The notion that the U.S. needs to funnel money to European infrastructure providers Ericsson and Nokia or somehow foster a homegrown rival to Huawei raised more than a few eyebrows this week.
For one thing, Ericsson and Nokia are doing pretty well on their own, and Huawei is embroiled in a fight with the U.S. government over security, so its elimination from the competition is well orchestrated. For another, the whole idea appears to be totally anti-competitive, so where does that lead us?
The Financial Times cited Washington, D.C., officials, whose thinking goes along these lines: The best way to counteract Huawei’s dominance is to ensure its rivals can match the Chinese company’s multibillion-dollar credit lines from China’s state banks that allow it to offer much longer payment terms than most of its rivals.
The article also said that others are pushing instead to foster a homegrown rival to Huawei and asked large American companies like Oracle and Cisco whether they would consider entering the radio transmission market. Both companies reportedly rebuffed such suggestions, saying it would be too expensive and time-consuming to do so.
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The White House declined to comment to the publication, which said the Trump administration is also looking closely at incentives to encourage U.S. companies to invest in new 5G technology, including software that enables pieces of equipment from different companies to communicate with each other. (Nevermind that companies are already doing this on their own.)
These ideas conjured up images of some earlier comments from the administration suggesting that the U.S. build its own nationalized 5G network. That pretty much went over like a lead balloon, and the administration eventually held what appeared to be a Village People-inspired event at the White House with FCC Chairman Ajit Pai that doused that scheme, presumably once and for all.
Analysts’ interpretations
I asked some long-time industry analysts if they think the U.S. is at a disadvantage because it doesn’t have a U.S.-based end-to-end 5G vendor. Nokia, based in Finland, bought New Jersey-based Lucent Technologies and Bell Labs in 2016, largely because they provided an end-to-end product line, something Nokia has been selling to clients as an advantage over Swedish rival Ericsson.
“The U.S. government is shutting the door after the horse has bolted,” remarked Geoff Blaber of CCS Insight. “Mobile network infrastructure has long since shifted to Europe and China. What’s key now is that it nurtures the companies that are at the heart of 5G standardization and development.”
He also said the lack of a U.S. leader in network infrastructure is a bigger problem for the government than it is for the carriers. “Carriers have enjoyed steady price erosion on network kit thanks to intense competition. Any change to that dynamic risks slowing 5G deployment in the West right as China lights up 5G at unprecedented scale,” he said.
Monica Paolini, president of Senza Fili, said she doesn’t think the U.S. is at a disadvantage. With 5G specifically, “I think the U.S. is doing extremely well in terms of technology.” A lot of big technology companies are based in the U.S., and “we are at the leading edge in 5G. I’m not worried about it.”
Technology is global, and vendors and operators contribute to the standards from different markets. While some countries are home to bigger vendors, Paolini said, “I don’t see where there is a problem… When I talk to operators or vendors, I never perceive that to be an issue. Nobody in the U.S. thinks that we are at a disadvantage compared to anybody else. In fact, I would say, we’re doing pretty well.”
She pointed to Citizens Broadband Radio Service (CBRS) in the 3.5 GHz band. That’s a unique system for sharing spectrum and it’s putting forward a new model—one the U.S. deserves to take pride in.
Chris Nicoll, principal analyst, Mobility and Wireless Networks at ACG Research, worked at Lucent for a number of years. “I think the U.S. is one of the leaders when it comes to 5G R&D, but not having a large telco vendor to help drive that technology into the marketplace puts the U.S. at a disadvantage,” he said. “The success of the Brooklyn 5G Summit, sponsored by Nokia and NYU, showcases some of the most leading edge technology being developed in the U.S. and that is just one of the centers doing such work. China has certainly ramped up its innovation work, but the U.S. I think still has a key edge.”
Like others, he has not heard operators complain about not having a U.S.-based end-to-end supplier. Both smaller and larger vendors are stepping into the Huawei void and not just radio vendors. Optical companies such as Ciena are benefiting, but U.S. companies such as Airspan are also seeing more interest and benefiting from their own relationships with the larger operators.
The suggestion that the U.S. is lacking in telecom equipment expertise ignores what’s already happening in a large segment of the industry.
Stéphane Teral of IHS Markit noted that the U.S. does have homegrown innovative technologies in the open RAN domain led by Altiostar, Mavenir and Parallel Wireless that are building serious momentum worldwide and backed by large leading service providers—including AT&T, Deutsche Telekom, Orange, Telefónica, Telecom Italia, Verizon and Vodafone, to name a few.
“Open vRAN is definitely where the telecom world is going. And yes Cisco, backing Altiostar, and Oracle are well positioned to eventually step in,” Teral said. He also noted that the vendor financing movie has run its course in previous generations. “Remember the beginning of this century with undersea fiber networks and terrestrial fiber optic backbone exuberance, we all know how it ended. That’s also part of the reason why we only have a handful of global network equipment vendors left.”
Having gone to the Huawei Analyst Summit this year, Bill Ho, principal analyst at 556 Ventures, said they made a big push for consolidating their equipment to minimize footprint. They showed footprint and weight savings, but in the U.S., it’s all about not having one or two vendors control everything.
Having manufacturing in the U.S. is always a good political call. But when dealing with several vendors, “one wants all the service features enabled and that interoperability testing is done ahead of any commercial launch to avoid any service outage threats,” he said, adding that infrastructure vendors—think Cisco, Intel, CommScope and others—hold some piece of the pie, but it’s also important to remember others who enable 5G use cases, including Qualcomm, Magic Leap, AI shops and more.
Initiatives like Open RAN are attempting to get more vendors to work better together. One issue with AI is having access to the data; data typically is collected from different vendors and if every vendor has its own proprietary way to deal with that, that’s to the disadvantage of the industry, Paolini said.
In reality, a number of players exist in the market and to restrict the discussion to three does not recognize the contributions that companies bring to 5G and the industry in general. “We need to encourage diversity,” she said. “We need to encourage big vendors and small vendors. They all bring something to the table. Operators can choose which ones they want.”
Therein lies the crux: Operators want choices and not vendor lock-in. We should be encouraging innovation in the wireless ecosystem so operators have more and better choices, rather than fabricating a need for one big domestic supplier.—Monica @malleven33