Huawei Opens Back Door Into US

Recent news that Huawei has started selling networking equipment into the US didn't provoke the storm of reaction that I was expecting.

It's quite possible most people missed it owing to our rubbish choice of headline: Huawei Working Hard for Rural Success (zzzzzzzzzz...). As one CMO I met with this week told me: "I thought it was a story about farmers, so I didn't read it."

Well, for the record, this is actually a huge deal -- literally, figuratively and historically.

Unless you were strapped to the back of the New Horizons spaceship speeding your way to Pluto for the last few years, you'll know that three years ago the US House of Representatives Permanent Select Committee on Intelligence [Ed. note: talk about an oxymoron -- ha ha] issued an infamous report "strongly encouraging" US communications service providers to not purchase equipment from Huawei or ZTE because of national security concerns (a.k.a. "spying").

Most people didn't read the 52-page report, and so missed the following pertinent fact: The committee had actually found no evidence that either Huawei or ZTE was engaged in spying, had embedded spying capabilities in their products or harbored an intention to spy.

What the committee members did have was a clear desire to harvest some political capital, so they went ahead and made their recommendation anyway because, well, f*** you, China.

In fact, the only obvious truth that emerged from the release of the report was that this was a disgraceful and blatant piece of politically motivated economic aggression against the Chinese.

By seeking to lock out a competitive challenger from the US purely on the basis of suspicion and prejudice, the committee was, in a solid twist of irony, guilty of acting in the most un-American way possible. (And the ironies didn't end there, as it subsequently emerged that it was actually the US government that was doing the spying -- not only on the US population, but also on Huawei! (See NSA Reportedly Spying on Huawei: What's Chinese for 'Ironic'?)

Well, lest we forget, we are America [Ed. note: you're darn tootin'!], which means we're supposed to believe in stuff like a free market economy, globalization and our ability to win on a level playing field without the help of a bunch of slimy vote ferrets.

(Note: The chairman of the committee, Republican Mike Rogers, is also a Fox News Insider, which strongly suggests that a) He has no problem letting the facts get in the way of a spot of publicity and b) He's a giant asshat.)

Three years on and it emerges that in spite of the best efforts of Congressman Rogers and his committee of merry pranksters, Huawei has broken through in the US, successfully selling its fiber-to-the-home products to rural carriers. And it's doing it in the most American way possible: hiring a trusted rural industry statesman to head its sales initiative (Bill Gerski, who may, in person, look like this; sending its executives to meet with rural customers (and bringing those customers to tour its manufacturing facilities in China); and shipping competitively priced products that work.

Do not (not!) expect Huawei's success in North America to stop there.

These rural telcos are Huawei's "gateway customers" to Tier 2 accounts in the US, and thence to "kingmaker" deals with the Tier 1s -- AT&T, Verizon, CenturyLink. The seal on the North American market has been officially and irrevocably broken, and as executives in these smaller carriers spread the word of their successful experiences with Huawei, the Chinese uber-vendor will undoubtedly start to sell its way up through the layer cake of service providers to the very top.

At least one CEO of a major North American equipment manufacturer agrees with me, telling me earlier this year: "My worry is that in ten years' time, every network in the world will be built by a company in the East."

Is that really possible? In a word, 是的.

There are three main reasons why equipment manufacturers in North America (and everywhere else) need to be worried:

  • Numbers: The number 30 hasn't traditionally had any significance in Chinese culture, but it's certainly been lucky for Huawei, which is currently growing at 30% CAGR, and throwing off 30% in profit -- that's unprecedented. (Note: For all you numerologists out there, 30% is also the proportion of traffic that is now leaving enterprise networks for the wide area network, up from 10% at the start of the century, and one of the key drivers of Huawei's success.)

  • Know-how: The communications industry is undergoing a major shift away from complicated hardware towards simple New IP white box hardware and software. Huawei "gets" software and knows how to make low-cost, simple, reliable hardware (this is a Chinese company we're talking about, after all).

  • Culture: This is a big one. Anyone who works closely with Huawei knows that the company is undergoing a major transformation -- it has grown up (though not completely) and the slightly whacky and eccentric behavior once associated with the company is no longer in evidence.

As an American citizen, I was embarrassed by the 2012 Intelligence (sic) report. And today I'm happy to see Huawei competing in our country on its merits. That doesn't make me a communist sympathizer -- it actually defines me as a proud American, one who believes in a competitive meritocracy. And my message to US manufacturers is this: Huawei just arrived in your backyard and it thinks it's better than you. So get to work defending your territory and do it on the merits of your company, its solutions and culture and not through political bullshit.

Because that, my friends, is the American way.

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Susan Fourtané 9/12/2015 | 12:15:32 PM
Re: Anchors aweigh SoftwareArch, catching up after 15 years ... Hmmm ... It was about time. I know about the latest news, and about the deadline. Those cards upgraded in advance of Oct 2015 was only a small fraction of all the cards issued in the US, and it was done only a year ago. -Susan
Susan Fourtané 9/11/2015 | 6:51:24 PM
Re: Anchors aweigh KBode, not yet. It has always been a mystery to me why the US banks haven't adopted chip and PIN cards yet. Contactless cards are also already in use here. -Susan
KBode 9/11/2015 | 9:14:11 AM
Re: Anchors aweigh I'm sorry you had to go through that. Hopefully you've gotten to the bottom of it by now?

We've been so painfully slow to adopt chip and pin it's ridiculous, though I believe we finally turn the corner in that regard next year.
Solution84448 9/10/2015 | 5:55:37 PM
Re: Anchors aweigh You should talk to some ex-Huawei employees to see what goes on there.
kq4ym 9/7/2015 | 10:07:04 AM
Re: Anchors aweigh It would seem China despite it's many problems of late, is still way ahead in the telecommuncations game. With billions of potential customers in it's own territory, the rest of the world is just putting the icing on the cake. It's competitors are going to have to keep a sharp lookout as those products move bigtime.
Joe Stanganelli 9/5/2015 | 5:51:50 AM
Re: Anchors aweigh This comic here is relevant.
Joe Stanganelli 9/5/2015 | 5:50:27 AM
Re: Anchors aweigh And yet, the finger-pointing still happens a bit.  This sort of, "Well, pssh, i mean, yeah, we do it too, but only a little bit and not as effectively."
Susan Fourtané 9/3/2015 | 1:02:15 PM
Re: Anchors aweigh KBode, well, it's no so easy in Europe. We have Chip-and-PIN cards, and the card is never out of your sight when you pay. Never. It's impossible for anyone to see the security code, and, in the case of my bank, they periodically issue individual security codes for online transactions that are personal, and only in possesion of the user. For all this, I can only think that the problem was within the bank's own security, someone hacking their system, or something. Otherwise, it doesn't make sense that someone in Australia could use my card number and access the right security code which follows a specific order and I am supposed to be the only who knows such order. Also, the same charge appeared to other customers, also from Australia, according to an email from the bank. I'll try to get to the bank's CIO or CTO. -Susan
KBode 9/3/2015 | 12:36:00 PM
Re: Anchors aweigh Usually it's impossible to tell with credit card number theft. It's so easy for any waiter in the world to jot down all the info while back near the kitchen...
Susan Fourtané 9/3/2015 | 11:47:37 AM
Re: Anchors aweigh Mike, the wild wild west is very descriptive, indeed. -Susan
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