Will America Encounter A Cyber Pearl Harbor?

Narration: China’s primary 5G carrier, Huawei, is testing its equipment in 66 countries with 154 carriers. If China wins the race for 5G, what could it mean for America?

Brian Hendricks: So an area where the United States enjoys tremendous economic advantages at the moment could be under threat.

Narration: What implications would it have for national security?

Declan Ganley: The first ten minutes of the next great war will be fought in the cyber domain. And that’s where the Pearl Harbors of the future will take place.

Narration: Huawei is the world’s biggest telecommunications company. But is it a normal commercial entity?

Joshua Phillips: For the Chinese Communist Party, Huawei is a key foundation for its broader objectives in spreading the China model.

Narration: Seventy-seven years ago, America did not foresee Japan’s attack on Pearl Harbor. Could history repeat itself?

Simone Gao: America is the single most powerful country on the planet. It has enjoyed extraordinary technological, economic, and military advantage over the rest of the world for decades. But today, that foundation might be shaking. China is on the verge of winning the 5th strategic domain, which is the cyber domain. The other four are land, sea, air, and space. China has engaged in this battle against Western powers, primarily the U.S., in a systematic and dedicated way, and most importantly, without the U.S. even noticing it until recently. If China does win, what will the world look like for the rest of this century? Can this trend still be reversed? We’ll explore these questions in this episode of “Zooming In.”

Narration: On Feb. 25-28, Barcelona will hold the 2019 Mobile World Congress. Telecommunication gurus around the world will gather to announce their operation plans. Many believe this is one of the main indicators of what is going to happen in that industry. The theme for this year is 5G. Declan Ganley, Chairman and CEO of Rivada Networks, a U.S.-based communications technology company, told “Zooming In” this meeting is extremely important.

Declan Ganley: 5G is very, very significant. It’s a massive revolution in the wireless industry. It’s perhaps the biggest single pivot point in wireless since the advent of the mobile phone as we know it. The speeds are going to be greatly increased, the capacity for data, the amount of information that we’ll be moving, massively increase, a multifold increase in that. And the uses and the impact on the economy of 5G is going to be massive. I’ve seen economists’ estimates pointing that 5G, if it’s used in what they call an open access wireless model, will add at least 0.75 percent to U.S. GDP, for example, and the GDPs of any country that adopts it. Also, everything that we do, anywhere where information or data is exchanged from small devices, not just mobile phones and data, but air-conditioning, calling systems, transportation, security, health care, pharmaceutical delivery, entertainment, and agriculture, many, many fields are going to be using 5G technology where we haven’t—in ways and manners that we haven’t seen before. It’s going to touch every aspect of our lives.

Narration: The 2019 Mobile World Congress is expected to produce the world’s 5G rollout blueprint as telecommunicators announce which company’s 5G equipment they will use.

Declan Ganley: What is pivotally important is what architecture, what technology one deploys for one’s 5G deployments. And very frankly, given that the question here is China, is whether or not that architecture for 5G is going to be architecture developed in China and delivered by Chinese companies or architecture delivered somewhere else in the world and delivered by non-Chinese companies.

Narration: Chinese company Huawei is the largest telecoms equipment company in the world and China’s primary 5G equipment provider. They will also attend the congress. At a Hudson Institute event last November, Ganley said Huawei was planning a large wave of announcements. In other words, a victory party declaring its dominance in the cyber domain.

Declan Ganley: The countries here filled in red, I think there are 61 of them, that map represents countries that have already signed 5G contracts to deploy their 5G networks using Chinese equipment and primarily Huawei equipment. The countries that are pink are countries that are currently testing that equipment in government approved testing operations that are leaning in that direction right now. This is based upon publicly available information.

Narration: Why have so many telecommunications companies chosen Huawei as their 5G equipment provider? The single most important reason is the Chinese company provides equipment at a much cheaper price thanks to heavy Chinese government subsidies. But that’s not all.

Declan Ganley: In the UK, in some European markets, not only are the likes of Huawei funding providing discounted equipment and discounted funding, even the rollout cost. That’s where the concrete is being poured, the towers are being built, we have reliable information they come in 40 percent cheaper than the next nearest competitor. The only way you could do that is if you’re even subsidizing the rollout cost, because a British contractor is not going to charge less to Huawei than to Ericsson or to Nokia, so that’s being subsidized. I believe a deliberate policy of subsidization is to knock Ericsson, Nokia, and Samsung out of the market. It is to make people cut corners on the things like security, and it is to assert control in this essential security domain, the cyber domain and get into the edge of that network.

Narration: China also pioneers in 5G deployment at home. At the Hudson Institute event, Brian Hendricks, Nokia’s head of policy and government relations, explains what will happen if China deploys 5G first.

Brian Hendricks: I know one of the things that worries the national security establishment of the United States greatly is what if China wins the race to 5G? And my question to them is always, what does that mean? Does that mean they deploy first? Does that mean there is a huge lag until a fully evolved 5G gets deployed? So just as an examples. U.S. carriers are poised with spectrum in hand to do early stage 5G deployments in the United States. Those will give you capabilities of maybe 2Gb/per second, lowering of latency. But that’s not fully evolved 5G, right? They don’t have the assets that they need right now in the way of spectrum, to really upgrade that, and evolve that towards that 10-20GB/per second, zero latency model, China does, Japan will, South Korea will. And if they get there first, and there is an appreciable gap before the U.S. gets there, then most of those use cases that I have described, web scale, the verticals connected healthcare and transportation, the development work for that, is going to go where the networks support those use cases. So an area where the United States enjoys tremendous economic advantages at the moment could be under threat.

Narration: The cyber domain is of great importance not only for the economy but also for security. In terms of warfare, there are five strategic domains today: land, sea, air, space, and cyber. To gain dominance in the first four domains takes a long time and is extremely expensive. According to Ganley, China found a shortcut and an inexpensive way to achieve dominance in the most important cyber domain by making the world deploy 5G networks with Chinese technology.

Declan Ganley: So on average you’re looking at going to a Chinese 5G provider because they’re subsidized and because they have government financing backing them, they’re coming in at at least 40 percent less cost than anybody else. Now, it’s subsidized by the Chinese government. Now, what’s the cost of those subsidies? Maybe around the world 100, 200 billion dollars, a little bit more. Less than the cost of an aircraft carrier battle group. And that way you get to dominate a whole domain—cyber. The cyber domain is—God forbid there is another great war—the first ten minutes of the next great war will be fought in the cyber domain. And that’s where the Pearl Harbors of the future will take place. And whoever dominates the architecture of 5G has got an enormous strategic, security, and frankly, economic advantage. And what you’re seeing going on here is the great game in the 21st century environment where China has spotted an opportunity, Beijing has spotted an opportunity, to dominate the cyber domain globally, to use mobile carriers as their Trojan horses who do the lobbying for them to get their architecture in, and to deploy these 5G networks globally basically by subsidizing them. It’s a brilliant plan, and it has almost worked.

Filler: Coming up, if a country uses Huawei’s technology for 5G deployment, will that pose any risk to its national security? What will happen to ordinary consumers?

Narration: This is a 172-page Huawei internal document written in 2015. It was leaked in 2018. The document is entitled “VCM (video content management) Operation Guide.” It was used to train the Chinese regime’s internet police on how to monitor, analyze, and process video content in real time. The police were expected to send out alerts if they found anything “suspicious.”

Simone Gao: It is a standard operation for China’s “Golden Shield Project,” one function of which is to block access to sensitive information, and the “Skynet System,” used for surveillance of the whole society. Huawei has also played an extensive role in building and upgrading China’s Great Firewall, and it continues to function as a core technology and equipment provider for all of China’s surveillance apparatus.

Narration: According to Huawei’s official website, among more than one hundred clients who are using Huawei’s video cloud service, over half of them are local police departments, prisons, and police schools. Huawei also publicly announced that they will undertake the construction of more than 30 “safe cities” across the country. A “safe city” is the local public security’s urban surveillance system.

Narration: Huawei’s founder Ren Zhengfei has a background in the Chinese People’s Liberation Army (PLA). His wife, Meng Jun, is the daughter of a prominent PLA political officer. Huawei Chairwoman, Sun Yafang, according to CIA reports, has a background in the Ministry of State Security (MSS), China’s intelligence agency.

Simone Gao: Does Huawei pose a national security threat to countries who use its technology to deploy 5G networks? Ganley likens it to getting someone else to build your ship.

Declan Ganley: If somebody builds your ships and they know where the welds are, where the hinges of the doors are, what the weak structural points are, what the strong points are, where you can flood, where you can’t, where the engine room is, how it operates, what temperature the engines can max out at, when do things start breaking, what are the vulnerabilities. If you’re the shipbuilder and you know those things, you know things about that ship, that network, that even the ship owner doesn’t know. And it’s not that you may have your crew onboard the ship all of the time, you don’t need to. But if you want to take over the ship, and you want to use it for your own purposes, you know where to cut the hulls. You know the routes to take, et cetera. It’s a simplistic way of explaining it, but it’s just, as you asked the question. The equipment, the software, the technology over which all of this information runs, whoever controls the supply, the architecture, the maintenance, who’s providing the equipment, they know where the weaknesses are, they know where the strengths are, they know how to compromise those networks when and where they want to.

Simone Gao: Besides government-level security, could the privacy of ordinary consumers also be compromised on a Huawei 5G network? I had this discussion with senior investigative reporter Joshua Phillips from the Epoch Times.

Simone Gao: If a country uses Huawei technology and equipment for their 5G deployment, besides national security implications, what impact will it have on ordinary consumers?

Joshua Phillips: Basically, 5G technology would give the Chinese Communist Party—or, say, Huawei, them through Huawei, access to an electromagnetic spectrum that is able to, say, access or compromise any device within that field. I mean, similar to Wi-Fi in your home, right. Any device within that field is able to, say, access that Wi-Fi network. The concern is that if, say, government offices or military offices were nearby, let’s say a consumer home that is using 5G technology, or say a big business that has a very large, say, 5G field around it from these technologies, what does that mean in terms of how they can access the devices or compromise the devices in that other facility. These are kind of next-gen cybersecurity concerns, but very real concerns that 5G is bringing about. And it’s why the United States, of course, has banned Huawei 5G technology.

Simone Gao: Tell us what Huawei really is. We know it has connections to the Chinese military. It also provides surveillance equipment to the Chinese police force. Does that make it abnormal and not trustworthy?

Joshua Phillips: I’d say the bigger picture, aside from, say, the backgrounds of the individuals who run the company, are what Huawei is being used for by the Chinese Communist Party. If you look at, say, the Chinese Communist Party’s “One Belt One Road” initiative, this isn’t just China, China going in and building infrastructure projects. This is the Chinese Communist Party implementing its new GPS system, it’s implementing its new, say, internet infrastructure, which is separate from the normal internet infrastructure. And Huawei plays a role in that. And it’s also implementing social control systems. Things like, similar, I’d say, to the social credit system. Things similar to the Great Firewall and the Golden Shield. And keep in mind Huawei is involved in both the Great Firewall and the Golden Shield. Huawei plays a key role in these totalitarian technologies that these countries where China’s doing these infrastructure projects can turn on if they wish. So China is not using Huawei as just a normal company. For the Chinese Communist Party, Huawei is a key foundation for its broader objectives in spreading the China model. And this is a totalitarian communist system that looks to use high technology to—I mean, if you look at the social credit system, monitor your every online purchase, monitor every friend you make, look at what your social connections are, what your beliefs are, what are your political views. And it will judge you and rate you and give you a citizen score based on these things. And your freedom in that society or your oppression in that society are going to be determined by your rating. China is exporting this technology, and Huawei plays a role in it.

Narration: Coming up: Is it too late to stop China’s 5G dominance?

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.