Let Freedom Ring Must Reads

To Boost 5G, Keep the Industry Free
By Robert M. McDowell
Regulating mobile broadband will hurt American innovation.

Europe and Asia are poised to surge past the U.S. when it comes to mobile internet innovation. At a White House summit Friday on next-generation mobile broadband, or “5G,” industry luminaries and government leaders will gather to discuss how America can retain its dominance in this vital economic arena. The focus should be giving private industry the freedom to innovate, invest and experiment.

Congress, local authorities, antitrust officials and the Federal Communications Commission must resist the urge to micromanage the next-gen wireless market. In January the National Security Council proposed a nationalized 5G network. This is precisely the wrong approach. Overregulation would crush next-gen wireless in its cradle.

Europe and Asia are still smarting over the U.S. having beaten them to the 4G finish line. By 2016, 4G added almost $100 billion annually to American economic output and created millions of wireless-related jobs. It also powered the rise of the “app economy” because tools like Uber, Airbnb, Netflix and Waze require superfast mobile speeds to work. Most apps weren’t even envisioned a decade ago; now nearly three-quarters of the companies in the global app economy are American, according to the advocacy group CTIA. Other countries know they will reap massive economic returns if they knock the U.S. off its perch as the 5G economy unfolds.

The advent of 5G will allow entrepreneurs to create new technologies and products that we don’t even know we need yet. Ten years ago most consumers didn’t have a smartphone; now most can’t live without them. All of this happened thanks to 4G. With 5G, mobile speeds could be 100 times as fast. This could enable driverless cars to avoid accidents, transform medicine through implanted medical devices, and produce smarter cities and energy grids through the emerging Internet of Things. Countries that build their 5G networks first will be in a better position to experiment with and deploy tomorrow’s technologies. Their first-to-market advantage could displace Silicon Valley and other U.S. tech cradles.

A 2015 National Science Foundation report on 5G network development concluded that “the United States is very much behind,” compared with Europe, South Korea, Japan and China. Since 2015, China has built about 350,000 cell sites, compared with fewer than 30,000 in the U.S., according to consulting firm Deloitte. That’s a huge competitive disparity because 5G requires far more cell sites grouped closer together than 4G.

America dominated 4G because the government largely got out of the way of risk-takers. U.S. regulators, unlike their European counterparts, didn’t try to mandate technical standards or require forced sharing of their wireless networks with competitors. Regulatory humility produced one of the greatest explosions of entrepreneurial brilliance in human history, the mobile internet.

Today the FCC is helping speed 5G deployment by modernizing regulations. Last December it removed utility-style regulations placed on wireless broadband by the Obama administration. On Sept. 26, it pre-empted localities from charging outrageous fees for 5G deployment. It is also gearing up to auction more spectrum in November to help connect the Internet of Things. Tax reform and the Trump administration’s broader deregulatory agenda have also created a more business-friendly environment.

But more should be done. Antitrust officials should update their definitions of markets to give more clarity to 5G entrepreneurs. As T-Mobile and Sprint argue in their merger filings, 5G and free Wi-Fi will compete head-to-head with cable broadband for in-home use.

Regulators also need to recognize that as 5G emerges, old categories are becoming scrambled. Consumers don’t necessarily know, or care, if their content comes from an online provider, a broadcaster, a cable channel or a “tech” company, so long as they can get it on their phone or tablet. Regulations must allow companies to invest, innovate, and merge in this new ecosystem.

China United and China Telecom may soon merge to create a massive 5G machine, and Japan promises to make the 2020 Tokyo Olympics a showcase for its 5G prowess. In this time of intense competition, American regulators can’t afford to concoct industrial policy or nationalize wireless infrastructure. Market-oriented policies have been the secret of America’s success in wireless. Regulators should stay out of the way.

 

Mr. McDowell, a former FCC commissioner (2006-13), is a partner at Cooley LLP and a senior fellow at the Hudson Institute.

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