Top Five Reasons Not to Nationalize 5G

Proposals are being kicked around behind closed doors in Washington to nationalize the nation’s 5G wireless broadband networks. From personal devices to transportation to manufacturing, 5G technology holds the key to unlocking the potential of an Internet of Things economy where all sorts of devices and machines are able to talk to networks and each other in essentially real-time to optimize efficiency and safety. Think driverless cars and then think even bigger than that. The economic potential is endless. Driven by the correct impulse to ensure America is the first to deploy a widespread and effective network versus geopolitical rivals like China, some people inside (and outside) government have had a knee-jerk response to nationalize our 5G network. This is decidedly the wrong approach. Here are the top five reasons why:

1. You do not beat China by becoming China.

While China’s economy has opened up to a significant degree, it remains a nation where the Communist Party retains significant interests in its major firms and industries. When the state takes ownership or another significant stake in an industry, you can bet the state will do what it takes to insulate that firm from competition and create a dependence on other subsidies. The lack of efficiencies and long-term innovation created by a dearth in competition is not a recipe for success in any industry, let alone a frontier industry like 5G and the Internet of Things. 

2. If it is a “race” to 5G, then you do not win by eliminating the incentive for companies to compete in both the initial network buildout and ongoing improvements once scale is reached.

When the competitive incentive is removed, so is the incentive to move swiftly. There’s a reason government infrastructure projects are constantly over budget and behind schedule. The whole point of 5G is speed and industries aren’t going to wait around for the U.S. government to finish building a network if they can invest elsewhere. In addition, without competitive pressure, there is no  incentive for the government to improve the network once it is completed.  The country shouldn’t have to wait for Congress to get around to appropriating borrowed funds to continue to update the network as technology inevitably improves. 

3. The race has already begun, now is not the time to change the game. Reversing course when crews area already deploying infrastructure would send a catastrophic signal to telecommunications companies and investors.

The most damaging aspect of poor tax and regulatory policymaking is usually the uncertainty it creates for investors. The buildout of nationwide 5G networks is capital-intensive, involving long-term investment from multiple companies and countless investors. Deployment is already well underway. Nationalizing the network at this stage in the game would destabilize the telecommunications market and their investor-base. This is the last thing that should be done, considering 5G is not the only way we’re going to get and keep Americans connected at high speeds to the Internet.  

4. We won the race to 4G without heavy-handed government intervention.

America won the critical race to deploy nationwide 4G networks without upending our system of private sector-driven investment and infrastructure. One study estimates that this contributed $100 billion to the US GDP in 2016 alone. If it ain’t broke, don’t fix it.

5. From Healthcare.gov under the Obama administration to Covid-19 testing under the Trump administration, the federal government has not proven that it has the capacity for this undertaking.

Under both recent Democratic and Republican administrations, there has been colossal incompetence created by the lack of the market incentives discussed above. If the federal government struggled to build a website to put people on a list for health insurance coverage, let alone the huge failure by career bureaucrats to develop and deploy a nationwide Covid-19 testing system, in what world are people who face the same incentives, or lack thereof, suited to control our 5G future?