Fear is never the best foundation for a relationship, but it’s exactly what T-Mobile and Sprint are counting on to fuel support for their proposed mega-merger. The deal would combine the two companies into a $146 billion behemoth better poised to compete with market leaders Verizon and AT&T.
But while T-Mobile and Sprint certainly want everyone to feel good about wireless competition, what they’re really trying to stoke is fear of China.
The country isn’t named in the official announcement, which is full of predictable talk of job creation, “synergies,” and scale, scale, scale. You can tell a lot from a document’s first line, though, and in this case Sprint and T-Mobile chose to emphasize that the merged company would have the network capacity to deploy 5G technology with a “breadth and depth critical to extend U.S. global internet leadership.”
It only takes an elementary reading between the lines to know they’re talking about China. A recent study by CTIA, a U.S.-based wireless association, found that China had a narrow lead in the race to deploy 5G, followed by South Korea in second place. Third place? That would be the good ol’ U.S.A.
Getting scared yet? All the wireless carriers — not just T-Mobile and Sprint — hope you are, because if there’s broad support to “beat” China to 5G, there will be more investment and government funding to create their networks.
Ultimately, the 5G race is really a matter of months: Both the U.S. and China have already started to develop these networks. But theoretically, whichever country deploys it first will have the most say in the direction it takes.
The problem is, by focusing on these macroeconomic issues, there’s a greater chance regulators and stakeholders will overlook the person they should be keeping top of mind: the consumer.
The new Red Menace
This is starting to become an uncomfortable theme in tech these days: The growing call to demonize China and its tech companies with exaggerated fears, then exploiting those fears to push for policy that is fundamentally anticompetitive. Before T-Mobile and Sprint’s 5G scare, AT&T responded to government pressure by scuttling a deal to sell phones from Huawei, China’s top smartphone manufacturer.
The U.S. has decided to build its own Great Firewall, with economics instead of tech
That means, if you live in America, you can’t buy the Huawei P20, one of the most innovative phones on the market today thanks to its three-camera system. It also means that not many U.S. companies will be using Huawei network equipment while they deploy 5G, even though there’s no evidence to support claims of spyware in their phones or equipment. Huawei USA even employs as its head of cybersecurity a former director for the U.S. Department of Homeland Security.
Mark Zuckerberg was even ready to peddle the anti-China narrative when he testified before Congress. (His notes revealed that one possible defense against breaking up Facebook is the notion that it would strengthen Chinese internet companies.)
In the case of T-Mobile-Sprint, the China factor is a question on emphasis. Of course, the two companies claim customers will enjoy “unmatched value” when they merge, but consumer choice is clearly a secondary question. You only need watch T-Mobile CEO John Legere in this interview with Cheddar to get the real message.
Here’s the key quote from Legere (emphasis added):
Why now? Why will this get approved? One is the criticality of 5G for the United States and the innovation cycle that’s underway that we currently as a nation are behind on…. This is very important policy-wise for the country.
Translation: Customers? Yeah, they’ll be fine, but who cares? We gotta beat China to 5G!
Don’t get me wrong here. China is no U.S. ally, and its track record on human rights is atrocious. State-mandated censorship has resulted in the Great Firewall, with Google and Facebook being banned. And the country is now wielding the incredible power of facial recognition and big data with the zeal of a Black Mirror writer — beefing up mass surveillance and assigning every citizen a “social credit score,” with real consequences if it creeps too low. The gap in values between China and the West is vast.
But we can acknowledge China’s problems and also be honest about what’s really behind Big Tech’s newfound concerns about them. This is economic protectionism, essentially a buy-in to a worldview also used as justification for the Trump administration’s declared trade war with China, and the controversial tariffs that go along with it.
Who’s afraid of fair competition?
To be fair, it’s true that China has invested heavily in tech in recent years. It clearly wants to be No. 1 in 5G, and the strong link between wireless carriers and the government means it can move quickly on that plan. Chinese internet giants Tencent and Alibaba are two of the most valuable companies in the world. And just last year China announced an ambitious $150 billion vision to become a world leader in artificial intelligence by 2030.
But the U.S. is no slouch either. Even absent a T-Mobile-Sprint merger, all the big networks have announced aggressive deployment of 5G, with some trials planned to start this year, and network rollouts coming in 2019. China’s commitment to AI is impressive, but so are the investments from all the major tech companies: Google, Apple, Amazon, Facebook, and Microsoft. And as nice as the Huawei P20 is, the iPhone still owns the high-end smartphone market.
So why not drop the scare tactics, and just let the market decide who has the best approach? T-Mobile itself — once left for dead after a failed AT&T merger of 2011 — is ironically one of the best examples of how fair competition leads to better products and lower prices. But somehow the fear of a technologically influential China means consumer choice comes second.
That should give everyone pause, but especially the U.S., because it’s fundamentally un-American. It used to be the West was confident enough in its own innovations and ideas that it would accept competition in open markets. Instead, we’ve decided to start building our own version of the Great Firewall, just with economics instead of tech. Maybe this protectionism will work, and in the arenas of 5G, smartphones, and AI, China will lose. But either way, consumers certainly will.