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dr Błażej Sajduk  10 października 2019

Construction of the 5G network. What is the economic and geopolitical game all about?

dr Błażej Sajduk  10 października 2019
przeczytanie zajmie 11 min

The increasing rivalry between the USA andChina leads to the statement that the catalog of areas in which countries compete for position on the international stage should be expanded. To theclassic (land, water, both on the surface and below, and air) and new areas(outer space and cyberspace) we should addanother one – the economic and technological sphere. 

5G as another strategic flow channel 

The widely understood technology has always been an important aspect of a state’s potential. In particular, a key role is assigned to technologies that have transformational potential, i.e. whose effective implementation qualitatively improves the strength of states. By transforming economies or the manner of communication, each such technology has contributed to improving the flow of strategic resources between states and economic entities in the past. In the past, such changes were triggered by the invention of wheel, steam engine and railroad, combustion engine and electricity, Internet and microprocessors. All these technologies had an impact on the volume and speed of communication, exchange of goods, raw materials, people or data. That is why they were being implemented, often with the state’s active support, which cared for improving its own economic potential. This potential depends on controlling the most relevant flows – the above strategic goods. Apart from being able to shape the flow’s direction and size, this control also involves its standard.

It is in this context that we should examine the emergence of the next generation of mobile communication technology, commonly referred to as 5G (the so-called New Radio standard, NG). This technology essentially affects the quality of communication and is qualified as the so-called game changer/disruptive technology and an element of critical infrastructure. In other words, it is a strategically vital technology for countries. Thus, it is almost certain that, like the examples mentioned above, it will be implemented, even despite the raised doubts, e.g. regarding its impact on human health.

Implementing 5G is given a geopolitical aspect by the fact that two most powerful countries compete in this technology. About a decade ago, China and its Huawei made a decisionthat 5G wouldbe one of the key technologies in which the Middle Kingdom would attemptto lead the way. Following the successes of European companies in the implementation of 2G and 3G technologies and Americans in 4G, we are now witnessing a race over whose solutions would dominate the 5G market.

In this case, the race analogy seems justified. With the crucial proviso that it is not only about who implements the technology first but also who manages to impose its solutions on a scale that will allow future profits to be made from it. This is not only about economic profits but also the benefits of the potential use of 5G infrastructure for one’s own political purposes. Washington is afraid

that it will lose to Beijing the advantage of intelligence, built since the appearance of the Internet, which was developed using the funds of the US Department of Defense. The great significance of this technology’s development and implementation for American services was brought to daylight when Edward Snowden revealed confidential materials. This advantage will not be easily given up, and the intensity of the struggle for it will be significant. Below are the five 5G features you should know about.

First of all, 5G networks feature a very low latency in signal transmission and unprecedented bandwidth and data transfer speed. For comparison, a healthy person needs about 300-400 milliseconds to wink. Delays in data transmission in the network are currently up to approx. 200 milliseconds. Whereas delays in a 5G network are to be mere milliseconds. Low latency in data transmission is the foundation of the so-called fourth industrial revolution and a key feature for the creation of autonomous factories and transport.

The 5G network is to be up to 100 times faster than the 4G/LTE network. And it will require high frequencies providing the ability to send large volumes of data, although over short distances. An astronomically large number of devices and sensors are to be communicated – there is even talk of tens of billions (even one million devices per square kilometer). As part of the marketing campaign targeted at individual network users, the operators emphasize that the very high download speed will make it possible to download e.g. all episodes of their favorite series in a few seconds. With the development of the network, the speed of receiving and sending data will probably become comparable and will depend only on the subscription. Currently, however, test networks (in Poland, USA and South Korea) allow data transmissionat speeds similar to those currently offered in the LTE-A (Long Term Evolution – Advanced) standard.

All this is necessary to implement the concept of the Internet connecting everything – providing a foundation for the vision of smart homes, factories and entire cities. There is also a security issue here as well, as the lack of delays in data transmission means that, for example, in the case of autonomous vehicle traffic or work of factory robots, there is no room for a situation where the exchange of information between sensors could be interrupted.

Second, to better capture the specifics of the 5G technology, we need to clarify (very simply) the structure of operation of the previous generation of mobile phone networks. There are at least three layers to it. Going over them from the lowest one – it consists of individual consumer devices. This is called the network edge, i.e. the interface between the provider’s infrastructure and the user. The devices connect to one another via base transceiver stations forming a radio network (Radio Access Network, RAN), which is also jointly responsible for connecting the individual device with the system of routers and network switches and for routing the signal to the network’s third layer, i.e. the backbone/core network, where data is exchanged between devices, including to provide cloud or Internet services. Due to the guaranteed transmission speedand the mentioned minimum latency, the 5G network will blur the difference between all these layers (especially RAN and core network). In other words, the speed of information exchange means that a potential threat introduced into the network will spread just as quickly as other data. However, some hope for reducing this type of threat may be brought with the possibility of easier separation of the network into smaller segments (network slicing).

Third, in order to be able to achieve the above properties, it is necessary to change the current network infrastructure, or actually create it from scratch for 5G. This involves the construction of a very large number of new base tranceiver stations responsible for signal transmission. Currently, the relays are placed 2 to 20 km apart. 5G requires reducing the distance  to several hundred meters. The cost of building the new infrastructure is to be immense – it is estimated at USD 2.7 trillion by 2020!

One should bear in mind that the telecommunications industry is still depreciating the recent investments in 4G and is not at all willing to incur new expenses. Economically speaking, the current situation on the market of equipment manufacturers, with the looming threat of oligopolies, is yet another problem. Huawei, ZTE, Ericsson and Nokia have the most comprehensive offer in the 5G range. The business model for 5G services will also require consideration. Using today’s data transfer rates may not work in a situation where users are able to download huge amounts of data in a short time. We are not yet able to predict some of the business opportunities that 5G will create – just as in 2007, hardly anyone understood how relevant the appearance of the first iPhone was for the market. A solution that increases competition on the services market will be the possibility of creating even larger and more advanced virtual networks based on existing physical infrastructure (virtualization), opening up the possibility of new entities appearing on the services market – even more suppliers and operators will be able to offer new services and subscriptions.

Fourth, the significant advantage that Chinese manufacturers have in this technology can already be seen. Chinese telecommunications companies are very active in the international organization 3rd Generation Partnership Project (3GPP), setting future standards for the functioning of the 5G network. These works are necessary so that, to use an illustrative example, devices from different manufacturers can communicate with one another or for an autonomous car to be able to drive between different cities or countries.

Huawei’s commitment to this process can be demonstrated by the fact that by mid-2019 it posted a total of 1,717 employees to work on the meetings (for comparison: Ericsson posted 1171 and Samsung 1116) and submitted 1554 applications regarding ICT solutions (for comparison: 1427 applications by Nokia and 1316 by Samsung). So far, Huawei has built 2/3 of the existing 5G infrastructure and, by April 2019, signed 40 contacts for its construction, compared with 34 contracts by Nokia and 18 by Ericsson.

Huawei’s advantage over the competition is not only due to the fact that the Chinese technology giant’s offer covers all elements of the 5G network and offers lower prices than competitors (also resulting from favorable loan crediting terms) but also from the potential technological advantage regarding (to put it in simple terms) the data coding method used to improve data transmission speed. While the  coding method used in earlier telecommunications networks (low-density parity check, LDPC) was being further developed in the USA, Huawei has been developing and successfully lobbying for adopting its own solution (the so-called polar codes).

Both standards are currently recognized and operate in parallel. Which solution becomes dominant will be decided along with the growing amount of infrastructure built. Thus we can see that the Chinese are trying to both dominate inter-network communication methods and impose their own coding standard in general.

Fifth, since 5G is a de facto a network of microprocessors, which enable the operation of this technology and are present in every device using it, this means even greater importance of trust in the manufacturer/supplier of the equipment used in implementing this technology. This is particularly crucial in the context of software updates (in general, this involves countless lines of code that make up the whole that is overwritten during further updates), which may potentially contain

gaps. Furthermore, the effective functioning of 5G will have to use machine learning/AI on a much larger scale to ensure e.g. prioritizing network traffic, which is related to the nature of decisions in public policies. The point is whether, figuratively speaking, in the case of transfer issues, priority should be given to remotely performed operations or the movement of autonomous cars?

Geopolitical competition 

Only time will tell whether telecommunications companies will be able to meet the expectations that have already been raised. If so, it is very likely that 5G will be built insularly, both at the level of countries (a group of leading states will stand out) but also at the intrastate level – the city-country division will be deepened, since areas outside large metropolises will have to wait much longer for 5G-related improvements to be implemented. The division will also apply to specific areas in cities.

Experts point out that effective deployment of this technology could generate $12.3 trillion by 2035 and help create 22 million jobs. The largest beneficiaries of this technology will be the countries that already have a substantial industrial base. It is estimated that 26.1% of growth generated by 2030 by means of the 5G technology will fall to China and 14.5% to the US.

In other words, in terms of the states’ potential, this may mean that the two most powerful actors would maintain their distance from the others and that a fierce competition may arise between them for the first place. For the position Washington has been guarding jealously since the end of World War II.

The world’s two major economies are competing with each other in an increasingly determined manner, so the technology that allows increasing one’s own potential has become one of the grounds of competition for dominance and perhaps the beginning of a new division of the world.

The ban on using Huawei components has already been introduced in the US, Australia, Japan and Taiwan. On the other hand, in February 2019, the largest Turkish mobile network operator (Turkcell) stated that, together with the Chinese technology giant, it will begin construction of the 5G network, and in June 2019 the largest Russian mobile operator (MTS) signed a similar agreement. It is noteworthy that both countries have increasingly difficult relations with Washington.

We will have to wait at least a few years to eventually see whose solutions and standards will be adopted. By September, the European Union is to publish conclusions from the risk analysis related to the implementation of 5G, although nowhere have Chinese manufacturers been explicitly indicated as a source of potential threats. For Poland and post-communist countries, giving up the cheapest Chinese solutions in this regard would mean having to spend additional billions on investments.

Polish version is available here.

Publication (excluding figures and illustrations) is available under Creative Commons Attribution 4.0 InternationalAny use of the work is allowed, provided that the licensing information, about rights holders and about the contest "Public Diplomacy 2019" (below) is mentioned.

The publication co-financed by the Ministry of Foreign Affairs of the Republic of Poland as part of the public project "Public Diplomacy 2019" („Dyplomacja Publiczna 2019”). This publication reflects the views of the author and is not an official stance of the Ministry of Foreign Affairs of the Republic of Poland.