James Andrew Lewis
The United States is in competition with China over technology and global influence. Success in this competition depends on the United States staying at the cutting edge of technology and innovation. This can only be done by taking advantage of fifth-generation (5G) technologies. But the United States lags far behind the rest of the world in allocations of the spectrum needed for 5G. This undercuts its advantages in the competition for technology leadership, global influence, and national security. A decision to modernize spectrum allocations by shifting away from incumbent uses will be complicated and must be done in a balanced way, but not doing so would mean that China will gain real advantages in economic growth, innovation, and influence.
Introduction
Economic strength is the foundation of national security. Economic strength now requires staying at the technological edge. Staying on the technological edge creates the income and innovations needed for a strong economy and for national security. While many new technologies will be important for the future economy—artificial intelligence (AI), robotics, cloud computing, Open Radio Access Networks (ORAN), and biotechnology will create the future economy, all of these will depend on digitalization, beginning with 5G wireless networks. This makes progress in 5G networks a strategic issue for the United States.
Some say the world is in a “fourth industrial revolution,” moving to a digital, networked world. Whether it is the fourth one or merely the latest phase of a process that began in the eighteenth century, the analogy is useful. The industrial revolution led to major shifts in power among nations as some fell behind in innovation and investment and lost technological leadership to new powers. Economic decline and reduced innovation damaged some countries’ ability to build and buy new weapons and weakened their international influence. Of the many great powers a century ago, only a few remain, and they face a powerful new challenger in China.
China has its own weaknesses, and the United States has advantages—but if the leader in a race takes their foot off the accelerator, they will be passed. In conversations with Chinese analysts and officials, some say that the United States is hampered by its legacy of victory in the twentieth century and that it is too wedded to the weapons and strategies that produced success in the Cold War. They believe this puts the United States at a disadvantage. This is an overstatement, but it has an element of a degree of truth. While China will not find it easy to displace the United States, there is no reason for complacency. Until the Biden administration, the United States was too comfortable in the belief of its technological, economic, and military superiority, resulting in an overall decline in its power and influence. The United States now needs to rebuild its strengths for the twenty-first century.
The levers of international power in the twenty-first century are complex, driven by the pace and scope of commercial technological change. While there is a general recognition of the importance of technology and innovation for national security, disagreement remains over how best to ensure continued technological leadership. In contrast to the Cold War era, defense no longer leads in this—seventeen of the nineteen emerging technologies identified as crucial by the Biden administration are being developed by the private sector. Staying competitive in a dynamic contest requires accepting disruption and prioritizing the new sources of national power. 5G connectivity is one of the most important of these new sources. It is not just another generation of telephones, nor just the ability to provide faster video downloads. The significance of 5G lies in its industrial and commercial applications that will provide new efficiencies and new services to spur economic growth. Not prioritizing 5G would be like deciding in the nineteenth century not to build railroads and telegraph networks.
Competition with China has raised contentious issues regarding 5G. Fears that China’s national champion, Huawei, would dominate 5G technology were fortunately exaggerated. While Huawei remains dominant in much of the developing world’s older telecom infrastructure, it depends on Western technology to provide 5G services. For now, the United States leads China in certain key 5G metrics. But misguided policy decisions could surrender any U.S. lead in 5G and future generations of network technology. U.S. success depends on the outcome of decisions on another contentious issue: spectrum allocation. Unfortunately, the United States is not competitive in how it has allocated the spectrum needed for 5G.
Spectrum Allocation Is Part of Strategic Competition
Spectrum allocation is the assignment by government agencies of different radio frequencies to different uses. If there were no assignments, spectrum would be unusable because different broadcasters and emitters would interfere with each other. Spectrum has become immensely valuable in the past two decades, with the creation of an increasing number of commercial wireless applications. This means there is increased competition over what has become a scarce resource. How a country manages this competition and how it decides among various uses are important determinants for its national economy and defense.
This competition is particularly important for the United States, since technological leadership has been key to its success. Reallocating spectrum is difficult for the United States as its early leadership means there are many government incumbents who occupied spectrum when it was less valuable—the U.S. military was a pioneer in the last century in space and sensor technologies that rely on spectrum access, and these incumbents sometimes use technology that is now outdated and inefficient. Before the mobile revolution, this was not a problem. Now, the United States faces a hard choice over whether to preserve incumbent uses or reallocate spectrum to new uses. This decision is also complicated by the long-term competition with China since success in that race requires technological innovation and economic growth as much as military power.
The significance of 5G lies in its industrial and commercial applications that will provide new efficiencies and new services to spur economic growth. Not prioritizing 5G would be like deciding in the nineteenth century not to build railroads and telegraph networks.
Spectrum allocations include both licensed frequencies, which are assigned to specific users, and unlicensed, for which specific approval is not required. While there is debate over the ideal balance between the two, licensing provides the greater assurance needed for multimillion-dollar investments. In recent years, the Federal Communications Commission (FCC) has used auctions to assign licensed spectrum to the highest bidder. Spectrum auctions have produced more than $230 billion in revenue for the United States since 1993, with more than half of that raised since 2015, including over $80 billion in 2021. Unfortunately, the FCC’s authority to conduct spectrum auctions expired in March 2023 and has not been renewed by Congress. This deprives the United States of a valuable spectrum management tool and makes it more difficult to align spectrum use to make the country more competitive with China.
Spectrum allocations help avoid interference and determine performance characteristics such as coverage, latency, and speed. Allocations can also shape investment by providing certainty for private actors in the ability to use the assigned spectrum. 5G uses spectrum in the low, mid, and high bands, divisions created by telecom groups to better manage scarce spectrum resources. Industry experts say that exclusive use of full-power, licensed spectrum is best for 5G deployment if the full economic value is to be gained. However, allocations in the rest of the world differ significantly from those in the United States, and this has implications for leadership in standards setting, intellectual property creation, and security.
The United States has done well in allocating low-band spectrum for 5G. Low band was the foundation of the first four generations of wireless and provides the ability to carry signals of long distances, but it provides only incremental improvement over existing network capabilities when it comes to developing innovative new uses. The United States has also done well in allocating high-band spectrum for 5G, but this comes with tradeoffs. High-band spectrum offers greater speeds but has a much shorter range and is more susceptible to interference. Mid-band spectrum is the globally preferred band for 5G, as it provides increased coverage and capacity. But in the United States, much of it is already allocated to uses that pre-date the mobile revolution—some allocations go back decades, when there were few competing uses for spectrum. This is where the United States lags compared to other countries. Government users have been allocated 60 percent of the mid-band spectrum, compared to only 5 percent for licensed commercial users. U.S. mid-band allocations diverge from the practices of other leading economies, including China, all of which have allocated much more mid-band spectrum to 5G uses. This comparative misallocation creates national security risks.
The effects of this are straightforward. First, countries that make infrastructure and devices to service the mid-band market will have an advantage in setting technology standards and building the infrastructure the global network will depend upon. If they are manufacturing equipment to use the mid-band spectrum all other governments have allocated to 5G, they will gain greater market share as countries buy equipment (which, for 5G, goes well beyond phones) that is compatible with their national spectrum allocations and offers better performance. Second, countries that allocate more mid-band spectrum to 5G will get better performance from their networks than the United States does. Finally, access to 5G services will accelerate innovation in other industries, such as driverless technology and manufacturing. The rest of the world will not accommodate the idiosyncrasies of U.S. spectrum allocation; having struggled mightily to limit the use of Chinese infrastructure for 5G, the United States could lose any gains through its spectrum decisions.
Hopes that technological progress would solve the spectrum allocation problem have not yet come to fruition. Eventually, the ability to dynamically share spectrum (using better antennae, more sophisticated software, and perhaps artificial intelligence) may allow more users to occupy the same spectrum and ease any shortage. Although spectrum sharing could eventually work, it is not currently ready to solve the competition problem, and no other country has tried this approach.
Migrating a legacy system that uses one frequency to another can cost millions of dollars. Previous administrations took advantage of the authorities granted by Congress to use proceeds from spectrum auctions to compensate agencies whose spectrum had been reallocated to valuable new uses. This allowed them to modernize equipment and offer the possibility for more efficient spectrum use, since equipment built years or even decades ago is more vulnerable to interference, more prone to interfere with other systems, and using more spectrum than new technologies (which require less spectrum to produce the same results). There is always reluctance to reallocate, given the inevitable disruption entailed by any move. In any case, the loss of the FCC’s auction authority locks the United States into its twentieth-century allocations.
The dilemma is that many of these incumbent uses are for military systems such as radars were designed in an era when there were few other applications and the opportunity cost (the loss of unrealized potential gain from alternative uses) of allocating large swathes of spectrum was small—and before powerful competitors such as China prioritized allocations to 5G commercial uses. This is where the possibility of losing the 5G race with China becomes real. Reallocating spectrum without a clear path for transition might harm national defense, but a failure to reallocate to licensed uses would put the United States at a competitive disadvantage from which it will be difficult to recover.
Allocating for a Competitive International Environment
Spectrum allocation is a strategic issue, as decisions on allocation will affect U.S. security and economic strength now and in the future. There are two competing rationales for spectrum allocation. Both revolve around the question of how best to maintain the United States’ national security and economic strength: by maintaining existing allocations or by adjusting them for a globally competitive environment.
One way to assess these competing rationales is to look at how other nations have approached the issue. U.S. allocations differ from that of other countries, which have allocated more licensed mid-band spectrum for 5G. The real problem for the United States is opportunity cost; it will be slower to adopt 5G and therefore lose the income and innovation that greater adoption could have produced. China does not face the same allocation problems and is projected to have as much as three times the mid-band spectrum available for commercial use. Its spectrum-using military equipment is in some cases newer and more efficient than that of the United States. Many of the incumbents are state-owned enterprises, making them more attentive to central direction. Chinese president Xi Jinping has made the adoption and use of 5G a priority for China’s move toward a digital economy. This top-down attention smooths the Chinese spectrum allocation process, which favors allocating mid-band spectrum by license, creating certainty for Chinese companies to innovate in spectrum-using technology.
Spectrum allocations have global implications. They shape markets domestically and internationally and affect the pace and scope of innovation. Allocations are harmonized during the World Radiocommunication Conferences (WRC), which occur every four years—the next being in November 2023. While China has been very active in using the WRC process to shape global spectrum allocations, internal disputes over mid-band allocations have so far prevented the United States from putting forth proposals to make new spectrum available. In the five WRC-23 candidate bands for new mobile spectrum, China is actively supporting proposals for new mid-band allocations that would provide 1490 megahertz (MHz) total, while the United States is only one, providing 100 MHz in total. The WRC decisions are important since making global identifications of spectrum bands that match the allocations of China and the preferences of their supported vendors makes it easier for Chinese companies to dominate global markets and isolate the United States’ trusted vendors. The WRC decisions are important since assigning spectrum bands that match the allocations of China (and all other leading economies besides the United States) benefits China and its companies on the global market.
There is some disagreement over whether China has a detailed technology strategy or depends on an ad hoc approach to gain commercial and international advantage, but it remains clear that Xi has set an overarching priority to use technology leadership to displace the United States and create a more China-centric world. As China gains experience, its efforts will be more systematized and coordinated and its economy and technological base will improve, with clear repercussions for U.S. national security.
The United States has not yet adapted its approach to spectrum to accommodate its strategic security competition with China. This competition can sometimes feel like a game of whack-a-mole, with the United States rushing from standards bodies such as the International Telecommunication Union (ITU) to cloud networks, social media, and supply chains to counter China’s efforts to restructure rules, standards, and technologies to better serve its interests and benefit its companies. The United States needs to decide which spectrum uses are more valuable in the strategic environment of technological and economic competition.
The United States has a less directed spectrum allocation process and more incumbents in the mid-band spectrum than other countries do. The recent dispute over 5G use near airports, in which the United States was the only country in the world to have concerns about potential 5G interference with aircraft altimeters and which took months to adjudicate, is not a good precedent in what has become a contest between different economic models.
Incumbents are understandably reluctant to give up spectrum they have been using for decades. They are also concerned about the cost and disruption of moving, even though previous spectrum reallocations suggest this concern is overstated (as a future CSIS paper in this series will discuss). These worries are understandable, and a wholesale reallocation would be as unworkable as sticking with the current inefficiencies.
What is needed is a reassessment of how to revalue spectrum uses in the new strategic environment of technological and economic competition. An assessment of value should include opportunity costs, lost commercial gains, and the national security risks of not reallocating. In undertaking this assessment, decisionmaking should be guided by what will help the United States lead in the current century. Current U.S. spectrum allocation is optimized for the twentieth century—and this needs to change. Difficult and complex as any transition might be, the United States cannot afford to lag China in allocating mid-band spectrum to the new uses 5G will provide. The United States must find ways to allocate sufficient amounts for licensed spectrum for 5G while supporting other national security priorities not to fall behind.
James A. Lewis is a senior vice president, holds the Pritzker Chair, and directs the Strategic Technologies Program at the Center for Strategic and International Studies in Washington, D.C.
This report is made possible by support from CTIA and its member companies.
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