How the West Can Counteract China’s Cyber Strategy

Narration: On Dec. 1, 2018, Meng Wanzhou, CFO of Huawei and daughter of Huawei’s founder, was arrested at a Vancouver airport after an extradition request by the U.S. over alleged Iran sanctions violations.

Narration: Meng’s arrest shocked Huawei. Will the arrest impact its 5G efforts?

Declan Ganley: It certainly is—focuses people’s minds on tactics and methods and risks that are associated with using certain providers. In terms of Huawei’s ability to—or the bigger challenge for Huawei is can Huawei be trusted to deliver vital national infrastructure in any given country around the world given the top-down nature of the Chinese Communist Party and the way that it operates. And I think that questions answers itself.

Narration: Meanwhile, according to BBC news, in early December last year, British Telecom said it will not use Huawei equipment in the heart of its 5G mobile network when it is rolled out in the UK. BT started removing Huawei equipment from its 3G and 4G networks in 2016. The company spokesperson said they are applying these same principles to their current request for proposal for 5G core infrastructure.

Narration: While Huawei will not be selected as a vendor for the core 5G network, the company spokesman said it will remain “an important equipment provider outside the core network, and a valued innovation partner.”

Narration: However, another UK mobile carrier, Three, announced last month that it is working with Huawei on a 5G home broadband demo in London.

Narration: America, Australia, and New Zealand have banned Huawei from their 5G rollout. South Korea’s largest carrier also left Huawei off its list of 5G vendors. Germany’s Deutsche Telekom announced it would review its vendor strategy. France’s Orange said it would not hire the Chinese firm to build its next-generation network in the country.

Simone Gao: There is still a long way to go. Ganley believes the real reason China has won a large chunk of the market is because the major commercial networks in America and other Western countries run on a retail model where they pay lots of money upfront to purchase spectrum from the government. Then they charge consumers as much as they possibly can for data. Meanwhile, they naturally look for the cheapest equipment and rollout costs. This equipment comes from China. And these big commercial carriers end up serving as lobbyists for Chinese companies to gain regulatory favors from their government. So in order to change this, the retail model needs to be flipped to a wholesale model where everyone is able to buy spectrum at a reasonable price. The government would get a constant income stream from leasing the spectrum. Most importantly, the market would decide how much data is really worth. This seems like a long-term strategy. For now, the battle is whether or not the world will build its 5G networks with Chinese technology and equipment. And for that, America has been in a fight for a long time without even realizing it. I’m your host Simone Gao. Please like our Facebook page and subscribe to our YouTube channel at “Zooming In with Simone Gao.” Thanks for watching and see you next time.