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The U.S. Is Losing Its Crusade Against Huawei

The United Kingdom has decided to allow Huawei’s 5G equipment into its national rollouts to a degree—the gear is banned from core parts of the British communications network, where it could pose a particularly acute spying risk.

The move is another blow to the United States’s campaign to pressure its allies into shunning Huawei’s 5G equipment. The campaign seems to have proven particularly unsuccessful in Europe, where both Germany and Poland have also declined to block Huawei-based deployments. In Southeast Asia, too, Huawei equipment will be used in 5G rollouts in countries such as Thailand and Malaysia.

The U.S. has since late last year been on something of an anti-Huawei crusade, with the main rationale being fears over Chinese state spying—China has a law requiring companies to support its intelligence work, and Huawei founder Ren Zhengfei once worked as a tech researcher for the People’s Liberation Army. Huawei denies it poses any such risk.

The American push initially met some success, with Huawei equipment deployments being blocked by authorities in Australia, Japan and New Zealand. But in recent months it has stalled, with country after country deciding to allow the company’s 5G wares into networks—albeit sometimes with reservations.

There are two main reasons for these decisions. Firstly, Huawei has not been proven to represent a particular spying risk, though concerns linger over the company’s ties to the Chinese state. And secondly, communications providers say forgoing Huawei equipment would make 5G deployments slower and more expensive, because Huawei is the biggest telecoms equipment manufacturer in the world and its products are relatively cheap.

Not persuasive

On the security front, Nick Read, the CEO of British communications giant Vodafone, complained a couple months back that the U.S. had not presented evidence of the supposed risk to European authorities. Earlier this month, German security officials confirmed this, saying Huawei would not be excluded from 5G deployments, again because they had “not received any concrete indications against Huawei.”

Last week, the CIA was reported to have told its closest intelligence allies—the U.K., Australia, Canada and New Zealand—that it had discovered Huawei was receiving funding by the Chinese military and state intelligence agencies.

However, judging by the British government’s green-lighting of Huawei gear this week, the CIA’s argument does not appear to have been overwhelmingly persuasive. According to the Financial Times, Defense Secretary Gavin Williamson and some other key ministers were in favor of keeping out Huawei’s 5G products, but Prime Minister Theresa May’s cabinet ultimately decided to allow limited access to the British market.

That’s not to say Huawei equipment does not pose any security risk. Last month, the British spies who have for almost a decade been giving particular scrutiny to Huawei’s equipment in a special testing lab—fears about the company are not new—issued a report saying the equipment was riddled with security flaws. But they also said there was no reason to believe this was “a result of Chinese state interference.” It was just poor security management.

The U.S. appears to be aware that it’s losing the security argument. Earlier this month, the Frankfurter Allgemeine Zeitung reported that the U.S. had backed down on its demand that Germany shun Huawei, instead embracing Berlin’s approach of allowing the equipment as long as it meets strict security requirements. This could amount to the same thing, depending on how tough the German scrutiny proves to be, but it’s a far cry from a straightforward ban.

Cost concerns

The German government’s approach is similar to what Deutsche Telekom, the country’s biggest communications firm, suggested at the start of the year.

Like Vodafone, Deutsche Telekom is terrified of the implications of a full-on Huawei ban. Both companies have warned that such a move could set back 5G deployments by as much as two years, particularly if they were also forced to rip out and replace the Huawei equipment they have already installed for today’s 4G networks. Vodafone’s Read also argued that it would be bad for the European telecoms industry to be limited to only two suppliers—apart from Huawei, the other two big vendors are Finland’s Nokia and Sweden’s Ericsson.

Last week, Poland’s cybersecurity minister told Reuters cost concerns made it unlikely that Poland would ban Huawei’s 5G equipment. Instead, the country is taking the German approach of closely monitoring the company’s products.

Huawei itself is complicating matters for carriers that have already used its gear in their 4G networks, AT&T CEO Randall Stephenson recently warned. Stephenson noted last month that Huawei’s 4G equipment is only interoperable with the company’s own 5G products. That’s an issue because 5G phones will also need to be able to connect to 4G networks for as long as it takes before 5G coverage is ubiquitous—and that will take many years.

Even in the U.S., there is still no comprehensive Huawei ban. Recipients of federal funding are blocked from using the company’s equipment—a rule that has earned a lawsuit from Huawei—but plenty of communications providers already have it in their networks. In December, the U.S. Rural Wireless Association said in a Federal Communications Commission filing that at least a quarter of its members would be impacted by a ban on Chinese equipment, and if small rural carriers were forced to replace the gear, they would require funding to do so.

The U.S.’s failure to convince governments and carriers to quit Huawei is apparent in the company’s financial results. On Monday, it reported a 39% increase in first-quarter revenue. Huawei said it had signed 40 5G contracts with operators around the world and already shipped 70,000 5G base stations to its customers.

“2019 will be a year of large-scale deployment of 5G around the world, meaning that Huawei’s Carrier Business Group has unprecedented opportunities for growth,” the firm said.