Trump Goes Socialist — Why This Is Bad News for 5G

In the US, we’ve just heard that President Trump has alarming plans for what we believe will be one of the biggest trends of the next decade — 5G.

His plans are not only wildly expensive and terribly inefficient, they could set a precedent for something similar to happen here in New Zealand.

I’ll explain in a moment…but first, a quick note about Halifax NZ.

Halifax NZ is an online broking firm, with a parent business in Australia. Just a few days ago, the parent company went into administration…

The sudden turn of events left many clients with money in Halifax’s hands wondering if they’ll get their money back.

As of yesterday, the Aussie company’s site went dark…with only a message of the new administrators shown. The Kiwi site is also down…but without any sort of message or explanation…just a blank page.

If you remember the dramatic shutdown of Phoenix Forex about four years ago, this may feel familiar…and it should. David McEwen, who ran Phoenix, slid over to Halifax as Chief Investment Officer after his business failed.

For now, we don’t have many details at all…only that the future of the popular NZ platform could be in jeopardy. We’ll keep an eye on the situation and update you with more details soon.

Also in jeopardy is the future of America’s 5G network.

Touted by many as the ‘next generation of networking’ and the ‘newest generation of mobile connectivity’, 5G stands to revolutionise how we communicate with one another.

Person to person. Person to machine. Machine to machine.

It’s really a remarkable future ahead of us. I’ll be releasing a report in a few days that will uncover what you can expect. Keep an eye out…

But today, let’s talk about 5G and how it’s suddenly been cast into peril…

Why is it important?

When mobile networks first came out, they were called 1G. We’re talking mid–‘80s. Download speeds were extremely slow…about 2.4 Kbps.

Then 2G came out, with digital signals…and that ramped the speed up by 27x…to a whopping 64 Kbps.

Again, incredibly slow by today’s standards. Slow enough that you could click a link, leave, make a cuppa, come back and the page would still be loading.

Then 3G came around and boosted speeds by 31x…to 2,000 Kbps. That was enough for pages to load and some apps to work, albeit slowly.

Today, we’re at 4G. 50 times faster than 3G. Average download speeds at 100 Mbps (100,000 Kbps). Here we can stream movies, play games, surf the web, no problem.

Now it’s hard to imagine, but 5G will be over 10 times faster than 4G. We’re entering an age where we measure speeds in Gigabytes per second, not Megabytes.

Like every generation before 4G, people will say something like, ‘We don’t need those high speeds. We’re A-OK with what we’ve got now…10x faster than current speeds won’t even be noticeable.’

But, inevitably, the new protocol comes around, we all start using it…and we look back and scoff at the snail-like speeds we were used to.

With 5G, the modern age of Internet-infused businesses and products will finally be able to get going. We’ll see businesses in the Internet of Things industry explode. Phone capabilities will soar. Connectivity will exponentially increase.

Here’s the problem — President Trump has suggested that the US should nationalise the new 5G network.

In other words, the American government will build new 5G towers around the country…and mobile providers like Verizon or AT&T will have to rent capacity from the government.

Up until now, each mobile provider was responsible for its own network. It would build its own towers and cables. It’s meant that the provider was responsible for the upkeep of the network…so today’s 4G towers are all well-maintained.

At the same time, America’s roads and highways — under the responsibility of the state — are crumbling.

Ironically, when this nationalised 5G network idea was suggested, it was compared to America’s national interstate system…the same one filled with potholes, disintegrating asphalt and endless cracks.

If the state were to take over the future of 5G, it’s my opinion that it would likely kill any innovative momentum. It would remove the incentives of the free market…and like the road system…would erode as detached government bureaucrats fail to maintain it.

But that’s just a guess…

Here in New Zealand, this sort of nationalised plan would really benefit Crown-appointed fibre provider Chorus.

If you were with us back in October, you’ll know how I feel about Chorus (If not, read here).

Now, of course Chorus wants exclusive control over the cash cow that will be 5G…much to the chagrin of Spark, Vodafone and 2degrees, who are all eager to set up their own networks.

We’ll have to wait until February when submissions for the Telecommunications Amendment Bill close to see where the state sits on this matter. Communications Minister Clare Curran will be a key figure determining how this plays out…

Ideally, for consumers, there would be a competitive element to the 5G network.

I’m not just talking about the prices of plans. I’m talking about the quality and coverage of the networks. Providers should be incentivised to improve their infrastructure to offer better quality services to their customers.

If Chorus is given monopolistic control over the 5G platform, we won’t get that. Instead, we’ll be at the mercy of a company that has nothing to lose. Why would they care if you’re happy with your service? It’s not like you’d be able to switch to another 5G network.

And with so much of New Zealand’s future business sector depending on a high-quality 5G network, it would be a shame to lose it all to Chorus’ shenanigans.

Let’s take this seriously by putting it in the hands of the market, not the state.

Best,

Taylor Kee
Editor, Money Morning New Zealand

PS: I’ve just been informed that Spark has called on the government to fast-track 5G policy…so that mobile providers can start building up their infrastructure now. The deadline given for everything to be up and running is the America’s Cup in March of 2021. That gives the state and providers 28 months to get it going. It’s going to be a mad rush…

PPS: 5G will play a central role in several of the themes I’m exploring for my new service which launches soon. I’ve already picked out five Kiwi companies selling unique products that rely on 5G. Once this network (or networks) get going, these companies could shoot for the moon. Keep an eye out for an email about the new service in the next few days.


Taylor Kee is the lead Editor at Money Morning NZ. With a background in the financial publishing industry, Taylor knows how simple, yet difficult investing can be. He has worked with a range of assets classes, and with some of the world’s most thought-provoking financial writers, including Bill Bonner, Dan Denning, Doug Casey, and more. But he’s found his niche in macroeconomics and the excitement of technology investments. And Taylor is looking forward to the opportunity to share his thoughts on where New Zealand’s economy is going next and the opportunities it presents. Taylor shares these ideas with Money Morning NZ readers each day.


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