The US military unveiled new plans around the use of potential 5G spectrum that carry "massive" consequences for the telecom industry, according to a new report from the financial analysts at New Street Research.
After all, the new plan from the US Department of Defense (DoD) would basically replace auctions of federal spectrum with a new spectrum-sharing regime. That's important considering the US military is likely the biggest user of spectrum in the US, and US mobile network operators have been clamoring for more spectrum for 5G.
And although the odds are "very low" that the military's plans will actually pan out, "the consequences to pretty much every stock in the sectors we cover are significant enough that we have to consider the possibilities of such scenarios," wrote the New Street analysts.
Indeed, the DoD's new plan for 5G spectrum received yet another jolt Monday when President Trump abruptly fired US Defense Secretary Mark Esper, the head of the Department of Defense.
Trump said he would replace Esper with Christopher Miller, director of the National Counterterrorism Center, as the acting secretary of defense. As DefenseNews reported, the news caps an eventful year for Miller, who entered Trump's orbit in 2018 as an assistant for counterterrorism and quickly ascended to higher positions, including deputy assistant secretary of defense for special operations and combating terrorism, and assistant secretary of defense for special operations. He was sworn into the National Counterterrorism Center role in August.
"The 73 days between now and the Biden inauguration will be filled with all kinds of stories of the Trump administration breaking all kinds of norms for the transition process," wrote the New Street analysts in a report to investors over the weekend, following news that Joe Biden appears poised to replace Trump as the next US president. "The most important potential story for investors in our sector is whether Trump pushes the Department of Defense (DoD) to push forward with the 5G network initiative."
At issue is a proposal by the DoD to "own and operate 5G networks for its domestic operations." That proposal came into focus late last month when the DoD issued its new "Electromagnetic Spectrum Superiority Strategy," which details both how the US military might make use of spectrum for its own operations and how it might share spectrum with commercial users.
DoD CIO Fred Moorefield explained the new strategy and what it means for commercial 5G operators in a lengthy article posted to the DoD's website. "Also involved, and part of the strategy, is development of spectrum sharing capability," according to the article. "That means acknowledging that there are other users of a segment of spectrum the DoD wants access to, that there are benefits to US commerce if the private sector or even other federal agencies have access to that spectrum, and then developing a system whereby more than one entity can take turns using that part of the spectrum when needed. That's not happened in the past, but it's happening now."
Moorefield said he envisions technology that will be able to "assess the environment to see what else is using spectrum, and what part of it, and then find the best available portion of the spectrum to use to accomplish the communications it needs to accomplish all without the assistance of users."
That's the same kind of technology that the Pentagon's Defense Advanced Research Projects Agency (DARPA) has been testing with its "Spectrum Collaboration Challenge."
Such an approach to spectrum management would represent a significant break from the current model for spectrum, which involves the government taking spectrum away from federal users and re-allocating it exclusively for commercial interests via an auction.
A big question now is whether Biden's apparent victory over Trump will halt the DoD's plans. "We think Trump's defeat is likely to once again cause the project to disappear but it could surprise us," the New Street analysts wrote.
They argued that the DoD's plans could receive support among GOP lawmakers eager to retain Trump's support for their own political ambitions. And they noted that it could also gain support among Democrats if it were tied to goals like universal broadband. For example, they argued that Dish which offered a lengthy proposal of its own in support of the DoD's plans could potentially satisfy both Democrats and Republicans by including commitments not only for the DoD but also for rural US coverage and low-cost service.
"We don't believe a single Democrat would sign up for that deal today but how would Democrats a few months from now, frustrated at the hand they have been dealt by [Senate Majority Leader Mitch] McConnell, react to that? Well, that is a known unknown," the New Street analysts wrote.
Esper, for his part, wrote the introduction to the DoD's spectrum plan, and specifically voiced support for spectrum sharing between commercial and military users.
But in a Nov. 4 interview with Military Times likely prompted by rumors of his pending ouster Esper also warned that he had worked to be a counter to President Trump. For example, he refused the president's order to station active-duty troops from Fort Bragg, North Carolina, outside Washington, D.C., in anticipation of Black Lives Matter protests.
"Who's going to come in behind me?" Esper said of his replacement as secretary of defense. "It's going to be a real 'yes man.' And then God help us."
How Miller, Esper's replacement, might approach the DoD's spectrum plans is unclear.
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