Europe struggles to solve the 5G puzzle

What is 5G and how did it become a geopolitical issue?

5G is the fifth generation of mobile connectivity, which is set to revolutionize the global economy and to propel the Internet of Things (IoT) into the mainstream. The installed base of IoT-connected devices is increasing exponentially, and may reach 75 billion by 2025. Those devices will take advantage of the massive upgrade that 5G will provide in terms of capacity, speed, and latency (the time it takes for a set of data from a device to reach its target and receive a response). Reducing latency is essential, for instance, to enhance the safety of driverless cars, whose reflexes are currently impaired by 4G’s insufficient performance in this department.

Given the ongoing technological rivalry between the US and China, as well as the future reliance of critical infrastructures and broad economic activity on 5G, it is no wonder that its rollout has become a bone of contention. For now, China has the competitive edge: the Shenzhen-based company Huawei has established itself as the world’s leading supplier of 5G equipment, at a quality and price that no US company can remotely match. Europe does have two companies – Sweden’s Ericsson and Finland’s Nokia – that are arguably in the same league as Huawei, although the prices offered by the Chinese giant are more competitive.

Why does the US have Huawei in its crosshairs?

In May 2019, the US effectively banned Huawei from selling telecoms gear and purchasing US tech components, alleging security concerns. However, the US Department of Commerce continues to allow some limited transactions with Huawei. Prior to the ban, the US also secured the arrest of Meng Wanzhou, the daughter of Huawei’s founder Ren Zhengfei, by Canadian authorities. Meng’s extradition is being sought by the US on charges of fraud and sanctions violations.

Despite being a private company, Huawei maintains close financial and political ties with the Chinese government. Moreover, there are indications that the firm would be forced to comply with any request stemming from the Chinese intelligence services, which some analysts fear may even include engaging in espionage on their behalf. Acknowledging these risks, a few US allies like Australia and Japan have also announced Huawei bans. Other countries, in contrast, have either dragged their feet or outright refused to follow suit, claiming that the threat has been overblown.

In any given country or industry, greater connectivity may give rise to greater vulnerabilities, through an increased exposure to malicious cyber activities and data breaches. The security dimension of 5G, therefore, must not be taken lightly. Nevertheless, the Trump administration has a history of hiding its protectionist impulses behind security issues. Whether Huawei constitutes a security threat is hardly the main variable driving US policy: President Trump was bound to target China’s national champion and attempt to prop up domestic alternatives in any case.

5G and Huawei in Europe: what’s the state of play?

European countries are lagging behind in terms of 5G deployment – an area in which South Korea, Japan, China and the US are setting the pace. Companies such as Ericsson point at high spectrum fees in Europe as one of the main obstacles. The lack of a true digital single market has also hampered the EU’s potential, as virtual borders and regulatory differences persist. The European Commission has long tried to put an end to this fragmentation, which is also partially responsible for the uneven rollout of 5G within the EU.

Despite Ericsson and Nokia being globally competitive vendors (both of which the US is currently favoring), EU countries are highly reliant on Huawei. The Chinese company is already deeply ingrained in 4G European networks, and there are strong financial incentives to build upon existing infrastructure instead of switching suppliers. More generally, competition between multiple suppliers is always welcome by operators in order to promote innovation, gain flexibility and keep prices low. A blanket ban of Huawei from European 5G networks would run counter to those principles and priorities.

In Southern European countries, Huawei has been particularly successful at penetrating telecommunications networks: Italy, Malta, Spain and Portugal all rank among the top European markets for the Chinese firm’s gear. But Huawei’s presence in Europe is very substantial across the board – even in Sweden and Finland, the home countries of Ericsson and Nokia.

Is there a single EU approach or a myriad of different roadmaps?

At the end of January, the European Commission endorsed a joint toolbox to address security risks related to 5G deployment by fostering coordination across member states. The toolbox contains recommendations produced by a security group comprising all EU member states, which still included the UK at the time.

Essentially, those recommendations go along the same lines as the strategy that the UK had unveiled shortly before. Boris Johnson’s government decided to exclude “high-risk vendors” such as Huawei from critical infrastructures and from the core of the UK’s 5G network, where the most sensitive data is stored. But, in open defiance of the Trump administration, the UK said it would allow these vendors to have a limited share in the network’s periphery, provided that they fulfilled all security-related criteria.

While backing those principles broadly, the Commission made clear that every single EU member state is entitled to full discretion in outlining their respective 5G security strategies. So far, no EU member state has yielded to US pressure. Prominent members of the Italian and French governments have recently ruled out a blanket veto of Huawei’s 5G equipment. In Germany, the ongoing debate has pitted Chancellor Angela Merkel against some of her fellow CDU members, who advocate a more hawkish stance towards the Chinese firm. The Spanish government, for its part, has come out in favor of a joint EU response.

In general, the European reaction has been subject to criticism for being too commercial-oriented (underestimating security risks), for lacking in internal cohesion and for not being proactive enough. Moreover, some argue that distinguishing between the core and the periphery of telecoms networks – as the EU and the UK’s roadmaps do – will become impossible under 5G, although there is no expert consensus on the matter.

What role should the EU play in the global 5G battle?

The new European Commission has branded itself as “geopolitical” in nature, and Commission chief Ursula von der Leyen has openly spoken of achieving “tech sovereignty”. This assertive tone suggests that the EU might be willing not only to capitalize on its regulatory power, but also to seek a greater degree of autonomy in the international scene.

Doubts remain, however, about the exact implications of this sovereigntist push, as well as its likelihood of success. The current 5G battle between the US and China provides a good test ground. The EU could be dragged passively into a tug-of-war between two superpowers or reclaim its agency by offering a credible alternative path, which may involve updating some EU-wide rules and principles, but not discarding them altogether.

Taking sides with the US against China is bound to backfire. The EU would squander its leverage, open the door to further coercion, and contribute to a polarization of tech ecosystems. Nor can the EU’s 5G policy be driven exclusively by fears of Chinese retaliation. If von der Leyen’s goals are to be achieved, EU member states will need to stand firm in the face of external pressure, and keep in mind that their sovereignty is always better protected by European means.

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