The R&D Tax Credit Aspects of 5G Cellular Networks

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        There are a multitude of new technologies hoping to enable and define future 5G networks. As 4G LTE networks settle in as the current standard and continue striving to meet the growth demands of coming wireless technologies, research races have begun in order to move towards 5G, the fifth generation of wireless networks.

The Research & Development Tax Credit

        Enacted in 1981, the Federal Research and Development (R&D) Tax Credit allows a credit of up to 13 percent of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:

  • New or improved products, processes, or software
  • Technological in nature
  • Elimination of uncertainty
  • Process of experimentation

        Eligible costs include employee wages, cost of supplies, cost of testing, contract research expenses, and costs associated with developing a patent. On December 19, 2014, President Obama signed the bill extending the R&D Tax Credit for the 2014 tax year.

About Generations of Cellular Networks and 5G

        Cellular networks have typically evolved about every decade since the first generation in 1981. G2 arrived in 1991, G3 in 2001, and 4G networks became standardized in 2012, with 4G LTE settling in as the transitional standard. These cellular network generations took approximately a decade to come to market from the start of their R&D process. Given the facts and trends about wireless network generations, the time for 5G is coming near and new internet-enabled technologies require a race towards the next generation.

Various Technologies, Many Directions to 5G

        There are competing visions and standards concerning what the shape and speed of 5G will look like and how it will function. The main goals of 5G are increased speed, flexibility, coverage, and volume, however the standards are not agreed upon because the different technologies are still being researched and built.     

        GSM History has written about the possible nature of 5G networks, laying out a vision of a hybrid model which incorporates several technologies.  GSM History’s vision also provides a foundation for both local and mobile access that is faster, more efficient, and provides wider access to users and devices.  

        GSM History explains that the foundation of future 5G networks is two-fold:

  1. Wireless Fiber: one part of the approach would be to utilize wireless dark-fiber optic networks in the dense urban areas where dark-fiber is unused and leasable for peak network capacities.A wireless fiber network would be a localized, hybrid form of cellular networking used for fixed locations. This would be the fastest of all the networks, at up to 10 Gb/second.

  1. Universal Mobile Network: Second would be implementing a “universal” mobile network that runs faster and more efficient based on demand. This network may provide true worldwide access for Internet of Things devices.
    An additional approach involves a super-fast mobile network, created for high density urban cellular clusters. This network would be much faster than the IoT network.

        While this is just a composite vision of what the next generation standard will be, one should recognize that 4G LTE has only recently become the standard for the current generation and does not enjoy universal deployment or access. The evolution of 4G standards and technologies has been marked with successes and failures in standardization and adoption. 5G standards and technologies may experience a similar course of development.         

The Race is on - Current Research Efforts

        The upcoming cellular generation development is early and open in nature, therefore companies and researchers are competing and experimenting with new and advanced wireless technologies.

        Huawei Technologies, global provider of information and communications technology (ICT) services, also has vision of the 5G possibilities which includes the “5G HyperService Cube”, an overview of the future 5G device space. The HyperService Cube is a useful infographic for understanding the placement of devices relative to the throughput, links, and delay that they will expect in a 5G network. Huawei is collaborating with partners, universities, and governments to advance research and planning for the future.  

        Ericsson, another global ICT provider, also has publications on 5G research. Ericsson's 5G whitepaper describes their ideas for the technical demands of a 5G network which include data rates, seamless mobility, reduced device cost, battery lifetime, reliability, security and privacy, and reduced latency. In an interview with Light Reading, Ericsson CFO Jan Frykhammar discusses the efforts of current research - focusing on accommodating current and future use cases to direct standardization in the core network.    

        In November 2014, Ericsson announced a partnership with IBM in an effort to research new 5G infrastructure antenna designs. These advanced antennas are comparable to over a hundred antennas and radios, all on a chip smaller than a credit card. The collaboration will help Ericsson create mobile networks that provide for increased and capacity even in dense environments.

        Nokia Corporation has also published a whitepaper regarding their vision of the 5G technology future. Nokia's vision of 5G focuses on interconnection through architecture that enables the family of existing networks to work together with new and expanded demands, including real-time, tactile control, and response of applications and devices. Nokia expects data sizes and rates to drive increases in demand through new automotive devices and Internet of Things devices. Nokia's key design principles for 5G networks are flexibility and reliability.  

        One of the major engineering challenges to developing a 5G network standard is understanding the amount of radio spectrum that is allowed to be used in a network. New York University's NYU Wireless Center at Brooklyn is a research center dedicated to next generation wireless technologies in communications and medicine. The NYU Wireless Center is funded by the National Science Foundation and the National Institute for Health.

        5G cellular network R&D efforts are influenced by regulatory policy that divide and apportion radio frequency spectrum for different uses through government licenses sold at auction. NYU's Wireless Center has advocated for the auction of wider areas of radio spectrum to foster innovation and allow for more sophisticated 5G wireless networks - offering the FCC over 50 pages of comments on auctioning space of the millimeter wave portion of the spectrum.  The Wireless Center commented that such an action would support and enable further R&D activity for 5G networks. So far, the FCC has auctioned what it calls the AWS-3 bands, which do not extend into higher range of frequencies.    


        5G, the fifth generation of wireless networks, is a frontier with competing standards, visions, technologies, and no small amount of challenges to overcome through extensive research and development. The amount of uncertainty and risk involved in cellular network development requires significant research and development effort. Companies performing R&D related to the creation of the 5G network can qualify for federal and state R&D tax credits.

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Charles R Goulding Attorney/CPA, is the President of R&D Tax Savers.

Adam Starsiak is a Tax Analyst with R&D Tax Savers.