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UK, Philippines Side With Huawei: Why is the US Behind on 5G?

Summary:
In a global 5-G battle, Trump has forced nations to take sides. The EU, UK, and the Philippines will buck Trump. The Wall Street Journal reports Philippines Has Chosen Sides: Not the U.S. The U.S.-China technology war is raging around the world, but the Philippines is no longer torn. It is binding its telecommunications future to China’s. The country got its first taste of next-generation 5G services in late June with gear supplied by Huawei Technologies Co. This month, a new carrier backed by state-owned China Telecommunications Corp. will begin rolling out a network largely designed in China, to be executed by Chinese engineers in the Philippines. The moves are a blow to the U.S., which has in recent months pushed allies to shun Huawei. U.S. officials contend Chinese companies could

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In a global 5-G battle, Trump has forced nations to take sides. The EU, UK, and the Philippines will buck Trump.

The Wall Street Journal reports Philippines Has Chosen Sides: Not the U.S.

The U.S.-China technology war is raging around the world, but the Philippines is no longer torn. It is binding its telecommunications future to China’s.

The country got its first taste of next-generation 5G services in late June with gear supplied by Huawei Technologies Co. This month, a new carrier backed by state-owned China Telecommunications Corp. will begin rolling out a network largely designed in China, to be executed by Chinese engineers in the Philippines.

The moves are a blow to the U.S., which has in recent months pushed allies to shun Huawei. U.S. officials contend Chinese companies could be compelled to conduct espionage for Beijing.

Huawei, which has repeatedly said it wouldn’t spy for China, estimates its 5G equipment will spread across more than 130 countries, including in Europe. Huawei’s 5G system is up and running in South Korea and will be deploying in the United Arab Emirates this year. Both countries are U.S. allies.

Chinese companies’ dominant presence in Philippine telecom networks stands to move the Southeast Asian country further away from the U.S., its treaty ally—testing a relationship that has already grown strained.

No Technical Reason to Exclude Huawei

The Register reports MPs Find 'No Technical Grounds' to Exclude Chinese Giant.

The UK's Science and Technology Select Committee said it can't find any "technical grounds" for chopping Huawei out of the UK's 5G and other telco networks, but said government should consider "ethical" issues and its relationship with "allies".

The committee of Commons MPs wrote in a letter (PDF) to Minister of Fun [Secretary of State for Digital, Culture, Media and Sport] Jeremy Wright that Huawei's involvement in the 5G network posed no techie issues, excepting, of course, the not-so-minor point that if the country pulls the Chinese firm's kit from either its current or future networks, it could cause "significant delays".

The UK will have to choose between bowing down to Trump and doing what it thinks best.

Huawei in Germany

Earlier this year, Angela Merkel Ignored Trumpian Pressure to ban Huawei in 5G auction.

“There are two things I don’t believe in,” Merkel said in an onstage discussion on Tuesday at the Global Solutions summit in Berlin. “First, to discuss these very sensitive security questions publicly, and second, to exclude a company simply because it’s from a certain country.’’

European carriers have warned governments that sidelining Huawei would delay fifth-generation networks by years.

The threat escalated when Nato’s Supreme Allied Commander in Europe, US General Curtis Scaparrotti, warned Germany that Nato forces would cut communications if Berlin were to work with Huawei.

NATO Threat

If the US will not share sensitive NATO data with Germany, so what?

Heck, it's likely a good thing to not listen to US propaganda about Russia, Iran, or whatever.

What's It Really About?

The US is just as likely to have security back doors as China, if not more so.

This isn't really a security.

Rather, 5-G is Tied Up in Trump's Trade War Disputes.

What do 5G and the Chinese telecom-gear maker Huawei have to do with the escalating trade war between the US and China? In a word: everything. 5G, the next generation of wireless, will not only allow you to download an entire season of Stranger Things in minutes, but also serve as the foundation to support the next generation of infrastructure, including billions of internet-connected devices powering smart cities, cool new VR and AR applications and driverless cars.

"The leader of 5G stands to gain hundreds of billions of dollars in revenue over the next decade, with widespread job creation across the wireless technology sector," the Defense Innovation Board, a group of American business leaders and academics, said in a report for the US Department of Defense earlier this spring.

How's the US Doing? 

Wireless industry trade association the CTIA claims the US is "tied" with China. And it's advocating for policy objectives to keep pushing the US toward dominance. But the Defense Innovation Board offered a more dismal outlook. In its report issued in April it offered a scathing assessment: "The country that owns 5G will own many of these innovations and set the standards for the rest of the world," it said. "That country is currently not likely to be the United States."

Why is the US Behind?

  1. China has invested massive amounts of money in companies such as Huawei to develop 5G technology, to great success.
  2. Chinese companies hold the majority of the world's 5G patents. The Chinese government also controls China's wireless service market and is pushing its three major providers, China Mobile, China Unicom and China Telecom, to combine efforts to develop a standalone 5G network that'll commercially launch in 2020.
  3. There are no major US companies building and developing 5G telecom equipment. Thanks to decades of market consolidation, US companies once dominant in providing telecom gear have been sold to foreign companies.
  4. The defense department assessment is the US hasn't been quick enough in making available the wireless spectrum that's essential to deploying the service. And the spectrum the US is making available is the wrong kind.
  5. The US has been allocating a lot of so-called millimeter wave or mmWave spectrum, which can transmit huge amounts of data very fast. But signals can travel only over short distances, and interference like trees or even bad weather can disrupt service. The problem with using this spectrum is that it's hugely expensive to build a network this way. And it'll be impossible to blanket the nation with the service, because it'll be too costly.
  6. The US needs midband and low-band spectrum in the mix. The only problem is that the prime spectrum that could be used for this service is already being used by the military. And getting government agencies to share spectrum with commercial entities is no easy task.

Trump Prepares to Ease Ban

On May 24, Venture Beat reported Trump’s Glib Approach to Huawei Invites Nasty Unintended Consequences.

The U.S. government has spent the last year and a half making the case that Huawei is an international security threat — a telecommunications hardware company that could help China’s government surveil communications and seize control of 5G-networked assets. But President Donald Trump suggested yesterday that this “very dangerous” company may not be such a threat after all as the U.S. might be willing to look the other way if China agrees to a trade deal.

Does this sound like pay-to-play politics? Of course. After the last two years, is anyone even slightly surprised that Trump would shrug off international security concerns to settle an economic dispute? Of course not.

Regardless of how this situation plays out, Trump’s glib attitude toward trade relations with Huawei is inviting highly unpleasant and long-lingering consequences. The most obvious: Foreign rivals now can plausibly argue that the U.S. targets individual companies to force political outcomes, which is effectively an economic form of hostage-taking.

No Trust

The current state of affairs is likely irrelevant. It can change on a whim for any reason or non-reason.

Companies may seek to install Huawei equipment only to be told days or even hours later they need to rip it out.

There is no reason to believe any decision Trump makes will stick.

You cannot run a business this way and you shouldn't run a country this way either.

Mike "Mish" Shedlock

Mike Shedlock
Mike Shedlock (Mish) is a registered investment advisor representative for SitkaPacific Capital Management (http://www.sitkapacific.com/). Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

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