Next development in Huawei saga may not be about 5G

Thursday, 7 February 2019

Limiting Chinese involvement in the telco industry while preserving network competition could prove a tough puzzle.

ANALYSIS It may take months or years before Kiwi telecommunications companies find out whether they will be able to buy 5G equipment from China's Huawei.

But the next instalment in the Huawei saga could come sooner than that, with one of New Zealand's spy agencies revealing it is requiring telecommunications companies to submit plans on proposed network changes on average every few days.

In December, the Government Communications Security Bureau blocked a proposal by Spark to use Huawei equipment to upgrade its mobile network to 5G, citing 'significant network security risks'.

Spark now has the right to explain how it could 'prevent or mitigate' the risks the GCSB has identified, after which the spy agency could refer the matter to the Minister responsible for GCSB, Andrew Little, for a final decision if it wasn't satisfied.

* Tough calls ahead on 5G mobile roll-out

Protesters demand the release of Huawei chief financial officer Meng Wanzhou who was arrested in Canada at the request of the US in December over alleged breaches of US sanctions on Iran.

* 2degrees could face 'significant' costs if Huawei banned from 5G**

Spark has chosen instead to bide its time before pressing for an answer, perhaps while it waits for the international angst surrounding Huawei to abate or for the geo-politics of the west's relationship with China to improve.

Vodafone and 2degrees have made it clear they would prefer to wait anyway before investing in 5G.

But the next test for Huawei could still come at almost any time, as and when a telco needs to submit a plan to the GCSB that involves making a change to one of their existing networks.

2degrees' 4G network is largely built using Huawei technology and Spark, Vodafone and Chorus also use equipment from Huawei for 4G, cable networks and for some rural broadband services.

Under the Telecommunications Interception Capability and Security Act (TICSA), which was passed by Parliament in 2013, telecommunications firms need to engage with the GCSB before making changes that could impact network security.

Chinese Foreign Ministry spokesman Geng Shuang has called on Washington to stop what he described as an unreasonable crackdown on Huawei.

These are not uncommon. A GCSB spokeswoman says that it deals with 'more than 100' TICSA notifications each year.

If a telco did, for example, need to ask the GCSB to approve the purchase of more 4G equipment from Huawei, that would be unlikely to become public, however.

The spy agency treats all applications under TICSA as commercially confidential and its knock-back of Spark's original 5G proposal only became public because Spark chose to make it so.

While that means New Zealand's stance on Huawei could go dark for while, the potential fall-out from the global squeeze on Huawei became apparent relatively close to home late last month.

FILE - In this Dec. 18, 2018, photo, the logo of Huawei stands on its office building at the research and development centre in Dongguan in south China's Guangdong province. The U.S. Justice Department unsealed criminal charges Monday, Jan. 28, 2019 against Chinese tech giant Huawei, a top company executive and several subsidiaries, alleging the company stole trade secrets, misled banks about its business and violated U.S. sanctions. (AP Photo/Andy Wong, File)

Australian telecommunications firm TPG announced it had abandoned the construction of what would have been Australia's fourth 4G mobile network after spending A$100 million on Huawei equipment for 1500 cellsites and on partially building 900 of them.

TPG, which is valued at A$6.7 billion (NZ$7b) on the Australian Securities Exchange, said in a statement that Australia's 5G ban on Huawei was a 'key reason' for its decision, since it meant the 4G network could not in practice be easily upgraded to 5G.

There is a backdrop to TPG's decision. The Australian Consumer and Competition Commission signalled in December that it was minded to block the merger of TPG and fellow telco Vodafone Hutchison Australia because of the likely impact on mobile competition.

With TPG's nascent mobile network now scrubbed, the regulator's main objection to the deal now appears moot.

Nevertheless, TPG's move does highlight the challenges that Kiwi telcos – and 2degrees in particular – would face in New Zealand if the GCSB's block on Spark sourcing 5G gear from Huawei was firmed up into something broader.

2degrees has said it faces 'significant' costs if it has to switch to another supplier, with chief technology officer Mike Davies saying changes in the radio access network would keep him awake at night.

Huawei carrier group president Ryan Ding played down developments in New Zealand in a letter to a British select committee late last month, saying the New Zealand government had 'turned down a single 5G proposal submitted for review by one carrier' while noting the regulatory process was continuing.

'The governments in some countries have labelled Huawei as a security threat, but they have never substantiated these allegations with solid evidence,' he said.

Little may eventually have to decide which he needs to put first; the GCSB's undisclosed network security concerns, or strong three-way mobile network competition.

But for the moment, it may suit everyone to lie low.