Telecommunications is an industry that is evolving at an increasingly rapid pace, manifest not only in technological advances, but also the influence of regulation, legal policy, market forces, and security.
Particularly the last component has been a major sticking point as of late, where economic incentives that encourage foreign investment are frequently coming at odds with potential national security issues.
Most relevant to the United States is the Chinese corporation Huawei Technologies, a multinational original equipment manufacturer (OEM) that has recently overtaken Ericsson as the world's largest telecommunications equipment manufacturer. Here Sino-American relations have been bumpy, considering the official display of U.S.-congressional resistance earlier in October concerning the sale of Huawei equipment in the United States.
This recent economic unease turned political when a U.S. House committee issued a bipartisan report in early October accusing the private Chinese firm of stealing American intellectual property, in addition to posing a national security threat because of its close loyalties with the PRC government.
It is true that the company's founder Ren Zhengfei is an ex-military officer, whose time as an engineer in the People's Liberation Army (PLA) more than three decades ago is now being thrown around by those deeply suspicious of the communist party. In its report the House committee announced that it was prepared to warn American telecommunications networks against buying from Huawei, fearing that the purchase of these Chinese technologies could allow the PRC government to potentially spy on U.S. firms.
This concern fixates on something called deep-packet inspection, or DPI, which is a tool that Internet service providers use to protect against cyber attacks, and can allegedly be used to block websites, track users, and reconstruct emails. Those suspicious of Huawei's technologies do not have to point at just the United States: earlier this week a Reuters report highlighted that in Iran, Huawei allowed the Iranian government to monitor and collect data from its citizens' telephone and Internet use.
Huawei denies selling Iran equipment making up its telecommunications system that utilized DPI, illustrating that it is unclear how such technologies have been transferred and established. Obviously such cases would increase American suspicion of similar Chinese efforts to sell equipment in the United States.
International responses to Huawei has been mixed. In Britain, the company's investments have been warmly received, captured by photographs of Ren posing with PM David Cameron in front of the fireplace at 10 Downing Street in London.
This precipitated the declaration of the expansion of the Chinese company's sizeable operations in Britain; give the usually close ties between London and Washington, the contrast between their decisions involving Huawei is rather telling. Then again, like the rest of Europe, Britain will struggle to find reasons to turn down foreign investment that would create jobs and develop an industry that will only burgeon in the future. Nonetheless, this doesn't mean that Britain has entirely done away with its security concerns.
The Government Communications Headquarters (GCHQ) is Britain's signals-intelligence agency, and has a security-cleared unit that works to inspect code and equipment, ensuring that Huawei's technology is secure. Again, in comparison with the United States, Britain is much clearer about the conditions that telecommunications firms need to meet, and this transparency is paying off here versus the much more secretive review process of its ally.
Where else has the firm experienced a bumpy landing? Earlier in March of this year, Australia barred Huawei from bidding on contracts in the Australian National Broadband Network, citing security concerns. Seeing that the network would obviously be a valuable strategic asset and significant government investment, it makes sense that any potential for data monitoring by a foreign entity is reason enough to call off the deal.
Again, Huawei founder Ren's background with the PLA crops up and disturbs intelligence analysts, who worry about his potentially cozy relationship with the Chinese government. This unease is also directed at the financial subsidies, low-interest loans, and generous export credits that the PRC state frequently uses to prop up favored corporations, including Huawei. With such tight relations, one can perhaps see the concerns surrounding political whims, where even the private Chinese firm could nonetheless be exploited in order to eavesdrop and track information.
It is interesting to see some overlaps between company and military culture, particularly in the firm's rigidly hierarchical organization. Emphasis is placed on structural management rather than individual employee performance, many of whom are viewed as office or departmental units that carry out very specific tasks, and as a result are easily replaceable.
Although Huawei's culture builds upon quintessential Chinese values of resilience, hard work, and deference to one's superiors, one also notes the heavy rhetorical emphasis that nearly borders on propaganda: the introductory article of Huawei's basic law reads: "Love for our homeland, fellow citizens, work and life is the source of our cohesion; responsibility, creativity, respect and solidarity represent our company's quintessential culture."
Cybersecurity and U.S-China relations is certainly a major topic for analysts and policy makers. In the current highly-charged political environment, where both leadership administrations are fresh from recent transitions, mutual trust and cooperation remains a huge imperative for both states.
What are some of the major worries regarding a vast network of telecommunications equipment that may possibly be exploited in a cyber attack? In an arena where state borders suddenly become much less formal, computers and the digital spheres could be disabled through malware. The potential of constant data monitoring could provide a crucial intelligence advantage that would greatly tip the balance of power. Though it may be hard to see the mutual economic benefits of telecommunications investment becoming sidelined by security threats, the dangers do still exist, and government officials are certainly not willing to regard these possibilities too lightly.
China's track record regarding online freedoms is certainly not going to alleviate any suspicions. Although the number of annual cyber attacks that hit China are high - ranging from hacking of video game and social networking accounts, to stealing email usernames and passwords - the PRC government still deploys its censorship arm with little reluctance. Consider the major decrease in internet freedoms when important political events approach. The 2008 Summer Olympic Games in Beijing, as well as the more recent 18th National Party Congress last month regarding China's leadership transition, both saw a significant decrease in what could and couldn't be said and done online. With the possibility that any equipment sold by Huawei could even remotely result in such a situation, naturally suspicions and resistance is bound to skyrocket.
But this is a rather extreme circumstance. Right now investment is investment, and healthy business opportunities dominate the discussion as China continues to rise as an economic powerhouse. Banning Huawei from bidding for commercial contracts is not the way to go, as all Western capitalist citizens know that the economic competition from China is very appealing, and the potential to boost growth cannot be prioritized by much else these days. Huawei is a private firm and has a lot to lose if it is caught spying.
It sells cheap and effective equipment, and it does have quite a track record to examine in case some are too uneasy about the telecommunications giant; one only has to point to regions in Africa that have benefitted, such as in Kenya where Huawei has now become the largest provider of code division multiple access (CDMA) products. In a continent with less than five-mobile-broadband subscriptions per every hundred inhabitants, the Chinese company is looking to capitalize on the increasing demand for smartphones and low telecommunications infrastructure.
In other regions such as Tanzania, Huawei has recently launched an education program to provide ICT development and talent training. The examples are varied and widespread, illustrating that in many places the firm is welcomed, and indeed going far to establish itself.
Some have been outspoken in criticizing Huawei's approach to innovation. Cisco CEO along with its Vice President of worldwide operations question the Chinese firm's model, saying that "imitation isn't innovation." This is a particular moot point for Cisco, considering that back in 2003 Huawei admitted to basing some of the source code in its routers on the American company's system.
As of late though, it appears that the Chinese firm is quickly shedding these accusations, receiving The Economist's Corporate Use of Innovation Award back in 2010. It comes down to how willing Huawei is to abide by various governmental conditions regarding transparency and random equipment inspections, in order to dispel what would be harmful suspicions regarding its data monitoring capabilities.
The digital sphere and power of the Internet remains both an immensely beneficial and dangerous tool. Telecommunications is quickly being tied up in governmental discussions on online governance, and the question of how much regulation and protection is necessary for the huge swaths of data circulating online. In the age of increasing connectivity and rise of both social and digital networks, it remains imperative that these structures are safeguarded so as to protect one's citizens.
The case of Huawei demonstrates that economics can quickly be paired with politics, resulting in rampant suspicions of malicious intent and security setbacks. All recognize the powerful technological advances and capabilities of the telecommunications industry, which only contribute more to the increasingly heated discussions on how to properly manage the system.