When UK citizens went to vote for a new government in December, their options looked few and unsavory. The ruling Conservatives were hellbent on a hard exit from the European Union that most people opposed, according to opinion polls last year. In Jeremy Corbyn and John McDonnell, the main opposition Labour Party was controlled by two retirement-age revolutionaries pursuing an extreme-left agenda. The Liberal Democrats, the only mainstream alternative, lacked credibility.
Under the UK's cockamamie, "first-past-the-post" electoral system, the Conservatives won a resounding majority with fewer than half the votes, returning Boris Johnson as the UK's prime minister. His attention has quickly been drawn to a similar shortage of options that confronts telecom operators choosing their 5G network suppliers. Following years of consolidation, about 80% of the market for radio access networks is served by just three companies -- China's Huawei, Sweden's Ericsson and Finland's Nokia -- with the likes of Samsung, ZTE (another Chinese vendor) and smaller specialists sharing the rest. Not an ideal situation.
The telecom issue has become an unusually urgent one for Johnson because he is under intense US pressure to ban Huawei, the biggest vendor, for security reasons. After trying to raise its profile for years, the Chinese company became one of the world's best-known brands in 2019 when the Trump administration declared war on it. Huawei, says the US, is a Chinese government stooge, intellectual property thief and trade cheat. Meng Wanzhou, its chief financial officer, remains under house arrest in Canada, awaiting possible extradition to the US on charges of fraud. Huawei's products could expose countries to Chinese spying and cyber attacks, insist US officials.
Unfortunately, the UK is already heavily dependent on Huawei, and its operators are reluctant to switch at what they say would be considerable expense. Nor is it just a question of cost and 5G delay, as Johnson pointed out during a TV interview this week. "The British public deserve to have access to the best possible technology," he told BBC Breakfast, a news show. "We want to put in gigabit broadband for everybody. Now if people oppose one brand or another then they have to tell us what's the alternative."
For any service providers unnerved by Huawei's antics, Ericsson or Nokia would seem the obvious alternative -- much as the Liberal Democrats should have to Conservative voters appalled by Brexit. Yet neither of the Nordic vendors has been covering itself in glory of late: Ericsson has just agreed to hand over $1 billion to US authorities to settle numerous international charges of bribery and corruption between 2000 and 2016; Nokia has run into 5G difficulties after previously selecting overly expensive components, a move it had originally hoped would provide a time-to-market advantage.
Huawei's supporters, including many of its service provider customers, have claimed its 5G technology easily surpasses rival products, including gear made by Ericsson and Nokia. It clearly took some giant strides in the 4G era, dislodging Ericsson as the world's biggest mobile infrastructure vendor by offering high-quality products at competitive prices.
But even if Huawei does have a technology lead, it is unlikely to be great in a market based on a globally agreed standard and still split relatively evenly between three industry giants. While geopolitics might bear some influence, Ericsson now boasts 78 commercial 5G agreements and 24 live networks, compared with the 65 deals Huawei had reportedly landed by October and Nokia's 63 as of early January. Studies that attempt to show certain companies control the most important 5G patents have proven inconclusive.
For Johnson and the UK telecom industry, the big problem is that a ban on Huawei might simply drive operators back to Ericsson and Nokia, in the absence of a new, Huawei-like challenger. Ericsson already supplies most of Vodafone's radio equipment, and Nokia is being phased out of the Vodafone UK network. Without a U-turn on Nokia, Vodafone could therefore end up in a single-vendor situation -- something most service providers are desperate to avoid. BT, meanwhile, uses a mixture of Huawei and Nokia radios across the UK. Forced to eject Huawei, it could face the same dilemma as Vodafone.
Even if BT introduced Ericsson or Samsung, the South Korean technology giant now emerging as a credible 5G contender, the upshot is that supplier competition would diminish. This might not lead to higher prices: Strand Consult, a Danish advisory firm, says equipment prices have fallen in the US market since Nokia's 2016 takeover of Alcatel-Lucent. Nor have costs risen in Australia since it banned Chinese vendors, said Strand Consult in a detailed report published last year.
Next page: Dwindling band of powerbrokers