Over 68 countries went with Huawei for 5G deployment, despite U.S. warnings of national security risks. What does that mean?
Declan Ganley: “If Beijing succeeds in the strategy that it is implementing now, 10 years from now, there would be nowhere to go.”The U.S. is struggling to go 5G itself, what happened?
Newt Gingrich（前眾議院議長）：「他們花了850億美元買下了時代華納，他們負擔不起5G 開發的費用。」
Newt Gingrich: “They took 85 billion dollars and they bought Time Warner… They can’t afford to go to 5G and they’re desperate that nobody else go to 5G. ”
A wholesale open access model will break the mobile industry’s oligopoly. But is that all it takes to prevent China’s dominance in the cyber domain?
Robert Spalding:“ It is absolutely a government decision because it’s talking about our freedoms going forward. What kind of life you want to live in?”
蕭茗（Host/Simone Gao）: 歡迎收看《世事關心》，我是蕭茗。兩個月前，我們做了一期華為和全球5G應用的節目。那時候華為準備好要接管全世界網絡領域的大部分。我們探討了那種情景下的國家安全問題。我們注意到美國努力提升對國家安全風險的認知。兩個月過去了，我們現在討論話題的另一個方面。我們注意到美國的努力讓世界更好的認識到華為帶來的風險，但是華為擴張的勢頭依舊。事實上，華為和共產中國正在布更大的局。他們有一個狡猾的戰略，和中國的權貴資本主義本質相掛鉤。自由世界能贏得這場戰鬥嗎？靠什麼才能打敗華為？這一期的《世事關心》，我們來探討。
Welcome to Zooming In, I am Simone Gao. Two months ago, when Zooming In did a story on Huawei and global 5G deployment, Huawei was poised to take control of much of the world’s cyber domain. We talked about the national security implications of that prospect. And we observed the U.S. efforts to raise awareness of that risk. Two months later, when we did another story on this topic, we realized the world knows Huawei a lot better through these efforts, but Huawei’s momentum has not stopped. In fact, Huawei and China are playing a grander game. They have a brilliant strategy that is working well with the very nature of a crony capitalism. Can this battle still be won by the free world? And what does it take to win? Let’s find out in this edition of Zooming In.
Part one: A Huawei Victory Party
For many stakeholders, the Barcelona World Mobile Congress held at the end of February this year was what they feared: a victory party for Huawei, China’s primary telecommunications equipment provider who will be deploying 5G networks world wide.
According to Zooming In sources, Huawei has signed official 5G deployment contracts with 68 countries. That number jumps to 80 if Memorandum of understandings, where countries are testing and planning on using Huawei equipment, are included. When Zooming In reported this story in early February, the number of countries that had decided to go with Huawei was 61.
Interestingly, In public, Huawei has under reported the victory number by asking some of its new clients not to announce the deal. Some of its clients have also asked Huawei to do the same out of fear of political pressure.
Huawei’s success is significant against the backdrop of a few important events. First, On December 1st, 2018, Huawei’s CFO, Meng Wanzhou, was arrested in Canada at the request of the United States for allegedly breaching U.S.-imposed bans on dealing with Iran. Two months later, Huawei was indicted for theft of trade secrets, wire fraud, and obstruction of justice in the U.S. Following that, America warned allies that whoever uses Huawei equipment for 5G deployment will be cutting themselves from information exchange with the U.S.
In Response to the U.S. warning, The European Commission decided not to call for a European ban on Huawei, leaving it to EU countries to decide on national security. But it urged EU countries to share more data to tackle cybersecurity risks related to 5G networks.
On March 19, Danish telecom provider TDC announced it will go with Sweden-based Ericsson to build the company’s 5G network. But Germany recently refused to ban Huawei from its 5G deployment. The UK has indicated a similar stance.
“The Huawei campaign has been the most sorriest episodes of the U.S. diplomacy in history. As you know, the United States told its allies not to use the Huawei technology for the 5G rollout because that will give the Chinese Communist Party an opportunity for espionage. The result of that is even the British, not to mention the west Germans, Malaysians, South Koreans, Indians, and dozens of others, poles, Czechs and Hungarians have told us: No thank you very much, but we are going to use Huawei equipment. Why is this? We don’t make any of the systems. We used to. Cisco used to dominate the market. Cisco has 72 billions worth of cash in the bank. Huawei spent 72 billion dollars in R&D in the last 6 years. The alternative， Ericson and Nokia make their chips in China. The Chinese can put back doors to those chips as easily as they can into Huawei chips. ”
That was at an April 25th forum by Committee on the Present Danger: China, in New York. Two weeks earlier at an event by the same committee, former House speaker Newt Gingrich lashed out at another American company over 5G.
“Our companies are so out of sync. And take AT&T which is currently lying about this whole thing. And the reason they’re lying is simple. They took 85 billion dollars and they bought Time Warner. For eighty Five billion dollars, They could have leapfrog Huawei and we’d be the dominant Internet country in the world. But now that they have and now that they’re the most indebted American corporations. They can’t afford to go to 5G and they’re desperate that nobody else go to 5G. And so what you get is the domestic enemies will tell you we’re not doing badly. Well first of all we’ve we blocked Huawei from being here. But they missed the whole point. Huawei is now in 60 or 70 countries. Now how are you going to operate worldwide. Virtually every country in the world has a Chinese Internet system. We haven’t had a wake up call. We don’t understand what the problem is we don’t understand what the scale of the response is going to have to be and we are losing. ”
It actually took a long time for the U.S. politicians to realize there is a problem. When they finally decided to fix it, they immediately realized this is not a easy task at all. It takes more than just security alert about Huawei to turn the tables on China’s 5G ambition. Why is it so? We will have to first examine how Huawei became so Invincible in the first place, not just in the developing world, but in the developed world as well.
在許多西方工業化國家，移動寬帶服務行業以零售模式運行。 在這個模型中，主要的商業運營商預先支付大量資金，從政府購買頻譜，沒有別人能付得起這個價格。 然後，這些運營商盡可能多得向消費者收取數據費用。 同時，他們自然會去尋找最便宜的設備和部署成本， 該設備來自中國。 這些大型商業運營商最終成為中國公司的說客，以獲得政府對中國公司的政策傾斜。 Rivada Ganley是愛爾蘭和美國電信公司Rivada Networks的董事長兼首席執行官，他稱這些商業運營商為「特洛伊木馬」。
In many western industrialized countries, the mobile broadband service industry runs on a retail model. In this model, major commercial carriers pay a large amount of money upfront to purchase spectrum from the government, leaving no one else in the field because smaller players can’t afford the price. Then they charge consumers as much as they possibly can for data. Meanwhile, they naturally look for the cheapest equipment and rollout costs. This equipment comes from China. And these big commercial carriers end up serving as lobbyists for Chinese companies to gain regulatory favors from their governments. Declan Ganley,Chairman and CEO of Rivada Networks, an Ireland and U.S.-based telecommunications company called these commercial carriers “trojan horses”.
Declan Ganley（Rivada 網路通訊公司總裁）：「我談到過這個事實，就是北京使用這些零售型移動服務運營商作為特洛伊木馬，就是中文說的『殺手鐧』用在這上面了。就是競爭中使用不對稱優勢，還使用對手的力量來製約對手。這些運營商的遊說集團，在各個國家，用了很多來自北京的幫助來進行遊說工作。他們願意這麼做的原因，是北京給他們提供了極其誘人的條件，相當於變相為他們的5G網絡的鋪開提供補貼，大大降低了他們的成本。這幫助他們繼續他們的零售模式，這讓他們上癮。這是在西方世界通訊業壟斷現實下對中國補貼的上癮問題。」
Declan Ganley: “I talked about the fact that Beijing uses these retail mobile carriers as their Trojan horse. I think in China, in Chinese it’s, I’ll mispronouce this now, ShashouJian is the term that is used for this. The assassin’s mace is the rough translation in English it’s using an asymmetric advantage against your opponent and using your opponent’s own strength really against your opponent. And the retail lobbyers, carrier lobbies in each of these countries have done all of the lobbying with a not an awful lot of need for help from Beijing. And the reason that they’re doing that lobbying is, Beijing has offered them extremely attractive terms, is really offering a massive subsidization of their 5G rollout and these carriers who are trying to maintain the market, the margin, between what they retail a gigabyte of information of data for and the cost that it costs to produce it. While they want to maintain this retail business model, they need these Chinese subsidies and so they’re addicted. There is an addiction problem in the retail mobile carrier oligopoly in the West and the addiction problem is to Chinese subsidization so that they can do 5G. ”
America runs on the same retail model although it doesn’t allow Huawei equipment currently. However, what will happen if Beijing were to be successful in Europe and everywhere else? According to Ganley, if that’s the case, 10 years from now, there will be no other option other than using Huawei equipment.
Coming up, can the table be turned? What is the Wholesale open access model?
Part 2: Can the table be turned?
Can the table still be turned? The short answer I got from industry leaders and policy experts is Yes. And it so happens that a big portion of the cure for the problem identified in the 4G era is also a prerequisite for the 5G era. That is, a wholesale open access model.
As we mentioned above, in the U.S., under the current retail model, the major mobile carriers spend all their money buying spectrum, building networks and investing in the entertainment industry for maximum profit. They are left with little money for anything else. When the wave of 5G finally hits the United States, the country is presented with two options. One option is the continuation of the old retail model, in which 4 major players all have their own networks. They can tweak their networks to go 5G, but they won’t be real 5G. According to Accenture, a global management consulting and professional services firm, it will cost two hundred and seventy five billion dollars just to build one 5G network. If all four U.S. mobile carriers were to build their own networks, it would cost a trillion dollars, an amount of money they do not have.
Another option will be to build one physical network that everyone shares spectrum from according to General Robert Spalding, senior fellow at Hudson Institute. When he served as Senior Director for Strategy to the President, he was the chief architect of the framework for national competition in the Trump administration’s National Security Strategy (NSS). In my recent conversation with him, he said the characteristics of the 5G technology require a different business model.
Robert Spalding: “One of the things that 5G can do is called Virtual splicing. It allows you to have many private networks on one physical infrastructure. And so right now the 4G networks, each company has built their own 4G networks but because of the propagation characteristics of the frequency spectrum they’re in, which is primarily the mid band, they go much farther. Also the sigtnal itself is a broadcast wide area signal, not a very narrow pencil beam like 5G. And so that allows them to have fewer…fewer towers for them to place their equipment. Again, though they’re still paying off that equipment. In 5G because we have virtual network splicing and because you can use the same frequency that you’re using in 4G, except in a 5G implementation, as you build one 5G network, one physical network…In other words, same set of towers, one set of antennas for one physical network, every operator can use that network and have higher speeds to the customer, have lower latency and more bandwidth to the customer. If you were to apply that like the current 4G model you would have a slower, less capable 5G network. You’d have actually four. In the current model you’d have four very slow nationwide 5G networks. In fact you wouldn’t even consider them 5G because the max speed that you would get out of each of those networks would be probably in the range of 300 megabytes per second. When you take all of that spectrum and you build it on one physical network your max throughput on that network is up to five gigabytes maybe even 10 gigabytes per second. Now each network operator, if they are a virtual network operator on that network, can give their customers five or 10 gigabytes per second service. In other words, ATT’s customers are better served, Verizon customers, T-Mobile customers…They’re all better served by using one physical network. Now the wholesale argument came out of the fact that we have a number of retail operators in the United States. Each of these operators in the past have sought to build their own networks because it made sense because of the technology. The new 5G technology…It does not make sense to build your own network because it actually means that you’re investing more than you have to. In other words for the United States, I just told you we would have to invest almost a trillion dollars to build these networks. That’s four times what we, in the current system, what we would have to spend if we only built one physical network. So not only is your network cheaper to install, it has actual better speeds and it’s a better overall service for the American people. Now finally the big reason why we need one physical network is because it’s much easier to secure that network against infiltration by totalitarian regimes like the Chinese Communist Party. ”
“Who will build that one physical network and who will own it?”
“ So whatever company chooses to build it would be the one that built it. In our current system what would happen is the FCC would have to sell cell spectrum to a company to do that. ”
“Good. You know People have been criticizing the wholesale open access model as being a government controlled and nationalized 5G network. What do you say? ”
羅伯特·斯拜爾丁將軍（哈德遜研究所高級研究員）：「首先，正如我所說的那樣，美國的所有頻譜都已歸聯邦政府所有。他們出售使用該頻譜的許可證，但該頻譜繼續歸聯邦政府所有。因此， 幾十年前FCC初創時就已經在搞國家化了，這是其一。其二， 我認為這已被用作，本質上是一種藉口，用於支持和促進電信公司獲得的持續寡頭壟斷，他們不想放棄，所以他們阻止其他人進入市場。如果你建立了一個單一的實體網絡，它將使新進入者很容易進入市場並獲得頻譜的使用權，然後以比現在低的價格給客戶提供互聯網服務。電信公司不希望這樣做，因為這會讓別的競爭者通過提供更好的服務非常輕鬆地奪走他們的客戶。現在很難爭奪他們的客戶，因為他們擁有自己獨立的網絡，因此他們要盡一切可能繼續擁有它，他們要達到這個目地，就不可能同意建設對所有網絡供應商都開放的5G實體網絡。」
Robert Spalding:“Well first of all as I said the…all spectrum in the United States is already owned by the federal government. They sell licenses to use the spectrum, but the spectrum continues to be owned by the federal government. So nationalization actually occurred several decades ago when the FCC was begun, number one. Number two I think this has been used as a essentially a literary device to prop up and promote the continuing oligopoly that the telcos have obtained and they don’t want to give it up. And so they’re preventing anybody else from coming into the marketplace. If you built a single physical network, it would make it very easy for new entrants to come into the market and get wholesale, buy wholesale service from that network and then sell it to the customers at a reduced rate. The telcos don’t want to do that because it would allow you to take their customers very easily by providing better service. Right now it’s very hard to take their customers because they own the network and so they want to continue to own the network in the best way that they can do…the best thing they can do to maintain that ownership is to make sure that a single physical network that’s wholesale out to other retailers is never allowed to be built. ”
Coming up, what does the wholesale model have to do with China?
Part 3: What does the wholesale model have to do with China?
蕭茗（Host/Simone Gao）: 讓我們整理一下到目前為止事情的頭緒。在中國試圖主導下一代網路領域的征途中，西方幾大移動運營商提供了極大的幫助，他們在本國政府面前極力為北京遊說。他們這樣做，是因為他們從華為廉價的設備中可以獲得巨大的好處。華為也為推出5G網路提供了巨額補貼。只要他們想維護這種零售寡頭壟斷，就需要中國的補貼。另一方面，同樣的移動運營商為了維持原有的商業模式，也會阻礙5G在美國的成功推廣。如果移動通訊業的寡頭壟斷是造成這兩種糟糕局面的背後的原因的話，那麼廢除這一模式則勢在必行。而批發開放接入模式將成為解決之道。然而，改變業務模型並非全部的解決方案。如果中國繼續補貼下去，當大的特洛伊木馬消失的時候，小的特洛伊木馬就會出現，因為降低成本，追求利益最大化是任何公司的本性。
Let’s summarize the rationale so far. In China’s journey to dominate the next generation of the cyber domain, major western mobile carriers have provided great assistance by lobbying for Beijing in front of their own governments. They do so because they have benefited tremendously from Huawei’s cheap equipment. The Chinese company is also offering them massive subsidization of their 5G rollout. As long as they want to maintain this retail oligopoly, they need China’s subsidization. On the other hand, the successful 5G rollout in the United States is also impeded by the same mobile carriers in order to maintain their old business model. If the mobile industry’s oligopoly is the reason behind these two bad scenarios, then dismantling that model seems to be the way to go. And a wholesale open access model will be the route. However, changing the business model will not be a complete solution. If China keeps its subsidization, when big trojan horses disappear, smaller trojan horses will emerge because reducing cost and going after maximum profit is the nature of any company.
Simone: “How do you prevent this from happening in the future? I mean isn’t lowering cost, maximizing profit what every company is after?”
“China is subsidizing Huawei. That’s not OK. That’s not free trade. We should not accept that. And if we do accept that, in 10 years there will be no other input of manufacturers other than Huawei. They do it for a reason. Because if they install Huawei then they can have back doors. If we want to have an equipment manufacturing industry we actually have to prevent the subsidization of that equipment. Now that was supposed to be what the WTO was going to enforce. The Chinese don’t follow the WTO. So you have to come up with some mechanism to actually create an industry that allows you to have the kind of hardware gear that you want in your in your network. We need free trade. Fair reciprocal trade. We don’t have it right now. So it’s not just a wholesale model that’ll fix it. You actually have to have protections for the industry itself. Right now we we used to have Lucent in the United States, Nortel in Canada. Both gone. Ericsson, Nokia, Samsung…Samsung for equipment manufacturing. None of them will survive Huawei, if we don’t protect them. So it’s not just about, Hey we can’t do Huawei, we actually have to provide another mechanism to protect the industry as well. ”
“And also with the wholesale model these players can do without Huawei. But in the old model it’s almost like they can’t leave Huawei. They can’t afford it. ”
Robert Spalding: “But even in a wholesale model they can still go to Huawei, they just make more margins. Right? And Huawei supposedly has the best, some of the best technology, at least that’s what some of the telecom operators say. OK. So if they’re the only ones that are investing in new technology and advances in 5G and none of the other equipment manufacturers have any ability to do that, then how does that put us in a better position 10 years from now when we’re looking at the next iteration of infrastructure? It puts us in a worse position because then all we have is Huawei. And so it just can’t be we’re going to have a wholesale open access model. You actually have to think about how today you incentivize industry to build the kind of industry architecture that you need going forward for national security. In the National Security Strategy we said: Data is a strategic resource in the 21st century. Because data can be used along with artificial intelligence, machine learning, big data analytics and social media to do targeted influence to do mass surveillance and also to do other things that are inimical to the liberal order that you have to actually look at the world in a different way. And it forces you to think about industrial policy again in targeted areas. It forces you to think about how important it is that we have a secure internet for our nation and how we look at things like individual liberty, rule of law, private property, sovereignty in a digital sense. All of these are made worse when we allow consolidation for both the equipment and the infrastructure by a totalitarian regime that believes in none of those.”
Simone:“ So eventually it should be the government who makes the decision to keep Huawei out, not the free market.”
羅伯特·斯拜爾丁將軍（哈德遜研究所高級研究員）：「絕對應該是政府拍板，因為它牽涉到我們的各種自由未來命運的問題，你想生活在什麼樣的環境裡。AT&T公司不可能夜不能寐地操心怎麼確保美國的民主安全，他們考慮的就是怎麼賺錢。Verizon 公司也如此，T-Mobile 公司也如此，任何網路運營商都不例外，保護一個國家的公民並不是他們的職責，而是政府的職責。由此看來，政府在數據保護方面做得很差，那可是一種戰略資源，所以，你的數據、我的數據、行業的數據和政府的數據，都需要像業主一樣得到保護，這當然需要政府介入。」
“It is absolutely a government decision because it’s talking about our freedoms going forward.
What kind of you want to live in? AT&T does not sit up at night and think about how do we make the America safe for democracy. They think about how to make money. So does verizon, so does T-Mobile. So does any network operator. It is not their job to protect the citizens of a country is actually the government’s job. And so in this case the government is doing a very poor job of actually looking at how do we protect data. That’s a strategic resource so that your data and my data and industries data and government’s data all maintains along with the owner. That’s something that certainly government needs to be involved with. ”
蕭茗（Host/Simone Gao）:我們已經多次討論過這個話題，幾十年來，美中關係一直有追逐利益的公司主導，最終的結果一直很糟糕。如何防止這種情況再度發生？也許我們可以從這樣一個類比中得到啟示：美國永遠不會從中國軍方僱一位將軍，不管他要的工資待遇有多低，網路領域也不無類似之處。歡迎您在推特上@ZoomingInSimone 分享您的見解，您也可以加入我們的Facebook 互動頁面，訂閱我們的youtube頻道：Zooming in with Simone Gao ,下次再見。
I have talked about this several times. In the past few decades, the U.S.- China policy had been dominated by a profit-driven business sector and the results have been very bad. How do we prevent that from happening again? Maybe we could use this analogy: The U.S. would never hire a general from the Chinese military no matter how much cheaper he is. With cyber, it is similar. Let me know what you think on Twitter @ZoomingInSimone. You can also join the conversation on our Facebook page and subscribe to our YouTube channel: Zooming In with Simone Gao. Goodbye until next time.
Editors：Bonnie Yu, Frank Lin, Tang Bin, Melodie Von, Jule Kuo, York Do
Cameraman: York Du, Teddy Lin, Ken Li
Narrator: Rich Crankshaw
Transcription: Jim Battaglini
Translation：Greg Yang, Juan Li, Xiaofeng Zhang, Bing Tang, Chu Yue
Special Effects：Harrison Sun
Assistant producer： Bin Tang, Merry Jiang
Host accessories are sponsored by Yun Boutique
New Tang Dynasty Television
May 1, 2019