5G Mobile Promises to Connect and Speed Up Everything

But security and political concerns could delay, distort, and add costs to its deployment.

In Bulgaria, the country’s mobile or wireless phone operator Moabite exhibited fifth generation or 5G technology during a virtual reality demonstration. In the US, Verizon now offers 5G internet for homes in a few locations. In Australia, Telstra connected a customer with a commercial 5G device on 5G technology for the first time. These are just some of the trials completed or underway in recent months as the world prepares for a transformative leap in mobile.

5G’s promises include vast improvements in data speeds at lower cost and much faster response times (known as ‘lower latency’ in industry jargon). These benefits will arrive as technological advancements, turn existing 4G networks into 5G networks over the next decade. When it arrives, 5G is expected to transform daily life because it will enable key developing technologies such as the internet of things, driverless cars, smart factories, and remote surgery.

But the vital nature of 5G, the mass connectivity it will foster, and the potential for 5G-enabled applications to shift data processing from the ‘core’ to the less- secure ‘edge’ of networks are colliding with two forces that might slow 5G’s adoption, boost its cost and make it more politically disruptive than earlier versions of mobile connectivity.

The first issue hampering 5G’s deployment is that it magnifies the risks posed by the insecure nature of the internet. The second challenge is that 5G is tangled up in the rivalry between China and the US mainly because China’s Huawei Technologies is the leading maker of 5G equipment. That some regard Huawei as an instrument of the Communist Party makes it (and other Chinese companies) unwelcome in the US and some allied countries including Australia. While the deployment of 5G will be slower, more troubled, and less economical than it should be, these hurdles will hopefully lead to more secure 5G networks in time.

To be sure, even in the best of circumstances, the infrastructure required means 5G will take much time and money to be broadly deployed. Another hurdle is that the rate of 5G uptake will depend on how quickly people buy the new, more costly 5G phones. The lack of security on the internet came at its birth and will be hard to overcome.

5G thus has much to navigate for its benefits to fully materialize. But technological advancements usually hold sway in the end. The benefits of 5G are there to be widely shared in time if networks can be secured.

Insecure edge

Defined in technical terms, 5G is a standard for how wireless networks work, which radio frequencies are used and how devices interact with radio signals and data.

5G is only possible because of key advances. The most relevant is the ability of wireless carriers to slice their 5G networks to deliver different performance characteristics for different applications. Another key advance is the development that divides a channel into numerous parts so it can cope with the expected proliferation of connected devices.

Network structures will change too. Until now, networks have operated on a ‘core’ and an ‘edge’ basis. The core handles the sensitive data and is the most protected. The edge is where the users hover with devices that interact with the core network. The edge is considered insecure compared with the core and many are concerned that 5G network integrity and availability are at risk, as is data security.

The US administration of Barack Obama in 2016 decided the best way to handle such threats was to make cybersecurity a priority of 5G, the first time Washington deemed security to be so crucial when creating a network.

President Donald Trump, however, rescinded Obama’s directive prioritizing security. That decision re-aired concerns about security and the issue is still at an impasse. If 5G networks are as insecure as many experts warn, they might fail to fulfil their promise.

Deepening the rift

In Washington, an assessment is forming that Beijing is a rival for global power that possesses an ideology and world view that clash with the traditions, norms, thinking, and outlook prevalent across western liberal democracies.

5G’s handicap is that it is caught in this confrontation due to the fact that Chinese companies are world leaders in 5G, especially Huawei, which in 2018 earned US$110 billion in revenue from activities in more than 170 countries.

Huawei, which was founded in 1987 by former Red Army officer Ren Zhengfei, has often received help from the Chinese government. Such is the business environment in a country where companies and everything else is subject to the will of the Communist Party.

Governments in the west are thus worried that wireless networks could be vulnerable to Chinese spying or sabotage if built and operated with the help of software written by Chinese companies. Huawei has been under the scrutiny of western intelligence officials since it gained an international profile from the late 2000s.

To counter the threat from Chinese tech companies, Australia, New Zealand, and the US have restricted Huawei’s operation even though Huawei repeatedly denies it is an agent of the Chinese government and many claim the concerns about Chinese companies being Beijing’s pawns are “overblown”.

Whatever the truth, the rivalry between China and the west has consequences for the 5G rollout in the west. The 5G industry in the west will be deprived of Huawei’s innovations and low equipment prices. Instead, rivals such as Ericsson from Sweden and Finland’s Nokia will build more of the west’s 5G networks, which could result in less advanced and more costly networks.

It could thus take a while before all the 5G trials underway around the world lead to the widespread deployment of the next great leap in mobile in a secure way.

Michael Collins, Investment Specialist, Magellan