5G, and the potential benefits and applications of 5G tech, arguably represents one of the hottest areas of investment and development in the contemporary technology marketplace. In order for other emerging technologies such as the Internet of Things and autonomous vehicles to function as expected, spectrum capacity and capabilities need to be increased. With the deluge of data produced by every organization (and individual), expanding the capabilities of digital infrastructure is an imperative for organizations seeking to leverage this information.
With organizations both in the U.S. and overseas committing funds and personnel toward an array of 5G projects, this might seem like a boon for advocates of private sector involvement in the infrastructure of the future. Taking a second look, however, uncovers an underlying force that is having an outsized impact on the development of 5G and related technologies: the government auction process over spectrum. In order for telecommunication organizations to gain access to the spectrum necessary to develop 5G services, there is only one supplier in the marketplace: spectrum auctions conducted by the Federal Communication Commission.
The auction process is certainly superior to the FCC simply allocating spectrum via an opaque process, but nevertheless the control over this valuable resource by a single political entity distorts the market. As a result, mergers and acquisitions in the telecom space are not always driven by business realities, but rather a desire to access the spectrum possessed by other organizations. This convoluted logic behind mergers and acquisitions also leads to antitrust motions being leveled at organizations, increasing costs without leading to much in the way of consumer or competitive benefits. Owing to these perverse incentives, the goal of much telecommunication M&A activity is not customer acquisition, but spectrum acquisition.
In other words, the lack of competition in spectrum development and strict control over the acquisition process can both distort current operations in the private sector and make developing new applications more costly than necessary.
Spectrum is a clear example of how singular government control over
the supply of an asset can influence and distort the actions taken by
market participants, but currency is the example of this
concept played out in practice. Governments rely on their singular
control of currency for fiscal, monetary, and tax sovereignty, yet
monopolistic control is hardly a guarantee of effective stewardship.
Dozens of examples in just the last few decades illustrate the damage
that can be wrought when this singular point of control is abused — not
to mention the corrosive effect of inflationary policies on both
purchasing power and the propensity to save.
Competition and consumer choice are universally good for consumers
but absent in both the case of 5G spectrum provision and currency
options. This hurts consumers and organizations, and leads to unintended
consequences that ripple through the broader economy. In the case of
cryptocurrencies, however, a motivation driving this regulatory and
governmental crackdown and scrutiny might indicate another goal: the
adoption of this technology into the existing financial apparatus.
Bitcoin has broken this continuity and other players in the private sector have developed and introduced simpler and easier-to-use alternatives. In a context of greater involvement of the private sector, it was inevitable that states were curious about how these technologies could be adopted. Libra, for example, may have inadvertently provided states and financial institutions with a model by which this new area can be brought under the auspices of centralized institutions.
The United States and the Chinese government are in the midst of a trade dispute and their attention is catalyzed elsewhere, so emerging technologies such as 5G and cryptocurrencies could still evolve silently.
Technology,
not soybeans, lies at the crux of the tug-of-war currently underway
between the world’s two largest economies, and the possibility of a
crypto-fiat hybrid highlights the interest of both governments in these
emerging tools. This includes the People’s Bank of China (PBoC), which
more than the Federal Reserve in the United States is an arm of
governmental policy and direction.
Several central banks, including the regional Federal Reserve Banks and the Bank of International Settlements, have issued similar statements. But the embrace of this concept within the Chinese banking establishment is noteworthy in no small part owing to how closely the proposed cryptocurrency mirrors the Libra structure
The former governor of the PBoC, Zhou Xiaochuan, has argued that the Chinese state should take measures to strengthen the yuan even more in response to the launch of Libra. This follows statements by President Xi Jinping that have openly praised blockchain as central to the country’s plan to lead in several technology categories in the near future.
Given the central government ban on initial coin offerings (ICOs) and many other crypto-related activities, the launching of a cryptocurrency may seem ironic until one looks under the hood. The cryptocurrency announced by the PBoC looks very similar to a crypto-yuan: supported, controlled, and issued by the central bank, and potentially decreasing Chinese reliance upon the world’s reserve currency, the U.S. dollar. The bottom line is that the private market for emerging technologies such as 5G and cryptocurrencies should be able to grow and develop, or fail, on their own. The alternative is an underdeveloped market with allocation errors that doesn’t benefit buying organizations or consumers.