Huawei exclusion clouds Australia’s tech growth potential

Huawei exclusion clouds Australia’s tech growth potential

Wed, 15/08/2018 - 10:26
John Lord

FUTURE Australia risks falling behind not only on technology but also on economic growth if competition is not encouraged in the technology sector, says John Lord. Photo: Philip Gostelow

Huawei car

Shutting out one of the biggest global investors in telecommunications technology from building Australia’s next generation mobile networks would be a massive blow to the country’s international competitiveness.

That’s the call by Huawei Australia chairman John Lord, amid growing international scrutiny over the security of Huawei-built communications infrastructure.

While Mr Lord, a member of the Victorian Government's Defence Council who served in the Royal Australian Navy for 36 years, achieving the rank of Rear Admiral, has a vested interest in Huawei's participation in the next level of mobile internet technology in Australia - 5G - a look at recent history reveals he may have a salient point.

Despite the investment of tens of billions of dollars into the National Broadband Network, Australia is ranked 54th in the Speedtest Global Index, a monthly international ranking of broadband internet speeds.

Shenzhen-headquartered Huawei has had nothing to do with Australia’s NBN, thanks to the federal government barring it from participating in the $49 billion infrastructure upgrade in 2012.

As it’s been rolled out across the country, the NBN has been plagued by cost blowouts and myriad consumer complaints that it fails to deliver what the government set out to do – fast internet for all.

The government has urged consumers and commentators to wait until 2020, when the NBN is scheduled to be completed, to judge the network’s performance.

But Mr Lord, who described Huawei’s exclusion from the NBN as an initial shock, said the limited pool of bidders for NBN works had likely contributed to its perceived poor quality.

"Whenever you exclude a key player, you can end up with not enough competitive bidding," Mr Lord told Australia China Business Review.

“What you do by having enough competitors in, it’s not only competitive price bidding, it’s the technology.

“It’s very easy for ICT companies to get very lazy if they don’t have competition in bidding.

“And when I say lazy, it’s lazy in technology. They won’t reinvest in technology to ensure their technology is the best.

“That’s the importance of competition.”

The official line from the federal government to justify Huawei’s exclusion, which came at a time the company had been shortlisted for a $1 billion NBN contract, were concerns over cyber security.

Huawei, which is active in more than 170 countries, says no inspection has ever found any backdoor vulnerability in its equipment, while it has always maintained it is a private company not under Chinese government control and not subject to Chinese security laws overseas.

“Every country has its national security concerns and deals with them in different ways,” Mr Lord said.

“If you go to countries like the UK and Canada, we have actually set up cells where we test our equipment because that’s what they wanted.

“In the UK, it’s a government-funded cell with government-cleared employees, while in Canada it’s a third-party cell, which is outsourced, and they check equipment.

“Different countries use different methods.

“We are working with New Zealand to set up a cell to test 5G, and in Europe we are working with Belgium in a similar regard.

“Every country has its national security concerns and they deal with those concerns and mitigate them in those ways.”

Nonetheless, the concern that the Chinese government could force Huawei to hand over sensitive data has been echoed in the United States, where Huawei is barred from doing business.

International news agency Reuters also reported recently that a British government report indicated technical and supply chain issues with Huawei-manufactured equipment could expose the country’s telecommunications networks to new security risks.

The international scrutiny has contributed to mounting speculation the Australian government is preparing to exclude Huawei from tendering on the 5G mobile network.

However, Mr Lord said he believed that speculation was incorrect, with discussions between Huawei and the federal government continuing and a timeline for the 5G rollout yet to be released.

“We are still briefing different government agencies about the 5G setup,” Mr Lord said.

“Separately, we are having discussions with government about mitigating any risks they consider by using an overseas company in different parts of the 5G network, and that’s similar to discussions that we’ve had over the years.”

Mr Lord said he believed some of the consternation over Huawei’s presence in Australia’s technology sector had been bred by unfamiliarity with the company’s operations, and an overarching fear of the unknown.

“In Australia, we’ve always gotten our technology from Europe or the US, they’ve been the traditional sources.

“We’ve never gotten technology from anywhere else, particularly from Asia.

“Lo and behold, out comes this company from China which is world-leading, which is offering technology ahead of the traditional sources.

“That is very hard for some Australians and Australian security agencies to get their mind around the fact that new technology may not come from the traditional sources.”

Mr Lord said if Huawei were barred from the 5G network, the exclusion would cause significant impacts in the business sector.

Huawei is already a major supplier of mobile network infrastructure to some of Australia’s biggest telcos, with estimates indicating around 50 per cent of the country’s population uses its equipment each day – knowingly or not.

Any exclusion of Huawei participation in the upgrade to 5G would result in those telcos, including Optus, Vodafone, Hutchison Australia and TPG, having to replace and rebuild infrastructure across its networks, which could become an extremely costly exercise.

Job losses would also result, Mr Lord said, particularly at Huawei, which currently employs more than 700 people across its offices in Sydney, Brisbane, Melbourne, Perth and Adelaide.

At risk also would be Huawei’s involvement in the communities in which its operates, from its sponsorship of the Canberra Raiders NRL side and AFL team Gold Coast Suns, to its charitable donations to groups such as indigenous education group Clontarf Foundation and the Tour de Cure cycling initiative, which raises funds to help children living with cancer.

In addition to the potential cost of exclusion, Mr Lord said blocking Huawei from being involved in 5G would essentially stop Australia from receiving the newest and most innovative communications technology.

Huawei’s annual spending on research and development last year was around $US15 billion ($20.2 billion), ranking the company in the top five of all companies worldwide in that regard, and the top-ranked ICT provider.

“There isn’t anyone out there that’s going to be able to replace us,” Mr Lord said.

“We are competing against Asia, we are trying to maintain our standard of living and we are trying to maintain our level of technology.

“I don’t think we can afford to be behind the eight-ball any more in technology.

“Two thirds of the world’s millionaires are going to be in Asia by 2030 – there is going to be huge demand, a very educated population, and if Australia is not going to be part of that technologically, it is going to lose.”

Mr Lord said the rise of the Asian century would become even more limiting to Australia’s growth, unless the discussion led by the media and government over national security was combined with the country’s economic and industrial outlook.

“Asia is getting bigger and more and more companies with technology are going to come out of there,” he said.

“Australia needs a good platform to be able to go forward and accept Asia technology here, US alliances there and other arrangements here.

“That doesn’t mean you don’t criticise countries like China or any other country, but we just need a solid base where whenever we make a decision it takes into account all of the factors – it takes into account our long-term strategic interests, our economic interests and our security interests

“That discussion has got to happen in the future if Australia is really going to position itself well in an Asian future.”