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Commentary By Charles Hughes

Nationalizing 5G Network Would Be A Massive Mistake

Economics Regulatory Policy

A recent memo and presentation by a staff member of the National Security Council suggested that the federal government should build and operate the fifth-generation mobile network, or 5G. The report argues that the federal government should build a centralized 5G network within three years, citing the need to protect against actions from China or adversarial actions from other groups.

The 5G network will be important for the development and operation of a number of different emerging technologies, including autonomous vehicles, virtual reality, and a whole range of other, internet-connected smart devices.

Some suggest that 5G will be as much as 10 times faster than the current standard, and it could attenuate concerns for consumers about data limits. According to a report from Accenture, a consulting company, the deployment of 5G would create as many as three million jobs and boost GDP by $500 billion. Given the prominence 5G will play in the coming years, it is reasonable to think about how to help facilitate its development and proliferation. However, the proposal outlined in the National Security Council (NSC) memo is severely misguided and would be counterproductive. It should not be given further consideration.

The proposal would be a significant departure from the current state of affairs, in which private companies lease spectrum from the federal government and builds their own systems. Some of these private companies have already begun investing in the infrastructure and development that would be needed to roll out their own 5G networks and the total amount of associated investment could run as high as $275 billion. AT&T has already announced that the first smartphones able to support 5G will be on the market sometime this year, and it will launch 5G in at least a dozen cities in 2018.

Anything along the lines of nationalization would disrupt the investment and innovation that is already taking place, and significantly deter these companies from investing in the future. The three-year deadline is completely divorced from the constraints and considerations that drive these decisions in the marketplace. These private companies have substantial incentives to roll out their next generation networks as soon as they feasibly can.

Companies estimate that it would take them almost a decade to fully build out their 5G networks, and they are far ahead from the point where any efforts by the federal government would start. A three-year target would not be practical, or if somehow the network was built, it would be replete with vulnerabilities.

The federal government’s record in terms of securing data and shielding against antagonistic actions from other actors is far from sterling. In 2016, the Office of Personnel Management was breached by hackers who came into possession of the millions of records of government employees, and the Securities and Exchange Commission was breached in the same year. Even if the concerns about security were well-founded, nationalization would not necessarily do anything to allay them, and could increase risks.

Both Federal Communications Commission members and White House officials have come out strongly against the proposal. 

FCC Chairman Ajit Pai released a statement saying he opposes any proposal for the federal government to build a 5G network. He goes further to say that the experience and American success in wireless networks to date suggest that the market is better positioned than the government to foster innovation and investment. He called any federal effort to construct a nationalized 5G network a “costly and counterproductive distraction.”  The other four FCC commissioners, including both Democrats, quickly announced that they held similar views on the issue.

Multiple people within the White House told reporters that the memo and presentation were dated, and were merely a suggestion from a staff member, instead of an indication of the Trump administration’s policy towards 5G or any impending proposal.

Due to the opposition, it is unlikely that 5G nationalization will become reality, although NSC spokesperson Marc Raimondi declined to close the door completely, saying only that “all options are under consideration.”

Notably, Chairman Pai does see a productive role for the federal government by making more spectrum available to commercial carriers and establishing a framework that encourages private investment and technological development. At the more local level, those governments can support the development of 5G by granting the permits needed for related infrastructure and keeping associated fees and taxes manageable.

It is welcome news that the NSC staff member’s proposal to nationalize the 5G network does not seem to have much support, because it would create a whole host of serious problems and disruptions without necessarily addressing the concerns about security.

Moving away from the flexible market-oriented system that has led to the successes to date towards a top-down, government-controlled nationalized 5G network would be a grave mistake. Governments at all levels do have a role to play in supporting the next generation of mobile network, but nationalization should most certainly not be a part of it.

Charles Hughes is a policy analyst at the Manhattan Institute. Follow him on Twitter @CharlesHHughes

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