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U.S. vs. China – Really?

Thu, 11/11/2010 - 12:47pm

Is excluding Huawei Technologies and ZTE from wireless network contracts being crazily alarmist or is it the wise, cautious thing to do?

When I first heard that Sprint Nextel was excluding Huawei and ZTE from their network modernization project due to security concerns, it sounded like a classic example of fear mongering, or what comedian Stephen Colbert calls "Keep Fear Alive." Either that, or a really good example of government interference so extreme it would make you say "Really?," like in the commercials Microsoft is running to tout Windows Phone 7. 

Turns out, I must have been naïve and drinking China's Kool-Aid flavored tea because security concerns about Huawei have existed for years, even though security officials seemed to be OK with Huawei supplying gear to Clearwire last year, and other, smaller entities getting gear from ZTE. Apparently, Sprint's ties to and aspirations for future U.S. government contracts are what's raising the current level of security concerns.

It's worth noting that the security concerns do not apply to devices. Sprint this week announced Sunday's arrival of the unique ZTE Peel case, which can be attached to an Apple iPod touch for connecting to Sprint's 3G network without having to rely on a Wi-Fi hot spot for data connections. Obviously, network infrastructure is treated differently when it comes to national security.

The thinking is that these two Chinese vendors' ties to the Chinese military might create an opportunity for the Chinese military to manipulate switches, routers or software embedded in American telecom networks so that communications can be intercepted, tampered with or purposely misrouted.

The Wall Street Journal broke the Sprint story last Friday, and it followed that up this week with a sneak peak of a congressional advisory panel draft report that concludes China's growing role as a global supplier of telecom gear raises "fresh risks to U.S. security and will require greater scrutiny by government officials."

I was not able to get my hands on the draft report, but a conversation with a member of the U.S.-China Economic and Security Review Commission that is finalizing the report shed some light on the subject. The upshot: Better to be cautious than ever-trustful.

"We are reaching a critical point policy-wise where we really have to address [China]… Huawei is a symbol of a larger challenge," said Michael Wessel, a Washington, D.C., consultant and U.S.-China review commission member appointed by Rep. Nancy Pelosi (D-California). "We're going to face this on an increasing basis over months and years to come. China is here to stay. We're not excluding them from supply chains. They are able competitors."

It's no secret that Huawei and ZTE have been trying to aggressively grow their North American market share for quite a few years now. But it hasn't been easy. Even teaming with a U.S.-based partner, Amerilink Telecom, didn't seem to do the trick for Huawei. Amerilink could have provided a third-party way of verifying Huawei's gear, but once you introduce a third-party into the mix, that sort of ratifies the underlying concerns of people. And why should an operator have to verify the security of its vendors? It sounds easier to go another route.

A few years ago, the accusations about the Chinese vendors centered on their ability to undercut other vendors on pricing. The last time I spoke with a Huawei executive about this, he acknowledged those accusations but (of course) said Huawei doesn't skimp on solid know-how and delivers quality products. Besides, operators are not going to sign up a vendor that doesn't live up to their quality assurance requirements.

It's hard to know what's really going on with Sprint because it's not commenting, nor is ZTE. I haven't heard back from Huawei, but its silence seems to be an indication. In the past, ZTE and Huawei have defended themselves, basically saying these alleged ties to the Chinese military or government are exaggerated, out of date or otherwise unfounded. But their reassurances haven't been successful enough to allay concerns of U.S. security officials and some lawmakers who raised concerns  about Huawei's ties to China's People's Liberation Army and  a "concerning history" involving sales to Saddam Hussein's regime and supplies to the Taliban before its fall. (Such references will catch anybody's eye.) It appears that it is up to Huawei and ZTE to prove they are what they say they are.

When I visited China on a ZTE-sponsored trip this past May, I didn't get any vibe that they were spying or had some other nefarious agenda up their sleeves. (Then again, I'm not exactly in the State Department.) However, there was a moment on the plane between Shanghai and Shenzhen when it dawned on me, looking down at a sea of lights and very modern infrastructure, that China is not the same place us oldsters saw in pictures a couple or a few decades ago. It's a huge force with an incredible amount of infrastructure, innovation and super smarts of the type that is a real threat to the U.S. brain power/technological prowess. They could very well eat us for lunch if we let them.

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