Amid Global Turmoil, Huawei Still Counts at Least One American Supporter
It's been a rough few months for Chinese vendor Huawei. As reported in front-page news around the globe, the company's CFO was arrested, the US government began criminal proceedings against the company, and a growing number of governments and operators around the world are taking steps to block business with Huawei completely. (See Nokia Replacing Huawei in Vodafone's German Core, Huawei Controversy Pits Spooks Against CSPs, Where Huawei Fears to Tread and How the West Can Hurt Huawei.)
And, most recently, President Trump is reportedly considering an executive order that would declare a national emergency to ban all US companies from using telecoms equipment from Chinese vendors such as Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763). (See Will Trump Fan the Flames as Huawei Is Burned at the Stake?)
But all of this hasn't changed James Groft's view of the company.
"Of course we're concerned. I'm not trying to be naive," Groft, CEO of James Valley Telecommunications (JVT), told Light Reading. "But this is the United States. I'm a believer in being innocent until proven guilty."
Added Groft: "There are things out there that makes me wonder, that makes my antennas go up. But I haven't seen anything 100% proof positive that they're using my network to conduct espionage."
Groft's comments essentially represent a reaffirmation of JVT's support for Huawei. Roughly a year ago, Groft told the FCC that JVT -- which provides voice, mobile, video and broadband services to nearly 10,000 customers in South Dakota -- is essentially a Huawei shop. He said the Chinese vendor supplies all of JVT's wireless core and wireless radios.
"JVT chose Huawei because it was the most cost-effective option with a 40% savings versus the second most cost-effective option," Groft told the FCC last year. "Huawei is highly cost-effective and it provides excellent customer service. Before contracting with Huawei, JVT had a series of terrible experiences with another, higher-priced vendor. Huawei's service record, while not perfect, has resulted in fewer and less severe coverage outages for our customers. Huawei is there when our customers need them."
Groft made his comments to the FCC in response to the agency's proposal to prevent companies that take the government's USF money from using it to purchase equipment from Chinese suppliers like Huawei and ZTE. "A strict ban on using Huawei equipment moving forward would not allow JVT the time to properly test and calibrate new equipment to ensure it can work with a predominately Huawei legacy network," Groft said. "In order to ensure that we can provide the service our customers expect, we would have to make as clean a break as possible. We estimate that the purchase price of replacement equipment is close to $5,000 per affected customer and would result in the abandonment of a network that is not fully depreciated and does not need to be replaced."
To be clear, Groft's JVT isn't the only small wireless operator using equipment from Huawei. The Rural Wireless Association estimated late last year that fully 25% of its members use equipment from the Chinese vendor. (Light Reading contacted more than a half dozen other small wireless operators about Huawei, but none responded beyond JVT.)
So why is Huawei so enmeshed among rural wireless operators, when the nation's larger carriers have gone so far as to strip Huawei equipment out of their networks? (See Surprise! Sprint Still Has Huawei in Its Network.)
According to at least one Huawei competitor, that's because Huawei can provide sweetheart financing deals via support from state-connected banks in China. "Huawei has non-transparent financial institutions behind it and that makes it tough [for us] to compete," Thomas Neubauer, VP of business development and RAN solutions for software vendor Teoco, said in 2016. (See Huawei: New King of the CSP Market.)
But there might be another factor at play as well: "There's a reason they're giving it away. They want our data," said Sen. Marsha Blackburn of Tennessee, explaining that Huawei's equipment is inexpensive because the Chinese government wants other operators to purchase it, for the purposes of espionage. Blackburn made her comments during a recent Senate Committee on Commerce, Science and Transportation hearing on 5G. "Huawei and ZTE, as we well know, are well known for embedding that spyware and malware into their equipment."
During that hearing, Michael Wessel offered a lengthy argument against Huawei, ZTE and other Chinese equipment suppliers. Wessel, a commissioner on the U.S.-China Economic and Security Review Commission, first pointed to testimony last year from the the heads of the CIA, FBI, NSA, DIA, NGA and the Director of National Intelligence that in part said they were "deeply concerned about the risks of allowing any company or entity that is beholden to foreign governments that don't share our values to gain positions of power inside our telecommunications networks," and that such a move could provide "the capacity to exert pressure or control over our telecommunications infrastructure."
Wessel also quoted the director of the National Counterintelligence and Security Center, who said that China's 2018 National Intelligence Law requires Chinese companies to support, provide assistance and cooperate in China’s national intelligence work, wherever they operate.
"No Chinese commercial entity can refuse to cooperate with China's security services," Wessel said.
Concluded Wessel: "Financial networks, smart cities, power plants, dams, chemical production facilities, air traffic and so many other sectors are supported by the Internet and will be increasingly dependent on 5G with the dispersion of IoT devices. If Chinese companies provide the equipment, with control over the source code, the updates, and servicing, it creates extreme vulnerabilities."
On the other side of the fence though stand Huawei and the company's allies, including Groft, who generally argue that there is no clear link between the Chinese government and Huawei, and no clear evidence that Huawei's equipment could be used for Chinese espionage. Nonetheless, the situation appears to have snowballed in recent months as a growing number of carriers and governments around the world take steps against Huawei, with a potential Trump ban against Chinese suppliers looming.