Intelligence Committee: Huawei & ZTE Security Threats

Chinese telecoms vendors Huawei and ZTE should not be allowed to operate in the US due to potential links with the Chinese state, according to a draft report from the House of Representatives’ Intelligence Committee (pdf), reports Reuters.

Republican Congressman Mike Rogers and the ranking Democrat on the House Intelligence Committee, Dutch Ruppersberger, believe that letting a Chinese company build and maintain critical communication infrastructure here would be a serious mistake, reports 60 Minutes:

Mike Rogers: If I were an American company today, and I’ll tell you this as the chairman of the House Permanent Select Committee on Intelligence, and you are looking at Huawei, I would find another vendor if you care about your intellectual property, if you care about your consumers’ privacy, and you care about the national security of the United States of America.

The committee said the companies cannot be trusted to avoid influence from the Chinese state and pose a potential risk to the US following an 11 month investigation. Both companies were criticised in the unclassified report for failing to provide sufficient information about formal relationships and regulatory interaction with the Chinese state that would allay the concerns.

Huawei responded:

The report released by the Committee today employs many rumors and speculations to prove non-existent accusations. This report does not address the challenges faced by the ICT industry.

Huawei has likened the US government’s efforts to block it from trading in the country to the ‘witch hunts’ of the McCarthy era.

The committee warned potential customers to seek other vendors for their projects and urged the US intelligence service to inform the private sector about the potential espionage threat. The body is also seeking to block any mergers of acquisitions involving the firms in the US.

The 52-page report (pdf), which is unclassified, doesn’t include evidence showing either company’s equipment has been used for spying. But it says some companies in the U.S. “have experienced odd or alerting incidents” involving Huawei or ZTE equipment, although it provides no details.

The report comes as Huawei reportedly considers an IPO. Huawei is now the world’s second-largest provider of telecommunications equipment, and it does 70% of its business outside China.

ZTE has a smaller U.S. footprint, primarily through sales of devices like smartphones. Its sales in the U.S were $30 million last year. State-owned enterprises own 15.68% of the company.

Both Huawei and ZTE are dominant international players in 4G LTE infrastructure. Carriers in Europe, Asia, Australia, Africa and South America have committed to the Chinese vendors for major parts of their 4G infrastructure.

China Mobile and Intel recently announced a joint “cloud basestation” venture to lower the cost of broadband. It this approach, tiny radio hubs, not much bigger than WiFi hotspots, are controlled by Intel servers miles away.

China Mobile Research Institute in Beijing is collaborating with Intel Labs and China Mobile to design and prototype a full-scale Cloud Radio Access Network (C-RAN). China Mobile is working with Alcatel-Lucent combining AlcaLu’s lightRadio with China Mobile’s Cloud RAN initiative.

Huawei spokesman William Plummer called national-security concerns “baseless,” saying that “purporting that Huawei is somehow uniquely vulnerable to cyber-mischief ignores technical and commercial realities, recklessly threatens American jobs and innovation, does nothing to protect national security.”

“ZTE should not be a focus of this investigation to the exclusion of the much larger Western vendors,” ZTE, China’s second largest telecom equipment maker, said in a letter addressed to the U.S. committee.

When Huawei began competing against Cisco in emerging markets five years ago, Cisco teamed with ZTE offering cheaper products — manufactured locally — through reseller and licensing agreements. However, Cisco has now disolved its relationship with ZTE, Reuters reports, after it was revealed that ZTE was selling Cisco-branded networking equipment to Iran. ZTE said that Cisco Systems severed their strategic cooperation agreement, a ZTE spokesman said Monday.

Both Huawei and ZTE denied accusations in September that their equipment had been installed with code to allow sensitive information to be sent back to China, according to a BBC report. Senior executives from both companies made the statements in front of a House Intelligence Committee.

Softbank’s TD-LTE network in Japan uses ZTE microcells.

ZTE has deployed TD-LTE trials and commercial networks for 33 leading operators in 19 countries, and won nine large-scale LTE-TDD commercial contracts worldwide.

Huawei has secured over 100 commercial LTE-A contracts and has launched 45 commercial LTE networks with leading operators worldwide, more than any other network infrastructure provider.

Huawei’s 100G networks serve more than 40 carriers in over 30 countries and regions across Europe, the Middle East, Latin America, and Asia Pacific. These include the world’s most extensive 100G network for Russia’s largest fixed network carrier, Rostelecom, and the first pan-European 100G WDM network for leading carrier, KPN, in the Netherlands.

According to Tolaga Research’s LTE Market Monitor:

Huawei and Ericsson dominate the market with close to 60% of contracts awarded for commercial LTE networks, followed by Nokia Siemens Networks, which is involved in 20% of the contracts.

Huawei and Bain Capital Partners were forced to give up their bid in 2008 for computer-equipment maker 3Com after the Committee on Foreign Investment in the United States raised objections. Last year, Huawei dropped plans to buy certain assets from 3Leaf Systems, a computer services company, after more problems with the foreign investment panel. Sprint eliminated Huawei as vendor in its massive Network Vision upgrade, after pressure from the government.

It was Huawei that asked for this investigation.

We sincerely hope that the United States government will carry out a formal investigation on any concerns it may have about Huawei,” the company said in the letter in February, 2011.

The company may have thought the government’s rejection of the Bain Capital & Hauwei deal for 3Com would insulate them from scrutiny. Apparently not.

Now the gloves are off.

As AT&T, Sprint, Clearwire and T-Mobile move to LTE-Advanced networks, the federal government will apparently encourage carriers to choose Ericsson (based in Sweden), Nokia Siemens Network (based in Finland), Alcatel-Lucent (based in France) or Samsung (based in South Korea), as preferred vendors.

There are clear signs of service providers combining 1800 MHz with higher bands, notably 2500 MHz, in their LTE deployments, according to Tolaga’s Radio Spectrum Intelligence. ZTE is good at that. That’s how the UK’s Olympic network was planned – ready for the 2.6 GHz auction. That’s how AT&T and Clearwire could deliver international roaming.

Kill ZTE and you deny citizens an infrastructure provider that can deliver real benefits.

It’s moving towards a trade war. I don’t care about the global cyber warfare battlefield. That’s not my job. I want cheap broadband. Now.

Chinese vendors could be our best shot at cheap broadband. Banning Lenovo laptops may be next. Intel (and the US Government) will keep them honest.

Google and Apple apps have been “phoning home” for years. Should governments ban Google and Apple? Verizon and AT&T sell your personal data to advertizers. Governments (and conceivably terrorist organizations) can buy it. Should the federal government ban AT&T and Verizon as well?

What is the problem here?

If this is a trade war, Huawei and ZTE will win it. China, India, Asia, Europe and South America are unlikely to boycott Chinese vendors.

It may not be such a bad thing to put everyone’s cards on the table. The U.S. position could be entirely justified. But the line between domestic security and espionage is nebulous. Domestic security can be a double-edge sword. Look at StuxNet.

There ought to be more trust on both sides. With verification. And oversight.

Related Dailywireless articles include; Concerns Linger over Huawei and ZTE, Huawei Before Intelligence Committee, CISPA Passes House, NRO: The Real Ice Station Zebra?, DEFCON 20, FISA Amendments Extended, ISPs Adopt Cyber Security Recommendations, Russians Not Controling Springfield Water Pumps, Dueling Cyber Security Bills, and Stellar Wind

Posted by Sam Churchill on .

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