Posted on Sep 16, 2019
Boris Johnson has been in 10 Downing Street for less than two months, but US president Donald Trump has already found the time to press the new British Prime Minister on a number of his favourite topics, from escalating tensions with Iran to his desire to block Chinese telecoms giant Huawei from installing its 5G equipment in the West.
With the UK facing the imminent prospect of an economically damaging hard Brexit, Trump probably sees this as an ideal opportunity to get Johnson’s ear. Yet, despite the apparent camaraderie between the two leaders, Trump may find it tricky to sway his opposite number on the Huawei issue. For one thing, imposing a moratorium on Huawei would endanger Europe’s timely rollout of 5G. For Johnson in particular, such a ban would throw a major wrench in fulfilling his ambitious campaign promise of delivering full-fibre broadband to all UK residents by 2025.
Blanket ban would hamper Europe’s 5G deployment
Tech giant Huawei has become a key battleground in a high-stakes conflict between the US and China, with the rollout of 5G infrastructure a major flashpoint in the countries’ broader tech rivalries. Deep in the throes of its bitter trade war with Beijing, Washington has tried some fairly heavy-handed strategies (including threatening to exile European countries from intelligence cooperation like the Five Eyes alliance) to pressure Brussels into dropping Huawei. The truth of the matter, however, is that jumping on Trump’s bandwagon of blacklisting the Chinese firm would do significant damage to Europe’s capacity to innovate and deploy its 5G networks in a timely fashion.
A report by telecoms industry group GSMA estimates that the rollout of the continent’s 5G networks could be delayed by roughly 18 months and cost some $62 million more if Chinese companies like Huawei are excluded, significantly widening the gap in 5G penetration between the United States and Europe. Roughly half of the additional costs would be as a result of the higher input costs of European operators and the requirement to replace existing infrastructure before 5G could be implemented.
Huawei already enjoys a considerable market share in Europe—controlling more than 40% of European base stations—and piggybacking off of its existing 4G infrastructure is considerably cheaper than starting afresh with a new supplier.
Europe falling behind
What’s more, the EU is already falling behind in the implementation of 5G technology. Although quick to commission pilot projects, it has since lost impetus, allowing other regions to surge ahead. Around half of all EU countries haven’t published any national strategy for adopting 5G. It’s a classic chicken-and-egg scenario: if 5G isn’t widely available, consumers and businesses won’t be tempted to upgrade to 5G phones and digital networks, while investors will need to be sure of selling their services before they commit to setting up 5G infrastructure.
A recent survey by McKinsey suggested that European telecom experts don’t expect 5G to be rolled out at scale on the continent until as late as 2022 – in sharp contrast to the prevailing opinion in American and Chinese business circles that their countries will adopt the next-generation network before 2020. The prize? A global market estimated to be worth $250 billion in mobile services by 2025. As one analyst noted, what’s at stake isn’t just 5G itself—“5G is first and foremost an infrastructure that companies need to adopt in order to develop innovative services and applications for their own industries”. Each year’s delay in rolling out the next-generation network across Europe is likely to heavily cramp the continent’s industrial competitiveness.
Faced with the need to speed up the deployment of 5G across the bloc, EU leaders will have to settle on an approach that prioritises the region’s own objectives over noise from Washington. In May, Germany’s influential BDI industry association cautioned EU leaders against being drawn into the trade dispute between the US and China and urged the German government and the European Commission to stick to the planned 5G auction procedure.
While the US continues to pressure the EU to change its position on Huawei, commercial carriers including BT and Vodafone are already building their 5G networks using Huawei equipment. Delaying 5G deployment would not only cause uncertainty and under-investment in the communications sector but would deliver a hefty blow to the region’s economy—at a particularly terrible moment, as German industry’s worst drop in a decade has stoked fears of a looming European recession.
With even the US wobbling on its steadfast opposition to Huawei as the blanket ban cramps the American tech industry, the White House is likely to have a hard time persuading European leaders to toe the line. In fact, Trump’s winding back, following the G20 summit in Osaka, of his earlier edict banning sales of US tech to Huawei could be seen as a green light for EU member states to pursue their own 5G agenda.
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