ICT and countries’ misguided trend towards nationalism

ICT countries
Image by peshkov | Bigstockphoto

Over the last few years, countries have been getting increasingly concerned about their control over the development and production of ICT equipment. This concern was very visible with 5G, where the US worried that it would fall behind China. Many countries wanted to be global leaders in 5G deployment, some promoted the development of local industries, and all were concerned that falling down the 5G “league table” would lead them to lose their high-tech edge.

It is also present in cloud computing, where many want cloud facilities located within their country and is becoming more prominent in AI, where some countries are seeking to become “leaders” and to encourage the growth of national AI developers.

The desire for increased control

There are generally three factors behind this desire for increased control. One is the assumption that the availability of these new technologies will lead to other high-tech developments or increased productivity, whereas lagging behind other countries in their deployment might lead to a loss of competitiveness. The second is that if these resources are vital, then having some national control over their production reduces the risk that geopolitics or other factors will render them unavailable. The third is that it is thought that local manufacturing will provide jobs.

Increased nationalism

This increased nationalism has caused governments to offer subsidies to manufacturers, offer various grants or awards to those developing new solutions or deploying advanced networks, and put certain rules around security, privacy and particular suppliers in place. It is likely to have had an impact on regulation, especially in countries where the regulator is subject to political manipulation.

However, it is hard to see that lack of national control is a problem and that the interventions have actually helped in any way. Take 5G. It has not proven, at least so far, to be important in the broader capabilities of a country. Countries that implemented it early, such as South Korea, have not obviously gained from it. The fact that China has more 5G base stations than the US does not confer any benefit.

The benefits of waiting

Arguably, countries that waited will have got equipment at a lower cost and have learnt the lessons from those at the “bleeding edge”. No countries, with the possible exception of China, have suffered from having lower priority for equipment supply. The same could be said of cloud computing, where not having national cloud computing resources does not appear to lower productivity or reduce competitiveness.

Where there have been efforts to encourage 5G deployment, it is hard to see that they made any material difference in most countries. For example, grants in the UK have not resulted in any new uses for 5G nor any discernible increase in deployment speed, and certainly have not delivered the desired outcome of the UK being a world leader – recent data suggests it is one of the laggards.

Global industry with global standards

This is unsurprising. After all, it is a global industry, using global standards with a very small number of global suppliers. It is nearly impossible for any country to “nationalise” parts of this global ecosystem, with the exception of the very largest – China and the US.

It is equally difficult to grow new national players because of the solution’s complexity and most buyers’ risk aversion. And with the supply industry mostly in a downturn and shedding jobs, it would be economically foolhardy to encourage new entrants. Even if successful in creating a national player, the number of jobs involved is often relatively small compared to those working for operators. In some cases, companies only have tens or hundreds of employees. Even the poster-child companies are small – DeepMind had only 75 employees when acquired by Google.

Nationalism and AI

The same concerns and call for nationalism are happening with AI, especially generative AI. Countries are trying to encourage national investment. Some aim for regulations that are lighter touch so that investors will prefer their country. Many worry that they will not be able to control AI without national champions. Substantial grants and subsidies are being made available so that countries become “world leaders”. But there seems even less reason to promote nationalism here – no factories are needed to produce AI, and the number of jobs involved in its “production” is much less than those in the telecoms industry.

Does it matter if governments waste a relatively tiny fraction of GDP on projects with little potential benefit while entertaining unreasonable aspirations? It is not so much that the interventions will make the market less efficient – more that they will limit other types of interventions that could be helpful.

It’s all about connectivity

While consumers and companies may not need 5G specifically, for example, they need widely available connectivity that is reliable and fast. There is much that governments can do to encourage the deployment of high-speed broadband and ensure excellent wireless coverage. Governments can educate citizens on how to use new OTT services and protect them from harm.

Efforts to promote national champions are likely to detract from this since government departments have limited resources and politicians limited areas they can champion. It is very tempting for politicians and others to want to be associated with the latest new technology, but it would be better for the country if they understood what interventions can really make a difference and focus on these. A clear, logical and realistic national ICT strategy is a good starting point.

Mobile connectivity

As an example of what this might look like, consider mobile connectivity. A country would ideally have ubiquitous coverage and sufficient capacity and speed for all widely used applications. This should be delivered in the most cost-effective manner. Various obligations or contracts for improved coverage could be used to achieve this. But they need not specify whether the coverage is 4G, 5G, Wi-Fi or some other technology.

Should an important new application emerge that requires higher data rates, then targets can be adjusted. Generally, demand moves sufficiently slowly and predictably that this approach of evidence-based intervention works effectively. Countries should concentrate on how best to use emerging technologies, not how to control and nationalise them.

by Professor William Webb, CTO, Access Partnership

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