Michael Sainsbury
July 24, 2018

The big push for 5G networks

TelcoLand

The big push for 5G networks

Huawei calling: The 5G geopolitical conundrum is a tangled web of interests

Chinese telecoms equipment maker Huawei Technologies has stepped up its efforts to participate in the upcoming roll-out of 5G networks in Australia by adding Malcolm Turnbull’s former cabinet secretary Matt Stafford to its lobbyist roster.

The company’s dilemma is well known. In May 2012, on advice from Australian spy agencies, Huawei was prohibited by the then-Communications Minister Stephen Conroy from tendering for any contracts for the 95 per cent fibre-to-the-home (at the time) National Broadband Network.

Less than coincidentally, six months after the NBN ban, a searing report from US Congress in 2012 effectively also prohibited the company from any of the US networks.

Now, as mobile companies scope options the 5G networks set to reshape the Australian telecoms landscape in coming years, Huawei is once again being put under microscope by the security arms of government: That is, Defence, Attorney General’s and Home Affairs.

5G offers is a combination of increased data speeds, minimal latency, and the ability to connect an escalating number of devices to mobile network. This will enable the so-called Internet of Things that will see household devices, vehicles and all manner of business and industrial machines connected to the internet, introducing a new set of thorny security challenges.

Huawei and its major clients in Australia are arguing for compromise in relation to 5G, in the same way it was handled by governments in the UK, Canada and New Zealand, where the company has funded black-box assurance centres for authorities to investigate and test its products.

In 2012, Beijing was understood to have been furious over the NBN ban and had considered retaliating. But ultimately it realised Huawei could make inroads in the consumer mobiles and corporate sectors in Australia, which it has done.

The company now has a thriving Australian business in mobile and corporate communications networks worth $673 million in sales last year.

Beijing is also worried about a loss of face for Huawei and the potential for a domino effect to take hold in other western countries where it has made inroads.

China has shown in the past it is quite comfortable with plenty of tit for tat to countries that angers it, which is a growing realisation at senior levels of the government.

One insider described the Department of Foreign Affairs and Trade as “terrified” that such threats are now looking real, especially following retaliation against Australian wine companies after anti-China rhetoric from the government in the past year or so.

And now the arrival of Matt Stafford. Mr Stafford is president of the Hong Kong-based Asia Pacific arm of global public relations firm Cohn & Wolfe, owned by the world’s biggest marketing group WPP, which has had Huawei as a major client for a decade.

Also pushing for Huawei to be able to play a role in 5G are its two biggest Australian clients Optus and Vodafone Hutchison. In particular Optus chairman and former chief executive Paul O’Sullivan known to be close to Prime Minister Malcolm Turnbull.

The nub of the issue for mobile network players that already use Huawei is that any blanket ban could force them to replace tens of millions of dollars in Huawei equipment, as their 4G networks will use sophisticated software upgrades to handle the 5G mass-market heavy lifting a few years down the track.

The Critical Infrastructure Centre was formed in February 2017 and has been charged with making a recommendation to the ministerial National Security Council on Huawei and 5G.

The CIC sits in of Department of Home Affairs, led by minister Peter Dutton and includes senior bureaucrats from other relevant departments – including the influential Australian Signals Directorate (the Defence Department’s ‘intelligence gathering’ agency), as well as ASIO.

Telstra, too is now testing Huawei equipment, having shown real interest in the company for the first time during the 12 months, sending a team of senior executives to its headquarters in Shenzhen.

The National Security Council is expected to make a decision on the issue within about two months, ahead of the first Australian spectrum auctions for 5G due later this year.

As well as Mr Turnbull, Julie Bishop, Mr Dutton and Attorney General Christian Porter, the NSC also includes Finance Minister Matthias Cormann, Treasurer Scott Morrison, Defence Minister Marise Payne, and Deputy Prime Minister Michael McCormack.

People familiar with the intensifying debate believe the government viewpoint, lead by the Prime Minister, Julie Bishop and Trade Minister Steve Ciobo have moved from a blanket ban on Huawei to searching for some middle ground. This is thought to include access to tenders for certain parts of the network, with perhaps some conditions and restrictions, and security agencies are adept at sniffing the breeze,.

The middle ground on Huawei was pioneered by its UK arm, with the creation of the UK’s Huawei Cyber Security Centre, government-run but funded by Huawei. It tables a report every year on Huawei, looking at its source code and safeguards are in place, that was released on July 19.

It aimed some criticisms at the company, but was hardly conclusive and Huawei actually welcomed the report. Canada has emulated the UK model but in New Zealand Huawei is treated more like other vendors. Huawei has long offered to pay for a similar centre in Australia.

How the Australian government decides, in coming months to deal with Huawei on 5G, will be a clear reflection on how its strategy is developing on the high-wire act of balancing the imperatives of national security, where the US is an increasingly unreliable ally under Donald Trump, and where China is by far our biggest and most important two-way trade partner.

There is a lot of buzz about 5G, as there always is with major mobile network upgrades. Yet the full rollout and impact, as well as the proliferation of mass market devices, will take years.

So if the government is smart, it will opt for the middle ground or at least hold fire, and perhaps finally take up Huawei offer of a Cyber Security Centre.

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