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| By failing to conform to GSM--the global telecoms standard--the US fell well behind the leading edge.. |
But what American gear does the United States offer instead for those wanting to buy next-generation telecommunications equipment? Therein lies the rub: the United States does not have any vendor of gear that is as advanced as Huawei's. In 5G, the United States is arguably a laggard not because the government interfered too much but rather because it left the industry to its own devices, as the South China Morning Post explains:
How exactly did the US go from being the leader of modern telephony to also-ran within a matter of decades, allowing a Chinese company to become the 5G leader today?[...]The government not insisting on standards was made worse by industry deregulation encouraging the adoption of multiple standards without penalty. They did not think highly of the European GSM effort [which established standards for 2G, 3G, 4G, 5G and so on]:
Experts and former US telecoms employees point to the confluence of several factors that ultimately led to the downfall of the industry, including its deregulation in 1996 and the lack of national mobile standards. Europe had already mandated the use of the GSM mobile network standard in 1987. US regulators, however, allowed carriers to go with whatever mobile standard they preferred. US carriers Verizon and Sprint chose to offer services using the CDMA mobile standard, developed by US firm Qualcomm – which operates on different frequencies to GSM, which AT&T and T-Mobile adopted.
Consumers who subscribed to a Verizon carrier, for example, would likely have to switch handsets if they wanted to change providers, as a device configured for CDMA might not run on a network supporting GSM. “In the US there were wireless networks like TDMA, CDMA and GSM, and any carrier could choose any of those if they thought that it would be best for their own growth plan … the US was like the Wild West,” said Thomas J. Lauria, a former AT&T employee, telecoms analyst as well as the author of the book The Fall of Telecom. “Europe managed itself more contiguously than the US, they did not have a lot of disparate networks and picked the [GSM] standard that everyone had to agree to.”
The existence of multiple mobile standards in one market was further encouraged by the deregulation of the US industry under the Telecommunications Act of 1996, in which the US opened up the market, removing the monopoly that AT&T had on phone services and allowing smaller carriers to sprout. The entry of multiple service providers, all of whom were free to adopt different standards, was at the beginning viewed as beneficial for consumers and the industry as a whole. AT&T spun off its equipment division into what became known as Lucent Technologies, which thereafter listed on the New York Stock Exchange and raised US$3 billion in its initial public offering – then the largest ever in American history.I have an issue with the pro-government intervention argument in that the US federal government could have insisted on a standard which ultimately lost out in the global market. Still, the episode does point out the downsides to allowing a fast-moving industry too much leeway in deregulating and tolerating the proliferation of incompatible standards. The end result is what we have today: Americans telling people not to buy Chinese 5G gear to which US-based companies offer no real alternatives.
Lucent’s revenues grew rapidly by providing new entrants with networking equipment, and initially offered a variety of products compatible with different mobile standards, including CDMA, TDMA, GSM and AMPS. But multiple standards also meant that it was difficult to achieve economies of scale, so Lucent eventually bet on CDMA and UMTS – neither of which took off in Europe and most of Asia, costing it expansion opportunities in international markets.
“The US vendors were not convinced that GSM would become a global standard,” said Bengt Nordstrom, chief executive of Stockholm-based consultancy Northstream. “Instead, they supported all the technical standards in the US for their customers there. In many aspects, the era from the early 1990s to mid 2000s was lost time for the US mobile industry.” “From a US perspective and mentality, it is hard to understand why a technology not coming from the US should be better,” he added.
