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January 15, 2020
A bipartisan group of prominent US politicians has proposed investing more than $1 billion in new open radio access network technologies (O-RAN) that could provide a spur to US software companies and an alternative to controversial Chinese kit vendors Huawei and ZTE.
Led by Democratic Senator Mark Warner, who previously founded wireless network company Nextel, the group is proposing new legislation that would require the Federal Communications Commission to channel at least $750 million into O-RAN technologies. The funds would come from spectrum auction proceeds and be managed by the National Telecommunications and Information Administration (NTIA).
Under the proposals, the US would also set up a $500 million Multilateral Telecommunications Security Fund to speed up "the adoption of trusted and secure equipment globally." This would be open to foreign partners.
Other measures would include the development of a "transition plan" for operators shifting to O-RAN technology. The policymakers also want to see the US take a more prominent role in international standards bodies and work on harmonizing spectrum allocations with international partners to lower the cost of Huawei alternatives.
The radical scheme would open a new front in the battle against Huawei and ZTE, which US authorities regard as trade cheats and a threat to national security.
The US has already imposed trade sanctions on Huawei and charged Meng Wanzhou, its chief financial officer, with lying to financiers about Huawei's activities in Iran. Since late 2018, she has been under house arrest in Canada, awaiting possible extradition to the US.
Major US service providers have been warned off using either Huawei or ZTE since 2012 when a government report first identified them as a risk to security. The Trump administration has taken that fight around the world, urging governments in other countries to exclude Chinese vendors from their 5G markets.
That campaign has met with limited success, at least partly because there are few viable alternatives to Huawei. In some countries, its disappearance would risk turning the mobile infrastructure market into a duopoly split between Sweden's Ericsson and Finland's Nokia, Huawei's main rivals.
The situation has fueled interest in smaller O-RAN companies that are promoting open interfaces and commodity hardware as an alternative to the traditional set-up. O-RAN should make it easier for an operator to use numerous RAN vendors, instead of relying on one system, and it will reduce hardware costs, say its supporters. For that reason, it is seen as a potential threat to Ericsson, Huawei and Nokia.
But O-RAN companies such as Altiostar, Mavenir and Parallel Wireless -- all of which have US headquarters -- are tiny compared with the big RAN vendors, and the O-RAN market still lacks mainstream support and funding.
Warner and his colleagues evidently hope to change that with this week's legislative move. "The Trump administration's lecturing of our allies about the dangers of relying on the Chinese for 5G is no replacement for the development of 5G alternatives," said Senator Bob Menendez, a member of the Senate Foreign Relations Committee, in a statement. "This bill, which will supply the US government with resources to help the private sector create viable 5G alternatives from all ends of the supply chain, is a long-overdue step in the right direction."
"As I've said over and over again, confronting China is not the same as being competitive with China," he added. "It is time we do just that."
As one of the O-RAN players that could benefit, Parallel has already given its endorsement to the scheme. "One of the biggest issued for the telecom industry is the dominance of giants like Huawei, whose technology is very hardware-centric and incompatible with other vendors' technology," said Steve Papa, the Parallel Wireless CEO, in a statement. "The industry needs backward-compatible solutions that unify all connectivity generations -- something the US government is now pursuing with this latest announcement of funding."
But the plans will look hypocritical to US critics: The same press statement deriding Huawei as "heavily subsidized by the Chinese government" is effectively proposing US government subsidies for homegrown alternatives. "We cannot allow Chinese state-directed telecommunications companies to surpass American competitors," said Senator Marco Rubio, a member of the Senate Intelligence and Foreign Relations Committees and a long-standing Huawei critic. "It is... in our national security interests to support American competition in the 5G market."
For others, the question is whether a fund of roughly $1 billion can really move the needle. In 2018, the last full year for which data is available, Ericsson, Huawei and Nokia collectively spent about $24 billion on research and development, using today's exchange rates.
Warner's interest in the topic is perhaps unsurprising given his telecom background. Besides founding Nextel, he previously set up a VC firm, Columbia Capital, that made investments in various technology companies.
The timing of the announcement is also interesting. Earlier this week, UK Prime Minister Boris Johnson, under US pressure to exclude Chinese vendors, said those calling for a ban should come up with alternatives.
The latest US move comes several months after a similar bipartisan group introduced legislation that would pay US telecom operators up to $1 billion to rip Huawei out of their networks. While the main US service providers have steered clear of Chinese vendors, various smaller operators, usually serving rural communities, have become heavily reliant on Huawei.
— Iain Morris, International Editor, Light Reading
International Editor, Light Reading
Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).
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