As British telecom operators carry on extracting Huawei from their 4G and 5G networks, the controversial Chinese vendor is still clinging onto its job in UK fiber.

By 2023, its share of any 5G or full-fiber network must be capped at 35%, authorities ruled in January last year. After a toughening of the government position, operators were subsequently given until the end of 2027 to ensure not even a Chinese fingerprint remains on the 5G network. But Huawei's fiber fate was left undecided.

Judgement day is now approaching. The Department for Culture, Media and Sport (DCMS), which sets telecom legislation, has finished a consultation with operators aimed at finding out what fiber alternatives to Huawei currently exist.

BT's Openreach division, the UK's largest fiber builder, says it cannot comment on the process while DCMS works through the responses. But the eventual outcome will be something called a Designated Vendor Direction (DVD) paper that could be a death sentence for Huawei's UK business.

Policymakers have previously resisted any urge to unleash the firing squad mainly out of concern the full-fiber equipment market is even less competitive than the 5G one.

In the draft version of its DVD paper, circulated to service providers last December, DCMS said that "placing the cap at lower than 35% or introducing an earlier deadline would risk the resilience of UK networks, given the current lack of diversity of supply in the market."

The remark came after the National Cyber Security Centre noted in July 2020 that "there is only other scale vendor in this sector" and that "over-reliance on any vendor is bad from a security and resiliency point of view."

That vendor is Nokia, and data published by Omdia, a market research firm (and sister company to Light Reading), illustrates the problem from the government's perspective.

Late last year, when authorities were fretting, Chinese vendors and Nokia collectively served more than 80% of the global market for broadband access products, according to Omdia. And with about 23% of business, Nokia was the only Western vendor whose share exceeded 4%.

Figure 1: Market shares of broadband access products by revenues in Q3 2020 Source: Omdia

Fiber alternatives are appearing

But the fiber part of that market is now evolving quickly, says Julie Kunstler, a principal analyst with Omdia. It is not only set for growth in the next few years but also becoming more diverse, she reckons.

"New equipment vendors are entering the PON [passive optical network] segment, such as Ciena," said Kunstler by email. "In parallel, smaller vendors such as Adtran, Calix and DZS are winning contracts in Western Europe."

Indeed, Adtran is already established as a major force in the region thanks largely to its work for Germany's Deutsche Telekom, which counts the US firm as one of its two main fiber vendors – the other being Nokia.

Of greater interest to DCMS will be the deal Adtran landed with Openreach last year, when it joined Huawei and Nokia in the line-up of full-fiber vendors.

"There is a big chunk of pie for Adtran to go after," Peter Bell, Openreach's chief technology officer, told Light Reading in February. "We want them to be a big part of the multivendor environment."

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Still, another government clampdown on Huawei would be hard on Openreach. It had extended its full-fiber network to about 5 million properties by the end of June and has relied heavily on Huawei so far.

While Openreach has never provided a breakdown by vendor, DCMS put Huawei's share of the UK full-fiber market at 44% in December, against just 35% in mobile access. For Openreach, stripping it out would be costly, time-consuming and disruptive.

Openreach, unsurprisingly, is playing down Huawei's significance. "Our security and network architecture principles mean Openreach's use of Huawei equipment is limited," a spokesperson told Light Reading.

"Importantly, we only use their equipment in the access network – the physical infrastructure which connects an individual customer or device to the core network."

This is similar to the argument operators made about mobile when the government was considering a 5G ban. They hoped that keeping Chinese vendors out of the sensitive network core, where any security breach might be especially damaging, would be sufficient. Yet the government was ultimately unconvinced.

There may be fewer reasons to worry about fixed-line infrastructure, of course. "In general, mobile appears to be less secure than fiber-based networking," says Kunstler. Because 5G could be used to connect an "Internet of Things" comprising billions of everyday objects, it comes with far more potential vulnerabilities.

Known fiber unknowns

Authorities, though, appear to have just as much concern about fiber as they do about mobile in their draft DVD paper. US trade sanctions cutting Huawei off from Western suppliers will force Huawei to make even greater use of Chinese technology, they note.

"As a result, in its involvement in the United Kingdom's fiber to the property (FTTP) and mobile access (MA) networks, Huawei is increasingly reliant on unknown and untested components," says the paper. "This raises serious national security concerns."

Even if Openreach is not forced to replace Huawei's fiber equipment, it seems highly unlikely to buy more Chinese fixed-line products. This would mean dividing the other 20 million properties in its fiber rollout plan between Adtran and Nokia, much as Deutsche Telekom is doing in Germany. It would also, effectively, leave Huawei without a UK networks business.

The company had no official statement to offer on the latest policy developments and staff at a recent evening event in London drew attention to Huawei's ongoing provision of 2G, 3G and 4G products in the UK.

But operators have been dismantling its 4G equipment to ensure there are no interoperability problems with new 5G suppliers. That also means taking out its 2G and 3G products, which Huawei has provided on the same "single RAN" platform.

Among its circle of top executives in China, the hope is that Huawei can survive and even prosper by selling software and cloud services, less vulnerable to US trade sanctions.

The diversification strategy could work in China and markets less hostile to the Chinese, but no country that has banned Huawei from its telecom sector is likely to welcome it as a public cloud. How long it survives on UK soil will partly depend on the government's next move.

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— Iain Morris, International Editor, Light Reading