Merkel goes on the offensive at 5G

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Berlin, Dusseldorf Chancellor Angela Merkel is pushing ahead with considerations about Europe’s technological independence. This Thursday Merkel welcomes the heads of the European telecommunications groups Nokia and Ericsson to the Chancellery to talk about the development of the 5G network. The Chancellor receives support from the Union faction.

In a position paper on the 5G network, MPs from the CDU and CSU are calling on the German government to work with EU partners to develop an industrial strategy to strengthen the competitiveness of European providers and “protect them against hostile takeovers from abroad”.

According to information from the Handelsblatt, the topic should also be discussed on the margins of the Munich Security Conference. In this way, the United States wants to show the German side what significance the current 5G debate has for them. Last week, Attorney General William Barr launched the idea that the United States could choose to buy European network suppliers Ericsson and Nokia.

Even if that is unlikely, the message is clear: President Donald Trump’s government does not trust the Europeans to strengthen the two companies in competition with the Chinese market leader Huawei.

This is also supported by a new bipartisan bill in the US Senate: Democrats and Republicans introduced the “Utilizing Strategic Allied (USA) Telecommunications Act” there, which is intended to secure the technology leadership of the West. The US is expected to invest over a billion dollars in western alternatives to the Chinese providers Huawei and ZTE. European companies should also benefit from this.

Fear of dependence on China

Because hardly anything fears the USA as much as becoming dependent on China, its great rival in power. This is especially true for the 5G mobile radio technology, on the basis of which a new digital infrastructure is to be created that connects everything with everything: people, cars, factories and medical devices. The US overslept the development of 5G.

But now they have woken up – and are increasing the pressure on Europeans, who have technical know-how in the 5G sector, but have little to counter the Chinese market power. At the Munich security conference, the USA therefore want to present a concept this weekend: The European telecommunications providers Nokia and Ericsson are to help American people find a way out of the 5G dilemma.

Specifically, it is about a fund fed by the USA, which is supposed to support western allies in buying 5G technology from Nokia and Ericsson instead of responding to the lure offers from the Chinese market leader Huawei. “The idea is supported by both parties in the US Congress and also includes collaboration for the research and development of future technologies,” reports Jake Sullivan, formerly close policy advisor to Barack Obama and Hillary Clinton, the Handelsblatt.

In Europe, US initiatives are viewed with a mixture of goodwill and suspicion. On the one hand, they show that the value of transatlantic cooperation is still being recognized in Washington, despite President Donald Trump’s “America first policy”. On the other hand, they fuel concerns that the US could reach for European high-tech companies.

The Union faction decided on Tuesday on a position paper on 5G that the federal government is calling to develop strategies to counter hostile takeovers. “We have to join forces in Europe, otherwise the Americans will take the matter out of our hands,” warned CDU MP Gisela Manderla.

Approval comes from the opposition: “Our digital sovereignty is at stake,” warns the Greens-European politician Franziska Brantner. “We need a European 5G consortium. This is the only way we can pool our know-how in the EU, stay innovative and protect our infrastructure. ”Your party friend Jan Philipp Albrecht, Digital Minister of Schleswig-Holstein, suggests targeted support for European software and hardware providers:“ It takes a lot the courage to think of something like an Airbus project for digitization and 5G expansion, ”says Albrecht.

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According to information from the Handelsblatt, talks are ongoing between Merkel and the heads of Ericsson and Nokia about how the competitiveness of European 5G providers could be increased. However, these are still at an early stage, it is said. Since Merkel is also reluctant to ban Huawei from the German 5G network, Ericsson and Nokia could miss important orders.

The Americans are ahead. Democratic and Republican senators have introduced a bill designed to secure Western technology leadership. According to this, more than a billion dollars will flow into western alternatives to the Chinese providers Huawei and ZTE. Law sponsors include influential senators such as Democrat Mark Warner from Virginia and Republican Marco Rubio from Florida. Both are members of the Senate Secret Service Committee.

“We have to offer an alternative for American and foreign network operators,” Warner said. The senators want to provide 750 million dollars from the proceeds from the auction of mobile radio licenses to develop an open software architecture for the American mobile communications market. With an additional $ 500 million, the US government is to enable telecommunications providers in third countries to buy “trustworthy and safe equipment”. Ericsson and Nokia do not comment on the plans.

The background to the political pressure from the United States are fears that Huawei could use its 5G technology as a “Trojan horse” for industrial espionage or attack Western infrastructure. Huawei, like any other Chinese company, is required by law to work with the Communist government in Beijing. According to information from the “Wall Street Journal”, the US government should have concrete evidence that Huawei has built back doors into its already established mobile networks, through which information could be skimmed.

The Handelsblatt first reported that this information was also forwarded from the United States to the federal government in Berlin. In this context, we spoke of a “smoking gun”, ie clear evidence. Huawei denies the allegations: “Huawei has no access to the interfaces, this is done via third-party systems under the complete control of the network operator.”

USA builds up front against Huawei

The United States has only partially succeeded in building a united front against Huawei. Only Australia, New Zealand and Japan have so far categorically ruled out cooperation with the Chinese group in building their 5G network. The UK has decided against a Huawei ban despite considerable pressure from Washington and believes it has the risks under control. “The dispute over Huawei and 5G is part of a global technology war that may lead to a gradual decoupling of the western economies from China,” warns Ian Bremmer, head of policy advice Eurasia Group.

Secretary of Justice William Barr, a close confidante of President Trump, initiated the new search for an alternative to Huawei. Last week Barr suggested that the US could use its “financial muscles” to build Nokia and Ericsson into a “formidable” competitor to Huawei.

The Attorney General even discussed a direct “controlling” participation by the US government or American companies in the two companies from Finland and Sweden. “We must actively consider this proposal with our closest allies,” Barr urged. For the first time in history, the United States will not be a leader in the next technology age.

5G construction

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The United States plans to provide dollars to help partner countries purchase “trusted” 5G technology. (Source: U.S. Senate)

It didn’t take long for the White House to slow down its senior judicial officer’s industrial policy trip to state capitalism: “It’s not the US government’s job to buy companies,” Trump’s economic advisor Larry Kudlow made clear, but no one prevented American technology companies from making acquisitions to do. In other words, the government wants to stay largely out of the way, but one would not stand in the way of a US corporation’s participation in Nokia and Ericsson.

In addition, Ericsson’s largest investor, Cevian, has commented positively on a possible takeover: “I think the United States would do anything to get its hands on Ericsson,” said Christer Gardell, co-founder of Cevian Capital. Ericsson’s board of directors must treat the idea with the utmost urgency. In any case, the share prices of Cisco and Qualcomm, both network equipment suppliers from the USA, who are often associated with Ericsson, briefly went down on their knees – which is a common market reaction in the case of takeover speculations.

Agreements between the EU and the USA on the way

5G should also be on the agenda if the planned meeting of EU Commission President Ursula von der Leyen with Trump comes about. Trade commissioner Phil Hogan, during his recent visits to Washington, has campaigned for closer coordination on China policy in the future. The Commission believes there is more overlap in interests than the US government has recognized.

For example, Internal Market Commissioner Thierry Breton tried to emphasize the similarities in dealing with Huawei: As allies and partners, a “like-minded approach” should be followed when it comes to network security, he said. It was therefore “very welcome” that Foreign Minister Mike Pompeo had responded positively to the instruments developed by the EU states to deal with the security risks. In it, the EU states recommended excluding suppliers classified as high-risk from the core areas of the 5G network.

In its new industrial strategy, the Commission already wants to push the development of the next generation – 6G. For this, a strategic research partnership should be established, following the pattern of the public-private partnership with 5G launched in 2013. The sector is to be classified as strategically important and thus also to receive special support from the EU budget and national budgets. “Europe would already be technologically capable of building an alternative to Huawei,” says Andre Losekrug-Pietri, technology investor and chairman of the Joint European Disruptive Initiative (JEDI).

Losekrug-Pietri criticizes, however, that Europe has so far been lacking an industrial policy strategy in the technology sector and that there are also structural disadvantages: “There are 35 telecommunications network operators in Europe, and there are only three in the USA.”

More: Minister of Economics Altmaier and Minister of the Interior Seehofer argue about the emergency exit on the information superhighway.

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