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Banning us could hand China victory in the 5G race – Huawei

Tense relations between United States and China. Concept of conflict and stress

Reading between the lines, Huawei is asking the US a new question; banning us will make deployment slower and more expensive, so how will that help in the 5G race against China?

In a filing with the FCC, Huawei has put forward a pretty in-depth argument against prohibiting it from business in the US. Ranging from economic considerations, such as the price and speed of deployment, to the ‘critical’ support it provides smaller telcos in the rural regions, and questions the basis of why the US shouldn’t trust Huawei.

It is a comprehensive and logical plea to the FCC, but since when did sensible decision making factor into politics? The other point to consider is this is PR propaganda from Huawei. There will of course be truth to the statements, though everything will have to be taken with a pinch of salt.

“Huawei urged the Commission to consider the substantial costs of the NPRM, in particular its impact on carriers in rural and remote areas, many of whom are attracted to Huawei as a result of Huawei’s commitment to affordable, quality products and attentive customer service,” the filing states.

As it stands, Huawei is banned from participating from the 5G euphoria in the US. Back in August, President Trump signed the Defense Authorization Act into law with Huawei banned from providing any components or services to processes or infrastructure which would be considered ‘essential’ or ‘critical’. Should the components be used to route or view any data on the network, they are disqualified, which essentially translates to a total ban from US shores. Huawei has been fighting against this ruling both pre and post Trump signature.

Slower and more expensive

This is the main point of the filing and will hit the telcos where they worry the most; their bank accounts. The argument here is simple; without Huawei as a potential vendor, competition is limited, therefore prices go north. The more expensive projects become, the greater the due diligence which will slow down the process, and the fewer which can be run at the same time. Without Huawei, 5G deployment slows down.

This is a logical conclusion to make, but it is far from certain. The negotiating abilities of the procurement teams might shine through. It assumes Ericsson and Nokia will essentially hold the telcos to ransom.

Tom Dowding, SVP of the Wireless Business, argues as a result of the lack of competition, equipment prices in the US market in general tend to be about 20-30% higher than they are in other developed regions, for example in Europe. Allan Shampine of Compass Lexecon is also quoted, suggesting Huawei is outspending competitors on R&D and the increased competition should be welcomed ahead of the anticipated surge of spending on 5G infrastructure.

Speed is key for the US as it battles the Chinese for technology leadership in the 5G world of tomorrow. The US wants 5G to provide a competitive edge on the global stand and maintain its lofty position, though Huawei is arguing these actions undermine the ambition. The US is clearly prepared to make big decisions is defending its leadership position, the Executive Order blocking Broadcom’s acquisition of Qualcomm is a good example, though Huawei questions the logic of this ban.

We’re not dodgy when you think about it

The second aspect of the filing attacks the US justification for the ban. Huawei has pointed out it has more than 500 telco customers around the world in more than 170 countries, many of which are allies of the US. The US government might be doing a good job in convincing some to combat the Chinese threat, Australia and Korea are two examples, though many are continuing business with Huawei. The implication here seems to be they cannot all be wrong.

Another interesting point raised is research from the Rural Broadband Alliance which suggests the US is focusing too much on China. The Domain5 Whitepaper suggests banning Chinese vendors will have little impact on securing US networks as threats can emerge anywhere in the international supply chain. The focus should be on creating a more resilient security framework as opposed to targeting companies from a single nation. This is a very good point to make. Even in the most trusted of allies, there will be nefarious individuals who crave the opportunity to attack the US. This is a country which has enemies everywhere, a laser focus on one area might open up opportunities for hackers with a grudge sitting in Copenhagen.

Finally, Huawei asks why Nokia has been excluded from the Chinese witch hunt. Its joint venture in the country is supervised by a state-owned asset, which has perfect visibility into activities. If Huawei is being banned on the grounds of collusion with the Chinese government, shouldn’t Nokia suffer the same fate?

The little guys actually like us

Perhaps the most interesting aspect of the filing is the support Huawei has managed to muster from various US telcos and associations, each of which suggest banning the company would have a detrimental impact on their business. These might be small telcos, but they are important ones. They plug the connectivity holes in rural US which have been forgotten by the major players. With the digital divide a political ping-pong ball, these voices might be small, but they are weighty.

Michael Beehn, CEO of MobileNation, states the cost effectiveness of Huawei is critical for the business to operate with its small footprint of 20,000 customers. Viaero Wireless CEO Frank DiReco said he had worked with other more expensive vendors in the past, though deployments were never successful. James Valley Telecommunication (JVT) CEO James Groft claims Huawei was 40% more cost effective than the next best option for its wireless core and wireless radios. The Rural Broadband Association worries the US would be left behind in the 5G race because of the attention Huawei and ZTE give the smaller vendors. Finally, the Western Telecommunications Alliance states:

“[A] WTA member chose Huawei four years ago when another vendor fell behind on a critical network upgrade, and the member added that Huawei put an emphasis on getting the problem fixed  before worrying about getting paid. The member added ‘Huawei has treated us better than anybody’. The member also lamented about the lack of competition in the market noting that four years ago, there were five suppliers, but today there are only two.”

This is a very interesting tactic from Huawei. Rousing support of smaller organizations, the supposed ‘backbone of America’, is a PR gurus dream.

Will this actually make a difference?

We suspect not. The approach is interesting, suggesting the ban would help China win the 5G race, though there is too much at stake. Politicians have managed to make an enemy of Huawei and whipped the anti-China rhetoric up into a frenzy. How can these people go back on the condemning testimonies which they have made in the past. They are too proud and self-righteous.

Even if those in power see logic and decide increased competition is better, the smaller telcos need the attention of the Chinese and the bad guys are everywhere not just in China, it might be too late. Too many speeches have been made by President Trump and his supporting cast creating an enemy in China. If it was to let Huawei back into the fray, it would perhaps hand too much ammunition to political opponents.

What is worth noting is that this is PR from Huawei. It might not turn out to be true, but there is certainly a compelling case put forward.

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6 comments

  1. William B Plummer 03/10/2018 @ 4:48 pm

    A good synopsis of the petition to the FCC. I tend to agree with you that it will make no difference given that while you’ve presented the Huawei arguments as somehow new or novel, they are in fact the exact same arguments the company has made with the FCC and other U.S. Government Agencies and Departments for the last eight years. Some new faces, but same messaging. For that historical perspective: https://www.amazon.com/Huidu-Inside-William-B-Plummer-ebook/dp/B07DHZDSYG/ref=sr_1_1?s=books&ie=UTF8&qid=1538581600&sr=1-1&keywords=huidu.

    • Jamie Davies Jamie Davies 03/10/2018 @ 5:34 pm

      Hi William – useful to know that (1) Huawei isn’t really saying anything new and (2) the US government is not newly short-sighted. Unfortunately eight years ago I was a recent graduate will few concerns for anything aside from beer and late night kebabs, how things have changed :(

  2. Josh 04/10/2018 @ 3:37 am

    But isn’t US already ahead of the race? Verizon Wireless already has commercialized 5G FWA and it’s only a matter of time before they enable eMBB as well. Meanwhile, China hasn’t even come up with a single 5G service and is lagging far behind even with Huawei.

    Besides, wasn’t the whole point of being first in 5G race was to develop an early eco-system? But what’s the use of building the first 5G infrastructure in China when most of the major silicon valley companies can’t even experiment what they want because of communism? That’s why US was an important market for Huawei but now they’re just expressing it like sour grapes.

  3. Phil G 05/11/2018 @ 2:40 am

    Nobody here seems to have a glimmer on why Huawei prices are lower: they are supported by a non-market economy which heaps warchest scale money on any industry where the hope is wipe out global competition. And this has led to a central issue that has put the WTO in the crossfire between developed nations and China.

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