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Telecoms: China ban stokes fears of cyber cold war: Security concerns cited as Australia stops Huawei tendering for huge contract
(Guardian (UK) Via Acquire Media NewsEdge) Being banned from supplying telecommunications products to one country may be bad luck. But the Chinese company Huawei - the world's second-biggest supplier of telecoms network equipment - this week found itself facing shutouts from both Australia and the US, fuelling concerns about a cyber cold war between east and west.
The company announced this week it had been banned from tendering for contracts in Australia's A$38bn (pounds 24.7bn) National Broadband Network (NBN) because of cybersecurity concerns. Then it emerged that the reason why its joint venture with the US online security company Symantec (which had the 49% stake) was dissolved last November was that the US company feared losing out on information from the US government, according to the New York Times.
For Huawei, it's part of a continuous uphill struggle. "We were informed by the government that there is no role for Huawei in Australia's NBN," said Jeremy Mitchell, a Huawei spokesman in Australia. That will be a blow to the company, which aims to overtake Sweden's Ericsson to be the world's biggest supplier of telecoms infrastructure such as fibre-optic connections and routers.
It is already heading that way: for 2011 its revenues were pounds 20.3bn, compared with Ericsson's 227bn kronor (pounds 21.5bn).
But to take the top spot, it needs contracts in projects such as NBN, which was launched in 2009 and aims to connect 93% of Australian homes and workplaces to optical fibre by 2020. When Huawei sought a A$1bn supply contract for the NBN, the attorney general, Nicola Roxon, blocked the bid - on advice from the Australian Security Intelligence Organisation. "This is consistent with the government's practice for ensuring the security and resilience of Australia's critical infrastructure more broadly," she said in a statement.
Certainly, concerns about silent Chinese incursions into western businesses have never been higher. Besides hacker attacks on Google in 2010 - thought to be government-inspired - security companies and the Pentagon have uncovered evidence of infiltration into a number of important US companies, while some using suppliers in China have complained of more subtle theft of intellectual property.
A Huawei source insists that "we take cybersecurity very, very seriously".
But what's wrong with Huawei, an employee-owned business set up in 1987 that has never been accused of such activities?
First, its chief executive, Ren Zhengfei, was formerly a Chinese army officer, fuelling claims that Huawei has a cosy relationship with the Chinese government - something the company denies. Second, no Chinese company can do business without the approval of its government, and Huawei works in such sensitive areas - nothing is more essential to a modern country than its telecoms system - it faces extra hurdles that might not apply to western companies.
The US has fuelled the concerns: in 2008 Congress blocked a planned purchase of the networking company 3Com, and telecoms company TeaLeaf in 2011. Congress has also barred Huawei from selling kit to any US operator, after blocking a sale to Sprint Nextel in 2010.
Against that background, the New York Times says Symantec had become concerned that, as the US government shifted an information-sharing program about cyber threats to the control of the department of homeland security, it would be frozen out. For a company reliant on corporate clients, that could be lethal.
Symantec rebutted the claims on Tuesday, saying it had announced the sale of its 49% stake in November 2011,when its chief executive, Enrique Salem, said: "Symantec achieved the objectives we set four years ago and exit the joint venture with a good return on our investment, increased penetration into China and a growing appliance business."
In Australia, Mitchell said that "Huawei is building NBN-style networks in the UK, New Zealand, Singapore, Malaysia and more". In fact, 45 of the world's top 50 telecoms operators are customers. Most of the missing five are in the US.
"We have never been told by the Chinese government to do a certain thing. If we would, that would be to our detriment and we would lose the market share that we have," Mitchell said.
In the UK, BT reiterated its confidence in Huawei, and said that it was able to examine source code for products to check for "back doors" or eavesdropping functions.
It said in a statement: "BT's relationship with Huawei and other suppliers is managed strictly in accordance with UK laws and security best practice. BT's network is underpinned by robust security controls and built-in resilience. We continue to work closely with all our suppliers and the government, where appropriate, to ensure that the security of the network is not compromised."
Australia's former foreign minister Alexander Downer, who is an independent director on the board of Huawei's Australian unit, rejected the government's security concerns. "This sort of whole concept of Huawei being involved in cyberwarfare, presumably that would just be based on the fact that the company comes from China. This is just completely absurd," he told ABC Radio.
Huawei is likely to have the last laugh. While Ericsson sold its half-share in the loss-making Sony Ericsson mobile phone business in October 2011, Huawei has just ventured into the handheld business - and analysts already expect it to undercut rivals such as Taiwan's HTC.
Captions:
Symantec ended its joint venture with Huawei, above, to avoid missing out on US government information on cyber threats
Huawei's Ascend P1 S, said to be the thinnest smartphone, goes on sale soon
(c) 2012 Guardian Newspapers Limited.
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