Buying Huawei Technology ‘Like Buying Chinese Fighter Planes’, Shock New Report Warns


- Advertisement -

On the same day the U.S. pledged up to $1 billion of public funds for the country’s rural mobile networks to rip and replace legacy Huawei (and ZTE) equipment, a shock new report in Europe has claimed major networks can do the same for considerably less than had been previously claimed.

The U.S. has been essentially written off, and so the news from Europe that an industry researcher has trashed previous estimates of the costs involved in doing the same there will be of more concern. Beyond the financial estimates, Strand Consult pushes hard for Europe to follow the U.S. lead.

That the U.S. House Energy and Commerce Committee is mulling over a last and final sweep up of Huawei networking equipment will not come as a surprise. The battle between Washington and Huawei has been raging for months, and the impact of U.S. sanctions on the Shenzhen tech giant’s has made almost daily headlines.

The operators in question are represented by the Rural Wireless Association, which has suggested that 25% of its members will need to replace Chinese technology in their ecosystems—mostly from either Huawei or ZTE. The bill proposes funding to be made available in the fiscal year beginning in October, and to remain available until 2029.

And so to Battlefield Europe, where Huawei is desperate to shore up its longstanding relationships and install base. “Those skeptical of the claims that Chinese-made telecom equipment poses a threat to security should ask themselves whether they would be okay with NATO buying a fighter plane made in China,” John Strand says. “Why is there universal agreement that military equipment from China be restricted but not telecom networks where vital information is transported?”

Strand’s analysis focuses on European networks needing to upgrade to 5G regardless of whose equipment they select, and suggests that previous estimates of the costs involved in a Chinese-cleanse have overlooked this fact. “There is a sunk cost to network upgrades which must be subtracted from the total cost of using Huawei. Most of Europe’s networks are already 3-5 years old and are ready to be replaced.”

Central to this replacement program is 70-80% of existing radio access network equipment, on which Strand estimates some $2.9 billion has been spent in Europe annually over the last three years, and of which some 40% has been acquired from Huawei or ZTE. And so, assuming that 40% of acquired kit needs to be ripped and replaced, Strand gets to the cost of $3.5 billion, “equal to a one-time cost of $7 or €6.5 per mobile subscriber.”

Strand told me that there has been tremendous interest across the industry in his report, “with hundreds of enquiries,” it’s available on a request basis and so he has visibility of the companies, regulators, industry bodies and governments that have asked to see the research. “To date,” he said, “the calculations and assertions in our report have not been challenged.” Strand has also been engaged in discussions with U.S. regulators, sharing his perspective on the need to make changes to networks on both sides of the Atlantic.

Earlier this year, Huawei-funded analysis had calculated a significantly higher cost for such a move, as high as $62 billion, albeit other industry players claimed this heavily overstated the need to replace legacy technology to deploy new 5G equipment. The report also suggested delays of up to 18-months and national-level setbacks to IoT ecosystems.

“Restricting Huawei and ZTE from networks,” Strand says, “does not harm the economy for Europe’s mobile operators nor does it meaningfully reduce competition nor does it delay rollout. However, removing Huawei and ZTE equipment from the network can greatly improve security.”

And it is this security point that Strand focuses on when we speak. For him, there is simply no question that a rip and replace is the right move. He tells me he simply cannot understand why national communication networks would not be afforded the same security considerations as military equipment, given their importance.

All that said, the telecoms industry in Europe has shown little interest in a wholesale Huawei swap-out. Despite other claims the industry speak highly of the technology, its quality, pricing and innovation. And there is a concern that removing the number-one market player would put too much pressure on competitors Ericsson and Nokia, delaying almost everything. Even the U.K., which (just about) still enjoys Europe’s closest relationship with Washington has not yet decided to effect a national ban on its technology. Most of Europe has elected to enhance security assessments, relying on that to maintain security and integrity in its networks.

What this new report will do will raise questions as to the true cost of various options, and hawkish anti-Huawei politicians and security analysts will be delighted to be able to counter previous, much higher estimates.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: