Hosuk Lee-Makiyama and Robin Baker
Admittedly, the trading relationship between the EU and the U.S. has never been an easy one. Since the late 1960s, commercial disputes and conflicting agendas have charred a solid security alliance. Frictions have continued post-Cold War, with trade spats over everything between agriculture and civil aircraft. In the past decade, the internet and communications networks have spurred a commercial conflict that is more deeply rooted in ideology and strategic objectives.
The EU has attempted to curb the influence of predominantly US-based cloud providers and platforms. Legislative and administrative measures have centralised EU powers on privacy and digital markets whilst also protecting European telecom operators and other legacy industries.
Conversely, successive US administrations have embraced activist industrial policy. American alternatives have been promoted with subsidies or diplomatic powers of persuasion. Specifically, US officials are not shy about lobbying for the O-RAN Alliance – a consortium that combines the forces of US and Chinese PC and telecom industries in the hope of belatedly capitalising on Huawei’s misfortunes.
The conclusion of the second summit of the EU-US Trade and Technology Council (TTC) may disappoint some. But the merits of TTC are not contingent on settling differences over trade, or to defusing the ongoing war over platforms. Much less do they rely on setting “global rules” as some over-spirited transatlanticists envisage. Brussels’ digital charters simply cannot be undone. The Democrats may want to rein in social media at home, but President Biden is unlikely to forsake the US’ commercial interests abroad.
On balance, current outcomes are sub-optimal. History shows that industrial policies designed to “catch up” rarely achieve their objectives, regardless of whether they aim at strategic autonomy, bifurcation or indigenous innovation. Looking ahead, 6G and the next generation of network technologies, will see the convergence of cloud, wireless networks and services. These industries compete as relatively distinct today, but 6G will see Google, Huawei, and T-Mobile deliver the same product in direct competition.
The experimental development of 6G architecture has only just begun. Therefore, it is premature to speculate how or where 6G will be standardised. We can safely assume that views on market structure and user rights will be differ across the Atlantic. Interestingly, China is the sole global power to master the trinity of technologies that will merge in the 6G era. By contrast, the US and the EU are still overspecialised in one or two fields, providing for complementarities between them.
EU and the U.S.: Adversaries in their own rights
Without delving into any specific details, there were several different options on lead agencies and geometries of participants that were floated just before the TTC was launched. And among them, the TTC was arguably the least fit to address third country practices – but the best fit to resolve transatlantic frictions that are creating collateral damage on other governance forums like the OECD, G7 or WTO.
At its core, many transatlantic digital frictions are just bilateral commercial conflicts under the guise of global policy concerns. For Europe, the US’ competitive advantage over the internet – especially its online platforms – represents a long-standing irritant. A concatenation of legislative and administrative actions has been taken against the dominance of US cloud providers – GDPR, DGA, DSA, DMA, or the EU Digital Act – as well as privacy and antitrust enforcement against the platform-side of their respective businesses. For Washington, Brussels is potentially more dangerous as an adversary than China, as it possesses the soft power to legitimise similar policies around the world.
Simultaneously, the EU has launched numerous initiatives, such as “Gaia-X” and “the Cloud Alliance”. These are somewhat reminiscent of the Defi American-inspired industrial policies in that they aim to create European alternatives.
Meanwhile, the US has been preoccupied with re-entering the network equipment industry, not least capitalising on the void created by the sanctions imposed on Huawei. Intense US corporate lobbies have successfully petitioned for $750 million to develop indigenous radio access networks (RAN) through O-RAN – an alternative architecture built on virtualisation, cloud and cheap PC parts. By passing the USA Telecoms Act and USICA, lawmakers have paved the way for Beijing-style direct subsidies.
The emergence of society-critical technologies (like 5G) is always conducive to heightened competition. However, none of the market interventionist policies has rendered any success. As the EU lacks the right business environment, it has failed to spawn global service provider that can challenge the platform economy, and even the French and German public clouds rely on cloud technologies from Microsoft and Google.
Elsewhere, Silicon Valley tried to create a “western” alternative to Huawei and other integrated vendors in O-RAN. It has since resorted to jointly developing its software with Chinese tech, including several military contractors under US sanctions. As US 5G networks were already free from Chinese vendors, discriminatory support for O-RAN only serves to displace European suppliers. In practice, US efforts came too late, as all major 5G contracts were already signed. Paradoxically, they were also too early, as O-RAN remains premature for large-scale deployment.
Lastly, as the EU and the US exhibit a propensity to “pick” winners, any criticism of China’s state capitalist model is undermined. “Market failures” with too much market concentration are basically politically unpalatable outcomes with wrong winners and losers. TTC cannot undo these heavy-handed policies that seem juxtaposed to the principles of liberal market economies – at least not for the current generation of technologies. As a non-negotiating and non-regulatory forum, its purpose and objective have never been to create common standards or reshape America in Europe’s image (or vice versa).
6G is the cloud
Regardless of its revolutionary potential, even 5G will be unable to meet the requirements of extended reality (XR) applications or ultra-precision streaming tasks that are currently being developed.
Commercialisation and standardisation are some way off, but research on 6G network architecture has already begun. Established 3GPP vendors like Ericsson, Nokia, Huawei, and Samsung started R&D on 6G as early as 2019. Their efforts have also been bolstered by public funds in the EU, China, Japan, and North America. 6G test beds are forecast to emerge from 2024, while the first iteration of 6G standards may be concluded within five or six years.
6G will complete the ongoing convergence between cloud and mobile networks. It will fully deploy multi-access edge computing (MEC) that relocates part of the service-specific processing and data storage from the central cloud to “edge nodes”, physically and logically closer to end users. In conjunction with AI-led network management, MEC will reduce backhaul traffic and cut costs.
By bringing the cloud to the edge, 6G is more conducive to low latency applications. If today’s networks enable high-definition, two-dimensional video from centralised services, 6G will bring three dimensions in even higher resolution. Holograms and human-grade sensory feedback will enable full immersion into the ‘metaverse’, which is already being commercialised. In more extreme scenarios, skin patches, bio-implants and even brain sensors may be used to enhance connective experiences and facilitate an “internet of senses” (IoS).
6G networks may even use radio resources for both communication and sensing. By analysing how transmissions interact with the environment, high bandwidth radio waves would become a source of live situational information, as well as a means for carrying data. Sensory information will help users to locate empty parking spots, but it could also “hear” the heartbeat of vulnerable persons, alert emergency services accordingly and redirect obstructing vehicles.
In sum – where 5G, virtualisation and Open RAN move core functionalities into the cloud, 6G moves the cloud back to the edge. Mobile networks will be distributed clouds equipped with a radio access network. Cloud providers like Google Cloud, AWS and Microsoft Azure are already augmenting their centralised cloud services with edge computing at the periphery of existing 5G networks. Rakuten – the Japanese e-commerce platform – proved that a cloud service could successfully enter the heavily-guarded operator market, thanks to its cloud know-how and the vast user base.
Whether the impending conglomeration yields cross-industry mergers or a more predatory form of competition, it may add further political tensions if left unchecked. Needless to say, the perfect synchronisation of a digital-physical continuum will also necessitate a rethink of privacy, surveillance and security. On one hand, MEC and a more distributed network architecture means that some information will be decentralised and subsequently less vulnerable to a single breach. Cloud providers are also placing a greater emphasis on confidential computing and private networks – a form of isolated environments – in which users place their data. On the other hand, more intrusive data will be guarded by autonomous security systems. In this context, the need for an expanded ecosystem of secure and trusted suppliers is of heightened importance.
Tech before trade
The second TTC summit reveals an increasing emphasis on technology – at the expense of trade – is hardly surprising. The former will be more important to the future of the transatlantic relationship, compared with the trade disputes of our past. We might “strive to prevent” disagreements, although they are inevitable in our relationship. Unilateral trade actions are unfortunate, but we do not necessarily commit to refraining from them. Also, we will “engage” on the WTO but not necessarily collaborate.
Similarly, the EU and the US will continue to discuss known irritants in the digital realm, such as cooperating on enforcement where appropriate – without necessarily pledging to coordinate them. But the real emphasis is on more forward-looking and high-level questions on research and interoperability that aim to manage prospective conflicts, evident by how the TTC summit conclusions mention 6G more often than 5G.
The reality is that the EU and the US are too overspecialised (in telecom and networks, respectively) to win the 6G race. As an example, the US subsidiary of a European network equipment vendor employs more researchers in America than all US-headquartered firms put together. European and Chinese headquartered firms account for 37 and 30 per cent of all technical submissions at 3GPP – the international standard-development organisation on mobile networks. By comparison, US entities account for less than 20 per cent, a share that has rapidly declined over time. Conversely, over 324,000 cloud computing patents had been filed in the US, compared to just 47,000 patents in the EU, while companies like AWS, Microsoft, and Google account for the majority of the global cloud market.
By comparison, China is better diversified to face the 6G convergence: domestic firms supply 90% of 5G network equipment and well over 60% of the cloud computing market. Chinese entities make considerable contributions to Kubernetes and other open-AI or cloud-native platforms. Three state-owned enterprises control the entire telecom services market, with no privatisation or foreign competition in sight during our lifetime. But by all accounts, Beijing has written off 5G as a defeat, and focusing its resources on winning the next race. And it has all three pieces of the puzzle to be a leader on 6G, fair and square.
Against this background, joint EU-U.S. research or bidirectional investments and M&As are inevitable given our complementarities, regardless of whether we choose to cooperate or compete. In the coming years, EU telcos will be more inclined to invest in cloud technologies. At the same time, US cloud providers must tap into the expertise of network equipment vendors to be “the last man standing” when the three industries fold into one.
Finally, ever-expanding attack surfaces and heightened privacy risks will necessitate government involvement in both the East and West. Looking back at history, it is not entirely inevitable that East and West will remain interoperable – and national or competing specifications (like O-RAN today or WiMAX in the past) have come and gone. However, interoperability is a matter of standardisation, and TTC discussions on “standardisation” are still too premature for an architecture that is yet to be invented.
The US industry has also long eschewed international standardisation (and even lobbied for defunding its national standardisation agency) to promote private specifications akin to Microsoft Windows, Android or O-RAN. US industry claims of “Chinese dominance” or bias in mobile standard-setting are mainly anecdotal – China never ceases to complain over the disproportionate influence of Europeans and Americans working for EU vendors. Although TTC is carefully (and perhaps rightly) void of any institutionalised features, there is an exception for the new Strategic Standardisation Information (SSI) mechanism which enables information-sharing in strategically relevant standards. SSI is an intermediate step to bring America back to the table – in good time for the sixth round of the standardisation game.
Contrary to its title, technology comes before trade or eye-catching institutional deliverables at the TTC. Instead, Brussels and Washington must look beyond 5G to become better rivals than we are today.
Great article.
One dobt: why “Beijing has written off 5G as a defeat”?
Thank you