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Inside the talks to end the UK's reliance on Huawei

Huawei
Huawei

At the start of the year, before coronavirus swept across the country, politicians had a very different crisis on their hands. Boris Johnson announced he was allowing Chinese firm Huawei to build part of the UK’s 5G network - and Donald Trump was furious.

The US view was that it was “like allowing the KGB to build [Britain’s] telephone network during the Cold War”, Republican allies said at the time. Trump was reportedly “apoplectic” on the line to Johnson, having been pushing for the UK to change tack for months to no avail.

But, now, months later, things are changing. The Government appears to be setting the groundwork for Huawei to be stripped out sooner than expected.

Ministers are understood to have held talks over funneling taxpayer cash into an international scheme to standardise 5G network equipment, known as OpenRAN, that is backed by BT, Vodafone and tech giants including Facebook.

Sources also told The Telegraph there are early talks over compensating telecom operators for having to swap out Huawei equipment earlier than planned.

All this stems from a new emergency review launched into Huawei. Within weeks GCHQ branch the National Cyber Security Centre will report on how fresh US sanctions over semiconductors will affect the Chinese giant.

In practical terms, the restrictions stopping US parts being used in semiconductors for Huawei are likely to hurt the company’s handset business more than its network equipment arm.

But there could be concerns over the equipment no longer being “good enough because Huawei cannot access the best technology to make it happen,” says Janardan Menon, an analyst at Liberum, and others over what will happen to its supply chain.

He says the decision to launch such a review seems more political. “The US is ratcheting up pressure on European governments to try to end their relationships with Huawei as well. What we're seeing from the UK Government is probably more a reflection of that than what is happening on the chip level.”

It is a view shared by many. Speculation is swirling that Britain is preparing to make a sharp u-turn on its earlier decision over Huawei. Johnson may have given the company the green light, albeit with a cap on market share. Telecoms firms expected able to use the Chinese vendor, as they had when building Britain's 4G networks, for the fifth generation of mobile networks, 5G, that will offer faster speeds and greater capacity.

But now “there’s a growing resignation” that Huawei will not be allowed as big a role as was previously suggested, one industry source said. “It’s just a matter of what the timeline will be.”

Read more | Huawei 5G storm
Read more | Huawei 5G storm

For Huawei, such a move would be disappointing. It has operated in the UK for 20 years, touts its “proven track record" in the country. Victor Zhang, its UK boss, says that “the Government decided in January to approve our part in the 5G rollout, because Britain needs the best possible technologies, more choice, innovation and more suppliers, all of which means more secure and more resilient networks.” Huawei has always denied claims it poses a security risk.

Yet, within government, there has been a change of heart. The Daily Telegraph reported last month that Johnson had instructed officials to draw up plans to cut China’s involvement down to zero. Over the weekend, The Times suggested a new “multi-pillar” approach was being adopted, to invest in companies such as BT and Vodafone to develop their own network equipment, as well as grow out an international alliance.

Ministers are understood to be working towards a position where Britain does not have to use a high risk vendor in its telecoms network.

The cogs are moving to make this a reality. Recent talks with telecom operators are understood to have centered around a taxpayer investment into “OpenRAN”, technology aimed at standardising network equipment that has been in development in recent years.

This open standard could open the door for more rival suppliers to flood the 5G market and compete with Huawei.

One, for example, known as the Telecom Infra Project, already has the support of US tech giants Facebook and Intel, as well as operators such as Vodafone, BT and O2-owner Telefonica.

“It’s not realistic to just go out and create another Huawei or another Ericsson,” one source says. “It takes decades. The Government should be supporting the ability to quickly develop an alternative ecosystem. And what is feasible is to leverage the non-proprietary approach.”

Yet, that does not mean that telecom operators may not need some government support. In the discussions between ministers and telcos, there is talk of a potential “compensation”, should companies need to swap out Huawei equipment earlier than initially planned.

Technology Intelligence newsletter - UK
Technology Intelligence newsletter - UK

There are questions over whether firms will be allowed to keep Huawei equipment in their networks until they naturally need to be swapped out - in which case such “compensation” may not be necessary.

All this points towards a fresh decision being taken. Some urge caution over too much speculation on whether it could be the end of Huawei in the UK. “We’re not quite there yet,” says Bob Seely, MP for the Isle of Wight and chair of the 59-strong Huawei Interest Group of MPs. “It might be that the Government still tries to retain a Huawei share in the network.”

“We need to be sure that the only people that are in our advanced communication networks are trusted vendors”.

Still, opposition among MPs is clearly on the rise. Even if the review leads to very little, Seely doesn’t see MPs backing the upcoming Telecom Security Bill. “It would be very difficult for them to get anything through the House of Commons which has got Huawei in the mix for 5G”.

Whether it is with the review or the bill, one thing is clear: Johnson may have made a decision on Huawei in January, but that decision may soon have to change. This time, at least, the US may be happier with the outcome.