New Zealand is the latest western country to exclude Huawei from supplying key hardware for strategic telecommunications networks. It follows similar moves in Australia and the US. In each case the government concerned cited security concerns as the reason for not allowing the Chinese equipment supplier to provide network infrastructure.
The news broke in a roundabout way when Spark issued a press release on Wednesday saying: “GCSB declines Spark’s proposal to use Huawei 5G equipment”.
Spark’s release says: "Spark New Zealand recently notified the director-general of the Government Communications Security Bureau (GCSB), in accordance with the requirements of the Telecommunications (Interception Capability and Security) Act 2013 (TICSA), of its proposed approach to implementing 5G technology on the Spark mobile network.
"Specifically, this proposal involved the deployment of Huawei 5G equipment in Spark’s planned 5G Radio Access Network (RAN), which involves the technology associated with cell tower infrastructure.
“The director-general has informed Spark today that he considers Spark’s proposal to use Huawei 5G equipment in Spark’s planned 5G RAN would, if implemented, raise significant national security risks.”
Technically the decision is not a ban. It would be possible to challenge the GCSB decision. However, the process is far from simple, so, in effect, the decision amounts to a hard ban.
Soon after the story broke, Andrew Little, the minister in charge of the GCSB, backed the organisation. He says Huawei would put Spark’s network at risk of “intervention in an unauthorised way”.
Little backtracked later saying the GCSB’s assessment of the risk doesn’t necessarily mean a ban. He suggested Spark and Huawei could work together to address any security concerns.
Australia and the US are New Zealand’s partners in the Five Eyes security alliance. New Zealand has followed its partners by passing The Telecommunications Interception Capability & Security Act. The legislation gives the GCSB the power to block any companies that it considers risky from key infrastructure projects.
The ban is a huge problem for the industry because at the time the only active alternative network equipment supplier in New Zealand is Nokia. Spark had a poor earlier experience with Alcatel-Lucent, which is now part of Nokia. Between 2009 and 2010 the XT network crashed. Alcatel-Lucent paid Telecom, now Spark, tens of millions in compensation.
Ericsson has suitable technology, but has not played a significant role in recent roll outs and would need to ramp up its operation fast. Samsung has entered the market, but again has little presence on the ground. Many in the industry regarded Huawei’s technology as being more advanced and complete than its rivals.
Another issues is there is less competitive pressure without Huawei. Carriers have less bargaining power when talking to equipment suppliers. This is likely to mean more expensive network builds, a cost that, eventually, will be passed on to users.
Spark has previously said it will build a 5G network in time for the 2021 America’s Cup. The company says that will still happen. While it could challenge the GCSB's decision, the process is unlikely to finish in time to meet the deadline.