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Huawei poses a 5G spying risk, but other options are hard to come by

February 12, 2020, 4:30 PM UTC

The United States has finally specified its accusation against Huawei: The Chinese telecoms equipment firm maintains spying access to the traffic flowing through its products.

Governments around the world say telecoms equipment has to include this access, for the benefit of their law enforcement and intelligence agencies—in the U.S., the relevant law is called the Communications Assistance for Law Enforcement Act, or CALEA. But the makers of the equipment are not supposed to be able to poke around—accessing data such as what people are looking at online, and their emails and text messages—without permission from the operators that are their customers.

According to a Tuesday article in the Wall Street Journal, Huawei secretly maintains that access, and that is why the U.S. is begging its allies to not include Huawei products in their 5G networks—networks that will connect not just people but billions of cars, buildings, and devices, providing exciting new avenues for espionage and sabotage.

But what are these allies—and for that matter the U.S. itself—supposed to use instead?

Various ideas have been floated in recent weeks by members of the Trump administration and by the government of the U.K., a key ally that infuriated the American president by giving its carriers the green light to use Huawei’s 5G wares to a limited degree.

Here’s a rundown of those proposals—and the thoughts of industry analysts regarding their viability.

Attract another player

Huawei is the world’s leading supplier of 5G telecoms equipment. Its prices are lower than those of main rivals Nokia and Ericsson, thanks largely to cash flowing in from Chinese state support, plus the economies of scale that result from the country’s hyperactive 5G network rollout.

Telecoms operators can obviously turn to Nokia and/or Ericsson instead, but things aren’t quite that simple. Operators want multiple vendors’ equipment in their networks for flexibility, and they don’t want to pay any more than they have to, says Ian Fogg, an industry veteran who heads up the team of analysts at mobile analytics firm Opensignal.

“If you’re running a procurement process and you probably want at least two vendors on the network to have choice, you want at least three vendors in the procurement process to get competitive bidding,” Fogg says.

So who’s the third vendor, if not Huawei?

According to Nicky Morgan, the British minister responsible for telecommunications infrastructure, one option is to “get another provider who’s operating elsewhere to operate in the UK.”

Nokia and Ericsson already operate in the U.K. The other two players worth mentioning are ZTE—a non-starter given that ZTE is Chinese and potentially also poses risks—and the South Korean electronics giant Samsung.

Samsung has made some gains in the U.S. and South Korean 5G network markets, and also recently inked a deal with Canada’s Videotron, but it’s still relatively young in the space.

“It will take time for someone like Samsung Networks to scale up their business,” says Fogg. “It’s not something that can happen overnight.”

Timing is a recurring theme when considering any of these options. As Fogg puts it: “Really, these decisions should have been made three to four years ago before 5G networks started to be deployed… If a country or operator has already started deploying ,and then has to change midway, it risks distracting everyone from their day job of building a great network.”

Buy a big player

Last week, U.S. Attorney General William Barr expressed enthusiasm for the idea of the U.S. directly or indirectly (via a “consortium of private American and allied companies”) taking a controlling stake in Nokia or Ericsson, which he described as the “only two companies that can compete with Huawei right now as 5G infrastructure suppliers.”

“Putting our large market and financial muscle behind one or both of these firms would make it a more formidable competitor and eliminate concerns over its staying power,” Barr said. “We and our closest allies certainly need to be actively considering this approach… What we need today is a product that can win contracts right now.”

There are two big problems with this approach. First, as Fogg notes: “It’s not clear that ownership change will enhance the competitiveness of a company like Nokia or Ericsson. They want to be successful vendors in the mobile industry—they’re already going hell-for-leather to do that. Change of ownership could just be another distraction.”

Secondly, the Europeans would be displeased at the idea of one of their prize telecoms firms—Nokia is Finnish and Ericsson Swedish—being bought out by the Americans.

In a position paper approved Tuesday by Angela Merkel’s Christian Democrats and one of its coalition partners, the Christian Social Union, the conservative parties not only rejected the idea of a U.S.-pleasing ban on Huawei’s participation in German 5G networks, but also called for a common European industrial strategy that would push back against hostile foreign takeovers of 5G-critical European companies.

Coming so soon after Barr’s promotion of such an idea, it is hard not to see the German stance as an outright rebuff. And in the EU, Germany’s the most influential country.

Build a new player

Barr’s speech last week was notable for a few reasons, among them the fact that it made no mention of another how-to-substitute-Huawei idea that floated by a Trump administration member just a couple days previously.

Early last week, the Journal reported that the White House had corralled the likes of Microsoft, Dell and AT&T into a joint effort to build new software for 5G networks.

“The big-picture concept is to have all of the U.S. 5G architecture and infrastructure done by American firms, principally,” said White House economic advisor Larry Kudlow, who said Nokia and Ericsson could also participate as they have a significant U.S. presence.

Nokia and Ericsson aside, these may not be the most obvious players to take on Huawei. “The technologies held by [Microsoft, Dell, and AT&T] are useful for computing applications, but they don’t have the expertise in radio technology to achieve the high level of performance needed in the market,” says Joe Madden, president of the Californian analyst house Mobile Experts.

But there may still be something to the idea—though it probably won’t be to the liking of Nokia and Ericsson.

The plan appears to build on an interesting new development in the industry called Open RAN (“RAN” stands for “radio access network” and refers to the parts of the network that connect people’s devices to the core network, using cellular towers and so on.) The idea here is to have new standards that will allow operators to buy cheap, generic network hardware and run various developers’ software on it, as opposed to having to buy specialized software-and-hardware packages from established vendors.

It’s a bit like how Facebook and Google run their data centers these days, with the emphasis being on the software rather than the hardware. Notably, the Japanese e-commerce giant Rakuten is using the Open RAN approach to enter that country’s telecoms market in a relatively cost-effective fashion.

Being a new entrant without a legacy network, Rakuten gets to take advantage of new methods.

“Everyone in the industry is watching,” says Fogg. “The bigger dynamic in the industry is around Open RAN standards, and smaller vendors trying to disaggregate bigger technology vendors… [but] no-one knows how well this will work in practice.”

Perhaps this is where the real alternatives to Huawei lie. But not yet.

According to Alex Davies, a senior Internet-of-things analyst at Riot Research, Open RAN won’t come soon enough to solve the U.S. and U.K. governments’ current dilemma. “There are enough standards in place that you would be able to deploy, and I think it would function well enough, but there’s the lobbying side of things,” he says. “A very big business community doesn’t want to have the boat shaken by a commitment to open-source technology.”

“Open RAN is guiding all current [operator] purchasing decisions to some extent, and that’s only going to increase going forward, but I don’t think it’s an immediate solution to this problem.”

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