“Mr. Gorbachev, tear down this wall!” President Ronald Reagan famously proclaimed in a June 1987 speech near the Berlin Wall.
Chinese telco Huawei is currently trying to tear down a wall of a different kind: one preventing it from building 5G networks all around the world, including here in New Zealand.
The Berlin Wall did, of course, eventually come down. But so far, Huawei stands as much chance of bringing down the 5G wall as President Trump has of building his new Mexican border wall.
It’s not for lack of trying on Huawei's part, especially here in New Zealand. Huawei NZ deputy managing director Andrew Bowater told Newsroom last week that it wants another shot at building Spark’s 5G network.
Bowater said that his company has been treated unfairly so far, and there's been a lack of transparency from our government. "There has been no evidence produced that we've done anything wrong," he told Newsroom.
He went on to list several reasons why Huawei shouldn’t be excluded from our 5G buildout. Perhaps the most persuasive was that “5G will be made in China regardless.” He told Newsroom that other leading component manufacturers, like Cisco and Ericsson, made components in China just like Huawei.
Is there any danger in Chinese components?
In a literal sense, Bowater is correct: overseas telco suppliers, like Nokia and Ericsson, do indeed use Chinese components. But the real question is, can the Chinese government exert any influence on these Western companies?
Nokia seems to be the most invested in China. Telecommucations news website Light Reading wrote in November that Nokia had signed deals worth more than €2 billion with “all three of China’s national operators as they start to prepare for the launch of next-generation 5G mobile networks.”
Nokia also strongly believes it needs Chinese components in order to carry out its 5G projects. In a filing to the U.S. Federal Communications Commission (FCC) back in September, Nokia warned that US tariffs imposed on trade with China “specifically target a wide range of components that are critical to 5G.”
Even with all of Nokia’s highly lucrative business dealings with Chinese companies, the fact remains it is a company headquartered in Finland - not Shenzhen, as Huawei is. Probably for this reason, the Five Eyes alliance aren’t so concerned about what Nokia does in China, since ultimately it reports to a European government.
Unless…is there any evidence the Chinese government has undue political influence on Western telco suppliers?
A Sydney Morning Herald report last August claimed that for both Ericsson and Nokia, “much of their equipment is manufactured in Chinese factories with state-owned joint venture partners led by Communist Party officials.”
Both Nokia and Ericsson denied they report to the Chinese government; only that they must abide by local laws and regulations.
The SMH news report ultimately didn’t go anywhere. Since August there have been no further reports of Ericsson and Nokia’s supposed ties to China’s Communist Party. Indeed when Australian telco Telstra signed a deal with Ericsson to be its “key 5G partner” in October, the Sydney Morning Herald made zero mention of China in its writeup of the news.
Can Huawei sweeten the pot?
Since it’s unlikely our spy agency, the Government Communications Security Bureau (GCSB), cares about the business dealings of Nokia and Ericsson, Huawei needs a better strategy to get its Spark 5G bid back on track. Perhaps it needs to sweeten the deal for our government.
Huawei NZ’s Andrew Bowater told Stuff last week that it could invest millions of dollars in a “cybersecurity evaluation centre” for NZ that would be under the control of the GCSB. According to Stuff, this would mirror an arrangement Huawei made with Britain.
Huawei has invested heavily in the UK in other ways too, including a couple of joint innovation centres - one in Ipswich with BT and one in Newbury with Vodafone.
The money continues to flow in from Huawei to the UK. In December, The Guardian reported that Huawei has pledged a further £1.5bn, “in an effort to alleviate British security services’ concerns about vulnerabilities in its products.”
There’s nothing wrong with telco suppliers greasing the wheels in countries where they want to land business. Ericsson did so with Telstra, helping the aussie telco build a 5G Innovation Centre on the Gold Coast. It’s called capitalism and Huawei is as entitled as any other Western company to wave dollar bills in front of our government and our leading corporations.
However, it remains to be seen whether Jacinda Ardern’s government is amenable to such corporate bribes.
No sign of the wall going down
Even if Huawei pledges billions of dollars of R&D investment in New Zealand, I suspect it still won’t land them the Spark 5G deal. Not as long as the GSBC is acting as border control for the Five Eyes wall against Chinese telco companies.
The core issue for the GSBC is political. Because Huawei is owned and headquartered inside China, and because China is a powerful nation that lives under communist rule, it follows that Huawei’s technology is politically incompatible with the Five Eyes alliance of liberal-democratic countries (of which New Zealand is one).
The GCSB’s decision to block Huawei from building Spark’s 5G network was a geo-political one, plain and simple. The GCSB doesn’t care where 5G components are made; they care only about who controls (or could potentially control) the companies that use those components.
Huawei can promise all the investment money it likes, and point out all the ways our country is treating it unfairly, but the 5G wall is proving awfully hard for it to climb over - let alone tear down. I don't see that changing any time soon.