Huawei should face earlier UK ban if China threats grow
Chinese government threats should prompt the UK to consider a speedier removal of Huawei from its 5G market, according to a new report from a parliamentary committee.
UK service providers would be forced to remove the Chinese
vendor's products by 2025, instead of the current end-2027 deadline, under
proposals made by the Defence Committee, a cross-party group that led this
year's summer inquiry into the state of the 5G market.
It cites "clear evidence of collusion between the
company [Huawei] and the Chinese Communist Party apparatus."
The report also says that China's government exerted
pressure on the UK to retain Huawei through both "covert and overt
threats."
China has reportedly threatened to retaliate against UK
companies with a presence in China, including BP, Diageo, GlaxoSmithKline,
Intercontinental Hotels and Jaguar Land Rover, says the Defence Committee.
It is also said to have told UK business leaders that
banning Huawei could undermine plans for Chinese companies to build nuclear
power plants in the UK and participate in the construction of HS2, a planned
high-speed rail network, according to the report.
Huawei-free
Under current government plans, UK service providers will
not be able to buy any 5G products from Huawei starting in January 2021.
Further, they will have to ensure their networks include none of Huawei's 5G
products by January 2028.
BT and Vodafone, the two mobile operators most heavily
reliant on Huawei, had warned in the run-up to the decision that a rapid swap
would result in major disruption and "billions" in additional network
costs.
Those remarks were disputed by several experts, including
John Strand, the CEO of advisory group Strand Consult, and Richard Windsor of
Radio Free Mobile.
Strand has previously argued that rip-and-replace costs for
European networks have been grossly exaggerated, including fees that operators
would have to incur in a 5G upgrade regardless of a Huawei ban.
In a blog, Windsor said the telco "protestations"
were "questionable" and pointed out that Huawei had been able to
complete a "6,000 cell-site migration in Norway in ten months, beggaring the
question as to why it will take the UK 7 years."
The UK decision prompted Barclays to issue a note saying
that "most equipment is renewed every five to seven years, and so the net
impact of a swap should be limited, and included in maintenance capex."
BT, which has used Huawei across about two-thirds of its
footprint, recently announced an expanded agreement with Nokia, its other
mobile infrastructure vendor, for the replacement of some Huawei equipment. It
is widely expected to name Ericsson as a new supplier.
With an end-2027 deadline for the removal of Huawei
equipment, BT reckons the swap will add about £500 million (US$648 million) to
its costs, a sum that equals about 2% of BT's annual revenues.
That is the same figure BT cited at the beginning of the
year for compliance with a 35% cap on Huawei's share of 5G business, as
proposed by UK authorities in January.
Vodafone, which says Huawei's equipment is used across about
one-third of its mobile sites, previously told a parliamentary committee that a
swap would cost "billions."
It has yet to announce alternatives but has been very active
in trials of open RAN, a new technology that holds out opportunities for
smaller software companies and manufacturers of standardized kit.
Slow going for open RAN
The Defence Committee has urged the government to back
investment in open RAN technology "and work to make the UK a global
leader, not just in technological development, but also in production."
But open RAN still accounts for only $200 million of a
market worth between $30 billion and $35 billion annually, according to market
research firm Dell'Oro.
Its forecast is that annual spending will top $3 billion by
2024, giving open RAN technology only about a tenth of the overall market.
In the interim, there is government concern the UK will
become entirely dependent on Ericsson and Nokia, the only non-Chinese
competitors able to support the older 2G and 3G services still used by UK
consumers.
BT's deal with Nokia is not the only sign the Nordic
suppliers are becoming the main beneficiaries of the UK's anti-Huawei move –
Three UK, the smallest of the country's mobile operators, recently concluded an
arrangement with Ericsson under which the Swedish vendor will be its second 5G
supplier.
Three had previously named Huawei as the company that would
be responsible for the entirety of its 5G network.
The Defence Committee's report makes a number of charges
against Huawei but relies heavily on newspaper reports and unsubstantiated
claims and appears to lack a "smoking gun."
One of the most serious allegations comes from André
Pienaar, the CEO of an investment firm called C5 Capital, who told the Defence
Committee that Huawei has received more than $75 billion over the past three
years from the Chinese government, allowing it to "achieve the kind of
market dominance it currently has."
Responding to the publication, a Huawei spokesperson said:
"This report lacks credibility, as it is built on opinion rather than
fact."
"We're sure people will see through these accusations
of collusion and remember instead what Huawei has delivered for Britain over
the past 20 years."
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