Recent reports have indicated the United States is atop the leaderboard next to China in the global race to 5G and just last week the FCC Commissioner Ajit Pai and President Donald Trump announced plans for a third millimeter wave spectrum auction.

However, a lack of sub-6 GHz spectrum will continue to hamper the country’s ability to lead in terms of broad, nationwide coverage, according to Jeffries analysts.

“We think the US will likely remain constrained by a lack of sub-6GHz spectrum – mmWave cannot enable nationwide coverage and faces many tech challenges,” wrote Edison Lee, equity analyst at Jeffries Hong Kong covering the China telecom market, in a Sunday recommendation to investors.

The FCC has taken a number of steps to open up high-band 5G spectrum, including a 28 GHz spectrum auction that concluded earlier this year, and the ongoing Auction 102, which has spectrum licenses in the 24 GHz band up for grabs.

Later this year the agency will auction 3,400 MHz of millimeter wave spectrum, which are frequencies that can handle massive amounts of data at high speeds, but with shorter-range propagation.

Verizon and AT&T have each launched respective 5G services in certain areas of select cities using high-band spectrum. AT&T said it expects to roll out nationwide coverage using sub-6 GHz spectrum by 2020.

Still, Jeffries says that every megahertz of spectrum in sub-6 GHz bands “is significantly more useful” than in millimeter wave, for two reasons. One, limited coverage will make millimeter wave a hotspot-only solution, and two, tech challenges in RF, PA, filter, and antenna design may mean mmWave 5G handsets will not commercially available for the next two years, according to Lee.

Verizon currently offers a Motorola z3 that becomes 5G-capable when paired with a clip-on 5G moto mod, and Samsung’s 5G Galaxy S10 is launching this summer with support for mmWave bands.

While a report from CTIA found the U.S. is currently leading the 5G race in terms of availability of high- and low-band spectrum, it acknowledged America lags behind other countries in mid-band spectrum, which is needed for high capacity and larger coverage areas.

Jeffries analysts pointed to China, which has already allocated 460 megahertz of sub-6 GHz spectrum to the three Chinese telcos, with 100 MHz still unallocated. The country’s MIIT is also clearing an additional 500 MHz of spectrum at 3.7-4.2 GHZ for future 5G use, and 100 MHz at 700 MHz may be available for 5G next year. Other countries are also moving on mid-band spectrum, the firm noted, with South Korea having already auctioned 280 MHz of spectrum at 3.5 GHz and Europe initiating a 3.5 GHz 5G spectrum auction. Three South Korean mobile operators launched 5G networks earlier this month.

Indeed, CTIA’s report found that other countries plan to make more than four-times more licensed mid-band spectrum available than the U.S. by 2020.

“We believe 5G at sub-6GHz (especially at 3.5GHz) will be the world’s dominant 5G frequency and that countries that can deploy sufficient sub-6GHz spectrum for 5G will lead in terms of building wide-area, contiguous coverage,” Jeffries’ Lee wrote.

Another issue for the U.S. that the firm flagged is uncertainty surrounding 500 megahertz of mid-band spectrum at 3.7-4.2 GHz (also known as the C-Band), which is currently used by Intelsat, SES, Eutelsat and Telesat. Those parties have formed the C-Band Alliance, which proposed freeing up 200 MHz of spectrum by selling it to mobile carriers for 5G.

This proposal has faced opposition from consumer interest groups, cable companies and mobile carriers, including T-Mobile, which would rather see the spectrum auctioned off. Some opposition parties have threated to file a lawsuit against CBA’s plan.

“Worse still, the CBA has yet to obtain the FCC’s approval on its plan. Hence, we do not see 3.5GHz becoming available in the US any time soon,” Lee wrote.

In President Trump’s comments last week, he put to rest any notions of a nationalized approach to 5G, saying efforts would continue to be led by the private sector. The U.S. wireless industry immediately praised this move, but Jeffries believes operator-led investments could slow the migration from 5G non-standalone (NSA) to 5G standalone (SA), which the firm says will be vital for industrial applications.

“We believe China is the only country with an aggressive goal to build 5G SA as soon as the tech matures, and the telcos and various industries are working hard together to develop industrial use cases,” Lee wrote.

The firm says a U.S. export ban on Chinese telecom equipment giant Huawei is the only way to slow China’s 5G lead and continues to be the biggest threat to China’s 5G timeline.

“Although the market believes this issue will be resolved in the US-China trade deal, it is not a certainty until the US DoJ drops charges against Huawei,” Lee said.