The Huawei controversy – a symptom of a deep malaise

This is the text of my spring 2020 column for Stage, Screen & Radio – the quarterly magazine for members of BECTU, the media and entertainment union and a part of Prospect.

Note that some of the most recent developments in this story, including the ban on the use of Huawei kit, announced in the Commons yesterday, are now covered in a separate post above.

At the end of January, the government made its long-awaited decision on the third aspect of its Telecoms Supply Chain Review – addressing the security challenges posed by using network infrastructure supplied by so-called high-risk vendors.

Chinese company Huawei’s equipment will be allowed to account for 35% of kit used in the non-core part of the UK’s 5G network, despite pressure from US president Donald Trump to block the firm altogether. This includes being banned from supplying kit to “sensitive parts” of the network and excluded from areas near military bases and nuclear sites.

Huawei is not the only vendor of telecoms equipment regarded as “high-risk” – so, too, is ZTE, also Chinese. But it is the only one for which the National Cyber Security Centre (NCSC) has a mitigation strategy designed to manage the risks raised by operators choosing to use Huawei equipment.

Prospect has members in Huawei and we will continue to articulate their interests as the outcomes of the review are worked through.

The details of the decision have been well-publicised. Essentially, they boil down to first, the desirability of the equipment of “high-risk” vendors being embedded in the communications networks on which we increasingly depend; and second, the problems posed by one equipment supplier coming to a position of market dominance.

Both represent different aspects of the risks in relation to Huawei; but I want to focus on the second.

A blog post by Dr Ian Levy, NCSC technical director, and published as a part of the package of materials released at the time of the review, is key.

Dr Levy acknowledges that “the market is broken”, for reasons due predominantly to low margins at a time of high research and development (R&D) demands.

Prospect has been banging this particular drum for years and it is good to see this being recognised, at least in the equipment supply segment of the communications sector.

The solutions to which the review is directed are, at heart, a new test lab to de-risk the costs of market entry, allied to the government working with industry, and internationally, to increase the extent to which equipment from different vendors can be used seamlessly. Allied to this are questions of spectrum management and intellectual property.

All the above needs to happen, but also encouraging new market entrants, and facilitating market entry for those suppliers not currently operating here. However, this is a (very) long-term objective, so other solutions also need also to be considered.

There are few operators currently supplying the UK market. Nokia and Ericsson are the two most likely alternatives.

But they are already more expensive and, should there be no Brexit deal on goods, the cost differential after 31 December 2020 will rise further.

BT, whose compliance bill for limiting Huawei equipment is estimated by the company itself at £500m, may as a consequence face greater exposure in relation to costs.

Furthermore, the same problems are likely to arise in the future on batteries for electric cars. There are few operators of scale able to supply electric batteries at European level and, globally, those that are? Well, they’re Chinese, not least as a result of that government’s extensive backing for R&D.

We are beginning to reap what we have sown from our decades-long reliance on the market, privatisation and an emphasis in communications on price competition. The question that remains is how far the UK government is prepared to go to support the levels of R&D that “global Britain” will surely require.

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