, therefore, global economic and political leadership.

According to Cisco's new annual report, by 2023, 66% of the world population will have access to the Internet, and 5G will support more than 10% of mobile connections. The first countries in which 5G was officially launched in April 2019 were South Korea and the U.S. It is expected that by the end of 2020 the first 5G services will be available in almost 140 European cities. The most important thing you need to know about the 5G Internet is that it will be 10-100 times faster than 4G, opening  completely new possibilities before the mankind. For example, the so-called Internet of Things (IoT)—the concept of an environment in which all electronic devices have access to the Internet, transmit data and interact with each other without human intervention—will become a reality. It is not only the concept of ‘smart homes’, but also a completely new approach to urban infrastructure, transport, housing systems, healthcare, education, security, finance and production. That is, 5G for the 21st century will be about the same that electricity was for the 20th century, shaping human activity in all areas in an increasingly digital global economy. Therefore, as you might guess, domination in the 5G realm will mean dictatorship of the conditions to the rest.

Economic Future of 5G

Currently, two Chinese telecommunications giants, Huawei and ZTE, are ready to provide the state-of-art and affordable equipment for implementing 5G. Thus, for the first time in history, the U.S. may lose leadership in innovation and technology. Washington takes the consequences of such a lag very seriously. According to the U.S. Attorney General William P. Barr, allowing China to establish dominance in this area does not simply mean “monumental danger” that Beijing can use technology for monitoring and surveillance - “the stakes are much higher; the economic future is at stake”. “It has been estimated that the Industrial Internet powered by 5G could generate new economic opportunities of $23 trillion by 2025.  If China establishes sole dominance over 5G, it will be able to dominate the opportunities arising from a stunning range of emerging technologies that will be dependent on, and interwoven with the 5G platform. The more China gains ground as a supplier of 5G infrastructure, the more it will gain ground in all the constituent technologies that undergird 5G infrastructure,” Barr said in his report.

FBI Assistant Director of Counterintelligence Division John Brown emphasised that the world must decide whether its messages will pass through China or the U.S. As for Trump, 5G is the race that America must win.

U.S. sanctions and misfire

U.S. is trying to win the race by all possible means, preventing the Chinese giant from entering its 5G market and the market of allied countries. The reason is that Huawei is engaged in industrial espionage and is closely associated with the Chinese government. Moreover, the founder of the company is a member of the Chinese Communist Party, a military engineer whose name is associated with the development of information technology in the Chinese army. One of the latest U.S. moves was the announcement that the Trump administration is considering changing the rules to block chip shipments to Huawei Technologies from companies like the world's largest contract chip maker, Taiwan's TSMC. It is noted that according to the draft amendments, the U.S. government will force foreign companies using American equipment for the production of chips to request a license in the U.S. before supplying Huawei products. Prior to this, in December 2018, Meng Wanzhou, daughter of the founder of Huawei and the company's CFO, was arrested in Canada due to suspected violation of the U.S. sanctions against Iran.

Last May, the U.S. Department of Commerce blacklisted Huawei, blocking the way for companies to purchase components and technologies from the American manufacturers. The U.S. calls for its closest allies, including Britain, Canada, Australia and New Zealand, to join forces against the company.

Interestingly, the closest U.S. partner, London, openly neglected Washington's requests and warnings. The British said that, firstly, they will allow Huawei to develop their 5G network, because after the consolidation of the industry there are too few global competitors (Nokia and Ericsson). Secondly, the Chinese company will not have access to sensitive parts of the network related to national security. The UK government concluded that “the potential national security risk posed by the Chinese telecommunications giant has been outweighed by a projected economic growth of £126 billion ($164 billion),” if 5G rolls out as planned. As noted by local media, immediately after the announcement of this decision during a telephone conversation with Boris Johnson, American President Donald Trump was furious and at the end simply threw the phone. In turn, U.S. Secretary of State Mike Pompeo said that by allowing Huawei to 5G, London threatens the sovereignty of the UK.

At the Munich Security Conference, Speaker of the U.S. House of Representatives, Nancy Pelosi, made a warning about the loss of free flow of information when using telecommunications equipment from Huawei. The U.S. also highlight that the consequences of such a move by the British government may affect cooperation within the so-called Five Eyes intelligence exchange alliance. Recently, Mick Mulvaney, White House Chief of Staff, said that the decision of London will have a “direct and significant impact” on the exchange of intelligence between the U.S. and Great Britain. Moreover, all the hints and warnings are made as publicly as possible, which is quite unusual, since such showdowns between allies usually occur secretly. Especially since a lot in intelligence is built upon  communication and observation technologies.

Profit or national security?

On the other hand, inside the U.S. the attitude towards Huawei is different. For example, U.S. Attorney General William P. Barr stated that China’s dominance over 5G networks is one of the main threats to the national security and the U.S. economy. He also noted that intelligence had been talking about this for a long time, but Trump was keeping his ears open. Many American media outlets noted that the Trump administration has taken a controversial approach to Huawei and ZTE, providing specific examples of barriers to using U.S. components abroad. They also recall that in 2018, Trump lifted the harsh sanctions imposed by the U.S. against ZTE, which violated restrictions on Iran and North Korea.

Perhaps the whole point is just that in the confrontation around 5G, national security is very closely intertwined with financial interests. For example, Barr suggested that the U.S. consider investing in European tech companies like Nokia and Ericsson to counter Huawei. Literally, "by the United States aligning itself with Nokia and/or Ericsson through American ownership of a controlling stake, either directly or through a consortium of private American and allied companies." But how then would it be different from accusations of Huawei’s close ties with the Chinese government? Later, Washington rejected the idea proposed by Barr, and White House Chief Economic Adviser Larry Kudlow admitted that the United States works closely with Nokia and Ericsson, but the U.S. government, of course, does not buy companies. However, behind the contradictory approach of the Trump administration to Huawei is the same logic that guides London, which says that "the potential risk to national security posed by the Chinese telecommunications giant has been outweighed by the anticipated economic growth."

In 2015, the Chinese leadership launched the Made in China-2025 plan to push the United States as the dominant technology superpower. It turned out to be successful, since China is increasingly moving away from the position of global manufacturer of cheap consumer goods. A few years ago, Chinese smartphones were the object of ridicule, but now the latest models of Huawei are the pride of many gadget owners. In fact, the potential of the telecommunications giant are far from the only thing that worries the United States. For example, it recently became known that the U.S. administration was considering the possibility of preventing the supply of aircraft engines made by General Electric Co. for the COMAC aircraft of China. According to one version, due to restrictions, the U.S. could undermine the development of the COMAC aircraft, because China expressed confidence that local companies would be able to compete in sales with Boeing and Airbus. And this is just one example.

By the way, according to WSJ, General Electric opposed the cessation of supplies to China, since adopting advanced technologies is more difficult than members of the administration think. Which once again confirms the idea expressed earlier about the priority of financial interests. The U.S. is really concerned about China’s technological leap, but talking about national security or freedom of information in this context is just one layer of this concern.

Remarkably, Russia stands apart from the U.S.-China confrontation around 5G simply because it actively cooperates with China. Huawei launched the 5G test zone in Moscow, and Vladimir Putin even spoke out in support of the company, saying the U.S. was trying to "brazenly push the company out of the global market." The Kremlin declared 2020 the year of Russian-Chinese scientific, technical and innovative cooperation, with artificial intelligence being one of the priorities.

On the other hand, there is still no decision for allocating resources below 6 GHz suitable for creating 5G networks in Russia. The Russian Ministry of Defense opposed the transfer of frequencies between 3.4-3.8 GHz to mobile operators, which operate military satellite communications, special services and Roskosmos. Ministry of Communications proposed to develop a new standard at frequencies of 4.4-4.99 GHz, but there is no equipment for this range, and the local network is scheduled for 2025 only. Perhaps this way Russia also disguises its distrust to China. The reason is industrial plagiarism. For example, the Russian state defense conglomerate Rostech accused China of copying its technology. At the same time, the question is in technological asymmetry, as it is clear that China will not consider Russia an equal partner. But if Russia, like everyone else, does not digitalise production, especially in the mining and processing fields, it will start losing the market to competitors. Therefore, it is difficult to understand the tactics, if any, of Russia.

In general, the picture is quite clear and remarkable. New 5G network gradually becomes a specific marker revealing the causes and effects of the ongoing process. Allies of the future will be determined (or automatically become) based on who develops the latest technologies they use. Today, however, it was the outbreak of coronavirus in China that influenced the current situation. Many observers believe that it can, albeit temporarily, undermine confidence in China as a scientific and technological power. Time is just what the U.S. really needs now.