Aussie watchdog sniffs around TPG and Vodafone merger

The Australian Competition and Consumer Commission (ACCC) is having a closer look at the AUS$15 billion TPG and Vodafone merger, with the signs looking rather ominous for the pair.

After initially being rumoured in August, the merger was confirmed with the pair targeting convergence trends to source fortunes down-under. Neither telcos has been tearing up trees in the market, TPG’s recent financials revealed 0.5% growth over 2018 while Vodafone posted a first-half net loss of AUS$92.3 million in July, though this merger could have been viewed as a means to become more profitable.

However, the ACCC is citing competition concerns in both the mobile and the broadband business units. When the watchdog starts to get twitchy, it doesn’t necessarily bode well.

“Our preliminary view is that TPG is currently on track to become the fourth mobile network operator in Australia, and as such it’s likely to be an aggressive competitor,” ACCC Chair Rod Sims said.

“Although Vodafone is currently a relatively minor player in fixed broadband, we consider it may become an increasingly effective competitor because of its high level of brand recognition and existing retail mobile customer base.”

As separate companies, TPG has the broadband heritage with ambitions in the mobile game, while for Vodafone it is the opposite. Any regulator or competition authority which is starting to see organic diversification will start to get excited, though this merger will effectively kill off any promise of additional players in the individual connectivity segments, as they would lean on the new partners strength. The promise of four separate mobile and broadband telcos is disappearing in front of the ACCC’s eyes.

The question which remains is whether Australia needs a fourth player in the mobile and broadband segments for the market to remain competitive? There are of course pros and cons to both sides of the argument, though risk-adverse public sectors bodies tend to believe more providers means a better outcome for the consumer due to competition.

This is certainly what appears to be happening in Australia, though this is a country which needs to operate its own rules.

In markets like the UK, fewer providers might not mean less competition. The land mass which needs to be covered is comparatively small, therefore it is not out of the question to have genuine national providers, which can offer 90% or greater coverage. This means choice for the consumer and the providers have to scrap for attention and subscriptions.

However, Australia is massive, incredibly varied and contains some very hostile environments; not exactly the perfect playing field for telco expansion and greenfield investment. The risk of localised monopolies emerging are greater, due to the final burden of increasing coverage or entering into new segments. With this in mind you can see why the ACCC is getting a bit twitchy.

Of course, consolidation means a bigger subscriber base, greater revenues and therefore increased CAPEX budgets. Investors and management teams have more confidence in being able to upsell services to existing customers, therefore the risk in investing in new infrastructure or upgrades is decreased.

It is six of one and half a dozen of the other when you look at it, though that will come as little comfort to the TPG and Vodafone executives now facing the scrutiny of the ACCC.

Aussies determined to undermine security with anti-encryption law

Ten of the world’s largest tech brands have banded together to denounce a recent law passed by the Australian government which could be viewed as the first step towards a Big Brother government.

With the world turning against China and Chinese companies due to the threat of espionage, you have to question whether the Australian’s have a leg to stand on anymore, as personal privacy takes a heavy blow with this legislation.

The signs have certainly been worrying over the last 18 months. Australia might well be one of the first to pass such controversial legislation, but it is certainly not alone. France, Germany, the UK and the US have all made it clear they all have ambitions to make our world less secure and less private with their own attempts. The privacy damn was set to burst, and the Aussies caved. Privacy has taken a backwards step down-under.

The statement below, signed by Apple, Evernote, Dropbox, Facebook, Google, LinkedIn, Microsoft, Oath, Snap and Twitter, signals the opposition from the technology industry.

“One of the core principles of the Reform Government Surveillance coalition (RGS) is that strong encryption of devices and services protects the privacy and data security of our users, while also promoting free expression and the free flow of information around the world,” a joint statement declares.

“RGS has consistently opposed any government action that would undermine the cybersecurity, human rights, or the right to privacy of our users – unfortunately, the Assistance and Access Bill that was just passed through the Australian Parliament will do just that. The new Australian law is deeply flawed, overly broad, and lacking in adequate independent oversight over the new authorities. RGS urges the Australian Parliament to promptly address these flaws when it reconvenes.”

The law itself will allow the Australian police to issue technical notices, compelling technology companies to assist the government to hack, implant malware, undermine encryption and even insert backdoors into security software. Those who resist would face financial penalties. The justified concerns with the legislation are two-fold.

Firstly, the idea of a backdoor or writing algorithms which allow encryption software to be undermined completely defeats the purpose. The presence of such features should be seen as nothing more than a weakness in the software, a weak link in the chain. Whenever there is a vulnerability, nefarious individuals always expose it. It is just a matter of time before cyber criminals identify these vulnerabilities and it doesn’t matter how well they are hidden. It might happen after months of searching, or it might happen by accident.

Secondly, the law is flawed in that it is full of loop-holes and contradictions which leave it open to abuse and mission creep.

The initial remit of the technical notices will be for serious crimes, such as sex offenders, terrorists, homicide and drug offenses, though critics have pointed towards weak and vague language which opens the door for mission creep. And when there is an opportunity to push the boundaries of acceptable, there are people who will do this.

Another example of the problematic rules is the difference between Technical Capability Notices (TCNs) and Technical Assistance Notices (TANs). Both are used to compel technology companies into assistance for pretty much the same exercises and violations of privacy, though TCNs require approval by the Attorney-General, a consultation period and can only be used by the agency which submitted the request. TANs do not but can wield almost exactly the same amount of power.

“As Government and Labor MPs work today to craft amendments to the Assistance and Access Bill, it appears that one of the biggest flaws in the proposed legislation will not be addressed,” said Communications Alliance CEO, John Stanton on the differences between TCNs and TANs.

These are only a couple of examples of the criticism which the bill has faced over the last couple of weeks, though even after public consultation (which attracted 15,000 comments) few amendments were made to the original draft before being passed into law.

“The Australian government has ignored the expertise of researchers, developers, major tech companies, and civil liberties organizations by charging forward with a disastrous proposal to undermine trust and security for technology users around the world,” the Electronic Frontier Foundation said it a statement.

“The issue isn’t whether the Australian government read the 15,000 comments and ignored them or refused to read them altogether. The issue is that the Australian government couldn’t have read the 15,000 comments in such a short time period. Indeed, the bill’s few revisions reflect this—no security recommendations are included.”

In the pursuit of making life easier for the Australian police force, the government has betrayed the consumer and made the digital landscape a haven for hackers. We are unable to think of any examples of genuine encryption software being hacked or compromised to date, but the Australian government has just made life a lot easier for nefarious actors by voluntarily introducing vulnerabilities.

And this is without addressing the opportunity for abuse and violation of individuals human right to privacy.

There have been countless examples from around the world of individuals, either in private organizations or government agencies, being able to respect privacy rights when given the opportunity. Uber employees used the location tracking features of the app to stalk ex’s and celebrities, while Edward Snowden exposed how the CIA illegally undermined the privacy of thousands of its own citizens.

The Australian government has not done anywhere near enough to ensure the rights of citizens will be maintained, or that actions will be entirely justified. This is a very worrying sign for the world, especially with the likes of the US and UK watching very carefully.

Australia is part of the Five Eyes intelligence fraternity, which traces its origins back to the 50s. This intelligence alliance, comprising of Australia, Canada, New Zealand, the UK and the US, generally work hand-in-hand when it comes to intelligence and security, and tend to implement very similar legislation. With Australia setting the pace of making the world a less safe place, it would not be a surprise to see other nations follow suit.

International politics is generally like a dominoes set. All ‘Western’ governments have similar laws, and when one breaks rank usually it back-tracks or the rest get in line. In this case with governments around the world all showing Big Brother ambitions, we suspect it might not be too long before more of these bills are being discussed elsewhere.

Aussies question whether Google and Facebook are overstepping boundaries

The Australian Competition and Consumer Commission (ACCC) is shining the light of concern on Google and Facebook, seemingly one of the first steps towards regulatory overhaul.

Of course, there is no question the internet giants should be under greater regulatory scrutiny, though creating the red-tape maze does take time. The Digital Platforms Inquiry Preliminary Report released by the ACCC is just the first bureaucratic step in the dance which will take place over the coming months. Google and Facebook are in the crosshairs, though how long it will take to overhaul the dated and swiss-cheese like rules is anybody’s guess.

“The ACCC considers that the strong market position of digital platforms like Google and Facebook justifies a greater level of regulatory oversight,” said ACCC Chair Rod Sims.

“Australian law does not prohibit a business from possessing significant market power or using its efficiencies or skills to ‘out compete’ its rivals. But when their dominant position is at risk of creating competitive or consumer harm, governments should stay ahead of the game and act to protect consumers and businesses through regulation.”

There are several issues which are being raised through the report, though the important one seems to be the breadth and depth of influence which the internet players can wield. These are platforms which did begin their journey as curators or hosts of information, and despite pleas this position continues, their role in society has evolved at the same rate at which their bank accounts have grown. The ACCC is suggesting these platforms have an incredible influence on society, which they of course do, and this should be reflected in future regulation.

For the likes of Google and Facebook, there is another fight on the horizon. These are organizations which have enjoyed a relatively light-touch regulatory landscape, perhaps owing to the fact rule makers are not able to keep pace with the evolution of technology and the digital economy, though the world is starting to wake up. Recent scandals concerning privacy, location tracking, the dissemination of information and the depth of knowledge on the consumer are ensuring governments are taking this segment seriously now.

Looking at the specifics of this report, the ACCC is concerned about echo chambers being created thanks to personalisation algorithms. The lack of transparency is a concern here, as users might be unknowingly led down a biased news feed. Perhaps this would explain the polarised opinions we are seeing nowadays; not enough people are being exposed to both sides of the argument.

Other points raised by the report focuses on the depth of information collected on the user by these platforms, which far exceeds what the user has expressly given permission for, and also the ‘take it or leave it’ approach to T&Cs. The influence of these platforms due to the amount of information collected and the opaque ranking system might well be creating beasts which could favour certain businesses or political parties, a position which might be considered dangerous.

One of the proposals put forward in the report is to prevent Chrome being installed as a default browser on mobile devices, computers and tablets and Google’s search engine being installed as a default search engine on internet browsers. This is one example of how the Australian government is aiming to dilute the influence of Google, though it is important to note this report is not specifically directed at Google alone. Other proposals include modifications to the Privacy Act, which would (in theory) offer the consumer more choice and power.

For any fundamental changes to happen in government there are appropriate and measured steps to take. These steps involve research, consultations, as well (seemingly) endless debates and lobbying. This should be viewed as the first steps towards gaining greater regulatory influence over the internet players who have enjoyed greater freedoms over other businesses.

The world is starting to wake up and realise the internet players cannot be regulated in the same way as traditional businesses. It might be long overdue, but sooner or later the balance of power and influence will shift into a fairer and more sustainable position.

NBN’s journey hasn’t been smooth, but CTO claims its delivering on the promise

At Broadband World Forum one of the most common plays was to poke fun at the NBN troubles in Australia, but CTO Ray Owen’s reckons he’s got the last laugh.

According to Owen, the NBN network now carries 28 petabytes of data every day, with average user consuming 213 GB a month and the top 30% of fibre customers consuming more than a terabyte. Back in April, the team even noted one user managed to consumer more than 23 terabytes during the month. “We’re not too sure what he was actually doing, but he was definitely having a good time,” joked Owen.

The plan is to get 8 million happy homes on the NBN network by 2020, but also a minimum speed of 25 Mbps for all Australian citizens. In terms of penetration, Owen suggested the NBN network now services 4.4 Aussies, 63% of the target, though meeting the 25 Mbps government-mandated target would take more than fibre. A multi-technology mix has been tabled including Fixed Wireless Access (FWA), G.Fast, fibre and satellite to meet these demands. In a country the size of Australia, containing some very hostile environments, 100% fibre penetration is not a realistic goal.

Despite Owen’s claim on progress, it didn’t stop the mocking. Conference chairperson Richard Jones was one to poke fun, in between humble claims of founding 25 different companies over the course of his unassuming career, while Kate McKenzie, CEO of New Zealand wholesale network provider Chorus, revelled in the troubles as evidence of how wonderful she and her business is.

While the poking might have been on the obnoxious side, it isn’t untrue. The NBN rollout has been a painful journey, with the latest revelation coming from the latest budget estimates. CEO Steven Rue told Senate Estimates NBN would still be using the Fibre-to-the-Node (FTTN) approach until at least 2040. The multi-technology mix has been taking stick, but it is the only genuine option to ensure all Australian citizens are taking into the digital economy together. 100% fibre penetration is not going to be a viable option in the foreseeable future. That said, many of the criticisms of NBN do have merit.

Looking forward, NBN forecasts increased adoption of 4K and 8K video, smart home adoption will increase rapidly and augmented reality will start to make an impact over the next couple of years, while the business segment will continue to diversify. Real-time entertainment services are quickly declining, VPN uptake is on the up and file sharing is heading south. This will not only impact the technology which will be used to facilitate connectivity, but the approach to experience. As you can see from the picture below, the plans have been laid to evolve the network beyond the 2020 deadline.

“What I’m interested in as a CTO is the different technologies which can help improve this customer experience,” said Owen.

Beyond 2020, perhaps the full fibre (FTTP) vision will be revived. The current technology mix is best case scenario to meet demands, but it is by no means perfect or particularly future-proofed.

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NB-IoT gathers momentum

Trials in Australia and the UK involving Ericsson and Vodafone indicate the NB-IoT is starting to become a reality.

Ericsson and Telstra are claiming the longest connection for the narrowband wireless standard that is set to be the default for IoT. The trial used a Telstra base station to communicate with an NB-IoT temperature sensor 94 km away on Mount Cenn Cruaich in New South Wales, Australia. They say the previous range limit was more like 40 km.

“We’re partnering with Telstra to deliver its customers a world-leading capability in NB-IoT extended range cells and demonstrating the huge opportunity that IoT represents in rural and regional areas for both Australia and globally, particularly for logistics and agriculture,” said Emilio Romeo, Ericsson’s MD for Australia and New Zealand.

“Telstra already had Australia’s largest IoT coverage with Cat M1 across our 4G metro, regional and rural coverage footprint,” said Channa Seneviratne, Telstra’s Executive Director of Network and Infrastructure Engineering. “With this NB-IoT extended range feature, we have now extended our coverage to more than three and a half million square kilometers, delivering our customers the best IoT coverage and capability in the country.”

Meanwhile Vodafone has started trialling NB-IoT in the UK, as reported by Light Reading. Energy company Scottish Power is Vodafone’s first UK NB-IoT customer and is using IoT temperature sensors to detect when some of its remote kit might be overheating. They’re apparently powered by standard AA batteries and each one costs a couple of quid.

Lastly Counterpoint Research has found that global cellular IoT connections grew by 72% in the first half of this year and forecasted NB-IoT will account for around half of all IoT connections in the long term. As you can see from the charts below most of the action seems to be happening in China, but Vodafone is leading the international effort.

Counterpoint IoT 1

Counterpoint IoT 2

“Emerging markets like India, Brazil and in Africa while can offer tremendous scale but will likely be late followers compared to China in this path to connected everything,” said Satyajit Sinha of Counterpoint. “However, the massive growth opportunity remains in terms of cellular-IoT connections in emerging markets which will be possibly catalysed by operators such as Jio in India but more specifically from multi-market players such as Telefónica, MTN or Vodafone with plans to deploy LPWAN networks such as NB-IoT leveraging scale across their coverage markets.”

“Revenue generation from the IoT ecosystem is not siloed to any one specific segment of the value chain, rather it is distributed among all segments,” said Neil Shah of Counterpoint. “On an average for a cellular IoT solution deployment, connectivity represents around 12%, whereas hardware components, modules and devices represent 22%.

“The rest of the bulk of the value in an IoT solution is captured by system integrators, middleware, software platforms, and cloud analytics vendors. Hence, if operators are looking to capture maximum value, the strategies need to provide an end-to-end IoT solutions by bundling IoT devices, secure connectivity, platform, and data management to capitalize on the overall opportunity.”

The big variable with IoT, of course, is revenue. It doesn’t look too tough to scatter billions of sensors all over the place and connect them to the cloud via NB-IoT or whatever, but getting companies to pay for services on the back of them is another matter. It looks like a lot of the commercial precedent will be set in China, so the rest of the world might wait to see how that plays out before committing.

Aussies telcos given yellow card for foul-play in ‘unlimited’ advertising

UK consumers might find some comfort that lying to misleading the masses isn’t a speciality of telcos here; everyone around the world is up to no good.

The Australian Competition and Consumer Commission has told telcos to keep a better handle on advertising claims, demanding more honesty. Transparency and accuracy might seem like strange concepts to telecommunications companies, who have made somewhat of a speciality of applying flexibility to the definition of certain terms, but the regulator is hitting back.

“Telecommunications companies should be wary of using absolute claims like ‘unlimited’ where that does not give a true picture to consumers of what is being offered,” said ACCC Chairperson Rod Sims.

“We have taken a range of actions against telecommunication companies for misleading consumers. It is about time they showed more respect for their customers and the Australian Consumer Law. With much higher penalties now available for breaches of consumer law, I hope they will take their obligations more seriously. From now on consumer law penalties will seriously affect their bottom line, and we will not hesitate to seek the highest possible penalties.”

The issue here is focused on the ‘unlimited’ claims put forward by telcos when promoting mobile data plans. Optus, Vodafone and Telstra are the trio under the microscope of the ACCC, alongside private litigation brought by Optus against Telstra in the Federal Court. The result of the investigation, which took place between March and June, is that while the trio of white liars did include disclaimers, these were not sufficiently prominent or clear enough to explain to consumers the existence and impacts of the limitations. In short, consumers were not told about the throttling which would take place after data limits had been reached.

While the Aussies might be the centre of criticism right now, few nationalities are innocent. The UK has consistently mislead the consumer with the dreaded ‘up-to’ metric, and while this has been addressed by the Advertising Standards Authority (ASA) there are some, including Telecoms.com, who do not believe it has gone far enough. In years gone by, telcos could make speed claims in advertisements if they could prove 10% of customers could experience the promise. While this has been raised to 50% during peak hours, there have been calls this percentage should be higher.

In another example, Vodafone UK had one of its broadband adverts bands after the ASA deemed that there was a disconnect between the buffering scenario in the advert and how it related to the refund offer or service guarantee. The ‘ultimate speed guarantee’ advert featured Martin Freeman as a gamer experiencing connectivity issues at a critical point during the game, with BT making the initial complaint.

It is certainly promising to see a watchdog taking action against the telcos, perhaps we should all just ignore the advertising for the moment. We’re struggling to think of a telco which has earned the right to be trusted after years of misleading promises, inaccurate promises or childish moaning. Trust is hard earned and easily lost, and the telco industry is running on empty.

Merged Vodafone Australia and TPG plan to raise convergence game

Competition and convergence are the key words as Vodafone Australia and TPG announce merger plans to lodge a challenge to market leaders Telstra and Optus.

Although the pair have stated there would no notable changes to either of the brands after the merger, the opportunity to cross-sell Vodafone’s mobile and TPG’s broadband offering could mount a serious challenge to the domination of Telstra and Optus who control more than 80% of the mobile market as it stands. Vodafone currently sits in third place in the market share race, accounting for just over 18% of Australian mobile consumers.

“This transaction accelerates Vodafone’s converged communications strategy and is consistent with our proactive approach to enhance the value of our portfolio of businesses,” said Nick Read, CEO-designate of Vodafone. “The combined listed company will be a more capable challenger to Telstra and Optus, and will be much better placed to invest in next generation mobile and fixed line services to benefit Australian consumers and businesses.”

TPG is currently Australia’s second largest broadband provider with 1.9 million subscribers, and has built a 11,000km-long fibre network primarily through acquisition, also offering wholesale broadband services to businesses. Alongside its solid position in the broadband space, TPG has also been registering interest for a launch into the mobile space, though what this now means for plans remains to be seen.

Over the course of the day, share price in Telstra has increased by 2.9% while Singtel, parent company of Optus, has witnessed a 2.19% boost (at the time of writing), perhaps indicating relief from investors. With TPG spending billions on a new mobile network and acquiring three of the thirty available spectrum lots in the most recent auction, the promise had been a fourth player to undercut rivals with a AUS$9.99 a month offering in Sydney, Melbourne, Adelaide, Canberra and Brisbane. While this had the potential to heavily disrupt the Australian market, it seems investors are confident such plans will be brushed aside in favour of convergence.

This does not mean clear sailing for the pair, but fighting on value is much more favourable than an troublesome challenger kicking off a race to the bottom. Vodafone has suggested the combination of the businesses will allow create a much broader footprint for the business, while also scale when investing in future-proof mobile and fixed networks. The immediate introduction of a convergence offer will certainly give disillusioned Telstra and Optus customers to think about.

Telstra has been having a rough time of it in recent years, with a 55% drop in market value since the appointment of CEO Andy Penn in May 2015. The recent launch of the Telstra2022 plan, targeting a simplified management and operational structure, had little impact on the mood of investors, perhaps as it coincided with the third network outage in seven weeks. As a strategy, it Telstra2022 was supposed to offer a vision of a more efficient and profitable organization, saving roughly $740 million over the next four years, with the ability to invest in the 5G era. Apparently not.

Optus as a business has been plodding along relatively comfortably. The last financial statement revealed revenue growth of 6%, continuing to grow its subscription base on both mobile and broadband offerings. Progress has not been exceptional, but few would complain.

The market on the whole has been pretty steady over the course of the last two years, Telstra might be losing a bit of market share to rivals, but nothing exceptional. A Vodafone/TPG tie up would change the status quo however. A third player able to offer convergent offers to the Australian customer certainly has the potential to cause problems. With a suspect nationalised network, a public spat with Huawei, the government attacking the users right to privacy through encryption and now this merger, Australia is certainly an interesting market right now.

Huawei claims Australian ban is politically motivated

Chinese kit vendor Huawei has ramped up its rhetoric following the recent announcement that it is barred from the Australian 5G market.

“The Australian Government’s decision to block Huawei from Australia’s 5G market is politically motivated, not the result of a fact-based, transparent, or equitable decision-making process,” said Huawei in a lengthy public statement. Much of it was a fairly standard diatribe about the importance of competition, apparently designed to appeal to the Australian public.

The more substantial stuff attacked the basis for the decision, which essentially amounted to a profound distrust of the Chinese state and concern that it would use Huawei (or ZTE) to get up to no good if it had half the chance. The original statement didn’t offer any concrete evidence for these concerns, however, and that seems to be especially galling to Huawei.

“Chinese law does not grant government the authority to compel telecommunications firms to install backdoors or listening devices, or engage in any behaviour that might compromise the telecommunications equipment of other nations,” says the statement. “A mistaken and narrow understanding of Chinese law should not serve as the basis for concerns about Huawei’s business. Huawei has never been asked to engage in intelligence work on behalf of any government.”

While there’s no reason to question any of that, it’s also easy to see why it provides insufficient reassurance to a country worried about the intentions of the Chinese state. President Xi Jinping has been steadily increasing his control over the Communist Party and could potentially either change the law or act extra-judicially in order to force Huawei to play ball in future.

Another good query raised in the Huawei statement concerned the technological basis for the decision, which flagged up 5G as presenting a far more significant security challenge thanks to its distributed architecture. There is no fundamental difference between 5G and 4G network architecture; the core networks and access networks are still separated,” said the statement.

“Moreover, 5G has stronger guarantees around privacy and security protection than 3G and 4G. We urge the government to take an objective and fact-based approach to security issues, and work together on effective long-term solutions. Open dialogue, joint innovation, and close collaboration are essential to the ongoing development of the telecommunications industry.”

The techies advising the Australian government would presumably take issue with that statement, but it’s hard to argue with a request to address security concerns collaboratively. The statement concludes defiantly by criticizing Australia for failing to follow due process or give Huawei the opportunity to defend itself before taking this surprise, unilateral action.

“The Australian government’s actions undermine the principles of competition and non-discrimination in fair trade,” said the statement. “The government has not issued any specific concerns about Huawei’s governance, security, or suitability to safely and securely conduct business in Australia, so we’ve been given nothing to respond to. We will continue to engage with the Australian government, and in accordance with Australian law and relevant international conventions, we will take all possible measures to protect our legal rights and interests.”

One of the co-signatories of the decision was Scott Morrison, who has completed a busy week by becoming the new Australian Prime Minister. The incumbent, Malcolm Turnbull, was booted out by his own party following profound disagreements over its immigration and energy policies. There will have to be a proper general election before long but this development would seem to cement the move for the time being at least.

It’s hard to avoid the conclusion that Huawei is being treated as a proxy in the escalating diplomatic tensions between China and the west. It may well be as innocent as it claims, but the opacity of the Chinese government and its apparently limitless global ambition is increasingly causing western governments to err on the side of caution.

It’s probable that the Australian decision was initiated by Turnbull in a failed attempt to placate hardliners with his party, but it also seems likely that US President Trump is putting pressure on allied countries to join him in his bid to shackle China. This is bad news for Huawei, which may well end up having to repurpose that statement for other countries in the not too distant future.

Aussies ban Huawei from throwing 5G on the barbie

In what could be described as an incredibly passive aggressive move, the Australian government has effectively banned Huawei from joining the Australian 5G bonanza.

In a joint statement released by Mitch Fifield, Minister for Communications and the Arts, and Scott Morrison, Acting Minister for Home Affairs, the Australian government has not specifically named Huawei, simply mentioning dodgy governments. A Huawei tweet confirms it is on the wrong side of the line and will not be able to supply Australian vendors with its 5G equipment.

“The Government considers that the involvement of vendors who are likely to be subject to extrajudicial directions from a foreign government that conflict with Australian law, may risk failure by the carrier to adequately protect a 5G network from unauthorised access or interference,” the statement reads.

The rules, which will come into place on September 18 2018, set new legal obligations on security for telcos and are based on the idea 5G networks will have a fundamentally different architecture to the networks of today. With the core and edge merging closer together, and more sensitive processes and applications moving closer to the end-user on the edge, the Australian government is yet to be convinced there are any solutions or approaches which mitigate this security risk. The belief the edge is less secure than the core is a justified one.

The new landscape will provide the Australian government much more influence over the deployment and management of telecommunications networks throughout the country. Not only will the telcos have to offer the government considerably more access to the inner on-goings of operations, the rules essentially give the government the power of veto when it comes to selecting vendors. Huawei has stated it has been barred from the 5G euphoria, and while ZTE is yet to comment, it would be a fair assumption this ban extends to all Chinese companies.

Reading between the lines, the Aussies seem to be saying they don’t trust the Chinese government, or Chinese companies. There is little, if any, concrete proof Huawei is a government puppet, but this seems to be a blanket policy covering all Chinese companies and a message to President Xi Jinping; if you want to play in the global markets, you have to adhere to the same rules as the rest of us, irrelevant of the size of your economy, you can’t have it both ways.

Of course, such actions have been bubbling below the surface for some time. Several countries around the world, with the US being the most vocal, have been airing their suspicions of eavesdropping from the Chinese government, though this is one of the first cases which is seemingly directed at China as a whole. The US did temporarily ban ZTE of course, while it and Huawei are barred from government contracts. There does seem to be an unofficial policy to screw China as hard as possible, though little has translated into hardcore, sector-wide legislation keeping the pair from getting involved with 5G networks on every front.

The UK is another which has its own concerns over Chinese companies, there is a division in GCHQ which is specifically tasked with making sure Huawei doesn’t do anything suspect, though a full ban doesn’t seem like a realistic possibility right now. The Aussies making the first move worldwide is an interesting development however.

China is Australia’s biggest trading partner, accounting for 29% of exports and 17.7% of total imports across 2016-17, creating a tricky diplomacy situation. Banning one of China’s most successful players on the international trade scene is hardly going to make for comfortable discussions in the future. It’s a bold move from the Aussies.

Perhaps this is an indication the Australian government sees profit in cosying up to the Trump administration. President Trump has been incredibly combative in dealing with the Chinese government, or governments in general, and such action might get Australia in the good books of the US authorities. The US would certainly be a successful trading partner should the Australia be able to gain favourable terms, and a ban on the US’ biggest rival on the global stage could be viewed as Trump stroking.

While losing one market is not ideal for Huawei, and presumably ZTE, it is not the end of the world. What will be a worry is the domino effect. Governments around the world, especially those who would consider themselves ‘western’, have a tendency to lean on each for guidance in creating legislation. Precedent and trends are dangerous terms for Huawei here. With the 5G bonanza set to create fortunes, it will be interesting to see how many follow the Australian trail.

Theories and predictions over the potential implications will be plentiful, but one thing you can almost guarantee is Ericsson CEO Börje Ekholm and Nokia CEO Rajeev Suri will both be smiling quite contently over the news, even if neither is prepared to take their joy public.

Vodafone Australia and TPG mull merger

The Australian mobile market may be set for consolidation with the revelation that Vodafone and TPG are thinking of hooking up.

Widespread reports in Australia compelled the two companies to publicly admit they’ve been chatting. “Vodafone Hutchison Australia (VHA) confirms it has commenced discussions with TPG in relation to a potential combination of the two highly complementary companies,” said Vodafone in a statement. “At this stage, these are exploratory non-binding discussions, with no commitment from VHA or its shareholders.” TPG seems to have issued some similarly cautious statements.

TPG is a new entrant to the Australian mobile market that is expected to launch in metropolitan areas this year, making heavy use of small cells to augment a limited macro network. It has been providing some telecoms services via a wholesale agreement with Vodafone but its move into the mass market, most probably via the tried-and-tested aggressive pricing model, is expected to significantly disrupt the Aussie market.

Vodafone is the distant third of three Australian MNOs, with a 17% subscriber share according to Ovum’s WCIS. Telstra is the dominant player, controlling a narrow majority of subscribers, and thus has the most to lose by a disruptive new entrant. All this M&A talk seems to have actually boosted Telstra’s share price, however, with distracted competitors considered to offer competitive advantage.