China Telecom's latest financial report was clearly not calculated to soothe US fears about China's strength in 5G and artificial intelligence (AI).

In a detailed presentation today, the Chinese telco, one of three national operators that serve China, hailed various 5G-related breakthroughs, including the launch of the industry's first 5G-plus-AI handset standard. Its next-generation cloud network, it proclaimed, will be "industry leading" in latency, a signaling delay that could become a new battleground for 5G competitive advantage.

Latency on today's 4G networks is too high for whizzy new applications based on virtual reality (VR) and AI, say experts. To reduce it significantly, operators will have to move processing power much closer to end users. This investment in smaller data centers at the "edge" of the network could ultimately spur gadget and service development.

"In the longer term, the expectation is that it will not transform the smartphone but allow you to use new devices like glasses," said Juan Carlos Garcia, the director of technology and architecture for Spain's Telefónica, in a discussion about 5G at last month's Mobile World Congress. "Those have not been successful because they currently require a lot of computing power in the glasses. But if you can take processing capacity to the edge, then the devices we enjoy will be different."

That references to latency and the edge turn up several times in a China Telecom investor presentation shows where the 5G value lies, as far as the Chinese are concerned. Useful and cost-efficient as it may be, faster smartphone connectivity will not be a paradigm shift. But with low latency on a secure mobile network, 5G might just provide the foundation for all sorts of economically important new services -- and the companies behind them.

Including a few buzzwords in a PDF does not put China Telecom way ahead of AT&T, Verizon and T-Mobile US in 5G, of course. AT&T and Verizon already claim to have launched some 5G services, while commercial offerings are not expected in China until next year. Most of China Telecom's talk is about its pre-commercial progress, including trials on 1,000 basestations spread across 17 cities. This year, the company will spend just 9 billion Chinese yuan ($1.34 billion) on 5G -- about 12% of total capital expenditure.

But overall expenditure is set to rise 4% this year, to roughly RMB78 billion ($11.6 billion), after dropping 7.9% in 2018. And it will include a 21% increase in spending on "information and application services," to about RMB10.5 billion ($1.56 billion), as China Telecom prepares for a 5G future. Extensive 5G application trials have been underway, the operator points out, in areas include remote-control driving, VR live broadcasting and electricity distribution. In the case of the latter, the chief 5G attraction is not latency but network slicing -- a clever and secure way to reserve part of the network for a specific type of service.

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China's preparations have already given it a big 5G lead, according to some observers. In a paper published last summer, consulting company Deloitte said China had outspent the US on 5G-supporting infrastructure by around $24 billion since 2015. Last year, the 1.9 million mobile sites across China worked out at 14.1 for every 10,000 people. With just 200,000 sites, the US had an equivalent ratio of just 4.7, according to Deloitte. Catching up with China in 5G may be "near impossible" for the Americans, said the consultancy.

Scott Petty, the chief technology officer of Vodafone UK, is dismissive of US claims to 5G leadership. "They are making it up. They are rebadging 4G Evolution as 5G," he recently told Light Reading. By contrast, during his own trips to China, he has been impressed by the networks the Chinese are building. Much of that equipment comes from Huawei, a Chinese national champion whose presence in international networks has alarmed its US critics. Citing concern over national security, US politicians have warned the biggest US operators not to use the Chinese vendor. But some of Huawei's European customers rate its 5G technology as the world's best.

With its huge population and model of state capitalism, China could be a fertile testing ground for new 5G applications. China Telecom alone had a staggering 303 million mobile customers at the end of last year -- an increase of 53 million on the number in 2017 -- including 242 million on 4G networks. Revenues were up 3%, to RMB377.1 billion ($56.2 billion), thanks to customer growth, and net profit rose 14%, to RMB21.2 billion ($3.16 billion).

Seeking advantage in AI, China's government will undoubtedly look for support to a such a large, financially stable organization, with its vast reserves of customer data and stake in 5G. Demographics and democracy make the task much harder for US authorities worried about falling behind in the new technology arms race. Amid recent political talk of building a nationalized 5G network, the US operators may be under government pressure on a generation of mobile technology like never before.

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— Iain Morris, International Editor, Light Reading