By: Josh Cervantes
After employing a panoply of unsuccessful measures designed to seal off Chinese telecommunications giant Huawei from the U.S. market and those of its allies, Attorney General William Barr in early February offered a bold, new approach: frustrating Huawei’s domination of the 5G market by having the U.S. State Department take a controlling ownership stake in Finland’s Nokia and Sweden’s Ericsson, two of Huawei’s arch rivals. Barr’s suggestion is in line with a U.S. campaign designed to reduce Huawei’s footprint around the world due to concerns that the company could, at the direction of the Chinse Communist Party, use its technology to spy on foreign governments and other entities that China considers a threat.
Suggesting that such a move be carried out “either directly or through a consortium of private American and allied companies”, Barr envisions a not-so-distant future where all U.S. 5G infrastructure and operations are carried out by domestic firms, with the exception of Ericsson and Nokia, given their significant U.S. presence.
However, if Barr’s ambitious plan were to be executed, it may leave taxpayers on the hook for a massive bill while potentially providing only minor security benefits in the national security realm. These considerations beg the question: is Barr’s plan actually worth it?
Barr’s plan would initially require paying satellite operators to vacate their allocated spectrum frequencies to make room for 5G services. Key to the success of the plan is having the FCC rapidly auction off C-band spectrum that is currently utilized by several space station (satellite) operators, including Intelsat, SES, and Eutelsat. In a hotly contested vote earlier this month, the FCC voted 3-2 to free up to 280 MHz of C-band for 5G, allocating at least $9.7 billion for accelerated relocation payments to the companies currently occupying the spectrum. These funds would be paid to companies in exchange for quickly vacating the desired C-band spectrum, after which a public auction for the spectrum would be held by the U.S. government. Companies occupying the desired spectrum were previously unified under the banner of the C-band Alliance but as the prospect of vacating the spectrum has materialized, these companies have turned on each other and began requesting separate payments for opening the spectrum. The requested compensation appears likely to dwarf the $9.7 billion allocation from the FCC.
Considering that Ericsson and Nokia have a combined market capitalization of approximately $50 billion, the cost of purchasing a controlling stake in both companies could enormously inflate the bill for U.S. taxpayers. This situation could be avoided, however, if the “consortium of private American and allied companies” Barr referenced in his statement were to come together and purchase controlling stakes in the companies. While not implausible, the possibility of such a move occurring in the immediate future- a crucial part of Barr’s plan- is questionable at best, as the coronavirus continues to rout global markets and curb major investment. For now, Barr’s plan would likely require the U.S. government—the American Taxpayer—to foot the bill for controlling stakes in Ericsson and Nokia.
Prominent U.S. allies have already allowed Huawei to install telecom infrastructure or are courting the idea. The U.K., a member of the Five-Eyes Alliance, announced it would allow Huawei to “play a limited role in its next generation 5G mobile networks.” While Germany wrestles with how much access Huawei should have in the 5G market, Huawei is working on building a 5G equipment factory in France. These developments—coupled with wider adoption of Huawei’s technology throughout the EU—suggest that if even if Barr’s plan is successful, it will provide only marginal security enhancements because the U.S. would likely be forced to curtail the amount of information it shares until new security protocols are implemented. Moreover, Barr’s plan appears to overlook a crucial paradigm shift in the U.S.-E.U. security apparatus: the current system is already being upended; Chinese technology will be used by the E.U. regardless of U.S. efforts to persuade it otherwise.
The State Department, AG Barr, and the wider U.S. intelligence community must ask itself: is the juice worth the squeeze? It appears that Barr’s plan may provide only modest security protections at the cost of upending our intelligence sharing agreements with crucial allies around the globe. If the U.S. is to effectively counter Huawei’s march toward global domination, it must find solutions that can adopted by its partners abroad, not just here at home.