OPINION:
In May, a U.S. district judge ruled that longstanding practices regarding the sale of smartphone chips sold by manufacturer Qualcomm violate federal antitrust law. Judge Lucy Koh agreed with the Federal Trade Commission (FTC) that Qualcomm broke the law by requiring royalties from equipment makers in smartphone chip sales.
Now, just a few months later, the U.S. Ninth Circuit Court of Appeals put the brakes on the judge’s ruling that Qualcomm had to immediately revise all its contracts, which would have upended its business model before the company’s appeal could be heard. As welcome as the Ninth Circuit’s stay may be, if the lower court’s overall decision is affirmed by the Ninth on appeal, that ruling will impact the freedom of U.S. consumers to purchase world-class technology. This case is another strong signal that when it comes to buying the latest smartphone, the government has no business meddling with what has become an American birthright to choose the latest and the best technology.
What exactly is at stake for consumers? If you have ever been tempted to whack your smartphone as it loaded slower than a snail race across peanut butter, fifth-generation cellphone technology, or 5G, will not be just an improvement. It will be so blazing fast that it will feel like real time.
Qualcomm’s own testing shows that 5G will increase speeds by a factor of 20. This means you will be able to download a feature-length HD movie or a whole season of your favorite streaming series in seconds. The action on interactive games on your mobile device will respond as fast as Han Solo with a DL-44 heavy blaster pistol. Wireless virtual reality will be convincingly immersive.
True-to-life entertainments are one thing, but 5G promises to push several nearly-there transformative technologies over the finish line.
After years of heralding the advent of autonomous vehicles, major car manufacturers have backed off from their boldest predictions for self-driving cars. But with the ability to process traffic data in real time through 5G technology, cars will be able to share data with one another and with control centers, transforming into robotic chauffeurs that coordinate their movements to prevent traffic jams. The technology may not be ready for widespread consumer use until the next generation of wireless technology, but without robust 5G, autonomous-vehicle development will be stuck in first gear.
The so-called Internet of Things will also receive a big boost from 5G. The Internet of Things includes devices like a smart fridge, which will order fresh milk when you run out, or a smart home, which knows when to cool down your living room. With 5G, though, think smart cities. In the world of 5G, medical monitors will report your blood pressure to the doctor and allow surgeons to perform delicate surgery remotely without wire-line infrastructure. Retail, public transportation, energy distribution, urban design — 5G will connect and coordinate every device, potentially transforming many of the services we use every day.
All the expected benefits of 5G make Judge Koh’s ruling that much more frustrating. Antitrust law is supposed to protect consumers. Unfortunately, the district court’s decision would likely have the opposite effect, harming consumers by stalling the American 5G revolution. As a leading chip designer, Qualcomm invests many years of R&D for every generation of smartphone technology. Because Judge Koh’s ruling creates new legal obligations and undermines intellectual property rights, FTC Commissioner Christine Wilson, who disagrees with the commission’s case, observes that “a company understandably might question the value of investing in new assets and technologies.”
The U.S. Department of Justice is similarly critical of the ruling. The legal rationale behind the ruling in favor of the FTC is so flawed, in fact, that the Justice Department took the unusual step of filing a brief against the government’s own position. The brief notes that the district court failed to identify a single harm to the competitive process.
The impact of derailing American-led 5G is a matter of personal security as well as national security. Waiting in the wings is the Chinese telecom giant Huawei, which seeks global dominance in 5G. Huawei’s ambitions are especially disconcerting because of its close ties to the Chinese government, potentially allowing military intelligence backdoor access to user’s devices.
As it stands now, Judge Koh’s ruling will force Qualcomm to share the fruits of decades of American R&D with foreign competitors, including Huawei. “Foreign competitors will no longer have to steal American technology,” Ms. Wilson ruefully notes. American consumers, meanwhile, will be left having to trust in China’s handling of their personal information and network of devices.
If the U.S. judicial system sabotages America’s 5G networks, expect Huawei to exploit the opportunity in China and around the world. Americans will then have reason to envy South Koreans, Japanese and Chinese consumers for their superior telecommunications technology.
American consumers stand to benefit greatly from 5G, but if Judge Koh’s ruling stands, the FTC wins, Huawei reaps the benefits and American consumers ultimately lose. The appellate court’s stay may be a signal that the judges of the Ninth Circuit understand what’s ultimately at stake in the global race to 5G. For our country and consumers, that is a welcome sign of judicial rationality.
• Beau Brunson is director of policy and regulatory affairs at Consumers’ Research.
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