Govt’s treatment of Huawei is inconsistent

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This article is by David Kennedy, a Melbourne-based research director with analyst firm Ovum. Kennedy has extensive experience within the telecommunications and IT portfolios for the Federal Government, including a position as senior policy adviser to the Communications Minister during the 1997 reforms which opened Australia’s telecommunications industry to competition. The article originally appeared on Ovum’s site and is reproduced here with permission.

analysis Credible reports have emerged this week that Huawei was told in late 2011 by the Australian Attorney-General’s Department to cease bidding for future equipment contracts for Australia’s National Broadband Network (NBN) as such bids will not be successful. It is clear that security concerns are behind this decision.

This must come as a significant disappointment for Huawei as it had bid for earlier NBN tenders at considerable expense, imposing price discipline on its competitors. However, it has now emerged that the company was never a genuine contender.

Huawei has invested in the Australian market, setting up a local board chaired by a retired rear admiral of the Australian Navy. The board also includes an ex-Foreign Minister and an ex-State Premier from opposite sides of the political spectrum. Australia is the first market in which Huawei has adopted this structure, and demonstrates the vendor’s desire to integrate itself into the local industry.

However, the problem of “national security” won’t go away. While it is impossible for outsiders such as Ovum to assess the merits of national security issues because there is too much we don’t know, it is clear that there has been a lack of consistency and transparency in the way that Huawei has been treated.

Huawei has had some important successes in Australia. It is building a new mobile network for Australia’s third-largest mobile operator, Vodafone Hutchison Australia, and has emerged as a major supplier to Optus. It is unclear why Huawei’s involvement in the government-owned NBN raises concerns when its involvement in Australia’s privately-owned mobile networks does not.

This inconsistency also has an international dimension. The intelligence establishments of the US, the UK, and Australia are closely linked. Yet while Huawei seems unwelcome in the US and Australia, it is welcome in the UK. Although not a member of this close-knit intelligence alliance, New Zealand is another English-speaking democracy that seemingly has no problems with Huawei’s involvement in its Ultra-Fast Broadband project. Huawei has also been used in many other FTTx projects around the world.

Another issue is the lack of transparency. While it is unrealistic to expect security agencies to provide all the details of their decision-making processes to the public, the lack of transparency prevents Huawei from responding to or addressing the government’s concerns.

For NBN Co, the omission of Huawei from the tender process can only mean that the cost of the network will be higher than it otherwise would have. This is because future tenders will proceed without the benefit of Huawei’s technology or price discipline. However, earlier tenders that have involved Huawei have established a benchmark that will help NBN Co in future tender negotiations.

For Huawei, the problem is not unprecedented. It faced similar issues in India in 2009, but was able to recover its position through a combination of increased disclosure and effective lobbying. In that case, the problems centered on a government-owned operator, BSNL, which is similar to the current situation in Australia. However, that issue took over a year to resolve. Huawei’s response to the Australian government so far has been firm but polite. It has not attacked the government, instead presenting its record in other markets and asking why Australia should be any different.

As it proceeds, Huawei must seek clarity from the Australian government about its concerns. It should ask what the government would consider to be satisfactory performance from a security perspective.

It is also important for Huawei to make clear what is at stake. Global trade has dramatically cut the cost of telecommunications equipment. Increasingly, devices and equipment of all kinds will be Internet-enabled, and Chinese equipment will be no exception. If the presence of this equipment across a range of strategic industries becomes problematic, then it is not difficult to foresee significant trade problems arising. A multi-polar world fragmented in this manner would be a poorer world. This is why consistency and transparency are so important when it comes to these issues.

28 COMMENTS

  1. This article sounds like it is pro Huawei. Maybe a bit of lobbying ??

    There is more at play here than espionage, if you understand how this works you would also be concerned at who is looking at your national internet traffic. Think about it like this, small to large private companies across the world go to great expense to have firewalls and anti virus software installed and maintained on their servers, to keep prying eyes out but to also keep their systems operational.

    Now lets say a certain equipment provider has connections to intelligence services, and this company provides equipment and services to other countries , would it not make sense for these “people” to use this to their benefit. Their are many documneted cases of espionage activity in China connected to western business. After all were do you think the saying beware of the yellow peril comes from??
    Chinese companies actively partake in espionage activities even between themselves.

    If the national security service is concerned then this should be enough to validated the threat, after all it is not like there are any purely Australian companies providing the equipmnnet for the NBN so this is not “jobs for the boys” The other equipment providers are European which do not have such vested interests in Australian mining and resources. Read between the lines people..

    • “After all were do you think the saying beware of the yellow peril comes from??”

      The Second World War actually. It referred to the Japanese not the Chinese incidentally.

    • There is more at play here than espionage, if you understand how this works you would also be concerned at who is looking at your national internet traffic

      It still amazes me that this far into the NBN people still refer to it as being for internet. It’s not, in actual fact the NBN is just the last mile delivery, and a lot of different services types, one of them being internet, will be delivered over it.

      If the national security service is concerned then this should be enough to validated the threat

      I’ve raised this in another threat and got minimal response so perhaps you’d like to respond. Suppose NBN use Cisco (picking a name out of hat), does it in actual fact matter that they used this and not Huawei, when the equipment used at the POI by the SP is Huawei? ie. the SP Huawei equipment is quite literally on the other end of a cable in the POI connecting to the NBN Co equipment.

  2. Seriously, what is the furore about.

    One company (let’s not get bogged down with whom and where they are from) has been given their marching orders, BFD.

    This happens in contracts and tenders all the time in the “private sector”.

    Next…

  3. What a fluff piece — Ovum is paid to consult, nice choice of external contribution. Where’s the anti-huawei external contribution.

    It is unclear why Huawei’s involvement in the government-owned NBN raises concerns when its involvement in Australia’s privately-owned mobile networks does not.

    Telstra won’t be flogging chinese kit, Optus uses it for the RAN, but not the core, Optus has made a security decision not to let Chinese vendors into the core.

    The government will and has provided advice to T1 operators with government contracts to carry mission critical comms.

    For Huawei, the problem is not unprecedented. It faced similar issues in India in 2009, but was able to recover its position through a combination of increased disclosure and effective lobbying

    Yes of course, lobbying is very effective. Hard to resist someone throwing around money, speaking nice things to you, and treating you nice – Huawei is the Hugh Heffner of vendors, I don’t trust either very much.

    • Your knowledge of vendors used by carriers (referring to your comments about Telstra and Optus) are like Kony2012, ie. 6 years out of date.

    • SingTel Optus (Singaporean owned, hint hint) awarded Huawei a transmission contract and RAN as mentioned. You are right in observing no core components are being used by either Telstra or Singtel in Australia for production services. Trials are another matter, but they have been a pricing exercise to freak out the incumbents. However, both “flog” the peripherals of just about any manufacturer. Not alot of damage can be done with a handset though :-)

  4. Ovum say “Another issue is the lack of transparency….”. On this point may i ask if Ovum receives any revenue (or pitching for it) from Huawei – for research, advocacy or any other area now or in the past? I think it would be a good question for Delimiter to put to them, so that we can judge this article better.

    • Ovum say “Another issue is the lack of transparency….”. On this point may i ask if Ovum receives any revenue (or pitching for it) from Huawei – for research, advocacy or any other area now or in the past? I think it would be a good question for Delimiter to put to them, so that we can judge this article better.

      Why ask them? It’s all on their webpage if you go and look, Renai even provided a link to the site in this article.

      http://ovum.com/about-ovum/independence-charter/

      • I didn’t see a disclosure of revenue (if any) between Huawei and Ovum in there. Why can’t Ovum simply disclose whether or not they did business with Huawei and whether it was material or not. I’m only asking because the writer himself said “Another issue is the lack of transparency.” I wonder if Ovum can walk the talk?

        • Richard,

          Ovum is an independent analyst firm and always has been. I’m sorry, but I won’t brook further talk on Delimiter of them being funded by Huawei, because I’ve known the guys there for the best part of a decade now and they are not stupid enough to breach their own ethical statement in as idiotic a way as you appear to be suggesting.

          I quote from their ethics statement:

          “Ovum’s research or coverage is not influenced by whether a vendor/service provider is an Ovum customer.

          Ovum will not do reports for public disclosure or consumption which compare or evaluate products or services, commissioned by a company which provides those products or services.

          Ovum is not dependent on any single client. Our largest client accounts for no more than 5% of sales.”

          Cheers,

          Renai

  5. The worst thing is Australia made the decision to block Huawei’s bid, based on advice from USA intelligence. Wikileaks,Michael Moore, etc has already long established USA gov to be largely controlled by lobyists and industry interest groups. Surely, it’s the USA tech lobby groups that have done this? Huawei needs to step up its international lobbying to match the USA mastery at this kind of international propaganda.

    If USA tech industry groups do not fight with this kind of propaganda, I have no doubt that Huawei’s bids would annihilate the USA tech hardware industry.

    The worst outcome? It’s Australian tax payers that end up losing. They’re massively overpaying for a highspeed cable network that’s so OBVIOUSLY designed to only win rural votes. We can’t even get a decent WiFi or Wireless internet service in the CBD?? No, this is democracy at its worse. Australian government… you fail.

  6. I feel like practically every article on this topic has missed the main point.

    The Australian Government has acted on advice given to them by ASIO. That’s it. If they went against that advice they would be utterly cricified by many of the same media elements that are bagging them for taking this particular decision. Just picture the story about hackers getting into the NBN network (when all they had done is hack into an ISP) times a hundred. “GILLARD GOVERNMENT PUTS NBN AT RISK OF CYBER-ESPIONAGE”

    This is not a government which has a whole lot of political capital to be able to fight and win on these issues. The NBN is seen as one positive against a whole heap of (unfairly, in my opinion) perceived negatives, and they do not want to put the narrative around this project at risk. If ASIO has concerns over Huawei the government would be extremely reckless to ignore them.

    • ASIO’s concerns regarding Huawei do not appear to be shared by the private sector, which is the real issue here — what evidence does ASIO have that the private sector does not?

      • Could it be that the private sectors concerns ($$$’s=profits) are not the same as the security agencies?

        Externalities exist that private companies may not care about (or place on a lower level of importance to profit?)

        Sathias is right, the government would’ve been crucified for failing to heed ASIO advice. Can you imagine The Australian and News Ltd Tabloids? “White Elephant puts Aussie live at risk”

        • Do you really think the private sector (inclusive of all the major telcos, Telstra, Optus, Vodafone, etc), would put multimillion dollar government, corporate, financial and security based contracts at risk by using hardware advised unsafe by ASIO in order to try and save a few dollars in capitial investment costs?

          I’m sorry, but I just don’t buy that argument.

    • That’s a fair enough piece, however, has anyone also looked into the relationship between companies like Cisco, Alcatel Lucent, Ericcson, Nokia, etc, and their respective governments?

      It just seems extremely baised to say “you can’t trust them because they have a relationship with the Chinese government, but it’s ok to trust these other companies because they’re not Chinese”, especially since all research so far has shown Huawei doesn’t have backdoors in it’s hardware yet we do know (and it has been mentioned here) that Cisco do at the request of the US government.

        • umm.. Lawful intercept.

          http://www.cisco.com/en/US/tech/tk583/tk799/tsd_technology_support_protocol_home.html
          http://www.faqs.org/rfcs/rfc3924.html

          Where this gets interesting though is when we have situations like in the UK where they are planning high levels of internet monitoring (I’m not going to supply a link to this since it’s pretty much covered in the news right now) without the need for judicial process, and what level the ACTA agreement will cover with regards to monitoring of traffic.

          Going out a limb and making a presumption, it is entirely feasible we may end up in a situation where we have legally signed international agreements that allow our friendly nations to view our traffic on the off chance it’s somehow illegal in nature, yet this possibility doesn’t seem to concern people as much as Huawei.

          • Um, yes, but that’s something completely different.

            That provides for interception of data on a network by a law enforcement agency in-country — as in, an Australian law enforcement agency intercepting data IN Australia, not a Chinese agency in Australia.

            Apples and oranges.

          • Correct, but that’s the legal process behind it. The question wasn’t about the legal process it was a simple do vendors other than Huawei (highlighting Cisco in this example) have backdoors into their equipment capable of interogating traffic that we’re aware of. The answer to that is of course yes.

            Ignoring legalaties, there is nothing right now to prevent Cisco (or any other vendor) from being able to have backdoor access to any device they own that they have access to, whether that access be directly to the device or if the device is in some way connected to the internet. Oddly enough much the same way that Huawei would be required to connect to their devices should they wish to spy on us.

          • I’m not sure if that is quite true; I thought it was the telcos themselves required to give access for interception – not the equipment manufacturers.

          • Well yes and no, the police who perform the interceptions don’t need to ask for access because the ones who do that are based at the telcos. But that’s not the point, you’re dealing with the legal side of the process, I’m saying that regardless of whether not the process is used legally or not it is still capable of interrogating traffic.

            Ok, I think we can agree that all these devices are capable of intercepting and interrogating traffic, perhaps the real question is how secure are the devices, and whether or not an external source (whether it be Chinese, American, or wherever), would be capable of accessing the devices to begin with?

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