American officials, firms vow to step up efforts on fears they are falling behind
Fearing the U.S. might be falling behind China in the development of fifth-generation (5G) wireless technology, U.S. officials and companies have vowed to step up their efforts to deliver essential research in a wide range of areas.
In the latest move, two major U.S. telecom carriers - T-Mobile U.S. Inc and Sprint Corp - announced on Sunday that they had agreed to a $26 billion merger deal, which is said to invest heavily in 5G technologies and help win the race with China.
Investing in 5G
The agreement capped four years of on-and-off talks between the third and fourth largest U.S. wireless carriers, setting the stage for the creation of a company with 127 million customers that will be a more formidable competitor to the top two wireless players, Verizon Communications Inc and AT&T Inc.
U.S. regulators, who have challenged in court AT&T's $85 billion deal to buy U.S. media company Time Warner Inc, are expected to grill Sprint and T-Mobile on how they will price their combined wireless offerings.
But the companies believe their deal would gain approval from skeptical U.S. regulators, who might launch anti-monopoly probes into the deal, arguing that the merger would create thousands of jobs and help the U.S. beat China in creating the next-generation mobile network.
The combined company, which will be called T-Mobile, will invest $40 billion over the next three years to upgrade its networks so they can accommodate the next-generation 5G wireless technology, which is expected to have the speed necessary to power drones and self-driving cars, said John Legere, the chief executive of T-Mobile and the new head of the proposed combined company.
Both Sprint and T-Mobile are far behind Verizon and AT&T in upgrading their network to accommodate 5G wireless technology. Even after their merger, the combined company's budget to invest in 5G will be smaller than that of Verizon or AT&T put together.
Sprint and T-Mobile hope the deal will give them more firepower to participate in auctions for spectrum to develop 5G. They plan to participate in a spectrum auction in late autumn and will request a waiver if the merger prevents the companies from participating.
Following the announcement of T-Mobile and Sprint, U.S. officials have signaled a positive attitude toward the deal, stressing that developing 5G technology is a top priority for U.S. President Donald Trump's administration.
Wilbur Ross, the U.S. commerce secretary, said on Tuesday that building a 5G mobile network was a priority for the Trump administration, boosting the argument behind the proposed merger of wireless carriers Sprint and T-Mobile.
"I think the pitch that Sprint and T-Mobile are making is an interesting one, that their merger would propel Verizon and AT&T into more active pursuit of 5G," Ross told CNBC.
"Whoever pursues it, whoever does it, we're very much in support of 5G. We need it. We need it for defense purposes, we need it for commercial purposes," he noted.
The U.S. Federal Communications Commission (FCC) said in February that it planned new auctions of high-band spectrum starting later this year to speed the launch of next-generation 5G networks.
Carriers have spent billions of dollars acquiring spectrum and are beginning to develop and test 5G networks, which are expected to be at least 100 times faster than current 4G networks and to cut latency, or delays, to less than one-thousandth of a second from one-hundredth of a second in 4G, the FCC said.
Policymakers and mobile phone companies have said that the next generation of wireless signals needs to be much faster and far more responsive to allow advanced technologies like virtual surgery or to control machines remotely.
In the arguments for 5G, U.S. officials and companies frequently point to China's advancement in the area as a reason for the U.S. to step up its efforts.
While analysts believe such talk is mainly aimed at persuading the Trump administration to approve the merger, it would also help produce a healthier company, with sufficient financial resources to peruse 5G, the New York Times reported on Monday.
"They kept pointing to China… but that is just a nice way to grease the skids," Will Townsend, an analyst with Moor Insights and Strategy, a research firm based in Texas, was quoted by the New York Times as saying.
"And where the rivalry in advanced industries between the U.S. and China is concerned, the prize is significant," the report said, pointing to "bold plans" by Chinese companies to roll out 5G networks. "The implication: Failure to keep up in 5G would give China and Chinese firms the edge," it added.
China has been investing heavily in 5G technology, with the Chinese government throwing considerable policy and other support for the endeavor and companies making technology breakthroughs.
China will apply 5G technology to terminal devices as early as the second half of 2019, leading to the primary commercialization of the technology in the near future, according to an official with the Ministry of Industry and Information Technology (MIIT).
"China started 5G research experiments in 2016, and entered the third stage of system verification this year," Wen Ku, head of the MIIT information and communication department, said on April 23 at the first Digital China Summit held in Fuzhou, capital of East China's Fujian Province.
China has launched 5G cooperation mechanisms with Japan, South Korea, the EU and the U.S., with international companies joining the research and development, he said.
Wen said Chinese firms such as Huawei and Ericsson had participated in the development of 5G products to help create a complete 5G industrial chain.