Huawei’s NBN blockout raises fundamental questions

23

The following opinion/analysis piece is by Tony Brown (Twitter), a senior analyst with Informa Telecoms & Media. It originally appeared on Brown’s blog and is replicated here with his permission.

analysis For those of us who spend our lives in the bubble of the international telecoms industry it was not exactly a massive surprise to see the news that Chinese vendor Huawei would be blocked from bidding for work on the country’s A$38 billion National Broadband Network (NBN).

Rumours had swirled for months that Huawei would be blocked from the NBN on the back of security concerns and this was finally confirmed on March 25th in the local press – although the government itself did not issue a definitive confirmation of the decision in its own statement. Although Huawei had been privately aware that it had been blocked from the NBN since late last year, with its local management being advised of the fact by key officials in Canberra, the breaking of the news still caused a massive stir in the Australian market, with the development being reported even on mainstream TV news programs.

Given the fact that no Australian government ever wants to have more than a cigarette paper of distance between its own trade and foreign policies and those of its big brother in Washington DC, the NBN block on Huawei was inevitable given the company’s still parlous position in the US market. For a variety of security and trade related reasons the US government – across both administrative and legislative branches – continues to have major concerns about Huawei and has blocked the company from competing for many projects in the country.

As a result, it would have been hugely embarrassing for the Americans if Australia – its staunchest international ally – had allowed Huawei to bid on a state sponsored project like the NBN because it would have significantly advanced Huawei’s international credibility and left the US as something of an outlier in its continued opposition to the company.

Indeed, news reports have made it quite clear that the US political and intelligence forces have lobbied Canberra hard to block Huawei from the NBN project and the Australian government, faced with choosing between its long running US alliance and its burgeoning partnership with China, plumped for the former over the latter. The real questions now are these; how big a price will Australia pay in terms of trade implications with China for so publicly humiliating Huawei and, more importantly, where does Huawei go from here?

From the perspective of trade implications, there is little doubt that the Chinese will be furious at this public humiliation of one of their flagship technology companies – one which is already doing business in well over 100 countries around the world.

China is one of Australia’s biggest trading partners, with the middle kingdom importing tens of billions of dollars worth of Australian minerals every year to fuel its staggering growth – and those in the Australian minerals export industry are certainly unimpressed with this latest turn of events. Local mining investors, including the increasingly eccentric but nonetheless hugely successful Clive Palmer, have long urged the Australian government to be more welcoming of Chinese investment in the local market and there has already been some serious disquiet over the implications of blocking Huawei from the NBN.

Of course, the Chinese are not going to suddenly stop buying Australian coal, bauxite and whatever else it is that Rio Tinto et al dig out of the ground – their need for these resources is too great – but they might easily decide to become less welcoming of Australian investment in other areas of the Chinese market. After all, it could hardly be an unfair position for the Chinese government to say to Australia, “If you don’t allow Huawei to bid for NBN contracts then why should we allow your educational institutions to expand into our market and teach our students?”

Huawei Australia has already brought some significant political muscle to the table in its bid to be fully accepted into the Australian market, most notably with the addition of former Foreign Minister Alexander Downer – a genuine local blue blood – as well as former Premier of Victoria John Brumby to its local board. At this stage though it is doubtful whether Huawei Australia could have swayed the government even if their local board contained former Prime Minister’s Kevin Rudd, John Howard, Paul Keating and Bob Hawke with cricketing legend Shane Warne operating as PR adviser and pop singer Kylie Minogue providing backing vocals – the die is seemingly cast against the company for geo-political reasons.

Therefore, it seems fruitless at this point for Huawei to bring more political patronage to the table – it has already embarked on heavy lobbying of both government and opposition members of parliament – the firm will need to take an entirely different tactic and one which the Chinese are traditionally strong; displaying patience and taking a longer term view. The firm will simply have to keep on working with its key clients in the Anglo-sphere such a BT in the UK, Chorus in New Zealand, Bell Canada in Canada as well as SingTel Optus in Australia and hope for a gradual change in the positioning of the Australian government.

This is obviously a far from satisfactory prospect but probably the best on offer right now for the company given the seeming futility of hoping for a successful inter-governmental level intervention from the Chinese government.

As I have argued for several years now – and Alexander Downer himself has stated in recent weeks – the argument that Huawei is some sort of quasi-intelligence gathering arm of the Beijing government is so ludicrous that it should scarcely be tolerated in serious company.

As anyone in the global telecoms industry appreciates it would only take one instance of the firm being found to have somehow compromised the security integrity of a foreign customer – and Lord knows there sure are already plenty of people out there looking for evidence of such an instance – and Huawei would be instantly dead in the water. Would Huawei, a company already generating billions of dollars from international clients and whose future can only be secured via a huge international presence, seriously put all that at risk for the sake of helping out the Beijing intelligence services? One strike and they would be out of the game forever.

Moreover, with the Beijing government acutely aware that the future of the country as a global technology player relies heavily on ensuring that the likes of Huawei and ZTE become established and well trusted forces in the international market – it is hard to imagine that they would be willing to put that at risk by asking the firms to betray their foreign customers. Perhaps what sticks in the craw so badly about the current imbroglio is hearing the US security establishment disparage Huawei as being effectively a tool of the Beijing government when it is less than a decade since the US government forced its own telecoms industry, in the form of local carriers, to release highly sensitive customer information in its post-9/11 security crackdown.

Don’t think for a second that the Chinese don’t appreciate the irony of that.

Image credit: Huawei, Tony Brown

23 COMMENTS

  1. The thing is, this article compares australian acceptance of chinese investment with chinese acceptance of australian investment as though they are comparable- they are not. China has never been as open to external parties as we are. To enter the chinese domestic market usually requires a “partnership” with a chinese company.

  2. “Would Huawei, a company already generating billions of dollars from international clients and whose future can only be secured via a huge international presence, seriously put all that at risk for the sake of helping out the Beijing intelligence services? One strike and they would be out of the game forever.”

    I’m no conspiracy theorist, but surely the answer to this is “ummm of course they would”. China is no ordinary western government. Not saying they are any worse or better, but they are different and have different (i.e. more) powers. Now not only can you eavesdrop on your enemies/friends – you get paid to do it by setting up a “commercial” company. And you make it “legit” by hiring former politicians to represent you! Ha -surely this has to be enough to raise suspicion! The Hon. Alexander Downer of AWB fame a board member!

    In all seriousness now, I’m sure 99% of Huawei employees believe that they really are just a commercial company providing a service. And they are probably right. And our intelligence agencies have been known to stuff things up (I think Downer may have been Foreign Minister during such occurrences too!).

    But considering trade implications, surely you must agree that this decision couldn’t have been taken lightly. So while we may look at it in the Australian or even global telecommunications bubble – perhaps there may have been more important things in play.

    Also, you need to watch more Spooks :)

  3. I agree. The appeal to business interests is weak. History is full of countries destroying valuable business arrangements. They’re called wars. The salient point in this debate is that China is not an open democracy, and the executives of its companies could be induced to perform substantial services for their political leaders in a way that would not be possible in an open democracy.

    Also, I’m surprised Downer’s advocacy is not questioned more. Downer and the other politicians now paid by Huawei lack the engineering expertise to understand the vulnerabilities at stake here.

    The above is not to condemn China as such. Some of the comments on the other thread about China’s historical activity are misleading, in my view. For example, in the border confrontation with India in 1962, China was just respondiing to an Indian attempt to push their border forward. Once China had regained the old border, it stopped, even though it could easily have advanced much further.

    Similarly, in Korea, it only intervened because MacArthur had pushed beyond the 38th Parallel and was racing towards the Chinese border. It had warned America not to push too far.

    Nevertheless, it is prudent to guard our national security.

    • Sadly, when you look at the recent trade talks regarding “Intellectual Property” and how to give the established interests their best shot at maintaining a stranglehold… we aren’t much of an open democracy either.

      *SOB*

  4. I’ve just got to throw this one out there. For everyone who says Huawei even might be listening on our data, I’d like a technical explanation of how.

    By that I mean in order to spy they would need to be able to either get the information off the device, or have access to the device, neither of which they have in a controlled network (except in circumstances where vendor support is required and even then access is granted on a per need basis and is limited).

    So come on conspiracy theorists, explain it to me ..

    • Its not like western intelligence services have ever had any trouble rooting ‘reputable’ telco gear:
      http://en.wikipedia.org/wiki/Greek_wiretapping_case_2004

      Considering Huawei gear is in use in quite a few Australian telcos (esp at Optus and Vodafone) I can’t see what all the fuss is about. Chinese intelligence could probably tap into any Alcatel or Ericsson gear without their help anyway.

      • True, but that was a specific case and the hackers would have need to know the phone numbers to monitor for in advance, and of course they were only monitoring phones which in the scheme of things is a miniscule amount of data.

        This whole “tin foil hat” scenario is that they can/will monitor all traffic, and I just can’t see that is being at all feasible.

        What “could” happen is a backdoor to disable the equipment, so that in a war type situation they can just totally disable all comms via their devices, but then again this same thing could apply to any vendor.

    • In terms of what’s possible, are you seriously telling me that the NBN is not going to be connected to the open Internet? Or that a network switch somewhere in an NBN POP could not sit and watch for something that looked a bit like a gateway where lots of public IP addresses were coming from and then issue an occasional fake MAC address?

      Would you notice of 0.001% more of your network quota mysteriously got used up, over and above what you were actually using? I know your typical NBN user wouldn’t notice.

      Here’s an alternative scenario… suppose there was a magic encrypted UDP packet that contained a particular code number that caused each device to just start going nuts, and sending out copies of the same UDP packet on every interface. If this packet ever got issued from ANYWHERE that got into this particular network then it would instantly trash every device in that network. Would you know about the possibility of this packet, before you ever saw it happen? How would you test for such a thing?

      Suppose said packet also jumped onto all known VLANs.

      Nightmare scenario huh? How would you shut it down?

      • In terms of what’s possible, are you seriously telling me that the NBN is not going to be connected to the open Internet?

        It’s pretty well established the NBN is not connected to the open internet.

        Or that a network switch somewhere in an NBN POP could not sit and watch for something that looked a bit like a gateway where lots of public IP addresses were coming from and then issue an occasional fake MAC address?

        The NBN is handed off at the POI to the SP as VLANs, how the SP handles the traffic from then is up to them, but there will be nothing at the POI that “looks like a gateway”

        Would you notice of 0.001% more of your network quota mysteriously got used up, over and above what you were actually using? I know your typical NBN user wouldn’t notice.

        Unsure of your point>

        Here’s an alternative scenario… suppose there was a magic encrypted UDP packet that contained a particular code number that caused each device to just start going nuts, and sending out copies of the same UDP packet on every interface. If this packet ever got issued from ANYWHERE that got into this particular network then it would instantly trash every device in that network. Would you know about the possibility of this packet, before you ever saw it happen? How would you test for such a thing?

        Suppose said packet also jumped onto all known VLANs.

        Nightmare scenario huh? How would you shut it down?

        The NBN is layer2, UDP is layer4, see a problem here?

        No offense or anything, but it doesn’t seem that you have a firm grasp on the actual technical detail of how the NBN works, what it does, how it hands off to SPs, what they do with the traffic, etc, etc.

  5. So let’s try the question from another direction: Would PayPal, an American company, surrender Australian secrets to the US government if such was demanded of it? Would a company such as PayPal, or Visa, or American Express, block an Australian’s access to their services just because their government asked nicely?

    Of course they did. So why is there surprise that a company that’s a lot more distant from us politically and socially might help its government? That’s what companies do, as part of the collective washing of hands and swapping of favours – not just Huawei, but companies from every part of the Earth.

    Given that it’s going to happen whomever you hire, of course you’re going to try to get companies that are more “in tune” with this country’s mores. Companies that know which hand washes which. Alexander Downer’s hypocrisy looks like a simple tantrum from someone who backed the wrong horse.

    Cynical?

  6. Opinion : However clear and concise this website thinks it is being it does read (after two days) like it has an agenda beyond *just* fairness. Any person with a casual interest in the *cyberwar / hackfest* has read enough to know China is a player. Or is it all wrong? I can’t see why you can’t see.

  7. I agree that there is reason to be cautious of Chinese companies building backdoors into their equipment to aid government spying, but the hysteria around this is ridiculous. Huawei are an established and trustworthy player in the international telecommunications market, and to suggest that they could somehow build a backdoor in NBN equipment ~that we would be unable to detect~ is outrageous. This article is on the money about Australia’s true reason for cutting them out of negotiations – it’s all about keeping the US happy.

    Meanwhile, upstanding Western companies such as Cisco are known to build backdoors into their equipment, specifically for government use: http://www.forbes.com/2010/02/03/hackers-networking-equipment-technology-security-cisco.html

    • So if Cisco can/do, why is it outrageous to think others (not even mentioning names) won’t/cant, too?

      • “to suggest that they could somehow build a backdoor in NBN equipment ~that we would be unable to detect~ is outrageous”

        I can’t imagine that NBN equipment is going to come off-the-shelf without needing some custom firmware. Any backdoors present will have been requested for use by the AFP, ASIO etc – that’s precisely what we’ll get with Cisco equipment anyway, along with the possibility of pre-existing backdoors for US agencies.

        I hope you’re not suggesting that this stuff won’t be tested to make sure it’s up to spec and not doing anything unexpected? Consumer grade hardware and free software such as Wireshark make that sort of analysis child’s play.

        To be honest, I suspect Cisco equipment would be a better choice than Huawei for other reasons, primarily quality. But the idea that Chinese equipment manufacturers are not to be trusted simply on principle is indeed outrageous.

        • I’ve just been reading that the contracts in question were awarded to Alcatel-Lucent, doesn’t look like Cisco was in the running, so I guess it was pure telco equipment. The argument still stands.

          • I’m not suggesting anything, I asked a simple question based upon your comment.

            …and my initial question still stands, cheers!

  8. ASIO are having a bet each way here.

    The NBN are building a bunch of last mile fibre islands. It is up to telcos like Optus/Telstra/iinet to connect these islands together, and ultimately connect them to the larger Internet.

    If ASIO deems Huawei to be such a threat to national security, then they need to ban all of these ISPs who the data will be ultimately flowing through from using Huawei hardware, not just the NBN. Too late!

    My personal view is that this is a stupid, xenophobic, (and expensive!) decision, pandering to the US. Yes Obama, you can base your marines in Darwin. Yes Obama, we’ll ban Huawei. What next?

    Just my 2c.

    Regards,
    Douglas

    • “My personal view is that this is a stupid, xenophobic, (and expensive!) decision, pandering to the US. Yes Obama, you can base your marines in Darwin. Yes Obama, we’ll ban Huawei. What next?”

      Except Alcatel-Lucent is a French head-quartered company. Cisco would have been an expensive alternative, pushing the price up considerably.

      Never mind, lets keep bashing the US, because of reasons that are now forgot.

      Huawei are very likely going to want to remain very distant and very “commercial” in their presence in the market, and have thus far achieved a great deal. However, China’s government is still fundamentally a communist one.

      Huwaei are going to find that will open some doors, and close others. It shouldn’t. Because they’re fundamentally not going to benefit by doing the needful at the behest of Chinese Government sources, but some see that as a genuine risk.

      I’d have preferred to at least see them at the tender table.

      • I must admit, my preferred strategy would be to stake out two equal plots of land, one on the east side of Darwin and one on the west side of Darwin and then offer equal terms to both the USA and China for a naval base. Better yet, to start a bidding war between them on who gets the best position, and change them both plenty of rent.

        Firstly, it’s only Darwin in the middle.

        Secondly, when everyone in Darwin stops answering the phone, that’s an important warning message for the rest of Australia. Think about it.

  9. “Of course, the Chinese are not going to suddenly stop buying Australian coal, bauxite and whatever else it is that Rio Tinto et al dig out of the ground – their need for these resources is too great – but they might easily decide to become less welcoming of Australian investment in other areas of the Chinese market.”

    Egats, we would be quaking in our boots if that ever happened. Why, we would be stuck in a position where we had to invest our surplus in our own infrastructure… like… like… ahhh… the NBN.

    Noooooooooooooooooooooooooooooooooooooo!

  10. Hwawei is beholden to the Chinese government and party, and of course it’s going to make additional installations if given half the chance. This is a no-brainer.

Comments are closed.