Member log in

'NZ govt naïve about Huawei' – security insider Selwyn Pellett details Beijing experience with Endace

Huawei operates “hand-in-glove” with the Chinese government and its military-heavy surveillance apparatus, according to a leading NZ tech entrepreneur who had rare opportunity to observe the company at close quarters.

Selwyn Pellett told NBR of a government and corporate culture in China where electronic eavesdropping is so taken for granted that no sensitive information is sent by email; of his surprise at heavy anti-Western sentiment; and his certainty that government and commercial secrets worldwide are at constant risk of exposure.

Anyone who follows Mr Pellett on Twitter will know he’s skeptical of Huawei’s involvement in the $1.35 billion public-private Ultrafast Broadband (UFB) project.

“As someone who sold internet ‘monitoring’ for a living (2001-2007) I'd be worried about having Huawei in my govt funded internet backbone,” Mr Pellett tweeted on March 28.

Then, in reaction to an NBR story on the Judith Collins ACC email controversy, he commented:

 “The good news is soon we can ask Huawei to do some [internet data packet] inspection on the fly to tell us who did the leak. Lucky we went that way!”

Yeah, yeah, whatever, you could say. Following the events of the past fortnight, every man and his dog has an opinion, or at least conspiracy theory, about Huawei, the Chinese telecommunications equipment maker that was recently barred from bidding on Australia’s National Broadband Network following cyber-spying accusations. Huawei also faces an Australian government investigation into its proposed Perth-Singapore undersea cable. And in the US, lawmakers have blocked Huawei from bidding on a big telecommunications contracts, blocked its bid to takeover networking company 3Com, and pressured Huawei and US security company Symantec into dissolving a half billion dollar joint venture.

But Mr Pellet has had much closer access to Huawei than most, and has extensive experience in the global information technology security industry.

“My background is that I’ve sold network surveillance into probably 30 countries around the world,” said the tech entrepreneur, speaking to NBR at the Newmarket, Auckland, offices of one of his current ventures, Imarda (which sells fleet-tracking technology).

He was the co-founder and, from 2001 to 2007, chief executive of computer network security company Endace (he resigned from the board in 2010 and has sold most of his shareholding. Endace is still headquartered in Auckland, but is listed on the London Stock Exchange’s AIM Index - LSE:EDA - with a market cap of £77.38 million).

Endace emerged from the commercialisation arm of the University of Waikato.

Academics had developed clever ways to capture analyse data, which is sent over the internet in “packets” ( and indeed the university is still doing intriguing research into the way we use internet data, notably before and after the recently passed internet file sharing law).

“It was all about packet capture,” Mr Pellett told NBR. The headers were analysed, but the payload (such as the content of a message) was ignored. Companies used the technology to make sure data traffic was flowing smoothly through their networks.

“Then 9/11 came along and suddenly people wanted more than packet capture – they wanted content analysis,” Mr Pellett said.

“And that’s when Endace’s business went from network monitoring to network surveillance and we started dealing with national security agencies all around the world.”

Between 2001 and 2007, Mr Pellett met and did business with more than 30 security agencies, or their governments, around the world. All were Western or Western-friendly, he told NBR.

Endace also sold its technology to Chinese universities and research institutions. Mr Pellett says he assumes promptly reversed engineered his company's network cards and the software that runs them (and some will note Endace's technology has been helped along by our government, both in its University of Waikato genesis, and more recently through a $6.7 million grant; Endace has reciprocated by keeping its corporate and R&D staff in Auckland and Hamilton, and moving manufacturing home from Asia back to Christchurch).

But in , in retrospect, does it seem like a mistake?

No, Mr Pellett said. Universities all around the world attempted to reverse-engineer the technology and learn who it worked. Endace provided the technology to efficiently capture data – the needle in a haystack of packets – but it was up to the customer what they did with it, and whether they paired it with surveillance tools or other software (and as 9/11 paranoia eases and the company expands, Mr Pellett emphasises Endace now sells most of its product to the likes of banks and financial services companies).

The thinking at the time was that it was best to make a few sales for a small amount of money rather than be ripped off

In 2007, he Endace and Huawei were the two principal sponsors of a security conference held in Beijing.

Mr Pellet showed NBR a series of photos and documentation from the event.

The attendee list was heavy on Huawei staff, government officials and military representatives.

“Bear in mind that this was 2007, so it’s a long time ago. But the relationship between Huawei and the government was hand-in-glove and nothing  happens in China without the government’s approval.”

There was obviously and relationship between the Huawei and the Chinese government.

Beyond that, Mr Pellett was surprised by the whole tone of the event.

“I sat in that room as one of two Western faces amongst hundreds of people and I listened for hour on end,” Mr Pellot said.

“[It] was an eye opener to me to see how anti-Western the Chinese are.”

He did not speak Chinese, but was sitting by an Endace salesman who – reluctantly, at times – interpreted for him.

“To be in a room full of hundreds of people and have them screaming on stage … They were ranting and raving saying they would not and the government should not buy Western technology. They could do it all.”

But surely – if a little over-enthusiastic – this was essentially the same “buy local” sentiment expressed by patriotic or protectionist factions in every country?

Are we talking economic nationalism, or a desire to push security interests?

Mainly the former, but a bit of both, Mr Pellet said.

Many for economic, but it’s both

He noted that at the time the Chinese government was building what is known as new Great Wall of China, a huge firewall – involving 50,000 servers, according to documentation from the 2007 Beijing conference – designed to monitor internet traffic moving in and out of country.

The government was seeking better network technology, and better surveillance technology.

Mr Pellett noted the accusation by Cisco (the largest US maker of network gear) claimed Huawei had pirated the software code that runs Cisco hardware, using it as the foundation of its own routers.

The Chinese government could have done something about the Cisco case but chose not to, Mr Pellet said.

(Huawei said the copying was inadvertent, less than Cisco claimed, and the code since removed from its products.)

One of Mr Pellet’s key points is that many governments are now working closely with large technology companies to monitor internet traffic.

“We have a very naïve view,” he told NBR.

“What was going on in the decade between 2001 and 2011, and  certainly after 9/11, was governments didn’t give a damn about their internal laws. Stuff was going on all over the world that nobody knew about.”

In the US, the Patriot Act extended state surveillance power, but elsewhere, things were less official.

“There are countries around the world that have got laws against monitoring their own citizens and those laws were broken,” Mr Pellet said.

“I’ve been in countries around the world were people have told me it doesn’t happened.

“And I’ve thought that’s interesting, because I know your government’s bought all this kit and how it’s probably being used.”

And the persuasive surveillance culture goes beyond borders, Mr Pellett said.

What would Mr Pellett have done about Huawei’s proposed transtasman undersea cable, or its involvement, already underway, in supplying fibre and network management services for around 30% of the Ultrafast Broadband (UFB) project (though being one of several companies enjoying preferred supplier status with state-owned Crown Fibre Holdings, and its subsequent contracts with Christchurch UFB winner Enable and Ultrafast Fibre, which hold the UFB contracts for Hamilton, Tauranga, Whanganui and other North Island towns).

I’d just say to the government, “Do you want to feel comfortable with your national security, yes or no?,” Mr Pellet said.

“You’re choosing partners to align with. If [US company] Cisco is 5% more expensive does it matter?”

“And if you’re leaking information, would you rather be leaking it to the US or leaking it to China.

There are choices that governments can make.

“I suspect the citizens of the New Zealand would be more comfortable with the information leaking back to a US source than leaking back to a Chinese source.”

Certainly, were US and Australian authorities have actively blocked Huawei from bidding on public or private projects, our government has actively played match maker.  For example, in 2010, then ICT Steven Joyce included 2degrees staff on trade mission to China, which included a meeting with Huawei. 2degrees – which already used Huawei as its main network partner – later expanded its relationship to include a $100 million credit line from the Chinese company.

And Prime Minister John Key played cheerleader for Huawei, talking up the company’s ability, and pricing, on TVNZ’s Q&A as it angled for UFB-related supplier contracts.

Could it be that the government is aware of our allies’ security fears over Huawei, but, as with the Crafar Farms deal, sees potential advantage for New Zealand’s struggling economy if it’s seen as the most China-friendly Western country?

Are we simply seeing hard-nosed pragmatism?

“They’re playing a dangerous game,” Mr Pellet replied.

 “I remember Labour  celebrating the free trade deal with China and I was thinking Do you realise what you’ve done?”

The free trade deal was a disaster for intellectual property, from agriculture to technology, Mr Pellett said.

“ We’re sitting here playing by purist rules, but the same rules do not apply [elsewhere].”

“They’re being incredibly naïve – this government and the last.

“I don’t care who reads my emails, but if I were the government I’d care who reads theirs.”

More by Chris Keall

Comments and questions

NZ is a side show. Uncle Sam, Comrade Moa have far bigger fish to fry. Mossad steal our identies and the French sink a Rainbow. Who are our friends? Who is the enemy? Does it matter?
I'm confident that no matter whose technology is used, whose spy ware installed all that changes is who sees it first.

Spot on...

Open involvement by a totalitarian governments puppet in the UFB roll out compromises the networks integrity. I now have zero confidence in using UFB.

Don't be so negative because of 1 uncertainty...go along with modern time and enjoy million of goodies....

Being one of 3 non-Chinese working for Huawei in South East Asia in numerous network and broadband customers I can assure that Huawei has the means and the will to capture and exploit other countries IP and will continue to do it.

Furthermore all of Huawei's network and architecture layers (hardware, firmware and software) has the abitlity to capture any data, metadata and control channel data required on its journey around the network. Just like western countries, this is a requirement by government and security services in the pursuit of "legal" surveillance.

Only someone gullible and naive would believe that the Chinese Government wouldn't utilise these features in its day to day activities. As for other's networks, well leave the door open and I guarantee that they will walk through it.

The bottom line is that the Chinese Government and its handmaiden Huawei is in an extended trade war with the West and believe me, they fight dirty.

Traitor....or digging your own grave?

Don't know which Huawei you are refering to but the Huawei I worked for have hundreds of non-chinese working in SE Asia. Telco Pro? A legend in your own lunchtime I bet.

Telco Pro, there are many thousands of non-Chinese working for Huawei in South East Asia just like there are many thousands Chinese working for Cisco, Ericsson, Alcatel and others. Are you some right wing biggot or are you in fact a plant from the labour party or a bitter competitor?

China is still controlled by communists who holds values very different from NZ. I still believe US is still the better ally (the lesser evil). Just imagine if China is what is USA now. Complaining about American surveillance? See how it works for the Chinese communist. Supression of freedom, disregard of human rights, worshipping the Party. That's all you wil get!

The new China, unlike the USA is NOT attacking any foreign countries...who is more aggressive?

What makes one person - Selwyn Pwellet - the authority on this subject

He is just one biased opinion.

His whole argument is blown away when he basically admits that the USA is atready spying on us but he would back them before China

Get real, Doctor...who is NOT spying whom?

Well pointed out.

I don't analyse data for a living. I analyse 'communication'. Pellet 'reeks' of an anti-China sentiment that would make his views very suspect on this topic; informed or otherwise.

His explanation of events at the conference is telling.

"To be in a room full of hundreds of people and have them screaming on stage … They were ranting and raving saying they would not and the government should not buy Western technology. They could do it all.”

I've sat in many meetings, and more than a few conferences, with Chinese business people. The ethnocentric would see 'screaming', 'ranting and raving'.

Sometimes you don't need to intercept data to know what is really happening.

What makes him the authority the subject. Well as far as the article is concerned he is a well entrenched player in the business who has simply voiced his opinions. That's all. I certainly didn't read a "high and mighty" tone to his comments. Eye of the beholder.


This is Selwyn Pellet good friend of David Cunliffe and the Labour Party.

Selwyn Pellett who was fired as an ABAC representative and now holds a grudge

And he he is no more a security insider than Winston Peter's left testicle

Whats an ABAC? But yes David Cunliffe is a friend.

The only person "naive" here is the person who decided to call this idiot a "security insider" and the person who wrote the story based on Pallet's views. NBR is really going down hill.


It's called AES encryption people. If you want to send information over the internet, you pack it down with at least a 256-bit cipher. The default assumption should be that your traffic is being intercepted.

Like to learn more...

I believe every word of this - except where New Zealand was a called a "western" country.

When the Pakehas are outnumbered...

Selywn, Selywn, who the .... Is Selywn

Many things I disagree with the Security Insider Pellet.

One thing I agree - NZ cannot play by purist rules while the rest of the world play by mixed rules.

BTW - NBR will shortly have an article citing Rod Petrocevic as a finance expert and jail insider. So anything he utters in future about jail and finance will be an expert's view.


By in large the comments you'd expect. Yes lots of nations monitor Internet Traffic and that has its place in national security. What doesnt have a place in an already highly competative world is governments supporting commercial espionage. As someone said above Huawei and its masters play to win. We seem in almost every area of society to turn up to play believing our opposition is playing by our rules. Dream on.

"What doesnt have a place in an already highly competative world is governments supporting commercial espionage."

You think Israel, USA, France, UK, Russia, don't do this? You must be joking.

As I've said previously, NZ's best strategy is to have a mix of suppliers from different sources competing with and keeping a sharp lookout to spill the beans on each other.

Plus of course to use proper encryption systems where appropriate.

We should just fully convert to using Te Reo Maori. Then no one will understand what we're saying/sending anyway...

I think the most revealing sentence of this whole article was right at very the end.
“I don’t care who reads my emails, but if I were the government I’d care who reads theirs.”

I hadn't thought of this until I read that last sentence, but maybe the Americans are worried that in the future they wont be able to read NZ Government emails?

If reading Government emails is the big issue then maybe more attention should be paid to using secure email, if there is such a thing.

I think email security would be a good future topic for Chris Keall, after all I don't think most NZers would be very happy with someone reading our negotiating stance in trade issues like the TPP or Intellectual property issues.

" more attention should be paid to using secure email, if there is such a thing"

Yes, it has been freely available for a long time. There is a good history here:

It does require both ends to be using the same encryption software and to exchange their public keys.

what a load of horse hockey!!! Every single ISP and telco has to comply with lawful intercept requirements and as such are fully geared up for surveillence. Sure the NZ intelligence community are concerned about huawei given their PLA links, but this is overhyped rubbish and reeks of a slow news week

Doctor, I am not anti-chinese, quite the reverse. I admire the Chinese for being so focused, determined and strategic in their approach to almost everything. The problem is is it leaves New Zealand vulnerable in many areas. We behave very tactically as we are driven by transactional politics. This is but one example.

If Selwyn really admires the Chinese for being so focused, determined and strategic in their approach to almost everything, he should be encouraging all Kiwis to catch up rather than having cold feet...the correct way of upbringing the younger and learning generations.

Even if Selwyn spent the rest of his life "encouraging NZer's to catch up", I am sure that at the end of the day you will still find all manner of things to bleat and complain about. If you are such a know all , why not you get out there and do it Mr "Concerned Kiwi"

This is just a start...and perhaps you should join in some way.

boy level playing field obviously reading too much theory suggest you get into high levels of government and understand the realties the chinese and indians will be the usa and uk of the future for nz learn the speak quickly or become an island nation like tonga or fiji eating kumara

JP, I have been doing business in Asia for over 20 years and I totally agree China is the new Mega Power. So what? That's my comment about transactional politics. Not everything is for sale to the highest bidder. Some individuals and countries make boulder choices. There destinies have mixed outcomes and that's the reality of choices. But who would have thought Singapore or Taiwan could go it alone, or that Israel could defend its newly firmed borders in 1948 or that Finland could fight Russia to a standstill or that you would write that India would soon be a super power. NZ is capable of being more than a victim of other peoples policies and politics.

skeptical - NBR lost its spell check again? Must be time it bought one.

Big yawn really.

NZ is a nobody in the world and posers like Selwyn Pellett of the Labour Party should continue to just focus on undoing some of the grave economic sins committed by the Clark government.

Like interest free student loans and rampant government over-spending.

Like throwing money at South Auckland (to buy votes) and telling them their economic well-being will be better if the middle-class all become like them - lazy, free-loaders, uneducated and inclined towards crime.

Can we all have Sky TV, smoke cigarettes, drink beer and have sex like them all day long too, Selwyn?

Hi Chris,

In a Washington Times story, Cisco CEO John Chambers proudly bragged:

"What we're trying to do is outline an entire strategy of becoming a Chinese company."

Quite a lot of Cisco's products are manufactured in China, so Cisco CEO John Chambers bragged in a story featured in The Economist:

"Cisco also has a record of being willing to reorganise itself. It was an early outsourcer of manufacturing, for instance. Many of its products are never touched by a Cisco employee, but built by a contract manufacturer, tested remotely and then shipped directly to the customer."

So it appears Cisco's Chinese manufactured products are never touched by a Cisco employee before being shipped to U.S. customers by Cisco's manufacturing contractors located in China (the unanswered question is who owns Cisco's Chinese manufacturing contractors, perhaps it's the People's Liberation Army - PLA?).

And exactly what are the national security standpoints of using Cisco's Chinese manufactured equipment which is never touched by Cisco itself after being manufactured in China and then installed into the U.S. internet infrastructure?

Cisco will double its manufacturing in China, Chambers said, a move worth approximately $14 billion, based on the $7 billion Cisco said it purchased from China over the past five years.

The company has great influence over where its suppliers manufacture, and many would be directed to do so in China, Chambers said.

While Cisco CEO John Chambers is a registered Republican and was a supporter of Senator John McCain's presidential candidacy, he states:

"One thing a technology company should never do is fall in love with one political party or one form of government."


Brad Reese

Excellent blog Brad Reese

When will the rest of the sheep( population ) in NZ appreciate what the world is all about and stop believing the misinformation they are fed - normally promoted by the US government or US Government agencies - all indocrinated into still believing that they are the world leaders and can control anything and everything they wish.

More and more Kiwi's are starting to appreciate that they have been lied to and deceived by the mighty USA for years - as recent as this week we have lost another great Kiwi soldier in Afghanistan - a nonsense war created by the USA and all about resources and minerals that they want to own and protect.

Whether you like the Key Government or not their current stance to remain firends with USA but develop strong alliances with China and India is definitely the right strategy. We will be rewarded for that strategy while the USA and Great Britain slowly die into insignificance - and because of their arrogance won't even realise tehir predicament until it is too late and they are just one of the bunch.

I feel for the American people who are brainwashed via the media and politicians - they don't have a clue what is going on and continue to loyally supply their young men and women to the wars and conflcits that the USA manufactures to feed their greed.

Well said, Doc.

Iraq's WOMD anyone?

Hi The Doctor,

After receiving a $1.2 billion foreign profits repatriation tax holiday in 2004, Cisco created 237% more new jobs in locations outside of the United States than it did in the U.S.

Cisco's own internal slide presentation visually documents how after receiving a $1.2 billion foreign profits repatriation tax holiday in 2004, Cisco on a MASSIVE SCALE ramped-up the transferring of BILLIONS IN PROFITS from its U.S. operations to tax havens overseas:

In October 2011, the United States Senate Permanent Subcommittee on Investigations reported:

"The 2004 repatriation rewarded corporations that kept substantial funds offshore, and has created a new incentive for U.S. corporations to keep shipping jobs and diverting domestic funds offshore. Data shows that the 2004 repatriated funds flowed largely from tax havens, rewarding corporate behavior that moved funds to offshore locales rather than U.S. plants or manufacturing. The long term consequence of that policy is the current corporate stockpiling of offshore funds in anticipation of another repatriation tax break allowing multinational corporations to use a 5.25% tax rate in place of the top 35% rate that applies to domestic corporations. Such disparate tax rates punish small and mid-sized domestic corporations that don't do business offshore, by placing them at a competitive disadvantage, allowing their competitors to escape paying their fair share of taxes, and discouraging multinational corporations from investing in America. The AJCA's negative effects, in both the short and long-term, provide strong evidence that repatriation tax breaks create unfair tax advantages for a narrow sector of corporations with damaging economic impacts on the U.S. economy as a whole."

Additionally in a scathing report, Bloomberg documented how Cisco is EVADING U.S. income taxes by transferring BILLIONS IN PROFITS from its U.S. operations to tax havens overseas:

According to the Bloomberg report:

“Why should we reward firms for successfully gaming the tax system when we in turn are called on to make up the missing tax revenues?

“Much of these earnings overseas are reaped from an enormous shell game: Firms move their taxable income from the U.S. and other major economies -- where their customers and key employees are in reality located -- to tax havens."

Cisco is a "FRIEND" of the U.S. Government and the "ENEMY" is Huawei?

As of January 28, 2012 according to its most recent Form 10-Q (page 28) filed with the U.S. Securities and Exchange Commission, Cisco potentially owes $3.664 billion in claims, interest and penaltes for allegedly evading import taxes in Brazil:

Cisco seeks to pay ZERO taxes on a worldwide basis!


Brad Reese

Huawei as a whole engages in a variety of unusual practises. Now ZTE have been caught with their trousers down around their collective ankles with regard to back door access built into mobiles (@ the US's MetroPCS) and most recently the revelation that they were conspiring to provide US gear to Iran in contravention of US law. ZTE's very own General Counsel in the US turned on his employer and swore an affidavit to the US Government in which he detailed many aspects of the plan. You are entitled to think what you like, but talk to former ZTE or Huawei staff before you make your final judgment.

China is more powerful economically than many people think.

The IMF predicts that the Chinese economy will surpass the U.S. by 2016.

We believe the world highly underestimates Chinese economic power and that the Chinese economy is actually already much larger than the U.S. economy. The U.S. has a $15 Trillion GDP where as China’s GDP just passed $7.5 Trillion in 2011. This would mean according to standard GDP calculations that the U.S. economy is twice as large as China’s. Yet, China produces 10 times the amount of steel that the U.S. produces. China produced 20 million cars in 2011 with a market heading toward 35 million per annum. In 2011, the U.S. sold 12 million vehicles but only actually produced 7 million vehicles domestically. Virtually everything an American buys is made in China. The Chinese computer, cell phones, and luxury goods markets are now multiples of the size of the U.S.

Britain has a lot more secrets than New Zealand but they accept Huawei in their Broadband network
I look at the Telegraph and Guardian websites often and I don't see any beat up articles on China or Huawei.

Tim Groser, speaking about the Huawei controversy.
the beauty of New Zealand's independent foreign policy is that "we do not have to choose sides".

Maybe its time for the NZ press to get up to speed and support New Zealand's independent foreign policy, rather than another agenda.

You should do some research on Huawei's so-called Global CTO, Matt Bross. He was the means for Huawei to win its bid to provide gear to BT. Mysteriously, Mr. Bross ended up at Huawei in the USA not long afterward as "Co-President". Then, mysteriously, he was no longer Co-President, but now "Global CTO". No explanation was provided. Note that he remained in St. Louis, Missouri, even though he claimed in a BusinessWeek article that he directed part of a multi-billion dollar R&D budget. Mr. Bross previously was involved with the scandal at Williams, where he was head of the procurement function; he bought penny stock in firms with which he was contracting. Bross was reported to have made millions on his dealings while under the employ of Williams. I wonder why Huawei hired the man who pushed through a major purchase of Huawei gear as a door-opening deal in the UK. How much do you suppose he gets paid? Not being a citizen or resident of NZ, I would not dare to suggest that you should take direction from the US, UK, or Europe. However, I do think that you should be very careful with Huawei. Sometimes things are not what they seem on the company web page.

Telecom vodafone, 2 degrees, telstraclear and any ISP you'd care to name already have the capabilities in place to monitor internet data, its called lawful intercept and is a requirement of all telcos.. if the government is too stupid to use robust encryption then its their lookout.

S Pellett $2,000 donation to David Cunliffe. Totally objective observer given current attempts by Labour to politicise this issue

Brad Reese good on you for signing your name. Anonymous, of which there are many, but in this case the political ones. My views are my own and are owned by no or any political party. Yes I support a lot of policies that have come from Labour but certainly not all and have been public on both. I gave my own view on this issue at the request of NBR, based on my observations. It wasn’t a political statement of any kind. So agree or disagree is fine but don’t wrap it up in some political packaging that doesn’t exist.

This blog is being monitored - be certain of that. The question is by whom but I am wondering what the news is here? Technologies such as lawful intercept and deep packet inspection have been in place for many years – one is a regulatory requirement one is a commercial necessity. Security is a significant concern of all Telcos who spend considerable funds securing the network as a whole not just some boxes supplied by vendor A or B.
The mechanisms that Telcos put into place to secure their networks is the story - not the fact that a Chinese vendor (and not the usual Chinese manufactured product) won a minor part of the UFB build. If you want to deal in facts 90% of the UFB cost ($4.5b-$6.0b) is in digging holes. About 24% of that will go in traffic management etc. As most of the contracted construction companies are owned by Aussies the money is going overseas as usual.