Market Overview

Analysis: Government 5G Network Unlikely, Despite Reports

Analysis: Government 5G Network Unlikely, Despite Reports

Wireless carriers AT&T Inc. (NYSE: T), Verizon Communications Inc. (NYSE: VZ), Sprint Corp (NYSE: S) and T-Mobile US Inc (NASDAQ: TMUS) all traded lower Monday morning by more than 1.1 percent after Axios reported the Trump administration is considering a nationalized 5G network. Height Securities is extremely skeptical the government would make such a drastic move.

According to Axios, the government could either build its own high-speed mobile network and then charge carriers to use it or allow carriers to continue to build their own 5G networks.

Security A Top Priority

Axios said the primary motivation behind a nationalized 5G network would be to keep U.S. networks secure from the Chinese government.

“We want to build a network so the Chinese can't listen to your calls,” one government official told Reuters.

Height Securities said these proposals are likely just undeveloped ideas being batted around by the National Security Council rather than fully developed policy plans.

“We doubt these ideas will advance for a variety of reasons, including spectrum constraints, private sector investment and the availability of other security measures,” Height said Monday. 

Time A Factor

Both AT&T and Verizon plan to begin limited rollouts of their 5G networks before the end of 2018, and Height said it’s unlikely the government could beat the companies to the punch.

“Additionally, it seems unlikely that the government could purchase or reserve sufficient spectrum to build a 5G network as commercial providers have already purchased the majority of available spectrum,” Height said. T-Mobile and DISH Network Corp (NASDAQ: DISH) purchased the majority of the additional spectrum that was auctioned off last year.

More Likely Outcome

In addition, the potential $275 billion cost of building a national 5G network might get some major pushback from fiscally conservative Republicans in Congress.

Instead of creating a nationalized network, Height said the FCC will likely work more closely with private carriers to impose stronger industrywide security standards.

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