Banning Huawei is Not in America’s Best Economic Interests Nor for Its Development of 5G

By Tim Danks, VP, Risk Management & Partner Relations, Huawei Technologies  

While criticism from various sources continues to focus on keeping Huawei out of the U.S., the ban on Huawei will ultimately harm the U.S. economy through the delay of 5G network deployment and adoption. Want proof? According to analysis conducted by economist Debra J. Aron, the ban could cost the U.S. up to $240 billion.

So why should the U.S. care about 5G? As 5G networks are deployed around the world, a faster and more widely connected future is quickly becoming the new reality. 5G networks will support 100 times more traffic than 4G, increase peak speeds from 4G by a factor of 20, and decrease latency from 4G by a factor of 10. These enhanced capabilities will enable transformative benefits and innovation in various industries, including self-driving cars, logistics, the Internet of Things, smart grid electric systems, public safety, health and wellness, and smart cities. 5G opens doors to a world full of potential. 

Throughout history, the U.S. has had a propensity for slowly embracing globally-adopted technology ecosystems, and as a result, has experienced delays in deployment of new wireless technology. Aron notes that this has happened before when the U.S. fell behind Europe in 2G and Japan in 3G. According to Federal Communications Commission Chairman Ajit Pai, the U.S. recognizes that mid-band spectrum is critical for 5G deployment and intends to release it to carriers in 2019-2020, but no concrete date has been established. 

In the U.S., AT&T, T-Mobile, and Verizon have deployed 5G using high-band spectrum, which is also known as “milliliter waves” with frequencies above 24GHz. The drawbacks of high-band spectrum are that it penetrates poorly through walls and other barriers and requires a high density of cell sites to provide continuous coverage over an area. This means it’s only practical to deploy high-band spectrum in dense urban areas and indoor locations, severely limiting the scope of its coverage. On the other hand, T-Mobile plans to deploy 5G in low-band spectrum, with frequencies of 600MHz. The shortcomings with this spectrum are its slow speed, in comparison to mid- and high-band, its narrow bandwidths, and its inability to support Massive MIMO size (a multiple input multiple output active antenna), which is key to increasing 5G efficiency. 

Massive MIMO increases network capacity and spectral efficiency, which ultimately provides better coverage. Aron finds that sales of Massive MIMO have accounted for around 82 percent of total 5G RAN equipment sales so far. Additionally, she says Huawei’s Massive MIMO equipment is far more widely used globally than that of any other vendor, with a 67 percent revenue share in LTE Massive MIMO and 32 percent revenue in 5G Massive MIMO.  

Among the leading companies in the world with significant expertise, investment and capabilities in the development and production of advanced wireless RAN equipment, Huawei is a top three Information and Communications Technology producer by R&D investment globally and in the top five of all companies by R&D investment globally.  Moreover, Aron verifies that Huawei holds the most 5G-related patents and submits the most technical papers to 3GPP to help develop the 5G standard, clearly demonstrating Huawei’s commitment to supporting and improving 5G technology.

Considering Huawei’s leadership and experience in 5G network deployment, banning Huawei will result in significant economic and technological repercussions. Aron determines that the price of RAN equipment, necessary to 5G deployment, will increase by 13 to 14.9 percent due to heightened market concentration in Huawei’s absence. She considers this price increase to be significant and damaging to social welfare. Currently, the U.S. RAN market is served almost entirely (89.2 percent) by only two vendors, Nokia and Ericsson. According to the Herfindahl-Hirschman Index, the absence of Huawei will cause the market for RAN equipment to increase from 3,000, which is already a highly concentrated market, to over 4,000. This is particularly concerning for more rural areas and may make 5G deployment unfeasible in those regions.

Additionally, a ban may lead to carriers being forced to “rip and replace” Huawei equipment that is already in place in their networks. Huawei has been and continues to be committed to supplying underserved rural communities in the U.S., so this move would adversely impact rural residents’ access to the technology, connectivity and opportunity they need to be competitive. According to CoBank research, it would require in excess of $1 billion and take three to seven years for rural carriers to “rip and replace” existing Huawei equipment (if the required replacement equipment was available, which is, unlikely) just to return to the current levels of connectivity.

Through mobile carriers’ expenditures and job creation, U.S. 5G deployment directly contributes to GDP. Speed in 5G deployment and adoption can make all the difference in who creates and benefits from the latest technology that will not only improve lives in America, but globally as well. In short, delaying 5G deployment and adoption means losing out on technological, thus economic advancement. So, what is the U.S. waiting for?