Chinese operators said to be cautious about 5G investment

Analysts are predicting an underwhelming start to 5G from its biggest market, with China’s giant operators taking a cautious approach to investment.

The Global Times reports that, between them, China Mobile, China Telecom and China Unicom will invest around $5 billion on 5G networks this year. This is apparently in line with “their pragmatic and cautious strategies”. Apparently China Telecom is dropping 9 billion yuan on 5G this year and China Unicom around 7 billion, which by the reports own assertions means China Mobile will be the big spender with 18 billion yuan.

“5G investment will last 10 years, considering the investment speed in 4G,” said some bloke called Huang, apparently. “It’s a pre-commercial time for 5G, so it’s a pre-commercial investment model.”

As you can see in the clip embedded below, another analyst echoed this perspective in a recent interview with Bloomberg. All this speculation about Chinese 5G prospects has probably been prompted by the recent announcement of China Telecom and China Mobile’s 2018 numbers. The two slides from their respective earnings presentations offer some further insight into their immediate 5G plans.

China telecom 2019 5G slide

China mobile 2019 5G slide

 

T-Mobile uses FWA and digital divide as latest Sprint merger justification

T-Mobile US has announced the launch of an LTE Fixed Wireless Access service, which could address the connectivity needs of 50 million people, assuming the Sprint merger is approved of course.

It hasn’t been billed as an Uncarrier move from T-Mobile, however it has the potential to be quite disruptive. The team has pointed to statistics which suggest 61% of rural customers either have no or only one home broadband services available to them, offering a significant opportunity for CEO John Legere and his magenta army, if they can prove the concept works effectively.

In the first instance, T-Mobile plans to invite 50,000 customers to participate in the live trial, though should the bureaucrats approve the Sprint merger, the team would be able to open this up to 9.5 million customers by 2024. And thanks to 5G, T-Mobile is promising speeds “in excess” of 100 Mbps to 90% of the forecasted FWA footprint, also by 2024.

“Two weeks ago, I laid out our plans for home broadband with the New T-Mobile,” said Legere. “Now, we’re already hard at work building toward that future. We’re walking the walk and laying the foundation for a world where we can take the fight to Big Cable on behalf of consumers and offer real choice, competition and savings to Americans nationwide.”

Although FWA is not a long-term, realistic alternative to fibre, at least not on the current airwaves, T-Mobile could certainly craft a useful position here. Pricing the service at $50 per month, the team suggests customers could save $360 per year, assuming the average monthly cost of home broadband is $80.

For T-Mobile this is perfect timing to plug the benefits of the Sprint merger and gain the interest of influential politicians. With the 2020 Presidential Election machine beginning to crank into first gear, potential candidates and the President himself will be looking for soundbites to rollout to the Middle America rallies. The FWA service ticks two boxes here.

Firstly, with so many rural consumers (and potential voters) either unable to purchase a home broadband service, or only having a single option, T-Mobile is providing an answer. In most cases, the reason home broadband is not available is due to an inability for the telco to prove ROI or the geographical landscape makes it incredibly difficult. FWA addresses these problems.

Secondly, $360 is a lot of money. T-Mobile has a track record of undercutting rivals while delivering a service which is at least on par. This might well be an offering which will attract the interest of many.

Should any politician be involved in forcing the T-Mobile and Sprint merger through, it would be an excellent anecdote for the ambitious politicians to take to potential voters. Not only are they delivering Middle America the internet, they are doing it cheaper than what is available to everyone else around the country.

T-Mobile is promising the merged company will use a low-cost structure to aggressively capture market share by undercutting rivals. This strategy is not only a chance for Legere to further irritate AT&T and Verizon, but it is a massive plug for the merger. In an FCC document, T-Mobile suggests by “monetizing available spectrum and leveraging off of other deployed network assets, the in-home service will be profitable on its own”. The underlying message is quite clear; look what we can do once you greenlight the merger.

Interestingly enough, T-Mobile seems to be fighting the competition concerns in the wireless market, with the opportunity to enhance competition in the wireline market. Soon enough, the merger judges will have to decide what is more important; maintaining the four MNO balance or creating more competition in the home broadband arena.

“These pro-competitive and pro-consumer in-home broadband benefits are clearly merger-specific, verifiable, and compelling considerations to inform the Commission’s overall review of the merger’s effects on competition and the public interest,” the statement to the FCC reads.

Another point which will gain the attention of the pro-consumer politicians and bureaucrats is the promise of free hardware. T-Mobile is promising the LTE router will be provided and installed at no-cost to the consumer, and as soon as 5G is available in the area, the upgraded 5G router will be provided free of charge.

The merger is still hanging in the balance, but the promise of increased competition in the broadband world, especially with the prospect of a race to the bottom, might turn some heads. The pros and cons of the T-Mobile/Sprint merger are starting to become very interesting

Silicon Valley doesn’t know where to look in the 2020 Presidential race

Traditionally Silicon Valley has supported Democrat Presidential candidates but, with the resident internet giants increasingly becoming a political punching bag, this might change very quickly.

More specifically, Silicon Valley tends to lean towards ‘progressive’ Democrats. Many of those who would want to be included in this list have been running events in California recently to woo voters and potential donors alike, but these are candidates which have not been friendly to the internet giants in recent months.

Some of those who would call themselves ‘progressive’ Democrats include California Senator Kamala Harris, Massachusetts Senator Elizabeth Warren and New Jersey Senator Corey Booker, all of which have made moves against the technology giants for varying reasons. Harris and Booker have sponsored or supported bills which would place greater scrutiny on acquisitions, while Warren made the outlandish promise to break-up big tech and reverse certain acquisitions.

While Warren’s promise might end up meaning very little, we suspect there is too much of a focus on popularity instead of practicality, she has been the focal point of some criticism. Texas Representative Beto O’Rourke, another confirmed candidate, poked fun at Warren’s approach instead suggesting the digital economy should be more tightly regulated, avoiding the difficulties of breaking up incredibly complex, private organizations.

The prospect of new regulations is certainly a better option for the internet giants than Warren’s alternative, however O’Rourke is a bit of a difficult horse to back right now. Looking at O’Rourke’s website, it offers little (in fact, zero) insight into potential policies, but if you want to buy a t-shirt this is the place to go.

Of course, regulatory reform is top of the agenda for many of the potential candidates, and the technology industry is a hot topic here as well. Let’s start with the positives.

The majority of the candidates on show were supporters of net neutrality, battling against FCC Chairman Ajit Pai’s mission to undo the protections. Of the potential candidates, Washington Governor Jay Inslee might steal the crown here.

California might have grabbed the headlines for introducing localised net neutrality rules, potentially paving the path for a constitutional crisis, however it was Inslee who was the first to put pen to paper. Washington’s localised net neutrality rules were introduced in March 2018, six months ahead of California.

More positive news focuses on the Lifeline Program, an initiative which helps poorer families access broadband options. This is another area which felt the fury of Pai’s administration, though several of the candidates opposed the cutting of funds. Warren, Vermont Senator Bernie Sanders and New York Senator Kirsten Gillibrand are three candidates which would support the Lifeline Program.

Former Maryland Congressman John Delaney is another who would want to shake the infrastructure game up. Sticking with the rural digital divide, Delaney is proposing the formation of an Infrastructure Bank, with funds of $50 billion, to help close the virtual chasm. This might sound attractive, but Delaney shares the same anti-China rhetoric as President Donald Trump. And that has been working out really well.

Should one of these individuals win the keys to the White House, the FCC could be in-line for yet another shake-up.

Now onto the negative side of regulatory reform. The privacy and data-handling activities of the internet giants have come under a lot of scrutiny and criticism over the last few months. This is unlucky to change, and perhaps will become a lot more aggressive as politicians search for PR points. This is a popularity contest after all.

Almost every candidate is calling for more regulatory reform, pulling down the curtain which hides the data machine fuelling the sharing economy. No-one who is involved in the data sharing economy, internet giants and telcos alike, want too many of these practises exposed as it would lead to public backlash. The industry has allowed the education of the general public to fall too far behind technological developments; any bold revelations will be scary.

Two candidates are setting themselves out from the pack with bold regulatory change, Minnesota Senator Amy Klobuchar and tech entrepreneur Andrew Yang.

Klobuchar’s idea is to introduce a digital dividend on participants of the sharing economy. A levy would be placed on any company which transfers personal data to a third-party, penalising those who monetize data. Those who collect data and use it internally, current or new product development for example, would not be included in the tax.

Yang on the other hand is perhaps proposing the most revolutionary idea; Universal Basic Income (UBI). Effectively, every person over the age of 18 in the US would be entitled to apply to receive $1,000 per month. Yang claims one in three jobs is under risk from automation and AI, therefore the money will help people compensate for this.

The UBI would be funded by consolidating all welfare payments for efficiencies, a new value added tax (VAT), new revenues through increased consumer disposable income and improvements to other areas such as healthcare. However, we suspect this would not cover the outgoings, so it would not be unfair to assume a tax would be placed on those companies benefiting from automation.

Another development mid-way through last year was an attack on the state sales tax regime which the eCommerce giants have enjoyed for so long. These rules would effectively end tax avoidance benefits so many national players have enjoyed by locating head quarters in states like Delaware. Gillibrand, Sanders, Warren and Klobuchar were Senators to voted in favour of the state led digital sales tax.

What is worth noting is policies are still in their early days, and the genuine lobbying from industry will not have started yet. Who knows what the headline policies will be in the run-up to the 2020 Presidential Election, but the Democrats aren’t looking as Silicon Valley friendly as previous years.

Ericsson gets some commercial 5G work from KT

Korean operator KT is buying a bunch of 5G NR kit and software to help it launch 5G commercially in a few weeks’ time.

It has been a decent week for Ericsson’s 5G sales team, with TDC in Denmark also signing on the dotted line. This latest win is the first commercial deal resulting from Ericsson being chosen as a 5G supplier late last year. They’ve presumably been working on this for a while, since the launch is so imminent, but KT only just gave Ericsson the green light to go public about it.

“Having worked successfully with Ericsson on 4G LTE, we are pleased to continue that partnership to make our 5G ambitions a reality with Ericsson’s leading 5G technology,” said Jinho Choi, VP of Access Network Design at KT. “By taking a global lead to enable nationwide commercial 5G services through commercially available 5G smartphones, KT is demonstrating our commitment to our customers and showing how we can drive a global 5G ecosystem where Korea plays a key role.”

“We’ve worked with KT for many years to bring the very best mobile user experiences to its customers,” said Patrick Johansson, Head of Ericsson Korea. “Notably on 5G, we worked closely together to show the world what 5G could do during a major global winter sports event in 2018. With 5G we aim to help KT to take their customers’ experiences to new levels, whether through enhanced mobile broadband for mobile subscribers, or helping to make national and global IoT and Industry 4.0 opportunities a reality for enterprises and industries.”

Specifically this gig concerns KT’s 3.5 GHz Non-Standalone (NSA) network. Korea is set to be the first country to offer some form of 5G nationwide on a commercial basis, although how many people will be able to make use of 3.5 GHz spectrum remains to be seen. In practice this is likely to be a Seoul thing, but it’s nonetheless an additional win for Ericsson to be associated with it.

BT pleads for open access to street furniture

BT is attempting to rally the industry in an attempt to convince local authorities to ditch the current exclusive concessions model in UK cities in favour of an ‘Open Access Model’.

As it stands, many local authorities operate a concessions model which grant a single player exclusive access to council-owned street furniture, such as lamp posts, to place mobile network equipment. This might seem attractive to the councils from a revenue perspective, but BT is arguing this will be to the detriment of the digital economy in the long-run.

“While the concessions model made sense in the early 2010’s when it first came into common use, the market and regulatory landscape have changed, and it’s become clear that exclusivity agreements act as a barrier to further 4G and 5G investments,” said Paul Ceely, Director of Network Strategy for BT.

“Government initiatives such as the DCMS Barrier Busting taskforce are showing the way, but we believe that industry needs to act. We are leading the way by handing back exclusivity in nine key areas.”

BT currently operates nine exclusive concessions (Glasgow, Cardiff, Brighton, Plymouth, Carlisle, Newcastle/Gateshead, Nottingham, Gloucester and Leicester) and is proposing to end these contracts should the result be an open access environment. The new model would grant all mobile operators and infrastructure companies access to street furniture, paying the local authorities a flat, consistent rate.

Although it is not a new gripe, the bureaucratic and regulatory environment across the UK has once again been blamed for connectivity problems. Almost all the operators have had a moan at the red-tape wrapped regulatory landscape at one point or another, but an open access model would appear to be a sensible step forward to encourage improved mobile coverage and experience.

However, what should be worth noting is there are authorities who have made progress in this area without prompts from industry.

“One of the reasons why the West Midlands was chosen as the location for the UK’s first region-wide 5G test bed was our commitment as a region to do what it takes to work with operators to get the 5G networks we need built in the fastest, fairest and most cost effective way,” said Henry Kippin, Director of Public Service Reform at the West Midlands Combined Authority.

“The timing and spirit of this Open Access initiative is ideal as we will make faster progress through operators and public services working together to a shared agenda so that 5G can fulfil its full potential in driving economic growth that can benefit all our diverse communities.”

While some small-minded public servants might point to the lost revenue when ending the exclusive concessions, you have to look at the long-term benefits. The West Midlands is now home to numerous 5G test beds, R&D facilities and is home to hubs of excellence for emerging technologies.

Whether the local authorities pay attention to logic is an entirely different matter, but any suggestions to decrease the red-tape complications of UK bureaucracy should be welcomed by all.

Three UK readies assault on broadband market

While its latest financials might not look mind-blowing, Three UK is steading the ship as it casts its eye towards the promised land of convergence and 5G.

Convergence is not really much of a buzzword anymore, such is the accepted nature of the model across the telco industry, though Three is seemingly readying itself for a broader push into broadband segment. The first job is to rebrand Relish, which will happen next month, and the next box to tick will be 5G.

“We are well set up for some transformational shifts in 2019 for our customers and our employees,” said Three UK CEO Dave Dyson. “It will be a year when our customers will start to see the real benefits of the next generation of 5G “mobile” technology, a technology that will not only replace 4G, but will also replace the need for wired broadband services.”

With the new ‘Three Broadband’ branding and a 5G network launching in H2, the Three marketers will have plenty to talk about when attempting to add to the 800,000 broadband customers it already has. In terms of the current state of play, Three said 10% of its current customer base is already ‘converged’ but 5G offers an opportunity to accelerate growth in the broadband business.

The team feels it has an advantage over rivals with its 5G holdings, offering superfast broadband connectivity which is not reliant on fibre. Whether UK consumers are swayed by the Fixed Wireless Access promise remains to be seen.

Looking at the position of the business, it would be fair to describe the last twelve months as healthy without being particularly good. This might not sound the most positive, but the raw materials are certainly in place for Three to make some very strong strides forward.

Total revenues over the last 12 months rose 1% to £2.4 billion, while total network connections reached 11.3 million. 99% of new customers were brought in through Three’s own sales channels, churn is down to 1.1% and net promoter score has reached a new high of +15. Three might not have torn up many trees last year, but the foundations of the business are very healthy.

Looking forward, the team is in the testing stages for its fully-virtualized 5G-ready cloud core network, while there are now 21 data centres live on the network. The business has also signed an agreement with SSE to improve mobile backhaul and 3G spectrum is being continuously re-farmed for 4G. All these initiatives will incrementally improve the customer experience.

“Three is fully embracing a business transformation to take maximum advantage of the opportunities digital businesses enjoy,” said Dyson. “2018 was the year when we set the foundations in place for us to jump up to the next level and become the UK’s best-loved brand by our people and customers, meeting all our customers’ connectivity needs.”

This kind of feels like a ‘calm before the storm’ scenario. Once the broadband rebrand is finished and 5G launched, we feel there will be some very aggressive moves from Three, staying true to its data-orientated roots but heavily integrated convergence messages on-top.

Money is piling up in the US 24 GHz auction

Over 30 companies have put more than $560 million in bid money on the table at FCC’s auction for the 24 GHz frequency. And this is only the beginning.

Following the underwhelming auction of the 28 GHz (dubbed Auction 101) spectrum, which only returned $703 million, the new auction of the 24 GHz (dubbed Auction 102) is heating up quickly. The auction started last Thursday and has gone through 11 rounds of the first phase of the auction, or the “clock phase”, when participants bid on a Partial Economic Area (PEA) blocks. By the end of round 11, the gross proceeds have reached a total amount of $563,427,235. There are still two days, or six more rounds to go, before the winners can move to the next phase of the process.

The “assignment phase” will allow the winners from the first phase to bid for specific frequency licence assignments. The total bid value for the 24 GHz frequencies could go up to between $2.4 billion and $5.6 billion, according to the estimate by Brian Goemmer, founder of the spectrum-tracking company AllNet Insights & Analytics, when he spoke to our sister publication Light Reading.

The key difference the has driven up the interest from the bidders for Auction 102 is the locations where the frequencies are made available. While major metropolises like New York, Los Angeles, or Chicago, were absent from 28 GHz auction, they are all on the current 24 GHz auction together with other major cities that would be the candidates for the 5G services to roll out in the first wave.

Bidders have included AT&T, Verizon, T-Mobile, Sprint and more than 30 other companies. The FCC will announce the winners including those from Auction 101 only after both phases of Auction 102 are completed.

In addition to bidding for mmWave frequencies, operators like AT&T are also actively refarming the lower frequency bands in their possession that are used to provide 3G services. AT&T sent a notice to its customers in February that it will stop 3G only SIM activation, urging customers to move to LTE. The company said “we currently plan to end service on our 3G wireless networks in February 2022.” Specifically the company is planning to refarm the 850 MHz and 1900 MHz frequency bands, saying “it may be necessary for us to turn down one band of our owned and operated 3G network, such as 1900 MHz or 850 MHz service”.

Considering the AT&T only switched its 2G networks off at the beginning of 2017, this is a clear sign that the generational transition of mobile telecom services is accelerating. Earlier in the middle of last year, Verizon confirmed that it will shut down its 3G CDMA networks by the end of 2019. Even earlier at the MWC in 2017, T-Mobile’s CTO Neville Ray said the company was looking to sunset both GSM and WCDMA.

Inmarsat once again in the acquisition crosshairs

Acquisition rumours are once again swirling around British satellite company Inmarsat, this time to take the company back to private equity control for £3.3 billion.

The consortium, featuring Apax, Canada Pension Plan Investment Board, Ontario Teachers’ Pension Plan Board and Warburg Pincu, comes at a time where the firm has been facing investor pressures. Over the last six months, poor performance from Inmarsat share price decline by 26%, while acquisition rumours have caused this trend to reverse recently. Share price is still down, but there does seem to be appetite in the market for an acquisition.

On January 31, Inmarsat received a non-binding proposal from the consortium offering $7.21 per share for the entire issued, and to be issued, share capital of the firm. The offer values the business at $3.3 billion, roughly £2.5 billion. This is not a concrete offer, but it is seemingly enough to get the market excited.

Although Inmarsat has reported flat sales growth in its core business units, maritime and government connectivity contracts, there has been increased demand in the aerospace industry, as more airlines demands connectivity, while 5G is on the horizon. The failure to deliver material progress on the promises does seem to be frustrating investors, but there is potential.

While satellite connectivity has been snubbed in recent years, usecases which demand ubiquitous connectivity in the future imply satellite has a broader role to play outside of the developing nations. Due to the civil engineering difficulties, and sometimes commercial constraints of connectivity, satellite is increasingly becoming a critical component of the connectivity mesh.

Interestingly enough, Apax might be a familiar sounding name to Inmarsat lifers. Apax was part of a consortium which bought the satellite firm in 2003, before taking it public two years later.

For some, this might be good news, but what is worth noting is this deal will be placed under scrutiny from the UK Government, which will view Inmarsat as a national strategic asset, and other attempts have failed. EchoStar attempted to acquire the business last year, investors rejected an offer worth £3.2 billion, while Eutelsat was also rumoured to be considering a bid.

Germany pushes back against US Huawei threats

It tried scaring her, to convince her with niceties, the diplomatic approach and finally threats, but the US cannot seem to break the will of German Chancellor Angela Merkel over Huawei.

Speaking at the Global Solutions Summit this week, Merkel has continued to defy the desires and demands of the US over China and its telco champion Huawei. Germany is not only standing resolute against the political propaganda, but this message seems to be more of a push back against the White House.

“There are two things I don’t believe in,” Merkel said during the interview. “First, to discuss these very sensitive security questions publicly, and second, to exclude a company simply because it’s from a certain country.”

This has been the on-going message from Germany and it seems the US threat of intelligence exclusion has landed on deaf ears. Germany wants proof of nefarious activities, and it will not make a knee-jerk reaction to punish a company (or a country for that matter) when the drivers are political and economic.

While there is of course a threat of espionage from the Chinese Government, this on-going narrative is one chapter in the wider US/China trade saga. Threats should of course be assessed and mitigated in a reasonable fashion, but you must consider all branches of the storyline. And Germany isn’t buying into US chest beating.

In terms of what has actually been said, there are five key takeaways:

  • Sensitive security issues should not be discussed on the public stage
  • Punishing a single company is not the right way to ensure security
  • Targeting China due to its economic success is unfair
  • Security requirements should be across the ecosystem to mitigate risk
  • The same security requirements should be escalated to a European level

Each of these points made by Merkel this week, and various German government agencies for months, are completely fair, reasonable and pragmatic. But fair, reasonable and pragmatic does not help the US.

Why is Germany resisting?

The simple answer is that it doesn’t make sense to ban Huawei.

Firstly, from a competition perspective the telco industry is not flush with vendors, especially ones which can offer the same scale as Huawei. Removing Huawei, and Chinese vendors across the board, reduces the number of vendors available for telcos to choose from. This weakens the negotiating position of the telcos and, theoretically, slows down the deployment march.

Secondly, a Huawei ban would impact some European nations more than others and Germany is one of them. Huawei has deep relationships with German operators, with equipment embedded into 4G networks. Banning Huawei would potentially result in kit having to be ripped and replaced, slowing down progress, while backward compatibility becomes more difficult also, again, slowing down progress.

With the world increasingly being defined by wireless, Europe’s largest economy cannot afford to slip too far behind in the 5G race. According to data from Opensignal, Germany has been falling behind numerous European nations when it comes to average 4G speeds.

While it might not have a massive impact on what we associate with connectivity today, primarily consumer smartphone applications and entertainment, with 5G promising a revolution in the way connectivity influences enterprise and the economy, this could become much more of an issue in Germany.

In short, Germany cannot afford to stomach the consequences of banning Huawei.

The turning tide of momentum

The anti-China rhetoric from the US has been consistent and loud over the last couple of months, though it does not seem to be gathering the same support as during the initial propaganda assault.

After Australia, Taiwan, South Korea, Japan and New Zealand seemingly turned against Huawei and China, the ear-whispering has not been as successful in Europe. The European continent has been a successful arena for Huawei in recent years, and such is the dependence of telco infrastructure on the vendor, it is unsurprising these nations are resisting the call to ban Huawei.

While individual states have been pushing back against US ambitions, this leaves the governments in slightly precarious positions. Such is the power and influence of the US economy, individually European nations will be in a frustrating negotiating position when defying US requests. However, escalating to a European level changes the dynamics.

This is perhaps why Merkel is keen to escalate this discussion to European Commission level. The power of the collective against US ambitions is an excellent way to mitigate risk on an individual level. Sovereign nation states often begrudgingly hand over power to the Brussels bureaucrats, but in this instance, it might prove to be a very pragmatic idea.

The European Commission was reportedly looking into new rules which would effectively ban member states from purchasing equipment from Chinese companies (although China would not be mentioned specifically), but we can’t see this carrying through. Brussels would face a huge amount of backlash when seemingly contradicting the wishes of the majority of its member states.

That said, should the US be able to produce concreate evidence of Chinese espionage and collusion with Huawei, attitudes could shift incredibly quickly.

What does this mean for Huawei?

This is neither good or bad; it’s pretty much maintaining the status quo.

Being banned in the US won’t really impact the prospects of the business, it never really cracked this market, while it will continue to maintain its healthy position in Asia. Europe is a key battle ground though.

Europe is in a difficult position. It needs to tread carefully to ensure it can still use equipment from the vendor. European governments will not want to ban Huawei and this continued resistance is a good sign for Huawei. Germany and the UK, two influential voices across the bloc, are both preparing frameworks to allow Huawei’s business to continue, and should such ambitions be escalated to the European Commission, these trends would likely continue.

Due to on-going security concerns, some of which are not fairy tales despite a lack of evidence, and telcos desires to introduce more diversity in the supply chain, Huawei is unlikely to dominate the 5G world in the same way it did 4G. This is far from a secured position, politics has a way of U-turning occasionally, but the anti-Huawei brigade is starting to run out of puff.

US warns UK on efforts to cage Huawei

The UK Government feels it is capable of mitigating any risk associated with Huawei 5G equipment, but the US is not so sure.

According to the Financial Times, a US delegation has reached out to the UK Government warning its means of testing and monitoring Huawei equipment will not protect it against any curious eyes from the Chinese Government. How this warning is received could dictate the US/UK relationship over the coming months.

The UK, and generally Europe on the whole, has taken a much more pragmatic approach in dealing with the potential threat of Chinese espionage. While the US was quick to banish any Chinese equipment from critical infrastructure, European governments are implementing new regulations and conditions to heighten security requirements, theoretically mitigating risk while also allowing telcos the luxury of increased choice.

This might sound like a perfectly logical way to manage a potentially nefarious situation, but the US is not happy. Perhaps this is evidence of the eroding influence which the US has on the world and a shift in the geo-political landscape. Once upon a time, US politicians might have been able to whisper in the ears of the European political elite and achieve their aims, but this does not seem to be the case anymore.

US officials fear that because 5G networks will be software-orientated, any equipment which is embedded into communications networks could altered at a later date, creating virtual backdoors at will. Theoretically, this is a genuine risk, however, nefarious individuals at any juncture of the supply chain, in any country, for any vendor, could also create the same vulnerability.

Although the National Cyber Security Centre is yet to respond to the comments from the US, CEO Ciaran Martin played down fears during a conference speech last week.

“Huawei’s presence is subject to detailed, formal oversight, led by the NCSC. Because of our 15 years of dealings with the company and 10 years of a formally agreed mitigation strategy which involves detailed provision of information, we have a wealth of understanding of the company. We also have strict controls for how Huawei is deployed. It is not in any sensitive networks — including those of the government. Its kit is part of a balanced supply chain with other suppliers.”

While the US has been visiting various countries around the world in an attempt to convince governments to ban Chinese companies, successes are becoming less frequent. European governments in particular have seemingly been very resistant to the idea, with the US reportedly threatening Germany with consequences; should the Germans allow Huawei into their networks, German intelligence agencies would not be granted access to US intelligence databases.

This plea to the UK Government seems to be setting up a similar timeline; should the UK not react in the same manner, the US might well start thumping its chest and stamping its feet, threatening a similar exclusion.

What is worth noting, is that while the US is preaching the benefits of a total ban on Huawei and other similar Chinese vendors, it has not done so itself. Chinese companies are barred from providing products and services in most critical and sensitive products, but the White House has not gone as far as a complete ban. Perhaps the worry is over repercussions from the Chinese, though it does not seem to care whether China punishes its allies.