Why 5G Phones Are New Focus of Freakouts About Huawei
(Bloomberg) -- For years, the world has been looking ahead to 5G, the next generation of wireless networks, as the solution to growing demands for mobile data and the gateway to a reality of connected toasters, self-driving cars and robot surgeons. But just as its rollout was gathering speed, a wave of alarms were sounded. Would 5G bring new levels of connectivity or unprecedented risks? Many of the suspicions center on Huawei Technologies Co., China’s largest tech company, which was indicted by the U.S. Justice Department in January on charges that included industrial espionage. President Donald Trump is considering other moves to keep Huawei away from 5G in the U.S. Some telecommunications companies worry that too strict a crackdown will bring price hikes or disruptions in supply.
1. What’s 5G?
5G simply stands for fifth-generation mobile networks or fifth-generation wireless systems. It will be the successor to 4G, the current top-of-the-line network technology first introduced commercially in 2009. 5G could end up being 100 times faster than 4G, with speeds that could reach 10 gigabits per second. This would allow a full-length high-definition movie to be downloaded in seconds. 5G will also increase transmission speed and total bandwidth, which will be needed to accommodate added demand from the “internet of things” -- the ballooning number of objects ranging from refrigerators to traffic lights to dog collars sending and receiving data.
2. What are the security worries?
The new system’s ubiquity. 5G isn’t easier to hack than its predecessors, but it will eventually connect many more devices than in the past, so protection from outside malign forces becomes a larger concern. Some nations are worried that Chinese 5G equipment, chips and software could be outfitted to spy on other nations. In August, Australia banned Huawei and ZTE Corp. from supplying 5G wireless equipment to its telecommunication operators, citing national security. Verizon and rival AT&T have dropped plans to sell Huawei phones. In March, Trump blocked Broadcom Ltd. from acquiring Qualcomm Inc., the biggest maker of mobile phone chips, on concerns that the merger would help give China an edge in the race to develop 5G.
3. What else is being done on security?
Governments in the U.K., Germany, France and other places are weighing whether to restrict Chinese gear from new networks, as the Trump administration steps up efforts to have key allies ban Huawei. Trump is also considering an executive order to erect barriers to the company’s doing business in the U.S. Separately, the Federal Communications Commission is considering banning the use of some federal subsidies for networking gear from firms suspected of being a national security risk, such as Huawei. Some small rural carriers use Huawei networking gear, citing its low cost.
4. How big are the dangers?
Even more than current technology, control over 5G networks could allow an enemy to wreak mass industrial sabotage and social collapse, according to U.S. officials. While today’s wireless systems connect a few devices like our phones and computers, 5G promises a radio wave-rich environment where billions of chips, sensors, cameras, appliances and electronics around us will be interconnected, pinging information back and forth. By 2024, the amount of data carried by mobile networks will be five times greater than it is today and 5G networks will cover more than 40 percent of the world’s population, according to Ericsson AB, the Swedish maker of wireless networks. It estimates that more than 22 billion gadgets will be connected to the Internet of things by 2024.
5. What else are officials worried about?
Spying -- in particular about suspected ties between Huawei and China’s intelligence agencies. The European Union’s digital chief Andrus Ansip has urged companies to reconsider partnerships with Chinese companies due to an intelligence law, passed in 2017, that says any organization and citizen must assist Beijing’s spy agencies with investigations. While there’s no explicit evidence that the company’s products are compromised, it’s very difficult to know for sure -- a risk the U.S. argues is too big for critical infrastructure like 5G.
6. What does Huawei say?
Huawei has repeatedly rejected allegations that it is an enabler for Chinese espionage, and has said that blacklisting the Chinese company without proof will hurt the industry and disrupt new high-speed technology. Despite fear and speculation, there has been no convincing evidence that national security is in jeopardy, according to Huawei. The company commissioned a legal opinion to analyze the consequences of the 2017 law and has said that it doesn’t require Huawei to cooperate with state intelligence if it would contradict the legitimate rights and interests of individuals and organizations. Billionaire Huawei founder Ren Zhengfei used a rare press appearance in January to insist the company doesn’t help Beijing spy.
7. What do phone companies think?
Telecommunication companies have warned about costs that would rise if Huawei were cut out of supplying 5G equipment. Any bans on Huawei would have a “significant implication” for European carriers’ costs as they roll out 5G and create “significant delay,” Vodafone Group Plc. Chief Executive Officer Nick Read said in January.
8. What else is at stake?
The provider with the first working 5G network may take an immediate lead in sales and get a reputational boost. In the five years after Verizon was first to launch 4G LTE service in 2010, it increased its average share of new subscribers to 41 percent from 36 percent. Companies that have contributed patents to the 5G standards stand to make billions of dollars in licensing fees alone. Qualcomm will get a top charge of $13 for every 5G handset sold, Ericsson’s cap is $5 per device and Nokia’s is 3 euros (about $3.50) each, according to Bloomberg Intelligence. And everyone who wants 5G mobile service will need a new phone.
9. Is it in use yet?
The first 5G phones are slated to hit the market this year from companies including Samsung Electronics Co., Huawei, LG Corp., Lenovo Group Ltd. and OnePlus. And wireless providers in a number of countries are expected to launch mobile services later in 2019 and more broadly in 2020. In the meantime, companies including Verizon Communications Inc. and AT&T Inc. are already offering so-called fast wireless service that connects to devices that combine the functions of a mobile modem with a router. They allow a user to access 5G services from a fixed location such as an office or a home. Carriers in South Korea have launched similar devices. South Korea is set to be the first country that provides nationwide 5G service.
10. When will 5G be the new normal?
Not for a bit. Even if you live in one of the countries where carriers are busy rolling out 5G services -- the U.S., South Korea, Japan and China are all targeting early commercial networks -- it will be a couple of years at least before the geographic reach of access will be extensive enough to let you use your 5G phone without having to rely on current wireless standards for most of the time.
The Reference Shelf
- The Institute of Electrical and Electronics Engineers explains technologies that will be required for 5G.
- Bloomberg Businessweek on how 5G could add trillions of dollars to the global economy and why U.S. politicians fear Huawei.
- Bloomberg News on what a Chinese mobile mega-merger would mean for the 5G race.
- Bloomberg QuickTakes on 5G and the electromagnetic spectrum.
©2019 Bloomberg L.P.