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The space race to own 5G infrastructure

With 5G technology expected to open the door to ‘the economy of the future’ the race to get ahead in its infrastructure is driving another space battle between China and the US.

With 5G technology expected to open the door to ‘the economy of the future’ the race to get ahead in the infrastructure that drives is driving another space battle between China and the US.
Garry white employee

by
Garry White

22.05.2020

Technology is power. Or, to be clearer, the controllers of dominant technologies have immense influence they can leverage to get what they want. That’s why today’s billionaires are in a race to control near-Earth orbit.

Elon Musk and Jeff Bezos both plan ‘mega-constellations’ consisting of thousands of small satellites that orbit the Earth. Arrays of these cutting-edge devices will provide data accurate enough to allow self-driving cars on the road safely, as well as provide vital communications in remote locations helped by their low orbit. China, obviously, does not want to be left behind in this part of the ‘economy of the future’ but it is also clear they can be used for spying and defence purposes too.

UK assets going cheap?

While the high-profile billionaires are providing the vision – and much of the capital – many smaller companies are involved in the industry. Some of them are now in financial distress and Beijing has detected an opportunity. This included UK business OneWeb.

OneWeb was attempting to build a constellation of about 600 broadband satellites but it went bankrupt in March. Two Chinese companies with connections to the state are believed to be amongst the bidders now attempting to buy its assets. China wants a mega-constellation of its own.

Last month, Geely – the Chinese auto giant that owns Volvo and the company that makes Britain’s black cabs – confirmed it will launch two low-orbit satellites in the second half of 2020. These will “enable a satellite-based artificial intelligence cloud platform”. Geely is a privately-owned business but has often been accused of working in tandem with the Chinese state.

The advantages derived from centrally planning a country’s business investment – and the “theft” of intellectual property from the west – allowed Chinese companies to develop superior components needed to drive 5G networks. This is the main driving force behind Donald Trump’s mission to convince US allies to shun Huawei. Although China has pulled ahead in next-generation wireless technology, mega-constellations are also going to be a central part of the future economic backbone.

So, as well as encouraging its technology companies to make the choices necessary to get a mega-constellation up and running, Beijing is eyeing some of the west’s intellectual property once more.  

Cash burns like rocket fuel

Cutting-edge technology companies burn through cash because of high research and development costs. In the wake of the Covid-19 pandemic, many are struggling. Against this sort of backdrop, many are likely to go bust – and buyers with deep pockets may be able to grab important assets on the cheap. Beijing is awake to this opportunity.

Britain’s OneWeb would be an important prize in its attempt to catch up with Elon Musk, whose SpaceX company is currently leading the charge. This weekend, a SpaceX rocket is scheduled to launch from Cape Canaveral with an additional 60 “Starlink” satellites onboard, bringing the total in orbit to just under 500. However, it was OneWeb, which was backed by another billionaire, Richard Branson, that launched the first mega-constellation satellite in orbit.

So, it really matters who brings OneWeb out of bankruptcy. After pleas for funding fell on deaf ears in the British government, management turned to America. This made sense because OneWeb was under contract to provide internet access for the US Space Force in Arctic regions.

US investment to block China

Earlier this week the US Defense Department (DoD) said it was considering action. "We work with the White House and we'll be working with Congress, not just focused on OneWeb but all of the commercial space companies that face bankruptcy and face those concerns," a US Space Force spokesman said.

A cash infusion into OneWeb looks possible as the DoD’s Space Acquisition Council has already collected a list of proposed investments for space companies that need capital to survive. The aim is to keep these businesses afloat so the US military still has access to these emerging space technologies. The US Space Force also conceded that any cash being handed over to companies was partly driven by concern “that potential adversaries don't have the opportunity to acquire those capabilities”.

The clash of ideologies between Washington and Beijing has created a scramble for technological superiority. Free-market capitalism created much of what is good in the world today and provides a level of freedom that is regarded as unquestionable in the west. However, the Chinese model does have its advantages.

To develop the world-leading components that are essential for the deployment of 5G, Beijing used its authoritarian state apparatus to get ahead. Cash for investment, dictating major companies’ strategies and facilitating the transfer of intellectual property made it possible, even though it sparked a trade war.

An evolution of capitalism

The lessons are stark. If the west is going to outcompete China in future technologies, it must become more like China to do so. In February, US Attorney General William Barr proposed buying a “controlling stake” in Finland’s Nokia and Sweden’s Ericsson to counter Huawei’s dominance in 5G – a highly unusual move. Rescuing OneWeb would be similarly tangential.

As a centrally planned state with representatives on the boards of some of its major strategic companies, it is much easier for China’s rulers to give businesses a nudge in the “right” direction should the ruling Communist Party decide something is in China’s strategic interest. To compete with this, western capitalism in its current form needs to evolve – and do so in haste – or China may end up using its technological advantages to become the world’s dominant superpower. That cannot be allowed to happen, so capitalist societies may also now need some form of a strategic plan. To defeat China, we must become more like China.

A version of this article appears in the Daily Telegraph.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

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