Richard Grenell, the US Ambassador to Germany, has starting the intimidation game with his host nation over Huawei, hoping the same tactic used against the UK will reap better yields.
In a series of tweets through the weekend, Grenell made his position on Huawei very clear, aligning himself with the anti-China rhetoric lobby which is beginning to verge on xenophobic. The Ambassador has now reiterated the intelligence embargo which was promised to the UK should it offer Huawei opportunity to do business.
. @realDonaldTrump just called me from AF1 and instructed me to make clear that any nation who chooses to use an untrustworthy 5G vendor will jeopardize our ability to share Intelligence and information at the highest level.
— Richard Grenell (@RichardGrenell) February 16, 2020
Perhaps one of the most ironic elements of this story is the phone call itself. President Donald Trump has reportedly refused to use encrypted phones, due to the inconvenience, so any conversation he has is completely unprotected.
Irrelevant of whether the concepts of irony gain traction in the US, Grenell is effectively declaring that he has been given permission to take a firm stance against Germany. Although there has been no official confirmation, Germany will most likely be offered an ultimatum; access US intelligence data or have Huawei equipment in the communications network.
Although most of the transatlantic-lobby has been directed towards the UK in recent months, thanks to the now-concluded Supply Chain Review, Germany is another influential voice in Europe which is yet to formalise its position on Huawei. The US might have lost the political battle in the UK, but it still has until the EU Summit in March to convince the Germans China is the enemy.
There might have been some noises that Germany would head the same direction as the UK, but Chancellor Angela Merkel has previously said Germany would not make a decision until the EU Summit in March. Like the UK, Germany has a valuable trading relationship with the US, but it also has one with China. There is also the ambitions of the wider European Union to consider, where Germany is one of the leading voices.
Looking at the relationship with China, Germany’s highly influential automotive sector will not want to lose out because of issues with the telecoms industry. In 2018, almost one-quarter of all cars sold in China were German. In the first nine months of 2019, BMW delivered more than 500,000 vehicles to China, its largest single market.
As it stands, the automotive industry in China is not in the greatest of positions, sales have slumped over the last 18 months, while the US/China trade war has impacted the ability for these automotive giants to source some parts. The conflict between the US and China is not good for the German automotive trade, and this is a very powerful organisation in the German economy.
Germany may not want to say no to Huawei and anger the Chinese, but then again it might not have to.
The US, and Secretary of State Mike Pompeo, had been very aggressive towards the UK in the weeks leading up to the conclusion of the Supply Chain Review. When the carrot didn’t work, promising a favourable trade agreement, the stick was favoured. The threat of an intelligence data embargo for security agencies was pushed towards the UK, like Grenell is doing today.
The issue that Grenell might face here is that the US didn’t follow through on that threat to the UK.
The conclusion of the Supply Chain Review saw a 35% limitation placed on the telcos for Huawei equipment in the different segments of the network. This has proven to be awkward for some, having to reconfigure deployment strategies, though it is far from the apocalypse scenario of an all-out ban which was being demanding by the US.
The UK defied the US, but the US is yet to cut off the UK from valuable intelligence data for security and enforcement agencies. Considering this outcome, some in Germany might not take the US threat as seriously as before.
Huawei has publicly rebutted the new superseding charges of racketeering and trade secret theft filed by the US Department of Justice.
Officials from the DoJ and the FBI announced the charges against Huawei as well as two of its official subsidiaries, Huawei Device Co. Ltd. (Huawei Device), Huawei Device USA Inc. (Huawei USA), and two of its unofficial subsidiaries, Futurewei Technologies Inc. (Futurewei) and Skycom Tech Co. Ltd. (Skycom). Also on the defendants list is Huawei’s CFO, Meng Wanzhou (Meng), already in detention in Canada fighting her extradition case. The new charges being a superseding indictment means it contains and expands on the earlier charges officially announced in January 2019. As a result, most of cases listed out in detail in the full document are familiar to those following the Huawei vs. USA saga closely.
Huawei denies all the charges. “This new indictment is part of the Justice Department’s attempt to irrevocably damage Huawei’s reputation and its business for reasons related to competition rather than law enforcement,” the company said in a statement. “These new charges are without merit and are based largely on recycled civil disputes from last 20 years that have been previously settled, litigated and in some cases, rejected by federal judges and juries. The government will not prevail on its charges, which we will prove to be both unfounded and unfair.”
The charges broadly fall into two categories: racketeering and breaking US international sanctions.
Most of them fall into the first category. The DoJ alleges that Huawei and the associated parties have violated the 1970 “Racketeer Influenced and Corruptions Act (RICO)”. The law, targeted at organised crimes, lists 35 types of offenses that may qualify as “racketeering”, from bribery and kidnapping to obstruction of criminal investigation by law enforcement agencies and everything in between. In the present case, the DoJ accused Huawei of “misappropriated intellectual property included trade secret information and copyrighted works, such as source code and user manuals for internet routers, antenna technology and robot testing technology”, then, after winning unfair competitive advantages, Huawei and its subsidiaries reinvesting the gains from this “alleged racketeering activity in Huawei’s worldwide business, including in the United States.”
Specifically this category of actions allegedly include “entering into confidentiality agreements with the owners of the intellectual property and then violating the terms of the agreements by misappropriating the intellectual property for the defendants’ own commercial use” and poaching competitor employees the “directing them to misappropriate their former employers’ intellectual property”, as well as “using proxies such as professors working at research institutions to obtain and provide the technology to the defendants.” Huawei is also alleged to have incentivised its employees for obtaining the most valuable competitor information.
When it comes to breaking sanctions, the indictment, updated with more details, is against Huawei and its subsidiaries’ alleged “business and technology projects in countries subject to U.S., E.U. and/or U.N. sanctions, such as Iran and North Korea – as well as the company’s efforts to conceal the full scope of that involvement.”
Meanwhile, the Department of Commerce decided to renew the Temporary General License for Huawei for 45 more days, which means American companies can have another one and half months to do business with Huawei legally while moving “to alternative sources of equipment, software and technology”, the DoC said.
In response to the DoC decision, Huawei reiterated its position that it should be removed the government’s Entity List completely instead of being granted one at a time. Not doing so “has done significant economic harm to the American companies with which Huawei does business, and has already disrupted collaboration and undermined the mutual trust on which the global supply chain depends,” the company said in an emailed statement.
Incidentally, while the DoJ alleged Huawei of using scholars to gain access to advanced technologies otherwise unavailable to it, the Department of Education has launched an investigation into gifts from foreign governments to America’s top universities, with Harvard and Yale being singled out. These two schools as well as other Ivy League and leading schools including Georgetown, Texas A&M, Cornell, Rutgers, MIT, and Maryland, have failed to declare fundings from Qatar, China, Saudi Arabia, and the United Arab Emirates. The DoE said since its enforcement efforts started in July last year, $6.5 billion previously undisclosed foreign money has been reported.
The crackdown on the US academics’ links to the Chinese government went up a notch when late last month, Charles Lieber, the chair of Harvard University’s department of chemistry and chemical biology and one of the world’s leading nanoscientists, was arrested for lying about his link with Chinese government-sponsored lab in China as well as the hefty payments ($50,000 per month) he received.
Huawei has issued its retort to US accusations that it has access to telco networks, suggesting the US Government should be more mature than resorting to PR and propaganda campaigns.
“US allegations of Huawei using lawful interception are nothing but a smokescreen – they don’t adhere to any form of accepted logic in the cyber security domain,” the statement reads. “Huawei has never and will never covertly access telecom networks, nor do we have the capability to do so.”
Earlier this week, US officials briefed journalists at the Wall Street Journal regarding a technical loophole which granted Huawei access to telco networks around the work. Intended for law enforcement agencies, these backdoors offered opportunity for ‘Lawful Intercept’ activities when validated by the courts, though Huawei allegedly had access to these backdoors.
While it is a claim which certainly would have shocked a few people around the world, the story itself was a little bit suspect…
Firstly, if this is evidence of a smoking gun to prove espionage, why weren’t US officials showing this to the Governments of allied nations. Secondly, the US officials didn’t actually state that Huawei had done anything wrong. Third, it seemed unusual that only Huawei has access to these backdoors. And finally, if this is a situation which has been present since 2009, why are we only finding out about it now?
It would be foolish to completely disregard claims of espionage from the Chinese Government, but these statements from the US Government to the WSJ look more like a propaganda campaign, an offensive move to turn the tide of public opinion. If there was evidence, as the US officials suggest, surely it would be presented to other regulators and governments rather than a news outlet.
In its response to the allegations, Huawei has hit back suggesting the claims are nothing more than a rouse, the WSJ should have more credibility than to blindly follow such statements, its products are built to standards which make provisions for lawful intercept, and that it is an equipment manufacturer to the telcos.
The last point is an interesting one. Huawei manufacturers equipment which it sells to telcos, who then operate it behind security firewalls and systems. There would have to be some very sophisticated and nefarious software skills to embed such treacherous backdoors, and considering the damning reports the National Cyber Security Centre (NCSC) gave it in recent months, it seems like a long shot. Not impossible, but perhaps improbable.
At some point the telcos are going to have to put their hands up and say they aren’t that incompetent. Security is one of the most important roles in a telco nowadays, and to suggest Huawei has managed to dupe the telcos for all these years without a single sniff of suspicion, or at least someone accidentally bumping into a backdoor, is also quite unlikely.
If a network is breached or has played a role in international espionage, the telco which owns it has as much to lose as Huawei; how many subscribers or enterprise customers would it have left if this was the case? How many lawsuits would they open themselves up to if all these allegations could be proven true? Eventually, the telcos are going to have to say they aren’t idiots and know what they are doing to mitigate risk and uphold the security principles they preach.
US Government officials have been baiting the line of deceit for Huawei once again, this time half-accusing the vendor of maintaining backdoor entry to networks through its equipment.
In an interview with the Wall Street Journal, the officials have suggested Huawei has access to backdoors built into communications infrastructure equipment which were intended for law enforcement agencies. It is not entirely clear how these backdoors have been built, how they have remained secret for so long, or why Huawei is the only company which can access them, but this is apparently the evidence the US has been hinting at for so long.
While it might sound like a ludicrous idea, the US Government knows it is possible to build backdoors into communications infrastructure equipment because it has done so frequently in the past. In 2013, Edward Snowden came forward with evidence to prove the National Security Agency (NSA) and Central Intelligence Agency (CIA) was spying on national and international citizens with zero accountability via products made by Cisco and Juniper Networks.
What is not entirely clear from the statements made from the US officials is whether Huawei is actually doing anything about it. The officials have told the WSJ that there are backdoors, and Huawei is aware of them, however, there is no assertion that any nefarious behaviour has been undertaken.
Huawei is yet to make comment on the matter for the moment, though the question remains whether it actually has to do so just yet. The US has been making these accusations for some time, and this might just be another twist on the argument. Until evidence of the backdoor is verified, or that Huawei actually spied on anyone at the behest of the Chinese Government, this is little more than another wave of US propaganda.
Although these claims are more specific than others which have been made in the past, it will be interesting to see whether it is validated by anyone else. European Governments have asked the US to present them with a smoking gun if they were to consider banning Huawei, and it has not done so yet. Presumably the US officials have approached counterparts in allied nations to coincide with this PR campaign through the WSJ, otherwise the credibility falls straight to the floor.
This might be one of the strongest accusations made by the US to date, but if European Governments are not taking action it is either because (a) the US officials have not presented this evidence to them, or (b) the evidence is not deemed sufficient to make a decision on banning the vendor. The coming days and weeks will fill in some of the blanks, but if no action is taken by European Governments, this should be chalked up as nothing more than a PR campaign to turn the tides of public opinion.
The US Government might be losing the battle to turn public opinion in Europe against Huawei, but that is because it has not yet presented anything aside from rhetoric and suspicion. And it is easy to understand why the US Government is so suspicious and worried over espionage from the Chinese Government, given its own rich history in the matter.
China’s government bodies and businesses have jointly launched a mobile app to help detect if people have been in close contact with those suspected of carrying the novel coronavirus.
The app has access to multiple official holders of private data. By registering with his or her name and Chinese ID number, a smartphone user can use the app, called “Close Contact Detector” to check if he or she has been in proximity of those who are later either confirmed or suspected to have the virus. Such close contacts include travelling in the same train carriage or sitting within three rows on the same flight with those carrying the virus.
One registered user can check the status of up to three users by inputting their ID numbers and names. One ID number is limited to one check per day. The app will then return an assessment of which category the individual in question falls into: Confirmed case, Suspected case, Close contact, Normal. Xinhua, one of the major official propaganda outlets, reported that over 105 million checks have been made by users three days after the app was launched.
The app development was led by the government organisations responsible for health which was joined by China Electronics Technology Group, one of the country’s largest state-owned enterprises, as well as the leading smartphone makers Huawei, Xiaomi, OPPO, and Vivo. The backend data comes out of the National Health Commission, the Ministry of Transport, China State Railway Group Company, the state owned enterprise that operates all the rail transport in China, and the Civil Aviation Administration, the aviation regulator.
The fact that private travel data is made readily available to business entities without explicit consent from the individuals involved may raise plenty of eyebrows in places like Europe, but the attitude in China is different. “From a Chinese perspective this is a really useful service for people… It’s a really powerful tool that really shows the power of data being used for good,” Carolyn Bigg, a Hong Kong-based lawyer, told the BBC.
“Close Contact Detector” has been pushed out by the smartphone brands as a priority app to their users in China. It is unclear how or if promoting to users of other smartphone brands, iOS users, or non-smartphone users, will be conducted. Nor is it clear if there are plans to extend the coverage to residents without a Chinese ID number, such as foreign nationals staying in China.
Telecoms.com has learned that over the last few weeks there have been other online tools to help concerned users check if they had unknowingly come into contact with confirmed victims of the new coronavirus. The key difference from the new contact detector is that, in the earlier attempts, backend data was crowdsourced from publicly available information including the flight and train numbers of the confirmed cases published in the media.
Neither is contact detector the only use case where user data is playing a role. A recent video clip making rounds on social media shows a drone flying a blown-up QR code that drivers can scan to register before they enter Shenzhen after the long Chinese New Year break. The method is deployed presumably to prevent cars and drivers registered to the major disease hit regions from going through, as well as reduce human-to-human interaction. Xinhua reported that the Shenzhen Police, which is responsible for managing the local traffic and owns the automobile and driver data, is behind this measure.
Huawei looks to have survived another European scare as Germany closes in on a deal which would offer the company restricted freedoms, similar to the position of the UK.
According to reports in Reuters, the leading political parties in Germany are set to agree on a strategy paper which would allow Huawei a restricted role to participate in the deployment of 5G networks. It might be considered a bit of a snub to the US, but like the UK this would appear to be a pragmatic approach to delivering the next generation of connectivity.
“State actors with sufficient resources can infiltrate the network of any equipment maker,” the agreement states. “Even with comprehensive technical checks, security risks cannot be eliminated completely – they can at best be minimized.
“At the same time, we are not defenceless against attempts to eavesdrop on 5G networks. The use of strong cryptography and end-to-end encryption can secure confidentiality in communication and the exchange of data.”
Although this is not a confirmed position yet, it is believed the new position will be voted in later today (February 11). There are still aggressors who are pursuing an all-out ban, namely the Social Democratic party, a junior coalition partner to the Christian Democratic party, though it appear Huawei will survive, albeit in a limited function.
The paper would outline a similar approach to managing Huawei as the UK has taken. As you can see from the statement above, the German authorities seem to be taking the approach that as it is impossible to guarantee 100% safety, irrelevant of the equipment manufacturer, it is not logical to target one specific company.
The paper apparently states the network would be split into the three different components (radio, transmission and core), and different procedures for handling Huawei equipment dependent on its designation. This is a risk-management approach, similar to the one taken in the UK.
The issue which the Germans are facing is also similar; German telcos are all existing customers of Huawei and have signed agreements to work with Huawei going forward. Should a ban be implemented, not only would this create a problem in terms of time (negotiating new commercial agreements, testing equipment etc.) but there might also have to be expense incurred as ‘rip and replace’ projects are kicked off to ensure backwards compatibility.
In the UK, BT has said it will cost £500 million to become compliant with the Huawei restrictions in the RAN. This might sound like a significant investment, but it would have been considerably worse if a complete ban had been introduced.
Other elements of the strategy which could impact the telcos are potential demands to enforce a multi-vendor supply chain, and security checks on equipment which all vendors would have to adhere to. This is an idea which has been raised in the past, paying homage to the complexity and variety of supply chains nowadays; as 100% security cannot be guaranteed by everyone, every vendor would be forced to demonstrate security credibility.
It is not yet guaranteed that Germany will take this approach, but it does appear the German Government will try to mitigate risk and compensate for the current status quo.
Despite all the lobbying and threats which have been passed across the Atlantic from the White House, it does appear US delegates were unable to present evidence of a ‘smoking gun’ which would have turned European governments against Huawei and other Chinese vendors. This is a win for the US, it has demonstrated it has influence over Europe after all, but its ability to dictate policy is becoming weaker.
One question which does remain is the impact this will have on the German-US relationship. President Trump has not been on the greatest of terms with Merkel over the years and considering the influence Germany has on the European Union bureaucracy, the White House find itself more irritable.
On the other side of the coin is the relationship between Germany and China. China is an important trade partner of Germany, especially the automotive industry which has such a powerful lobby in the country. Irritating this relationship with the Chinese would not be something many would want, and it does appear a snub to the US is tolerable.
While the UK and Germany are only two nations, it does appear the US is losing the political influence game in Europe. Other European countries pay attention to the opinions and actions of these Governments, and it might be a case of the first dominoes to fall, especially with the likes of France and Italy also leaning towards a Huawei-friendly environment
US President Donald Trump reportedly gave UK PM Boris Johnson a major ear-bashing over the phone following the UK’s decision to allow Huawei in parts of its 5G networks.
The news comes courtesy of the FT, who has an anonymous source that reckons they know how the phone call went. We’re told Trump was apoplectic and expressed his views in livid terms. It must have been a hilarious call, with Trump hurling abuse and BoJo countering with placatory phrases such as “steady on, old chap”.
Trump’s notorious petulance aside, it’s becoming increasingly clear that his administration views 5G as a matter of core geopolitical concern, both in terms of security and commerce. It has been moved to the front line of the battle of wills between Trump and Chinese supremo Xi Jinping and the US is trying to insist its allies to what they’re told on the matter.
US Attorney General William Barr made a speech yesterday in which he banged on about what a threat to all we hold sacred China is. Barr thinks 5G is a critical weapon to be used against China and reiterated the FCC’s position on the importance of getting hold of C-Band spectrum as part of an increasingly state-sponsored bid for 5G dominance.
At the core of his speech was the need to have an alternative to Huawei that the US state can control. Apparently oblivious to the hypocrisy of this stance, since it’s the suspicion of Chinese state control over Huawei that has fuelled US hostility towards it, Barr seems to think state intervention in the affairs of private companies is OK so long as the goodies are doing it.
“There have been some proposals that these concerns could be met by the United States aligning itself with Nokia and/or Ericsson through American ownership of a controlling stake, either directly or through a consortium of private American and allied companies,” said Barr. “Putting our large market and financial muscle behind one or both of these firms would make it a far more formidable competitor and eliminate concerns over its staying power or their staying power. We and our closet allies certainly need to be actively considering this approach.”
The US position on 5G, security and China seems to be evolving rapidly. In the space of what feels like just a few weeks it has moved from trying to persuade its allies to distance themselves from Huawei to shouting at them down the phone and contemplating direct intervention in their companies. Trump needs to seriously consider winding his neck in on this before he permanently alienates the US from its global friends.
Huawei has announced it has filed a patent lawsuit against Verizon with the District Courts of both East and Western Texas districts, covering several applications in its fixed line business unit.
Although Huawei is not a supplier to Verizon, the Chinese firm is claiming several products in the wireless business make use of patented technologies which are protected by 12 Huawei patents. Verizon is yet to make comment on the lawsuit, though Huawei claims there have been various meetings between the two parties to discuss this dispute over the last 12 months.
“For years now we have successfully negotiated patent license agreements with many companies,” said Huawei’s chief legal officer Song Liuping. “Unfortunately, when no agreement can be reached, we have no choice but to seek a legal remedy.
“This is the common practice in the industry. Huawei is simply asking that Verizon respect Huawei’s investment in research and development by either paying for the use of our patents or refraining from using them in its products and services.”
This lawsuit is somewhat of a no-lose situation for Huawei. If it wins the lawsuit, it could be the focal point of a PR campaign to fight back against Chinese-aggression, but a loss could also be spun due to the anti-China rhetoric.
While details are thin on the ground, this is not the first time this saga has emerged. Last year, the Wall Street Journal reported Huawei had written to Verizon about this very matter, demanding payments which could have exceeded $1 billion. Song has not confirmed how much Huawei is asking for, though the lawyer did suggest the two companies had met several times to discuss the matter.
And while this is an interesting development, the Huawei legal team are of course no strangers to the US legal system.
On the offensive, Huawei has filed lawsuits against the White House claiming the ban on working with US suppliers is unconstitutional, while it has also questioned the legality of the FCC’s demands on rural suppliers. The FCC has previously stated any telco with Huawei equipment in the network cannot access federal subsidies for rural connectivity.
Sitting on the other side of the aisle, a trial date has been set in March 2020 to decide whether Huawei had stolen trade secrets from T-Mobile US concerning a phone testing robot called Tappy. It was also accused of stealing patents from Portuguese inventor Rui Pedro Oliveira.
Vodafone group reported solid Q4 2019 numbers for Europe but says it will have to blow €200 million on swapping Huawei out of many of its network cores.
Group revenues were up 7% year-on-year, driven by a 10% jump in Europe, which in turn was helped by the Liberty Global acquisition. Having said that, organic service revenue growth was flat, which is probably why the Vodafone share price is unmoved by the results. An additional factor will be an unchanged outlook.
“I am pleased with the pace at which we have executed our commercial and strategic priorities, which has allowed us to maintain our momentum in the quarter,” said Group Chief Exec Nick Read. “Competition in Europe remains challenging, primarily in the value segment, however we continued to improve customer loyalty and to grow in broadband, and we achieved good growth in Africa. We expect a further gradual improvement in service revenue growth in Q4, led by Europe.
“We have recently announced the proposed sale of our stake in Vodafone Egypt, which simplifies the Group into two scaled regional platforms – Europe and sub-Saharan Africa – and reduces our net debt. We have also appointed the senior management team for our European TowerCo, and we are preparing for a potential IPO in early 2021.”
The juicy bit of the quarterly presentation concerned Huawei, inevitably, with Vodafone detailing the implications of the recent decisions made by the UK and the EU on its business. The good news is that Vodafone UK is already complying by the restrictions, so no adjustments are needed. In parts of Europe, however, there are bits of Huawei gear in the core, which will apparently cost around €200 million to rip and replace.
We spoke to telecoms Analyst John Strand and he was keen to flag up the wording on the last part of the above slide, noting the €200 million number was just a ‘position’, rather than a piece of hard accounting. He also noted that, in the UK, BT has said the cost of replacing Huawei is essentially priced into regular network investment, so why is Vodafone implying this is extra cost. That whole section of the slide could be interpreted as laying the ground to get compensation from the EU and to lobby against quotas in countries where it has a lot of Huawei in the RAN, like Germany.
Other than that, the hell that is the Indian telecoms market remains a major issue. “In October, the Supreme Court gave an adverse judgement in the adjusted gross revenue (“AGR”) case against the industry,” said the Vodafone report. “The outlook for Vodafone Idea Limited (“VIL”) remains critical. VIL is actively seeking various forms of relief from the Indian Government to ensure that the rate and level of payments it makes to the Indian Government is sustainable and it can meet its other commitments as they fall due.
“In November, the Department of Telecommunications granted a two-year spectrum moratorium to the industry. In January, the Supreme Court rejected the review petition filed by VIL and other industry participants in relation to the AGR judgement. Both VIL and Bharti Airtel Limited have subsequently filed modification petitions, which are expected to be heard imminently, to request the Court to order the Department of Telecommunications to determine a payment schedule in relation to AGR dues and other reliefs.”
So Vodafone seems to be keen on state aid pretty much everywhere. To be fair a lot of the special circumstances it finds itself in have been brought about by state activity, but it still needs to be strategic about how often it extends the begging bowl. If governments and regulators start to perceive Vodafone as excessively opportunistic, they’re likely to lose sympathy fast.