You’re driving through a small town and need to make an important call. You stop, pull out your cell phone, dial, and—nothing happens. There’s no signal.
You decide to check the number again on your email, and the same thing happens: no signal. Except you’re not in the Painted Desert or on the Greenland ice shelf, you’re only thirty or forty miles outside Washington, D.C. or Memphis, Tennessee. No signal, and yet you’re paying higher rates for phone and data than in any other country in the world.
There has to be a better way, you think, and you’re right. There’s 5G, the next generation of wireless service, which can mean faster, better, and wider wireless coverage across America, including to its remote rural areas.
That’s why president Trump has become a dedicated fan of 5G. As he wrote in a recent Tweet, “I want 5G, and even 6G, technology in the United States as soon as possible. It is far more powerful, faster, and smarter than the current standard. American companies must step up their efforts, or get left behind. There is no reason that we should be lagging behind…..”
The question is, how to get there. The country that leads the way in 5G will dominate the world’s economies in the 21st century—-something the Chinese understand. That’s why they’re working overtime to get as many countries as possible enrolled in using China’s biggest 5G operator, Huawei. As we noted in our last column, Huawei has enrolled more than 64 countries, including some of our closest allies, and show no signs of slowing their 5G offensive.
America needs to move quickly to catch up. That may mean introducing radical changes in the way operators and carriers like AT&T and T-Mobile get access to spectrum.
Today, the primary way the government makes wireless spectrum available is through exclusive licensing to the highest bidder. This turns large and valuable swathes of spectrum over to a very small number of retail carriers, who often have had to pay out billions of dollars in order to have the winning bid. Ever paid more than you wanted for an item on eBay? Companies like AT&T have that experience all the time.
That layout leaves them saddled with high levels of debt, which means they have to extract every possible dollar from their customers in order to cover their costs. That doesn’t even include the cost of building out infrastructure and upgrading hardware, phones, and networks. In 5G’s case, with its demand for miles and miles of buried fiber optical cable as well as thousands, possibly millions, of new cell towers, those costs will be exorbitant.
That means the big carriers will be spending tens of billions of dollars before they make a single cent of revenue. That’s going to slow the pace of innovation and development, because retail carriers won’t have the capital to spend on network upgrades like quantum, until it becomes essential.
It also means with just a handful of giant nationwide retail carriers, there’s less pressure on companies to stay ahead of their rivals in terms of network performance. For example, U.S. prices for data currently retail at up to ten times the price in Germany, and other European countries.
According to a new study from Finnish research firm Rewheel, the U.S. mobile data market has the fifth most expensive price per gigabyte smartphone plans among developed nations, and was the most expensive for mobile data overall.
Finally, it means companies that provide niche services such as telemedicine and smart electric grids, or that serve less populous areas where the big national carriers don’t have money to invest, won’t have a place to enter the 5G sweepstakes. In other words, don’t expect that experience of dropped service out in the boondocks, to change much even with 5G.
But what if we changed the way that spectrum gets allocated in the first place? What if we allowed bandwidth to be distributed in real-time directly to users instead of being permanently reserved for the highest bidder?
That’s what key members of the Trump administration, including President Trump himself, are looking into. And they’re starting by using a small section of the bandwidth usually reserved for the Pentagon to test a new model for spectrum allocation, called the wholesale open access model.
It would operate the way most of us pay for the electricity we use, including customers large and small. The open access model lets actual users lease spectrum directly from the government, at a price based on the cost of service rather than the price the retail carriers need to set to recoup their large investments. The result would be a dramatic drop in the price of wireless service, and would mean a much more diverse marketplace for spectrum, including 5G.
At the root of the problem right now is the financial pressure the current system places on carriers, to keep consumer prices high and the pace of new products relatively slow. The open access model would do the opposite.
Full disclosure: one of the companies advocating the open access model also supports my work on quantum standards. So don’t just take my word. Here’s Professor Kevin Werbach of the Wharton School of Business, writing in the New York Times:
Making capacity available in real time at market prices limits hoarding and encourages innovation. Unleashing our brilliant start-up ecosystem through such market mechanisms, along with opportunities for unlicensed access to wireless capacity, is America’s best hope to beat China in 5G.
Nor would the big carriers be frozen out. AT&T, Comcast and Verizon can still buy capacity along with Apple, Amazon, Walmart, Uber and the small operator dedicated to serving rural areas. And technical innovations such as making 5G networks quantum-safe and quantum-capable can come faster, because the overall cost of securing spectrum will dramatically fall, as well.
The Trump administration is realizing this, just as they realize adopting the open-access model can bring wireless and broadband to rural parts of America that might never see it otherwise.
This isn’t distorting the free market, this is making free market competition work for us, against of against us.
The Chinese won’t like the new model, either. Huawei and the Chinese network-equipment industry like the existing model as it applies in other countries, with its large debt-ridden operators and carriers who need the Chinese to help cut costs. Shifting the model to one with a faster pace of innovation and a focus on coverage and network capacity will wreck a strategy Beijing has spent two decades perfecting.
Will it work? Using a small portion of DoD’s spectrum as a test case, we may be about to find out.
It won’t be the only 5G network available: AT&T and the other carriers will continue to build their own 5G networks the old-fashioned way. But what the Trump administration is hatching, could be the start of something new and unprecedented.
And done right, President Trump’s dream of a strong and secure American 5G network could be coming true, including to a small town near you.