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Why the futures of 5G and 5 Eyes depend on Britain

Spark and Huawei hope Boris Johnson will decide within days to use the Chinese firm's gear at the fringes of Britain's 5G rollout. They could then apply to the GCSB again for approval, tightening the trade and security vice we are in between China and America.

New Zealand might allow Spark to use Huawei equipment on the fringes of its 5G network rollout later this year if Britain and Canada defy America's demand they lock out the Chinese firm.

Britain is due to decide within days whether to allow Huawei onto the fringes of its 5G network. America wants a ban. Prime Minister Boris Johnson is pushing back, but faces American and Chinese threats to trade either way, and possibly restricted access to American security sharing via Five Eyes.

The GCSB, Spark and the Government are watching the British decision closely and could follow its lead to reduce the political and trade pain of going it alone. Canada is also waiting for Britain's lead and hoping to be part of a wider group. The decision is a test of the 'special relationship' between Britain and America under Johnson and US President Donald Trump, and a turning point in the wider contest over the future of technology in the great strategic clash between America and China.

If Britain lets in Huawei, then Canada and New Zealand could follow, which would leave America and Australia out on their own as anti-China hardliners and challenge the unity of the special Five Eyes security sharing alliance.

Wasn't this over last year?

Newsroom Pro broke this story in New Zealand first in late October 2018 when I asked Communications Minister Kris Faafoi if Huawei could be blocked from Spark's 5G rollout because of US security concerns and after Australia banned Huawei. He admitted it could, and then the issue was flicked up to Justice and GCSB Minister Andrew Little. 

Spark then announced to the stock exchange on November 28, 2018 the GCSB had rejected its proposal to include Huawei on the fringes of its new 5G network. That forced the GCSB to put out its own statement, including more information on the TICSA legislation and how the GCSB and the minister operate under it, and how 5G works.

But the door is not closed and New Zealand has been carefully ambiguous about which camp it is in (as detailed in this Robert Ayson piece on Newsroom Pro last week.) Spark withdrew its initial bid to only use Huawei in its 'fringe' Radio Access Network or RAN, which includes the equipment on cell towers at the edge of the network. Spark is still using Ericcson and Cisco at the 'core' of the new network, which is an upgrade of its existing 4G core rather than a brand new 'stand alone' 5G Core. It has also started rolling out the 5G 'fringe' with Nokia gear, which GCSB has already approved. Spark announced its 'multi-vendor' strategy in November last year, and has left the door open to reapply to include Huawei gear at the fringe in the 5G RAN rollout.

It already has GCSB approval under TICSA to use Nokia equipment on its towers, and the third supplier in the 'multi-vendor' strategy is Samsung, which rolled out South Korea's network in 2018 and 2019. Spark has already started using Nokia's gear. It set up 5G networks before Christmas in Twizel, Westport, Clyde. Tekapo, Hokitika and Alexandra. Spark is in a marketing and equipment rollout race with Vodafone New Zealand, which launched its 5G network in parts of parts of Auckland, Wellington, Christchurch and Queenstown in early December. Vodafone New Zealand (which is now owned by fund manager Brookfield and Infratil rather than Vodafone UK) is using Nokia equipment in its rollout.

A Spark spokeswoman told me via email last week that Spark would "work through the TICSA approval process in due course with our other RAN vendors, prior to any deployment of their equipment".

"However, our multi-vendor strategy means that we shouldn’t be a situation where we are reliant on a single vendor to build a 5G RAN network," she wrote.

"We expect that the security risks associated with 5G core networks will be very different to the security risks associated with 5G RAN network components, and note the recent speculation that the United Kingdom government may recognise this distinction when it finalises its policy on the use of offshore 5G vendors in UK networks."

Door open to apply again?

Essentially, Spark is hoping New Zealand adopts the same stance as Britain if Johnson agrees to calls from BT and Vodafone UK for Huawei to be allowed into the 'fringe' of the network. That would allow Spark to apply again to the GCSB and hope Britain's lead is enough to allow it through. The Government would then face a difficult decision over an about-face that puts New Zealand in a camp with Britain (and potentially Canada) in favour of China and against America in this new 'Great Game' pitting Beijing against Washington for the control of the future of technology.

Canada has also delayed its decision from last year, in part because of its own dramas with China after it arrested Huawei's CFO Meng Wanzhou, who is the daughter and presumed heir of the Huawei founder Ren Zhengfei, for extradition to America on fraud charges linked to Huawei supplying equipment to Iran and fraudulently moving the proceeds in breach of US sanctions.

Watch the Vancouver action

There is a extradition court hearing in Vancouver later today. The issue is especially tense in Canada, where Prime Minister Justin Trudeau is under heavy pressure from conservative politicians to exclude Huawei and back America, while Canada's telecommunications firms want to use Huawei.

China has also put intense pressure on Canada, arresting and (still detaining) two Canadians on spy charges and giving a death sentence to a Canadian accused of drug trafficking in China. Beijing also restricted Canadian pork, canola and other imports and last week announced sweeping espionage charges against the detained Canadians, including one diplomat. Like Johnson, Trudeau has delayed the decision repeatedly after the Huawei arrest, the arrest of Canadians in China, the Canadian election, and in recent weeks, the China-US 'Phase One' trade deal and Johnson's decision.

'Nothing less than madness'

American officials visited Britain last week to meet with Johnson and argued in a last ditch effort for a full ban. Johnson is scheduled to make the decision some time this month, leaving just 10 days to two weeks for the call to be made. An unnamed US official was quoted in British media as saying it would be "nothing less than madness to allow Huawei to get into next generation telecoms networks."

Johnson's only comments this year on the issue came in a BBC interview last week after the US visit, in which he hedged his bets, saying:

“The British public deserve to have access to the best possible technology. We want to put in gigabit broadband for everybody. Now if people oppose one brand or another then they have to tell us what’s the alternative," he said. "On the other hand, let’s be clear, I don’t want, as the UK Prime Minister, to put in any infrastructure that is going to prejudice our national security or our ability to cooperate with Five Eyes intelligence partners."

Huawei said the US 'dossier' and and the 'nothing less than madness' comment did not include any 'smoking gun on the issue. This backgrounder by BBC Security Correspondent Gordon Corera on the issue is useful, particularly on the debate over the 'core' vs 'fringe' distinction, and the wider implications for Britain.

"Security officials continue to believe they can manage the technical risks, but acknowledge there are wider factors in play. Those include the risk of a diplomatic fall-out with either Beijing or Washington, depending on the decision. That in turn would have implications for trade-deals and investment post-Brexit," Corera wrote last week.

Fringe blurring into the core?

For more on the importance of the 'fringe' in 5G, here's my backgrounder from last year on the technology of  5G and the use of 'mobile edge computing' in particular.

This would mean network operators such as Vodafone or Spark would install processors in or close to the base station that would talk with bigger databases in the cloud, and do the actual computing needed by the likes of industrial robots, autonomous cars and electricity networkers.

“That's putting caching and control right at the edge of the network, which will be really useful for the real low latency applications as well,” says Baird.

US officials fear this blurs the distinction between the core and the fringe, allowing China to potentially use any backdoors into Huawei gear to shut down power grids, water networks and transportation networks. This NBC News backgrounder gives more of the US view on the issue.

US, Australian and British intelligence officials and politicians are also watching New Zealand's position closely, in part because some see New Zealand as the 'soft underbelly' of Five Eyes.

This piece by New Zealand journalist Jamil Anderlini in this paywalled FT article from Hong Kong shows how closely and sceptically Wellington is being monitored by its Five Eyes partners.

"A senior intelligence official from one of these countries described New Zealand to the FT as “on the edge of viability as a member” of the (5 Eyes) grouping, because of its “supine” attitude to China and its “compromised political system,” Anderlini wrote.

Last week, Republican Senator Tom Cotton introduced legislation that would prohibit the US from sharing intelligence with any country allowing Huawei to operate 5G technologies within its borders. That would kill Five Eyes if passed in the Senate, the House and then approved by President Trump.

'We've seen the gear' 

The British decision is being especially closely watched for a couple of reasons. Britain has the biggest non-American set of security experts and has had the closest look at Huawei's gear. It has provided plenty of advice to its Five Eyes partners, including New Zealand's own GCSB.

One big difference in Britain is that Huawei has worked very closely with British Government technical 'spooks' through the Huawei Cyber Security Evaluation Centre (HCSEC), which is an R&D facility in Banbury, Oxfordshire. It was set up in late 2010 to allow British 'spooks' to look more closely at Huawei's 5G's gear "to mitigate any perceived risks arising from the involvement of Huawei in parts of the UK’s critical national infrastructure." HSEC has worked with Britain's National Cyber Security Centre (the former GCHQ) on checking the kit.

However the HSEC's oversight board has given plenty of wiggle room for Johnson to either accept or completely ban Huawei from the fringes of Britain's 5G networks, as this key section of the HSEC Oversight Board's  2018 annual report shows: "Identification of shortcomings in Huawei’s engineering processes have exposed new risks in the UK telecommunication networks and long-term challenges in mitigation and management."

The stakes are high and Britain's decision is far from certain. Either way, New Zealand's GCSB, Andrew Little, MFAT, MBIE and ultimately the cabinet will be put on the spot by Spark, Huawei, China and the American administration, which has issued veiled threats about restricting Five Eyes sharing and trade deals if Huawei is not blocked.

The deal matters also for 2 Degrees, which rolled out its 4G network on vendor-financed Huawei gear and is hoping to use Huawei again. Having three active competitors has helped drive down technology and telecommunications services prices down as much as 90 percent in some areas. The Reserve Bank has privately referred to this three-way competition, which was driven by regulatory intervention and the Huawei-funded rollout of 2 Degrees' network.

The decision will also have a huge impact on the future of competition in telecommunications and the wider 5G world, which will be the deliverer of many services in a global economy dominated by apps on smartphones providing services that were once domestically ring-fenced and expensive. Uber, WhatsApp, Airbnb, Netflix and Spotify were created in the post-iPhone era of 4G networks and transformed entire sections of our services economy in the last decade. 5G looks set to do the same. See more on the potential wider economic impacts on prices, industries, interest rates and the future of work in this backgrounder I did last year on How 5G could unleash a productivity quantum Leap.

We'll keep you updated on what happens in Vancouver, London, Washington and Ottawa, along with the implications for businesses and Government in Auckland and Wellington.

This was the third in the Newsroom Pro series of 8 Big Questions for 2020.

1. Will Labour win a second term?

2. Will Donald Trump be re-elected and should we care?

3. Will NZ let Huawei build any part of Huawei's network?

4. Will the Government appoint an Auckland Light Rail builder?

5. Will NZ conclude a trade deal with the EU?

6. Will Rio Tinto shut down Tiwai Pt?

7. Will NZ regulate Big Tech?

8. Will NZME buy Stuff?

Get it early – This article was first published on Newsroom Pro and/or included in Bernard Hickey’s ‘8 Things’ morning email of the latest in-depth business and political analysis. Get it early by subscribing now or starting a 28-day free trial.

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