The FCC and Trump administration’s recent announcement of a third major 5G spectrum auction to repurpose more airwaves for next-generation wireless broadband, coupled with the creation of a $20.4 billion fund to help finance small cell infrastructure in rural areas, is the latest in string of aggressive moves to support the deployment of 5G services throughout the U.S.
And yet, as the global race to 5G intensifies and China’s government-controlled rollout gains momentum, some commentators in the U.S. are advocating for more federal government involvement in the 5G market. Former U.S. House of Representatives Speaker Newt Gingrich warned in February that America needed to re-assess its “laissez-faire tendencies” and develop a “carrier-neutral, wholesale-only, nationwide 5G network to be built in the next two to three years across the entire country.”
Creating a government monopoly over 5G is exactly the wrong strategy. Our nation’s crumbling highways and numerous failed high-speed rail projects are sobering reminders of the government’s capacity to manage large infrastructure projects.
Beating China to 5G will not be accomplished by mimicking its command-and-control governance policy but by unleashing the power of American free enterprise and maintaining a stable regulatory environment that incentivizes private investment.
No one questions the significance of this contest. The first-mover advantage in 5G will be enormous, setting up the victor for a decade of economic superiority and unprecedented technological growth. In 2017, research by the American Consumer Institute estimated that a nationwide 5G network in the U.S. would add $533 billion to our gross domestic product (GDP) and provide $1.2 trillion in long-run consumer benefits.
As a practical matter, 5G will leave scarcely an aspect of modern life untouched. Thanks to increased bandwidth, ubiquitous connectivity, and low latency, 5G will power everything from smart appliances and driverless cars to critical infrastructure and industrial robotics. It will also unlock new military and intelligence-gathering capabilities, making it even more crucial that the U.S. stay in the lead.
The federal government should focus on establishing and maintaining a simple, predictable regulatory framework within which private companies can compete fiercely for the benefit of the American consumer. The FCC has embraced that approach through its “5G Fast Plan,” which has removed onerous red tape, streamlined permitting, and accelerated spectrum auctions. The rapid strides the U.S. has made in 5G readiness over the last year are thanks to these policies.
Earlier this month, Verizon customers in Chicago and Minneapolis became the first in the world to gain access to a commercial 5G network from a smartphone. Several more carriers are expected to unveil 5G services in dozens of U.S. cities in 2019. In the last nine years, private companies have spent $226 billion on communications infrastructure — and analysts predict the industry will invest $275 billion and create millions of new jobs as each carrier vies for market dominance. Consumers will reap the benefits of reliable networks, cutting-edge services, and competitive rates.
Two chapters of our own history are worth pondering. On the one hand, the Bell System’s decades-long telephone service monopoly showed the effects of stifling competition in the telecom industry, resulting in stagnant innovation, low quality, and high prices. Conversely, America’s victory in the race to 4G — and the $100 billion in economic benefits we gained from it — was made possible by smart regulatory policies and vigorous free-market competition.
With the stakes higher than ever, no mechanism is more likely to deliver victory in the race to 5G than the ingenuity of open and free markets.