Federal Court Ruling on 5G Could Undermine National Security
American leadership in 5G is profoundly important to American national security, but a pending federal district court ruling puts that leadership at grave risk, just when the Chinese government and its state-owned enterprise, Huawei, threaten to overwhelm America’s critical leadership role.
The advancement from 4G to 5G cellular technologies is expected to bring not merely an almost exponential improvement in speed and reliability, but also a totally new kind of mobile network that will satisfy the similar growth in demand for mobile data, enabling the transformative ‘Internet of Things.’ One independent study predicts this will open the way to an expected 3.4 million new jobs for Americans, and an additional $800 billion in American GDP by the year 2035. The current leaders of the race to create 5G networks — American companies who fund and do the research and development, implement the inventions, and broadly license the use of those inventions — create the conditions by which technical specifications are adopted to become standards by which the future is shaped.
Unfortunately, a court in California is taking actions based on a Federal Trade Commission lawsuit that will harm American leadership in 5G. On May 21, a federal judge in California ruled in FTC v. Qualcomm that the practices leading wireless chipmaker Qualcomm uses to license its patented technologies to cellular device manufacturers are not allowed under federal antitrust laws. The judge then ordered Qualcomm immediately to dramatically transform its core business model, and further set the stage for the company to fork over large damages. While an appeals court has temporarily stayed the trial court decision, pending consideration of the appeal, the ruling, if left in place, raises significant national security concerns for the United States in this time of rapid technological transformation and growing cybersecurity threats.
For decades, the United States Government and American companies have been the global leader in R&D. Qualcomm alone has invested tens of billions of dollars in developing key new communications technologies, and is the U.S. company making the most significant investments in 5G foundational R&D. Qualcomm licenses the fruits of its R&D to device manufacturers for use in new products. In turn, the broad licensing contributes to the development and adoption of industry-wide, international standards. By requiring the company to abandon this business model, the ruling jeopardizes Qualcomm’s ability to continue making these R&D investments and therefore undermines America’s continued R&D leadership in essential technologies like 5G. Contrast that model with the Chinese approach, through Huawei, to become the dominant end to end provider of mobile communications through its physical network infrastructure and devices. In the absence of alternatives, China (and Huawei) would have a significant advantage in its ability to pressure industry to adopt and build upon its “de-facto” standard. American leadership — and Qualcomm’s vitality in particular — therefore is important not just for the economy, but also for national security.
Accordingly, the Department of Justice (“DOJ”) argued in a recent filing in the case that unless the court’s injunction is stayed, it “could put our nation’s security at risk.” Under Secretary of Defense for Acquisition and Sustainment Ellen M. Lord agreed. In her statement accompanying the DOJ filing, Lord explained that “any measure that inappropriately limits Qualcomm’s technological leadership, ability to invest in research and development (R&D), and market competitiveness, even in the short-term, could harm national security.” Under Secretary Lord concluded that a weakened Qualcomm “presents a serious threat to DoD’s extensive networks, advanced telecommunications systems, and ultimately its ability to control the battlespace.”
Further, as Department of Energy Chief Information Officer Max Everett noted in a statement submitted in the case, “Qualcomm plays a central role in the U.S. telecommunications infrastructure and supply chain, specifically in regard to its important role in the setting of international 5G standards and the supply of 5G chipsets that drive mobile devices.”
It is vital that Qualcomm remain a leader in this space because, Under Secretary Lord explained, “5G technologies have significant military value, and will be foundational for new military capabilities, such as robotics, artificial intelligence, quantum computing, and a number of advanced sensing devices.” Because the race to set standards for 5G is “a zero-sum game,” without Qualcomm’s leadership, it is likely that Chinese companies — and Huawei in particular — will gain ground. The national security concerns associated with Huawei and other Chinese companies have been well documented. A 5G landscape dominated by Chinese companies — and therefore the Chinese government — would require future U.S. defense infrastructure to operate on a network over which China has substantial control.
These concerns, while serious, are not new. In early 2018, the Committee on Foreign Investment in the United States (“CFIUS”), a federal committee within the Treasury Department that reviews transactions involving foreign investment in American businesses, blocked an attempted takeover of Qualcomm based on similar concerns. It concluded that a “[r]eduction in Qualcomm’s long-term technological competitiveness and influence in standard setting would significantly impact U.S. national security.”
Given the grave national concerns raised by the Departments of Justice, Defense, and Energy, as well as CFIUS, a decision to undermine Qualcomm’s business model should not be made lightly. With the rollout of 5G continuing, this is a critical moment for the future of our telecommunications infrastructure, and the decisions we make now cannot be undone. Our adversaries pose an existential threat to the security of American networks, and we should not undermine our ability to face this threat by sidelining an essential American asset.
William J. “Jim” Haynes was General Counsel of the Department of Defense under President George W. Bush is now at The National Security Institute (NSI) at the Antonin Scalia Law School at George Mason University.
