Mika Laude: The people will have to pay the bill for the ‘game of thrones’ of the great powers

No country has ever benefited from prolonged resistance. This conclusion was described several hundred years ago by the famous military leader and strategist Sun Dzi in his treatise “The Art of War”, and its essence remains unchanged even today. Therefore, looking at the decisions made by some politicians in recent years and the efforts to exclude Huawei from the 5G network infrastructure, it must be concluded that there will be no winner in this geopolitical confrontation. In the long run, the economic consequences of political ambitions and short-sighted decisions will have to be borne by society in a number of areas. That is why the authorities should evaluate their actions very carefully in order not to place an additional financial burden on the population.

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In the current situation, when there is a clear external pressure on European countries, restricting cooperation with one of the technology market leaders, no one is able to predict exactly in which direction the situation will develop and, most importantly, what consequences it will lead to in general. However, as an expert in the field of technology, it is absolutely clear to me that such a situation will significantly slow down the development of the IT sector as a whole. In the worst case, this could even lead to a significant widening of the digital divide.

Huawei currently holds a leading position in the world in terms of the number of 5G technology patents and investments in cybersecurity. Abolishing the current cooperation will mean a slower and significantly more expensive process of digital transformation for each country, as they will be forced to look for alternatives and use solutions that are less technologically advanced, less advanced and less secure. In addition, Huawei is the world‘s largest telecommunications supplier and one of the largest telephone manufacturers, already two years ahead of other market players in terms of equipment and solution development. This means that if Huawei is excluded, some countries will be forced to choose the path of technological development that we were on two years ago. Given the rapid development of the IT industry, two years is a significant timeframe, especially from the perspective of cybersecurity and innovative 5G technologies.

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A step back in the development of the 5G industry will also have a negative impact on the economic situation. Internationally recognized experts from Oxford Economics have calculated how much it will cost Europe for Huawei to leave the market. They concluded that, due to restrictions on competition, the average increase in investment costs over the next ten years will range from $ 200 million to $ 600 million. As a result, prices in this ecosystem will rise for all parties involved. This applies not only to business, but also to ordinary people: the cost of living will increase and you will have to pay much more for the same products and services.

The European Union’s (EU) roaming regime, which has abolished the so-called roaming charge or call charge outside its own country since 2017, is also likely to undergo significant changes, with the introduction of common EU-wide tariff guidelines. However, these guidelines cannot be valid in circumstances where individual service providers will be forced to purchase certain components at a higher price than their competitors in other countries. Namely, those countries that will not be allowed to use the equipment supplied by Huawei will have to explain to the European Commission that the government has changed the structure of roaming costs, which it does not want to reimburse. As a result, roaming agreements will no longer be valid and a situation will arise in the single EU where not only some countries but also some companies will become more competitive than others.

Such persecution of one market player is not only contrary to EU rules and principles, but also distorts competition throughout the sector. The network equipment market is characterized by a small number of manufacturers, and the exclusion of one player would significantly reduce competition between other manufacturers. In the conditions of reduced competition, there is an increase in the price level for both individual and business customers. Taking into account the fact that the daily life of Latvian consumers and the business activities of companies depend on telecommunications, this situation would increase the cost of living for the population and reduce the competitiveness of local companies.

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Recent US statements show that Europe faces new and complex challenges. Internet users around the world have expressed open dissatisfaction and frustration at the US government’s announcement of possible fragmentation of the Internet. That is, the government’s idea is to divide the Internet between those users who are allowed to use Huawei’s equipment and those who are not. Doing so would mean the disappearance of the internet as we know it today, and there could be more internet in the future.

This would not only require a number of service providers, but would lead to fragmented technologies, a fragmented sphere of innovation, a regulatory framework, mass commercialization and, finally, a potential economic downturn for each of the countries involved in the plan. These are very serious consequences, and any decision must be taken carefully by countries, especially in the light of potential future scenarios and their impact on national economies, their competitiveness and the well-being of their citizens.

In this article, I outline just a few of the challenges that European countries will face if a decision is taken to exclude Huawei from participating in the development of the 5G network. However, despite this discussion, Huawei continues to grow, with the company’s revenue up more than 13% year-on-year, meaning that most countries and operators still trust Huawei. However, let us note that in times of great uncertainty, every company usually chooses caution and frugality, devoting free resources to creating an “airbag” rather than to development, technological evolution, innovation, security and other areas that are more important to society than geopolitical and economic struggles.

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