Promoting American Leadership in 5G Technology

Oh Jackson Jackson I might up and going good afternoon how are you all I'm Arthur Herman senior fellow at Hudson Institute and I welcome all of you and also welcome our distinguished panelists for what I promise you will be an illuminating and in some ways intriguing discussion about one of the most important topics that we are going to face in the high-tech frontier over the next several decades which is the future of 5g technology and the role of an important role of American leadership in this sector this is a topic which has taken on not just economic and technological importance given the new kinds of devices the the unimaginable in some ways unimaginable speed with which 5g will be able to deliver the kinds of access to Internet to provide the kind of amazing level of bandwidth that at this point is almost difficult to imagine and of course the economic consequences of such a technological revolution are ones that were only just beginning to appreciate and understand but as you'll see from the course of our discussion and one of the key reasons why we want to talk about this today is that they're all so profound geopolitical implications with this because in the race to secure and develop 5g technology and networks the United States is not the only competitor in this race we also have a very serious competitor who is pressing ahead in this direction in ways that as I think you will see in the course of this afternoon are ones that the u.s. is bound to respond to and the challenges that affect not only the United States and its economies that are going to have profound consequences across the globe at the same time so to bring you up to speed with this discussion and with the way in which the issue of 5g technology plays into the larger picture of the u.s. is race for high-tech supremacy with the People's Republic of China what we've done is to pull together a panel who will be able to explore this issue in depth and in ways that I think by the time you and our and our web audience leave you will have a deeper understanding of just why this is so important to American national security American economic security and also to our stance of alliances around the world for our panel we've got with us and an edition from the original invitation here we've also brought with us and we're delighted to have with us Bryan Hendricks who is head of policy and public affairs for Nokia in the Americas region who's responsible for regulatory and legislative developments impacting technology innovation and deployment including spectrum allocation which is you're going to find out is one of the most important aspects maybe the salient aspect when it comes to understanding the impact of 5g technology Bryan's spent nearly two decades with regulatory and legislative experience dealing with technical technology policy issues he was an enforcement lawyer with the Federal Communications Commission and prior to joining Nokia Bryan served as staff director of the United States Senate Committee on Commerce science and transportation where he also served as general counsel and that for the point of view of where we are on the hill and these issues is one of the key decision-makers in what takes place here this is also a good time to remind you all the turn off cell and to make sure you're shut down here so that we're able to proceed without interruption also joining us at the same time is a newcomer to Washington Karl Rove many of you probably don't know that but it was a big thrill for me yesterday to give him a tour of the city his delight and seeing the Washington Monument and Lincoln Memorial were really intense although I have to tell what is when I had to tell him that Grant's Tomb was actually in New York and not here his disappointment was deep but he seems to recover from that of course I'm joking Karl Rove is one of the as it has been over the last two decades one of the key figures in shaping the not only policy in in a couple of White House's but also in understanding in the direction of policy in the US he was senior advisor to President George Bush from 2000 to 2007 that's George W Bush and deputy chief of staff from 2004-2007 he oversaw the office of strategic initiatives political affairs public lives on and intergovernmental affairs today he writes a weekly column for The Wall Street Journal and he's author of the New York Times best seller courage and consequence my life as a conservative in the fight he also serves on the University of Texas Chancellor's Council of Economic Committee and on the board of trustees for the Texas Parks & Wildlife Foundation he was inducted into this is this is something I did not know he was inducted into the Scandinavian American Hall of Fame Carl and I share one characteristic and that is we're both of Norwegian American descent so that's that's an honor which is not only one that I could admire but perhaps when I can aspire to you'll see maybe with Carl's see what happens with that and the American Association of political consultants Hall of Fame in 2012 sitting next to Carl we're very pleased to have with us Declan Ganley who is the CEO of Revati networks Declan moved from Ireland to London where he worked in construction and insurance instead of going to college and with the collapse of the silver unit he travelled to Russia where he founded and then sold a forestry business before moving on to the telecoms industry and that's where he's been and that's where he's been immersed himself ever since in 2004 that he founded rivana networks a us-based firm specializing in the provision of telecommunications systems to the military the police and emergency services in disaster situations and for robotis work in deploying emergency communication systems in the wake of Hurricane Katrina Declan was awarded the Louisiana Distinguished Service Medal and then finally we have with us as well Harold Ford got Roth from 1997 to 2001 Harold served as a commissioner of the Federal Communications Commission in that capacity he served on the joint board of universal service he's actually one of the few economists who've served as a federal regulatory commissioner which comes as considerable surprise when you think about it that that should be so but there it is and the only one to have served in the FCC from 2001 to 2003 he was a visiting fellow at the in American Enterprise Institute where he completed the writing of a tough act to follow which was about his earlier work in the house Communications Committee implementing the Telecommunications Act of 1996 which was one of the most important and revolutionary acts in dealing with telecommunications in our country's history but I'm delighted to say we've now got him and that he is now a scholar at the Hudson Institute and I'm proud to include Harold as a colleague and as a friend so for the course of our discussion what I thought we would do is have each of our panelists talk about their perspective on this issue of American leadership and the 5g technology of the challenges that that leadership faces and the ways in which we can extend and direct that and I thought it would begin our discussion with Harold well first of all Arthur thank you so much for that very warm introduction and thank you very much for organizing this panel it's great to have this issue here at Hudson it's very important for the United States and I think you wanted me to begin by just talking about what is 5g5 G stands for fifth generation technology there have been five generations of wireless technology roughly you could say one every five years or so 5g replaces 1g 2g 3G 4G those technologies were very well defined within a specific band frequency band of spectrum and had incremental amounts of capabilities faster speeds greater capacity greater reach 5 G's is a change it's it's different from the prior generations it will have substantially more capacity but instead of being sort of channelized into sort of thing we're going to use this particular band to provide services you can use multiple bands of spectrum for 5g and you can use it in ways that you can splice this splice the capacity to to use it for different purposes to use it for different users it has a lot more capability than in Prior technologies have had it will require new equipment it will require new networks all of which you're going to cost a lot of money in countries around the world businesses around the world are racing to deploy 5g technology in the United States all of the major carriers have plans for 5g networks and we're seeing just the very first beginnings of it the other big difference I would say about 5g technology is that unlike prior prior generations where you could say these are the specific bands and only these bands can be used for say 4G LTE 5g is still there are lots of different bands that are being developed for it and we haven't seen the end it's we don't know the ends of where 5g technology will ultimately be used we talked about 5g we talked about as a wireless technology and yet so much of the discussion about the cost and infrastructure involved in 5g focuses on fiber optic cable or fiber optic cable what's the link between those two those two those two technologies how does that work well all wireless technologies from 1g to 5g all require what's called that call it's it's not that all of the network is being done wirelessly although in theory could be and practice it isn't it's to interconnect with the rest of the internet fiber based networks around the globe and being able to connect those networks requires not just the wireless infrastructure to go from from a cell site to to a handset but it requires a fiber network from the cell sites to the rest of the internet and from a regulatory point of view who is it who's got the final oversight over what what unfolds it takes place it's it's it's the usual regulators it's it's the in the in the United States it's the FCC and regulatory agencies and countries around the world and the kind of spectrum that we're talking about is going to be require a lot more spectrum then then 3g and 4g and and how will how will carriers and users have access to that to that additional spectrum how would that work well different bands of spectrum are being used for 5g in different countries around the world here in the United States we have an auction that's just about to begin for some very high frequency spectrum lots of new bands are being opened up a lot of the high frequency bands have very short distances and they're very useful and urban environments but but they're not very useful in in less dense environments and one last technical question on that for you and that is one of the other sort of things that people talk about that will be facilitated through the rollout of 5g technology in addition to the incredible speed with which you'll be able to have access to two to the Internet and two services provided is also the way in which this will become fundamental what they call the Internet of Things and to the whole range of devices which will now be able to be sort of plugged into the Internet we think about Internet of Things today in terms of things like the smart regulator for temperature in your home and for variety of appliances but if we're really looking through a 5g for a big expansion in terms of Internet of Things access correct I would say there this is kind of a semantic issue whether Internet of Things is the same as five G in my vocabulary they're they're different there are two things going on one is the ubiquity of attached devices into the Internet and that's called Internet of Things every consumer electronic device is going to be connected into the Internet in some ways a lot of that connectivity doesn't necessarily require a lot of speed or a lot of bandwidth it can be done with often very simple types of connections 5g I usually think of is enormous capacity enormous throughput low latency things that will certainly include the Internet of Things but not necessarily in latency just one more point on that latency being the kind of delay that you experience with regard to let's say Internet to phone service and so on because of the curvature of the earth and where you are geographically that is going to diminish significantly as a result of this technology this yes yeah Brian did you have something I just wanted to frame a little bit more what what Harold was excuse me talking about so if you think about the past generations of of wireless technology the primary use case was the consumer and we were thinking about things like connectivity internet access high-speed data reliable voice but you had real limits to the technical capabilities of those networks based in part on the choices of the spectrum using single bands you wouldn't have had the throughput or the speeds or the reliability to do some of the use cases that you've been reading a lot about that require you know no latency everything from remote diagnostic healthcare to you no autonomous driving vehicles etc 5g really opens the options box for us because it's going to use different spectrum bands for different purposes in different locations to give us flexibility we need 10x at least capacity and we need to drive the latency down close to zero and in order to do that you will use different spectrum at different locations millimeter-wave for urban locations are not ideal for suburban and urban or I'm sorry rural deployments so you'll need multiple bands but the key here is to recognize that with this huge growth in capacity and flexibility for managing networks a lot of those use cases that five years ago were science fiction become a reality about to again is is something which is not going to be just limited to the US or North America we're talking about a global transformation as a result of 5g technology and what the dimensions of that global realization look like and what the landscape will look in terms of who dominates thing is one of the topics that I think we want to talk about today and there I thought I would turn it over to Declan Ganley to talk about where from where you are and from your perspective involved in telecommunications business both in Europe but also here what that what that landscape is beginning to look like sure so just to put it into a bit of context Levada holds a number of key patents for 5g across the world in the US and even in China the what we we've watched over the last year is fascinating think about another way to think about 5g and and Harold is right it's not just about the Internet of Things is potentially a million plus 2 million connected devices per square mile in certain circumstances some of those things doing very you know moving information that's a tiny amount of information and off-peak times and other devices moving huge amounts of information at other times of the day and it's it's necessary to look at the international field and what's gone on in the context of the history over the last 20 years really of the wireless industry so in Europe you had the 3G licence auctions with it raised a huge amount of money for governments that took money out of the private sector moved it moved that money into governments and started to slow down the amount of money that was available to deploy networks and that otherwise might have gone into dropping the price of capacity and yet price has come down but carriers have been squeezed and carriers have been squeezed all over the world and I am there wouldn't be agreement on this panel for example uniform agreement on this issue but our experience of this has been that as we have seen carriers get squeezed carriers have not just have decided not to move off a retail consumer model but stick to their guns with the retail consumer model have wholesale as really a almost despised part of their Anette but necessary part of their businesses but have focused on retail and that focus on retail has resulted in this situation where this has become about propping up price the price of a gigabit the and that being an equation of the difference between producing a gigabit and what you can sell it for so what's the cost of production what's that what's the price and keeping that spread as as wide as possible and it's an interesting situation if I can pull up a few slides here because it that in in that effort to prop up price we have not seen a shift to MVNO or wholesale in a way that was originally expected when MVNOs were first being talked about and so we we now have a situation where in the u.s. I'm trying to pull up in the US we have a market of the medium gigabyte price that looks like this there amongst the OECD an EU 49 the US has the highest median price per gigabit in the world now there are one or two sort of outlying markets or countries that frankly don't have very big economies that would be more expensive than this but this is an interesting graphic and there's a lot of data out there that supports this that you end up in a situation where price is as high as it is and where the price in certain markets in Europe France for example is originally it is the barrier to entry is a lot lower so carriers are getting squeezed and they're getting squeezed all over the world and they have an a carrier that's getting squeezed on its margin because it's focused on a retail model is looking to find margin is looking to find cut cost wherever it can so one of the places that you look to cut cost is in the cost of your next generation of equipment so if you're going to roll out a 5g network where do you go for the equipment and what we have found is that the Chinese government to make a long story short is prepared to subsidize the cost of equipment to an unprecedented degree and not only are they prepared to subsidize the cost of the equipment they're prepared to precise the cost of financing that equipment so this is a very capital-intensive and are hugely capital intensive that you're putting out and and and five g's i mean rough rule of thumb about a hundred times faster than 4G it requires more points of presence okay you don't have to have as many tall towers but you need more individual sites it's an expensive capital intensive business so your cost of equipment is is a huge part of being in business and staying in business and your cost of financing is hugely important as well so if you want extremely sweet a hundred percent hundred and plus percent so more than a hundred percent of your equipment cost vendor financed the the Chinese will vendor finance your equipment at really unprecedented levels and what has happened is carriers focused on this retail centric model have become de facto and it's not their fault but they've become Trojan horses for for Chinese 5g technology and they've become Trojan horses because they're the guys that will go in and do the lobbying it's not going to be somebody that flies in from from Shenzhen or Shanghai to do the lobbying it's going to be somebody that went to Eton with the Deputy Minister and in the UK for example you have a situation where publicly announced free which is owned by Hutchison Whampoa Hong Kong company has announced that it's going to do its 5g roll out with Huawei not publicly announced but we our information is that that EE the other carrier and other one of the carriers in the UK has is doing the same thing it's going to go with Huawei and that Vodafone is going with Huawei outside of everywhere except Greater London so the rest of the UK will be a highway 5g network and the countries here filled in in red and I think there's now 61 of them that map represents the countries that have already signed 3G or sorry 5g contracts to deploy their 5g networks using Chinese equipment in primarily Huawei equipment the countries that are pink are countries that are currently testing that equipment in government approved testing operations but that are if you like leaning in that direction right now this is based upon publicly available information for example although Ireland is now coloured in red it's a country where I happen to live it is not been announced that the main carriers in in Ireland have signed for their 5g networks with with Huawei but we know that has happened so because we have this carrier centric retail based pricing model that's seeking to prop up the price of the gigabyte you're looking to in a market where retail Wireless is 100% penetrated so in many markets either everybody that could possibly have a device already has one and some people have more than one device so where do you go where do you go in a situation where you're trying to sell a $60 or a $50 a month plan to somebody and what I suggest and what revita suggests is what you go is you actually flip the model and you say that capacity is there let the market tell you what it's worth and clear that capacity at any price because there are devices that will have a business model for $5 a month there are devices that will have a business model at $0.50 a year but if that capacity is there and it's not being sold sell it let the market clear it and we believe that it's going to say take something dramatic like that changing the model of how we sell capacity to flip the model and prevent China from owning the cyber domain because make no mistake whoever controls whoever architects these 5g networks remember they're going to be connecting in some in some cases a million-plus devices a square mile in some city environments whoever architects those networks and deploys those networks has got an advantage in the cyber domain and the cyber domain is the edge of of any security network so you've got land as a military domain C airspace and now cyber so those networks must be secure they've got to be ultra secure because our first and primary point of vulnerability you know the next Pearl Harbor the next ten minutes of the next great war forget you and god forbid there should ever be one but it's likely that the first ten minutes of the next great war will be fought first in the cyber domain that's how important this is and that's how important it is that we get this right that we make sure that these networks are absolutely secure and out we make the case that the way that you do that is by ensuring you have an economic model that where the private sector can sustain and fund networks 5g network 6g networks that are sustainably fundable and that they will have the money to pay for the security and because we have a broken business model for wireless we have made ourselves vulnerable to this hack by trying to prop up the price of a gigabyte we have created this huge vulnerability let's use what we do best in the West which is bottom-up let's use the free market let's use free market pricing to to to find out what the value is to clear capacity at that value and we believe and we've modeled this in great detail that that produces revenue that otherwise is not being seen and that revenue is what companies will use to pay for the equipment and pay for the security that will make these networks secure and to detach ourselves from the vulnerability that has been created and that frankly the Chinese government has hacked to be able to come in and say we'll give you cheap stuff will give you cheap money leave it to us in the UK in the UK in some European markets not only are the likes of Huawei funding providing discounted equipment and discounted funding even the rollout cost that's where the concrete has been poured the towers are being built we have reliable information that they're coming in 40% cheaper than the next nearest competitor the only way you can be doing that is if you're even subsidizing the rollout cost because a British contractor is not going to charge Leicester huawei then it'll charge to Ericsson or to Nokia so that's being subsidized so there is a I believe a deliberate policy of subsidization that deliberate policy is to not guys like Ericsson and Nokia and Samsung out of the market it's to make people cut corners on things like security and it is to assert control in this essential security domain the cyber domain and get into the edge of that Network we cannot allow that to happen we have to flip the model and if we don't flip the model I believe by the end of February which is Mobile World Congress in Barcelona it will be too late these decisions are being made these contracts are being signed in the UK it's very hard the British government has that a lot of this stuff is in the public domain it's very difficult once you have made this decision and you've started to go down the road to to reverse that decision it's like getting you know your jaw drilled for dental implants having a whole new set put in and then somebody telling you you've got to rip them all out that's very hard to do once it's done so these decisions are being made now I expect that there's going to already 61 countries have announced that they're going this way in many cases I think those are still reversible decisions because those deployments haven't been made but we don't have much time and action needs to be taken now you talk about business models I mean the Chinese definitely have a business model here don't they yeah which has been laid out in the 19th Party Congress with the made-in-china 2025 plan that China very much has a comprehensive strategy of dominating the world's high-tech frontier whether you're talking about 5g or if you're talking about AI artificial intelligence or quantum or robotics and all of these areas China sees this as part of a vey vey larger picture which is that 5g will give them command and proprietor proprietary stake the lead proprietary stake in the world's telecommunications network and as we know that's an issue from the point of view of security let alone from the point of view of the economy of economics involved that for for example our armed services who will look forward to being able to use 5g networks in Asia in Europe in the Middle East to know that that they'll be sharing that information across those 5g networks that are wired by Chinese companies specifically by Huawei is not going to make them feel very comfortable about the information the networks in which they would have to rely and and they're not in a position the the intelligence services and military services aren't in a position to create their own networks they're going to be in a in a very difficult situation you can see in the UK right now this debate playing out sits in the Financial Times almost every day for the last couple of weeks where you have the government issuing a letter asking the carriers to effectively back off they don't name China but everybody knows what it means and the carrier's coming out very aggressively in asserting no we won't back off we've paid money in auctions for these licenses and by the way they paid money in auctions for these licenses not building business models that are dependent on Chinese financing in Chinese equipment so there's big pushback from the carriers the Australian government to give them enormous credit has been very bold in in understanding the the just the scale of the threat that's taking place and putting in a blanket ban on on Huawei and on Chinese vendors and I believe that that's a model that needs to be copied right across that the Western world this is as I say it's a key military domain as well as a key economic domain huge parts of our economy are going to be dependent upon this kind of connectivity we cannot compromise the security of that by taking the the cheap option now and really having carriers through regulatory capture become Trojan horses for Chinese technology and Chinese government policy which is to assert exactly the type of control and influence across the whole of the technology domain that it's not a secret this is publicly available announced information we're not up here spinning a conspiracy theory they've said they want to do this you've seen this play out firsthand full disclosure of course kia is a competitor in this 5g role out with Huawei looking to compete in different continents and in different countries from where you your perspective is and for where you've watched this process play out firsthand two key questions for you one is has is declan's description of how the Chinese are able to leverage these key advantages accurate and number two is the kind of shift in a model to a different way of allocating spectrum a realistic one as a means by which we sort of put a break the momentum that China already has on this in this area well thank you so then two hard questions to answer with respect to what's actually been playing out we we do business and some hundred and fifty countries and for those that don't know nokia late of the handset days is has been built back into the probably the the only in our estimation company which can compete with the Chinese vendors over the long term because we have a full complement of equipment and services and to end which only the Chinese have and we have that capability so we we actively pursue deals all across the world we have won quite a few deals working head-to-head against the Chinese and we're in trials now for for many others but Declan is not wrong about some of the advantages that China has for example it's really a whole China approach not to cast aspersions but it isn't just a carrier that shows up in a latin-american country and makes a push it's a banking system it's a diplomatic presence mm-hmm it's a multi sectoral cross sectoral approach with energy companies and the web-scale companies and the pushes look at all of the economies of scale look at all the advantages look at the cheap equipment that we can provide and then there's also diplomatic pressure there's investment in the civil infrastructure of countries that are struggling financially to prop up university research largesse and and we've seen this model where in Africa particularly for 3G and 4G it was quite successful those markets are heavily dominated by the Chinese and you see a certain amount of buyer's remorse expressed by some of those African countries now that essentially they like Western choices but those markets have become very difficult for companies like ours to compete in and so we're seeing that that same approach being deployed in Latin America in particular where Nokia is obviously very strong some of those countries are struggling significantly to figure out how do we participate in digitalization of our economy we need infrastructure and we're struggling financially enter the whole China model which is an extremely attractive approach we have failed as Western governments and Western suppliers to be able to meet that challenge head-on by working collaboratively to bring different monetization models to bring diplomatic to do cross-sectoral presentations of an entire ecosystem that would give choices to these countries and so Ducklin isn't wrong in a sense that we've been slow to respond to that and there are some things that really in the next six months or so need to change dramatically or we think some of those countries are gonna go the way Africa has and and so we're interested in participating in a lot of those conversations it's difficult to compete but not impossible to compete the quality of our equipment they may disagree with this is better still but there are some built-in advantages when you protect your home market to the tune of 70 plus percent of the equipment market being given to Chinese suppliers when you consider roughly two-thirds of all base stations are in mainland China on the planet Earth it's a real big advantage in terms of being able to float an R&D budget that is Dwarfs what Western suppliers are able to offer and to be insulated in many respects from the downturn that we saw at the end of LTE deployments where companies stopped investing to gear up for 5g so operationally there are some strong advantages and you've seen the suppliers from the western side have to consistently restructure our businesses to take costs out of our business to remain competitive we think we're pretty well positioned but there's no question that you know a concerted effort from the United States and Western governments to present an alternative to the to the whole China model would be very advantageous for Western suppliers in terms of being able in terms of spectrum you should excuse me I think there will be strong resistance among our customers to the idea of changing a business model to do a wholesale model as Declan points out but what is clear is that monetization has become quite difficult in in this space we looked at at the end of LTE for a better description of what was happening in the market we saw two key indicators average revenue per user and return on capital employed flat or falling in most of our markets and that's a really tough set of economics for a carrier to justify an enormous expense of acquiring spectrum for auction or the next round of commercial deployments of equipment to upgrade your network so there's no question that monetization remains a challenge one thing has to happen is we have to be judicious and the regulatory choices we make that don't constrain operators from doing some experimental things like prioritization of traffic you know that feeds into the net neutrality debate that we've talked about because those economics remain very difficult I don't know if if what Declan proposes is is something in in the mid to long term that that can can happen I do know there will be culturally a significant opposition to it among our customers but I think I see these issues as two important issues but two different issues think in the short run which is to say the next six months maybe nine maybe less in some places the die will be cast for what the equipment market and services market looks like globally it isn't too late for some governments to to make different decisions about their deployment the one thing that I think is clear and I think this is important to say I see we've got some folks from governments here our message is very simple you don't start in a place where for for Nokia or Ericsson or Samsung or juniper or Cisco that you need to create a cybersecurity center to review our equipment and to attempt to do very difficult things like go out into a network to look at you know code every time it is updated to see that it isn't nefarious you start in a position of trust with us as a supplier that you simply don't have with the Chinese each government has their own reasons for reaching those conclusions but many of them have reached those conclusions and I think our view is that it's difficult if not impossible to mitigate security in these new rounds of networks and that are put there purposefully and I'm not suggesting they are I'm just saying if you believe there is a risk of that in certain suppliers we don't believe that that is easy to mitigate we think if you can't start in a position of trust and we have a hundred and fifty three hair your heritage right as a company then you have some difficult choices because I think when we looked and forecast what will be running on top of these networks it's not just you and me and our consumer use case the premise behind 5g is to drive the verticals it's to drive remote diagnostic healthcare and digitalization of entire sectors of the economy the sheer volume of data that will transit these networks is almost incomprehensible to us at this point so if you can't start from a position of trust then you're nowhere very quickly on the issue of standards robust standards and those standards everyone get the question that I had posed with regard to the role of standards and these things are you just dressing me oh you said Carl so oh I understand I think God was really nervous I was actually sitting here very eager which would be understandable I was very Carl was going to say in response to that question I so we've heard a lot about standardization there's been a lot of hand wringing about the the rise of Chinese participation and standardization and I think what we have said to the US government and others is let's pump the brakes a little bit you know a couple of key things to think about one of which is standards bodies are places where for most of the recent past the best engineering decisions drive how we approach things from a sector and so you what you want to look at as an indication of whether that process continues to be based on the best engineering solutions as opposed to being driven by company or region specific desires to dominate a technology is not just body count of how many people are there there's no question that Asia writ large now is sending far more people to standards bodies you want to take a look at leadership and study groups you want to take a look at actual IP that is being declared and created because some people are just kind of throwing IP declarations out there but it's quantity over quality and you want to take a look at what we call change requests which is during the deliberations of a study group how many inputs that are being made as potential suggestions for the standard or ultimately accept kind of like a shooting percentage for a basketball player when you look across those things what you see is we're still getting the outcomes that we want we're still getting engineering based solutions but that does not mean that there are not some worrying signs the participation rate and level from entities in the Americas has stagnated even as we've seen an exponential from from Asia and so we do need a greater level of participation and to do that you have to make it more affordable for small and midsize businesses to participate getting voting rights and standards bodies not debilitating for us but certainly for startups and smaller companies is very difficult sue might want to take a look at the tax code and things that you can do to encourage more participation for small mid-sized companies and also the verticals this is an area where the United States will retain for the short run anyway a comparative advantage over the rest of the world web-scale healthcare intelligent transportation those entities share a significant interest in the outcome of these standards bodies but by and large they are not currently participating and so we need to find ways to encourage even at the risk of our own relative influence being diminished a bit to get a broader participation level there the answer is not to get more government involvement in standards bodies we want to keep the politics out of standards bodies they work best when smart engineers make these choices and decisions I don't think we're a what a bad tipping point but we also cannot ignore the fact that Asia is rising in supremacy and it is by the way part of the 2025 strategy to essentially dominate standards development and we see that for example with regard to quantum technology standards and one of the reasons why our quantum Alliance initiative has been a very active in this in developing a set of standards for quantum random numbers generator and quantum key distribution even though these are still emerging technologies and won't be deployed qkd for at least another decade it becomes important and it's been communicated to us by regulatory bodies that they want to see standards established ahead of time before a certain other country steps in in order to push its standards the one that meets its engineering practices and commercial practices involved in that process and one of the things that we have found is that it's not that difficult to put together in international consortium of companies that are involved in qk d and q rng because they do realize that with american leadership it becomes possible to really take the initiative away from other countries in this development and it's a little bit tighter fit with regard to 5g because 5g is we're really on the cusp of that if it's if it's not here already but at the same time being able to sort of set standards that are that provide for a kind of seamless interoperability across countries across companies this is a very very important part of that a part of that contest and in this regard united states well in our case QR ng and qk d there aren't a lot of American companies that are involved so you you're a necessity one draws an international consortium with it but even in that case it can be the United States that takes the lead and that points the way forward and what and shows what's possible and what needs to be done and that brings us then to karl rove thinking about the role of a US leadership in this area i think it's clear to all of our panelists and i hope to our audience that US leadership is going to be nasty necessity going forward here so from your looking at this situation looking at the technology looking at the challenges involved what are the levers that the US can use as part of that part of that leadership process first of all thanks for having me i'm in the competition to be the least experienced and expert member of the panel i have a runaway lead so i'm joined being here and thanks for having me I sort of stumbled into this issue at the White House in the aftermath of 9/11 you may remember the 9/11 Commission report found two difficulties on on that day in New York one is the interoperability the various departments didn't talk to each other and more importantly because that issue gets solved by us all moving towards wireless was the other issue was that the amount of spectrum available for communications was simply inadequate and as a result Communications collapsed and so in the aftermath I have Michael Jackson and others began an effort to identify a spectrum that could be set aside for a first responder network and so I began to see this issue first of all how difficult it was to identify spectrum in the hands of the government that could be converted to this use and then to clear it by moving the functions that were then in that spectrum out I mean it took the better part of a decade to free up 20 megahertz of spectrum that was largely unused it was in the hands of DoD and commerce and the weather AG I think a couple of others but it opened my eyes to a couple issues one is how critical and how critical to our economy in the future access to spectrum is and what a perishable commodity it is and how inefficiently we use it and it's one of the things that ultimately led me to an association with declan because this question how do we God is not creating any more spectrum and yet our demand is growing at 50% of the year and likely to accelerate as we download more videos and the Internet of Things comes on a precision agriculture and all these other things we we're not just talking about but getting ready to do or already beginning to do begin to take up spectrums so I mean I'm interested in this because there is an issue of how do we more efficiently use spectrum than our current bottle and I want to come back to that in a minute but you asked about our strategic competition with the Chinese on this I mean the 19th Congress she you know we want world leadership on these technologies of the future by 2025 we want to command the heights this is a this is a there's not an economic threat alone to the United States this is a strategic a geopolitical threat to the United States that has to be met with a geopolitical response and you know there are advantages of having a command and control economy and we see a lot of those in that map with 61 countries they are methodically bribing cutting deals offering sweethearts sweeteners to get themselves to that kind of advantage in places where they shouldn't have now it's some of it is reversible a lot of it is reversible but 61 country signing agreements to either test their equipment or to let them deploy the networks as a problems but a command-and-control economy also has weaknesses and we see it in for things that we can exploit one is they got a reputation for shoddy equipment and shoddy deployment and we can exploit that by having a better product they are the debt dependency instances in Africa and Asia are causing some people to have doubts about whether or not they want to be further depending upon the Chinese we saw this become an issue for example in the Brazilian election where the ultimate winner was a clear skeptic about did Brazil want to engage in more deals with the Chinese that made the more debt dependent upon China the third thing is the Chinese even for a thing like this don't have enough money so they're gonna have to get other people's money into this and some of that is going to come from international lending institutions and some of them is going to become for the private sector and the weakness there is that both of those sources of money if they've got a better alternative are going to be more likely to fund the things that come with a better alternative and finally then the security questions which are we barely touched on to here today we could have spent a lot of time talking about but we would probably have to have most of us excluded from the room and they'd have to have a meeting in a skiff someplace in order to discuss them but imagine situational awareness of America's defense posture moving across the network that passes through lots of Chinese equipment I remember in 2001 and 2 & 3 being surprised how much information we were picking up about al Qaeda and other adversaries in the United States it was passing through US networks and being plucked out of the ether here in the United States imagine what the Chinese would be a do if they dominate most of the backbone of 5g around the world so these things all combined I think if we have proper US leadership into supporting an alternative and there may be several turns the one I'm an advocate of is an open access a open access of wholesale wireless market where people can in essence bid for the use of that unused spectrum at perishable commodity that's residing on all those towers and and do so in an electronic marketplace because then it makes it that chart that showed that the u.s. is your the top of the heap or at the top of the heap in the or in major industrialized country and the cost per gigabyte there's a reason why because we got a model that basically is a duopoly between two big carriers and then a bunch of carrying logs behind that and as a result they have better and more power over pricing than they would in a truly competitive marketplace which brings me to the final point I wanted to make which is about the carrier's themselves look they've done a great job for our country but they have a model that is yesterday and it's not up to this challenge in my opinion 5g they have a 25-year plan for all-out and a lot of it a lot of those plans don't cover a lot of the country so we're going to take this and divide that we have today between those that got access to quality broadband and those that don't and height and then divide by saying that my hometown Austin Texas is going to have 5g early and Mandan North Dakota where the Scandinavian American Hall of Fame is actually Minot North Dakota or the CNN avian American Hall of Fame is is not and this is this is a problem they have legacy investments in 4G and 3G and a psychological commitment to a model that says when we have spectrum our object is to use that spectrum only for us and if we're going to provide it to somebody else by God we're going to skin them skinned their hide and using it and if we don't if some places on economic for us used to have a ranch in Fort Davis Texas you've never been there it's actually north of Valentine Texas population 263 nearest hospital is two hours away the nearest gas station is an hour and 15 minutes away that you know that part of the country is served by West Texas telephone which gets its spectrum from AT&T because it has a federal subsidy that makes it more attractive to AT&T to say we'll license you to handle all the business out there in Far West Texas because we'll be able to charge you not the normal and ordinary price that we Charvet charge in an urban area because you get a subsidy we can get an extra kicker so they're gonna be whether they like it or not they're gonna be reluctant apologists for the current structure that's allowing the Chinese to get 61 countries and us to get zero and allow a Huawei and ZTE to grow and Ericsson Nokia and Samsung to shrink in their business to this very important market so Bart you know Game of Thrones is coming on back next summer and winter is coming there but Barcelona is coming for 5g in the United States has got an opportunity between now and then to begin to change the game let's see if it does the carrier's involved here because again full disclosure they have been 18t Verizon the innovation Alliance have been supporters of Hudson Institute in the past we have a great track record with them but one of the great advantages of being a nonprofit institution and a think-tank and of a initiative like the quantum alliance initiative which is able to look at the whole range of technologies and understand their impact from a strategic as well as economic level is that we're able to open up to new ideas to have a diversity of views and to really sort of think about the fundamental problems and issues that underlie all of all the business models and also the way in which our government is able to participate and will participate in in this new high-tech frontier that means you have one more thing you might just gonna say you know a privately funded privately built old sail model is is a knit that was purely wholesale becomes a resource for carriers it's actually not a threat to them they see it as a threat right now it will actually become a resource that they can use an exploit and that's the case I mean not just in the US but across all of these 61 countries that have already signed deals with the Chinese to deploy 5g and all of the others that are testing so this is a way to flip the model the challenge obviously in in you know declan raises some interesting things I think we tell you from our experiences there are quite a few other reasons why those 61 countries have have signed deals I like my simpler explanation with the Chinese there are structurally some problems and I think once again I would return to the notion that we've been as Western suppliers and governments competing with one another understandably for the business but we have not been sufficient in providing a full ecosystem solution that goes across multiple sectors that utilizes the resources of the various governments the government of Finland where we are headquartered has has caught on to this and has been very supportive in many of the countries working with us diplomatically to position the entire Finnish IT ecosystem which is much bigger than you would think in the aftermath of Nokia's a handset failure there are there was a lot of organic growth in startups and web-scale and apps and so there's an ecosystem to position and where we show up and we do that we win deals so there's a lesson there which is that a little closer collaboration between Western suppliers and governments can go a long way it's the last thing that I would say is I think what makes me somewhat skeptical of the wholesale approach is is more pragmatic which is you're talking about cultural acceptance and adherence to particular pricing strategy for most of our customers that's neither right nor wrong I mean it probably is right or wrong but I'm not casting that judgment what I would tell you is that the discussion about whether to pursue that type of policy objective and the implementation of that will take some time doesn't mean it's not a worthy discussion it just means that the dye is being cast now for what 5g will look like in the next six months and so I think we are putting our focus on what can we do to provide a real alternative to developing countries to keep their markets open for Western suppliers oh yeah I hear you about taking a long time but there is something out there that will help the movement towards a wholesale open access not market and that is the customers American Trucking Association for example endorse us why because they're paying AT&T and Verizon to send 10,000 pieces of information a day from the average 18-wheeler moving on America's highways and they know what it's costing them and if there's a way to get it done cheaper they'd like to do it cheaper because again when that when that truck is moving across u.s. 90 through West Texas it's not just simply paying AT&T or Verizon it span the charge on West Texas telephone 10 largest farm groups in America 1 an open access wireless market why because they're getting you know hit hard by the cost of a wireless largest world the room the largest world electric co-ops in the country one of their officials told me if this if we had this market we would give away wireless meters free because you're telling me we can tap that that meter at one o'clock in the morning if we've got coverage rather than paying the freight to AT&T large I don't want to use the name but a very large commercial company that has lots of has a sense billions of pieces of data a day through them through through Wireless AT&T and pays of bills to Verizon and AT&T and so forth I happen to be talking to the CEO as a personal friend on an entirely different issue when we finished what he wanted to talk about I said I'd love for an introduction to your CTO to talk about this he said well tell me what this is explain it when I finished he said he said literally hold on I'm getting him on the line with us because he said you cannot imagine how much money we spend each year to communicate the informations about our Letarte our business and how much it costs us in your telling me that I could find a way to get that cheaper so there's a customer base out there that is going to be open to adaptation if there's an if there's a nationwide open access network hell there will be they'll be amenable to it even if there's a regional network because they're sitting there saying my choice is to pay a price that is dictated to me versus a price that I can bid for and it particularly if it is time sensitive or not time sensitive there's a big big implication for that so I agree with you it's gonna take a while but from what I'm seeing out there and it's limited obviously there is a market for because of how much people are now spending there's not it there they may not be able to articulate that we pay that big chunk per gigabyte compared to the rest of the world but they know instinctively it's a big cost for their business and they'd like to lower it sure one of the great strengths of America is is precisely the openness of our markets the ability of companies to tailor their offerings to to meet consumer requirements economics is really based on the idea that supply follows demand and not the other way around so it's it's the it's the American consumer it's the American businesses that that want wireless services that want communication services that will determine the the way in which it is provided and the the greatest way to to support the development of really any service is to to make precise property rights to enforce those property rights Nobel laureate Ronald Coase famously wrote about the importance of that yes there are transaction costs there are a lot of transaction costs and in all these businesses but ultimately the way to to make the American consumer better off is to to focus a lot on the property rights one of the things we haven't discussed up here today which I know is a big concern to to all the manufacturers working in this business is the the protection of dropped property rights there is wide-scale theft of property intellectual property rights that just compound some of the problems that that are going on and in this business and that's one area where I think our government could could take an even stronger role it's taken a stronger role than probably any administration in recent decades has taken but at the same time there's a long way to go and the problems of the deployment of 5qi are also problems of getting stronger property rights in place there was a ironically on the IP point we spent the last few years of the the Obama administration turning back pushes and efforts from what I call the Silicon Valley free lunch society to alter dramatically how we protect intellectual property how particularly as it relates to standards essential patents for us you know you don't make money off of sending engineers to standards bodies except to the extent that you create share time and technology and you're able to license that technology so far from respecting and protecting property rights we spent a good deal of time making it much more difficult for us to justify investment in this thankfully this administration has has turned its attention to a more fair and balanced approach to IP enforcement but he also had this section 301 investigation which pointed out clearly that it remains an ongoing challenge to get a bilateral enforcement and respect for intellectual property with with China and other places so that is you know I often quoted when I say you know we policymakers need to stop doing stupid things that was a stupid thing to weaken intellectual property rights ahead of a huge wave of new technology that the people needed to underwrite investment in we think things like net neutrality which overly restrict the ability of carriers to monetize through things like prioritization and experimental pricing models these are the kinds of policy things that make it much more difficult on operators to monetize on us to to generate return on our investment in technology and all of those things and there are great benefits to the Chinese model because we cannibalize ourselves I can't emphasize the the intellectual properties issue with new technologies and emerging technologies enough we had a whole conference here with the quantum Alliance initiative on quantum technology and intellectual property and how important protecting and strengthening those kinds of rights and patents are for and the right kinds of use of patents not as a defensive measure to shut down innovation by others in competition and how important that is for advancing and then moving forward with the commercialization of these kinds of emerging technologies hugely important should we open it up to questions for the audience let's do that what I'd like you to do is we raise your hand just wait for a microphone to come around so everyone be able to hear your question and then if you can just identify yourself and divulge what you're willing to do of your affiliation and we'll be happy to hear your question so we have a question there the young lady and then we have two questions over here as well huh Eliza student uh-huh thank you so much for joining us but I want to say that much of the discussion both today and in general is about competition it's ultimately this premise that we're in a tech race you see and Reming say you murmur say that there's an AI cold war so I kind of want to challenge this notion just a little bit and I wondering if there's actually room for collaboration between the US and China and if so where I think so I think it begins coming out of the section 301 investigation we've gotten a bit off the rails in terms of what remedies were actually sought and the approach here but I think the message to China was ultimately let's work together on bilateral enforcement of intellectual property no key has been extremely successful in China in fact we have the largest market share of Western suppliers in that market we win deals there were respected by the Chinese government and part of the reason is that were collaborative we say to them for example when they were still a shewing participating in standards bodies look instead of coming in and mandating a particular encryption mechanism for China bring it to the standards body let's have a better encryption mechanism and you guys are are now interested in in exporting your technology to other markets as long as you are seen as someone that doesn't respect intellectual property rights are engaged in cyber espionage as long as you're not participating in standardization you've got these indigenous innovation policies you're not going to be terribly welcome in other markets then we've been successful in getting engagement from the Chinese government to recognize that they need to to conform more as much as their economic model will allow them to frankly to more Western trade norms we have not done enough of that we have not done that at a bilateral government level but we think there's opportunity to do that instead of they're treating everything as though it's you know as you said a cold war I'm gonna let every one of the panelists answer that important question and take a shot at it I have a I have a very dubious view of the Chinese willingness to cooperate on any basis other than outright theft look at their trade related investment measures look at their Latin their approach to licensing and what you have to have a Chinese partner and after that partnership breaks up they retain the license to your technology look at their procurement rules you've got a you want to sell Lots to the Chinese government you got to produce it in China with a Chinese partner and the Chinese partner has access to all your technology I thought the administration did a very good thing in March by filing its action at the WTO on an intellectual property I wish they backed it with a diplomatic initiative to get every other country which has IP rights around the world that they're concerned about losing in China to join with us in that action that's the way to get the Chinese to abide by the rules get the rest of the world to insist on it the the WTO is is a good venue for this because in fact it's probably the only good venue for this because when we started putting these rules into place with in the 1990s there was no internet there was no they all these technical questions with regard to a lot of the intellectual property that we're dealing with today didn't we weren't even asking ourselves those questions this is the place to rally the world to get it and my sense is the world is very interested in getting respect for its IP rights inside China and would it be fair to say Carl that we have tried and bent even bent over backwards on the cooperation route with China for two decades or more including including subsidizing a lot of the technological development including infrastructure within China and that the real problem has not at that level there's problems getting worse it's been has made things worse today so this problem is getting worse there is nothing there's no evidence whatsoever that the Chinese have stopped stealing technology from any source they can get it you know we were there stories about you know rifling through people's private people's phones and computers at international meetings of industry experts just so they can steal information I mean this is this their this this is a continuing pattern on their part and there's little that they've done to to gain the trust of the rest of the world which frankly is an advantage to us right now if we turn it to our advantage so give you one example we were involved in a bid in a Latin American country three days before our bid submission our bid boxes were being delivered to our office in downtown very Tony neighborhood and our the vehicle carrying our big boxes with two members of my staff and it was hijacked at gunpoint and the big boxes were stolen out of the trunk and now I don't because it's think it's because the thieves you know valued good carpentry this is a this is sharp elbowed stuff and we cannot be naive in understanding what the stakes are here China has an opportunity by the end of February to effectively have won the control and domination a preponderance of power in one of the five strategic domains Lancie space cyber it the lowest hanging fruit the one that they are closest to winning they're not going to have a deep you know blue ocean Navy that's capable of for quite some time but they are this close to winning this 5g cyber domain footprint globally 61 countries have already signed and it's more than one carrier in multiple of those countries connecting every devices devices in your home and in your car and that applies to everybody they know what they're doing it's absolutely brilliant it's almost unprecedented so as Ronald Reagan said my plan to answer for that strategically would be we win they lose and the only way we win is if we flip the model this broken business model that we've been stuck in of auctions won by what have become rent-seeking carriers who are propping up price to the point where the u.s. is paying the highest prices in the world this is an idiot situation that we put ourselves into we have to change that model the carriers aren't going to change it themselves my friend from Nokia here who I've never met before today by the way is right they're not going to lead the change to change the lead has to come from somewhere else and the options are available the only country in the world at this point this wasn't the case two years ago but now the only country that can flip the model and start that process is the United States the UK isn't going to do it Australia's not big enough to do it the Canadians aren't going to do it so it's the US and we have until the end of February to do it and it really is a case it's it's really a case of we win they lose they want to dominate this it's not a secret they've said it we have to stop them and the way we stop them is with a better smarter business model that financial markets and private money is willing to back and that does exist with with all of that today I would just return back to the section 301 situation because I think here it is so the investigation that was done that was referred to earlier in the year alleging a long-running pattern of intellectual property theft and abuses by the Chinese which has in turn given rise to the imposition of tariffs and and other things to encourage a change in Chinese behavior I think the question many of us have now is what is the exit strategy there for the administration you can take a position one direction or another there's some folks that believe the the United States government is and governments and for that matter in many other parts of the world have had an accommodationist strategy towards the Chinese for two or three decades and that it hasn't yielded a change in behavior that you're unlikely to get them to adopt market norms and others believe something fundamentally different but and the fact is if the tariffs were going to work what is it we're asking the Chinese to do it's unclear to me at this point that we have articulated for them changes in their behavior which would lead to a de-escalation and it seems to me that you know if you you have to have to have an exit ramp and then spot the exit ramp and it's unclear to me that we have that at the moment the strange part of that is that we've just imposed in the third round of those tariffs duties on the bulk of the infrastructure that will be building 5g networks the United States that hardly seems a sensible policy and it's what I meant when I said let's not do stupid things let's not make it even more expensive or require rejiggering of people's entire supply chains in order to evade duties which will delay the availability of the equipment there doesn't appear to be a coherent exit strategy that could get to Chinese change behavior and I think that's got to be where it starts the team at the White House has to articulate to China you want to de-escalate these are the things you have to do I just I have not heard an expression publicly of what those things are yeah I'm with you it's not clear what the strategy is and or how you get from tariffs to an acceptance of a new intellectual property regime which is why I think if there's an action and there are actions that can be taken to open the door to an open access wireless network that's a good opening step but the next steps are I think all in the international front it's it's pursuing the case that was filed in March and lining up additional support around the world in in in in in favor of the position of forcing the Chinese through the WTO to agree to abide by the international standards regarding intellectual property far better than saying we're going to slap two hundred million two hundred billion dollars where the tariffs on you unless you change these ten things I'd rather be focused on the on going to the body where they're obligated to honor it's it's its decisions and outcomes suppose first actions next now if I could just quickly address the question about whether collaboration with the Chinese would help first of all for those of us of a certain age collaboration has a certain pejorative tone certain pejorative meaning and the issue from from a consumer is consumers want competition they don't want businesses to collaborate it's also it's technologies don't come from countries they don't come from governments they don't even come from companies really they come from they come from engineers they come from people with ideas with better ideas the greatest friend any consumer ever had is a competitor it's someone walking down the street scene I can give you a better product if suddenly those collections of engineers begin to collaborate and sort of say oh well actually you know what's not can be let's go take a vacation we're not really gonna be here to compete that is the worst thing that can ever happen for a consumer in any business and so the idea really is how do you get to situation one she the wireless the wireless industry was built by dozens of companies around the world competing head-to-head engineers staying up months on in trying to come up with a better chronic get it to market as quickly as possible it did not develop with engineers collaborating and sort of saying well you know let's just get together and do this this competition is what is the the key role for consumers and for the advancement of technology fair competition I'm gonna make sure we have time for the other questions we've got we've got the two over here please and then we've got a third that's a hand and the fourth hand it's Papa Doc right thank you very much my name is accent a menace I'm from public affairs firm called advance advocacy so this question is for mr. FERC furchtgott-roth thank you and I hope I didn't completely butcher your name there but also welcome many of the other panelists thoughts on this too so there's been a lot of discussion from the distinguished panel on network security a little bit of chip security the implications of Chinese rising tide of their influence but what about as it pertains to spectrum security so I wanted to get kind of if you could expand on that who's worrying about it who's responsible for it and you know above just the pie-in-the-sky implications of it how can we take some tangible steps forward to ensure global security of spectrum thank you bye-bye spectrum security do you mean not having third parties eavesdropping on communications is that what you mean by spectrum security it it's a big problem there's I'm not sure I wanted this maybe a better question - talk to me offline because we could go on for a how us about this leave it let me just say that it's a very serious problem there's a lot of security breaches that go on with with wireless communications so a lot of security breaches go on with wireline communications as well security is a very big problem that has not yet been solved I can speak a little bit to this mm-hmm we had a discussion earlier among some of us about standardization and where are things going now and I made the point that security is there's a trade-off particularly talking about wireless network between security and how many how much radio resource is available to serve the subscriber we could make a very very very very secure Radiohead but it might not have very much capacity left to actually give services which is not to excuse not having security it's just that we are also looking backwards over the previous generations as we design the equipment for 5g to think about where did we maybe fall on the wrong side of some of those choices in previous generations so for example you have MC caching opportunities with LTE where you could essentially put a fake base station between the user and his cell tower and spoofed the device into disclosing its location and intercepting the call part of that was making a trade on radio resource availability versus security for LTE that particular issue is being addressed in the first release for 5g we are focused on layering security for 5g so it will never be perfect in terms of how we we minimize or making it as difficult as possible another one that was obvious and in LTE which is fourth generation is the control channels for the radios we're fairly narrow and it opened it up to something called smart jamming which is a bit of a challenge when you consider we're building a national public safety wireless network in LTE so that's an issue that had to be addressed again so you're constantly looking backwards at vulnerabilities and things that existed in the previous technology to figure out how you can make things more secure moving forward now the good news with 5g is the options box is even bigger right the challenges are different and in some cases bigger but all of the tools that we've had before things like isolating individual Network elements to protect them all of the firewalls all of those things are still part of the options set we're also going to be introducing things into 5g like a I machine learning you know sort of adaptive security measures where you're actually taking people out of the equation because no person has to log into a network sometimes they bypass their credentials or whatever we want to make networks more self adaptive to security challenges that happen so we're being very cognizant of challenges from the past but that said there will be new threats which emerge and we have to be responsive as an industry and doing that and I guess the last point is we also have to ask tough questions of the carrier's who are my customers after all we do a lot through the standards bodies to develop security approaches which we are required to support in the equipment but there isn't always a follow on requirement that they actually deploy all of those security tools that are developed their standardization so we have to be smart about making sure that they have the right incentive mix we're not in favor of command and control but there has to be something looked at in order to make security a priority and incentivize making sure we deploy all the tools that we're developing Atlas have young um I'm an economist and researcher and question would be for mr. Roffe The Economist and mr. Rover on national security the reason why China has become a Challenger and a threat on telecommunications is the same reason why now ik um a challenger and a threat on the military side because its economy has grown so much faster in the last 40 years relative to the US and other Western nations and as long as this growth gap continues this situation will get worse on numbers fields of technology which have national security implications so the question is is there are you trying to develop a new growth theory that could supply to the US faster rate of growth then the one of the last 10 years which has been just about 2% annually China during that same period has grown at 8 percent that's that gap it's just colossal and I'm saying that because then two weeks ago Nobel Prize in Economics was given to Paul Romer from New York University and great reason for that was because he's been saying that economics doesn't have a mechanism to guarantee fast and sustained economic growth for any nation in the world which is the reason why they called the dismal science and that there's a reason for new ideas but nobody's coming up with new ideas so I'm wondering if you as a think-tank I've been trying to develop new ideas and within the Republican Party years there are there new ideas trying to to attack directly this problem phrase that questions if I can sit with where we are do it this way and that is in terms of winning the the 5g seep sweepstakes with China to what degree are we looking at economic factors and to what degree are we looking at political factors as far as what drives this drives this competition I think the answer is both and all of the above all these factors are important but I think the question is a good one in terms of economic growth is going to drive the demand for new services and as long as China is growing faster it still is not as large as the American economy but projections are in the next ten years it will catch and and exceed the United States if it continues on the same growth path there's no question I think in my view there's no question the greatest national security asset the United States could deploy is to get to faster economic growth and I think there it's a very simple solution which is less regulation lower taxes do things to to define and enforce property rights those are the things that I think most economists over time have agreed on I think the administration is taking steps in those directions there's a lot more that can be done but I would say that over the past 10 years economic growth the United States has been well than 2% on average but in the past 12 months we've seen 3% growth it's the the economy is picking up we are having less regulation we are having lower taxes and we are having greater definition of property rights I could take the other angle of that I agree that we need to do things that are to hasten growth here in the United States but I think we also make a mistake we just look at this as a question of China versus the US and the China has emerged as a adversary for the United States simply because it's grown its emerged as an adversary of the United States because it's chosen to be an adversary of the United States just read G's comments at the 19th Congress and I mean I thought was interesting a couple weeks ago the administration said well we're getting we're gonna think about imposing the tariffs and what was his response he sends a message to the military departments in the South China Sea to make further preparations against the possibility of war I mean that's that's that's a guy who's out to have a conflict and I also look at it in terms of not just the US versus China but in essence the Western world versus China the interests of the United States are similar in this situation to economically to a lot of our friends longtime friends in Europe and they're certainly similar to the to the people in the region do you think Vietnam is really excited about an aggressive China the Philippines Japan Korea I mean what a large part of the region is concerned about what they're seeing is the Chinese advances in the South China Sea and the Chinese attitudes towards them so we've got allies out there if we if we choose to avail ourselves of them both economically and economic world economic growth perspective you know you have that metaphor right rising tide lifts all boats I for Brian for Declan if you look at the contrast between a Western model for 5g technology versus the Chinese model for technology which one is more likely to boost economic growth and prosperity for other countries and which one is going to subordinate the economic growth and prosperity of other countries to the advantage of one country in particular well the problem is the Western model for 5g at the moment is the Chinese model and we have to change that we have to allow price discovery to take place on bandwidth the right to your point of economic growth if you drop the price if you drop the average price of a gigabit in the United States of America somewhere between where it is now one of the highest in the world to zero and you drop it enough but you increase consumption or demand by fact of that drop the economic shot in the arm that that would give the US economy and any other economy that would introduce it would be significant now we've run numbers on those and had economists independently run numbers on what that would do and it will have a very significant impact on GDP we saw the introduction of basic wireless technology and what it did to GDP s across the world introducing price discovery on bandwidth where you allow that price to drop and find its natural level in alliance with demand that will become a huge stimulus equivalent to perhaps a significant tax cut because it affects everybody every single person in this room everybody that you know is paying you know X amount a month you dropped that bill by you half that bill you add you know millions and millions of new devices of demand that are paying a bit less the economic stimulus that that that adds to an economy I think could be quite significant so I think seeing bandwidth is a commodity and allowing it to be priced as a commodity I think has potential to have economic impact that will be measurable on GDP we saw the introduction of wireless and how we've had a measurable impact on GDP in the past allowing price discovery hot dynamic wholesale markets to come into being I think we'll have an economic stimulus effect so just I'm gonna take my Nokia hat off excuse me just for a moment because I think as you mentioned I've spent some fair amount of time in the Senate as a staff director so I would couch my policy answers this way with respect to what's going on at the moment you know the the best way to win a race is to recognize that you're actually in one and I'm not sure as you go around the US government at the moment there's a full appreciation for exactly the race that we're not just with respect to 5g but as you mentioned with respect to policies around growth in Congress you know the policy choices are framed as binary choices between this or that it's no regulation or it's this kind of regulation instead of looking for things like flexible regulation right nobody wants poison air or water but we also have to recognize that when you're dealing with a competitor that's growing at three or four times the rate that you're growing there are costs imposed on the system in terms of your dexterity your ability to do things as a business quickly in response to this we built out LTE in China in 18 months which is very difficult to comprehend except when you start realizing that there are some advantages to a command economy right they have different land use policy for example you don't have to deal with 39,000 towns in order to get the network deployed you know you need a national spectrum ban cleared like mid-band well there it is a hundred megahertz for each operator go we don't have those choices available to us nor should we want to be a command economy that's not what I'm suggesting but we have to move with greater purpose and some of these areas you have to be able to look and say okay where do they have strategic advantages land use policy check FCC you know under chairman pie and and president Trump have gone done a lot of things to speed deployment in the United States relative to 5g spectrum we still have a bit of a mess you know we don't have plans to get some of those mid bands deployed on a timeline that's gonna make us competitive with Asia and we've had a lot of meetings like this and panels like this over the last time was too wonderful thank you for the invitation but that has to be translated into actual action right there has to be a national strategy for dealing with the information technology economy the telecommunications economy and in recognizing there are limits that we have in our system so we have to move with greater purpose and speed to take advantage of the things that we have because the other country that we've mentioned many times here it can move with all the speed that it wants to to implement those policies and we're still arguing about what's the scope of the problem meanwhile the dye is starting to be cast as Declan said I don't know if February you know Mobile World Congress is the sort of point of no return but the dye is definitely being cast and we're still you know we're still in the paddock waiting to go to the racetrack yeah and that doesn't show that we really appreciate the economic race that we're in thank you Dave Rubin with some a retired engineer and by the way engineers do collaborate business people compete engineers are more interested in making progress and making money but my question is if you look at 4G and below to both well if you look at 4G and below you're thinking about cell towers every few miles or whatever it is but for 5g and especially urban 5g it's more like Wi-Fi we've got a whole bunch of small stations a building like this would have a whole bunch of separate base stations and in theory the owner of the building could install the Wi-Fi system himself and then rent the capacity to the carriers and the question is under the current regulatory environment is that possible so this will be interesting in an hour let declan this is totally his wheelhouse I would imagine I think you're gonna see a very interesting thing happen in 5g which is these questions already be is starting to be asked at the tail end of LTE with the idea of things like private LTE networks for certain applications and we're having to sell all the equipment in the world the people that would like to do this but the enterprise customers and customers themselves have started to say ok Nokia if you make all the gear that I need to connect to the network and and have in building coverage and capability and you're gonna sell me the applications and the analytics and I'm the same technology solution from you that I'm gonna get if I buy 5g as a service from a carrier why do I need a carrier I don't know the extent to which that will actually materialize I do know that we have an enterprise business and an enterprise strategy which is focused on you know you pick your carrier to do the transport but in terms of on-site for all the things that you need it's not a foregone conclusion in 5g that that involves carrier markets respond to incentives first of all on your comment on engineers I actually have found that indeed I say to my own engineers sometimes you tell them what they're into when they talk to their engineering colleagues from some of our our commercial competitors I I think you raise a very interesting point and and I think within the point that you raised about the incentive for a private property owner to do something to create capacity is because they can make some money out of it and I think in right in the heart of that thought is the answer to the problem with all of these 32,000 or whatever it is municipalities where they're being told you know clear the way you you're just gonna have to we're mandating that you have to allow this to be rolled out and that's good and it makes it a bit more like China in terms of we're issuing a command which perhaps is less good but wouldn't it be interesting if a municipality would wanted somebody to deploy because they were gonna get a piece of the action a piece of the revenue that was being generated off their piece of real estate now currently on the way we run the wireless industry doesn't even contemplate such a thing allow you know somebody like you a major hotel operator to have a piece of the action for for for the the traffic that goes over the network that they help enable by making sites available I think that there's a lot there I think it will happen I think it's gonna take time it's not going to happen fast enough to solve the immediate problem but I think that you're you're being quite visionary in what you've pointed out there and I think there's a in within that statement is long-term answer to how we fund wireless infrastructure deployment in terms of points of presence in the future by making it worth that guys while to put that capacity there because he's going to get a piece of the action thank you 31 Weston dynasty TV I just wonder if you have communicated your concerns to the Trump administration on this technology this 5g issue and how's their response to that and would they take any concrete actions you're asking me and help you yes for some time now we have flagged I think a couple of dimensions one of which is you know what we consider to be unfair competition and lack of engagement to the whole China solution that we're seeing other places and encouraging US government diplomatically to to get involved in in this space I think I would say this year in particular the last four or five months you've seen a lot of engagement from the administration we had the 5g summit at the White House which you know as events of that there was the sort of what everybody saw you know the the retail PR version of that but there's a lot of work going on behind the scenes to frame actionable things that can be done on security on as I mentioned the standardization approach we've shared all of those ideas that I outlined to to NIST and to others in the administration about how you encourage more involvement in standardization from the America side very receptive to that lots of follow-up happening so I I'm more confident than I have been in some time that the scope of the problems is is understood as I mentioned with it with the tariff issue it's not always clear to me that the the tool chosen is the most constructive tool in the world but you know we're working on that too but I think the engagement and awareness level at the National Security Council National Economic Council Office of Science and Technology Policy NIST the is very high and I think we've shared a lot of ideas with them miles to your question would be yes [Laughter] gotta define what a win means and looks like so I know one of the things that worries the national security establishment of the United States greatly is mm-hmm what if China wins the race to 5g and my question always to them is what does that mean does that mean they deploy first does that mean there's a huge lag until fully evolved 5g gets deployed so just as an example US carriers are poised with spectrum in hand to do early stage 5g deployments in the United States those will give you capabilities of maybe 2 gigabits per second lowering of latency but that's not fully evolved 5g right they don't have the assets that they need right now in the way of spectrum to really upgrade that and evolve that towards that 10 to 20 gigabit per second zero latency model China does Japan will South Korea will and if they get there first and there's an appreciable gap before the u.s. gets there then most of those use cases that I described web-scale the verticals connected healthcare intelligent transportation the development work for that is gonna go where the network's support those use cases so an area where the United States enjoys tremendous economic advantage at the moment could be under threat that I think is ultimately because we've asked the question what are you worried about really boils down to that we can close the gap on the initial deployment but the things we have to do aside from what declan's talking about with flipping the model assuming you don't flip the model what can you do in the next six months or so to shrink the gap both on that early deployment but certainly on the pathway to that full evolved 5g we've already done the citing reform that's tremendous you got to get mid band spectrum cleared and into the market you got to complete these auctions accelerate them where you can and you got to find ways to to incentivize you know more US and America's entities to show up and participate standardization to make sure that this remains a place that the best engineering decisions are made that drive this you also have to start thinking and providing the incentives to think about research into a post quantum world right we know that certain other countries we've named quite a bit here are working on quantum communications capability we're focused on 5g but we aren't thinking enough about the world in which communications technologies exist side by side the ability to quickly break encryption ciphers and how do you what technology what's the research strain the evolutionary thing working there there's not enough focus from the US about how to encourage that next generation of R&D because this touches on my wheelhouse which is on the quantum technology side and one of the from speaking from that angle one of the things that I would like to see may not be the primary goal but it could be a pivot point is more concentration on making 5g technology networks quantum capable so that they are able to incorporate quantum technology going forward over the next decade and after two decades from a cost standpoint my experts say this is not going to be that much more costly we're talking about pennies on the dollar in order to bring in that capability but that will demand two things it'll and a standard of what constitutes quantum capability a minimum standard in that area and also I think it's an area in which you can say here is an advantage if we have that kind of quicklime capability built into the standards for a 5g that will be an advantage that we have over Chinese competitors because other countries are not going to be one in a situation where in 15 years 20 years you're gonna have to dig up all their fiber-optic networks you know install ones that are going to be they're gonna be be quite unsafe and that's not where you want to go well I just said that what the government needs to take steps that make the likelihood of an open access wireless network in the United States more real and sooner and as I said I think earlier you have to be in order to win the race you got to figure out you're in the race my sense is people throughout the government have figured out we're in a race and they're figuring it out how we can make certain that we win that race and the time as time is running out 61 countries already have made the decision that's gonna be yet a c+ very very quickly Latin America will be gone Europe will be gone as you will be gone I mean maybe we can get Antarctica or somewhere the we flipped the model I think we have to do it before Mobile World Congress because ministers and companies and banks and international funding organizations will be making decisions by then many of them have already been made lots of announcements are planned for Mobile World Congress by the Chinese some of which we know about some of which probably we don't that's the moment you have to flip the model you have to create doubt you have to spike the model that's damaging us right now and the only way you do that is with a better idea there is one out there but it it needs to be flipped between now and the end of February otherwise I think it's irreversible I want to be wrong about that oh I want to check Oh what Carl was saying that coming up with a plan at the end of the day markets or what work it's one of the strengths of America but I think the discussion that that we're hearing today is that in China there's a very it's a very close relationship between communications companies manufacturers and the government a much closer relationship than exists here in the United States where essentially there there is no relationship at all and at the end of the day I think what we're hearing is is is the following challenge to markets work our markets superior to a situation where government and business have a very cozy relationship and engage in in game theoretic strategies to to do better than markets America always stands with the market America always stands with the things that reinforce markets and if we're in a situation though we're game theoretic approaches of the strong government can trump a market and we're in very serious trouble and I think that's the way our government needs to think about it is is there some countermeasure that our government can take to preserve the superiority of the market system that is the strength of America let me just add a quick word here I don't mean to disagree with my colleague Declan but he's Irish so he's a half you know glass half empty kind of guy I'm Norwegian and since we spent many a lovely spring and summer visiting Ireland and my forbearers where were a glass half-full kind of people and yeah we got 61 countries that have signed agreements but these agreements are reversible in many instances because underneath it all are those original strengths Chinese equipment Chinese security questions Chinese financing a model that fundamentally is not durable over the long haul and so I'm optimistic that if the US government does move and a new model begins to emerge before Barcelona that a lot of people are going to say you know what we want an alternative of Huawei and ZTE and we want it we don't want to become indebted to the Chinese and we want to we want to strengthen the Nokia's and the Erickson's and the Samsung's of the world so we're dealing with private sector companies that are competing against each other in a market to develop something better rather than state subsidized state-run and state dominated in state finance companies in China you know I know that this was not just a good panel but a great panel the fact that everybody sat here for two hours well the fact that we ran over half an hour longer and virtually everyone stayed in his rehearse and we made it though we still have more questions we didn't even we didn't even lock the doors anyway I want to thank our panelists I want to thank a lot of networks for their help in sponsoring this this event and also for quantum alliance initiative and this is our opportunity for all of us in the audience and all of us who have appreciated our session today to thank our panelists say hi to the boss form that will give her my best

Channel: Hudson Institute

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Id: JAWeWmIhXTE

Length: 115min 4sec (6904 seconds)

Published: Tue Nov 13 2018