Huawei blocked from Australia National Broadband Network, still good for NZ

The Australian federal government has banned Huawei from participating in tenders for its $A37 billion National Broadband Network, citing concerns over cyber-attacks originating in China, according to an AFR report.

The Chinese telecommunications giant – private, but run by Ren Zhengfei, a former member of the People’s Liberation Army – has been one of several companies pushing for infrastructure business on both sides of the Tasman as public-private ultrafast broadband roll-outs begin.

“As a strategic and significant government investment, we have a responsibility to do our utmost to protect [the NBN’s] integrity and that of the information carried on it,” a spokeswoman for Attorney-General Nicola Roxon told the paper over the weekend.

“This is consistent with the government’s practice for ensuring the security and resilience of Australia’s critical infrastructure more broadly.”

The AFR says it understands Huawei Australia’s chairman, retired Rear Admiral John Lord, was summoned by deputy secretary of the Attorney-General’s department Tony Sheehan late last year.

Mr Sheehan reportedly told Mr Lord that the Australian government was aware of Chinese cyber attacks; Huawei should not bother to bid for NBN contracts because it would not succeed.

The situation is a blow to Huawei Australia, which last year added former Labor Victorian Premier John Brumby and former Liberal Foreign Minister Alexander Downer to its board - no doubt in the hope the appointments would help it avoid such political controversy.

This is not the first time Huawei has run into political flak. In the US in 2008,  Congress blocked a $US2.2 deal that would have seen the Chinese company (in partnership with Bain Capital) buy US network hardware maker 3Com (eventually sold to HP).

Stark contrast
The Australian position is a stark contrast to that adopted by the New Zealand government.

In July 2010, fresh from meeting Huawei executives at the Shanghai World Expo, Prime Minister John Key told Q&A’s Guyon Espiner that the Chinese telco giant should be a leading contender to supply gear to companies building New Zealand’s $1.35 billion Ultrafast Broadband (UFB) fibre network.

"At the end of the day from New Zealand's perspective I mean we're looking for value for money, Mr Key said. "So let's take ultrafast broadband. They've got a lot of expertise in that area, Huawei is a big player, they're bigger round the world, they've got a huge partnership in the United Kingdom for instance."

“They've got a lot of expertise in that area. Huawei is a big player,” Mr Key said.

“No one's saying they would be the final selected partner in New Zealand but they've certainly got the capacity if they wanted to.”

Huawei subsequently ran into flack for paying Crown Fibre Holdings director Murray Milner for contract work.

However, it overcame the controversy, and it was recently announced that Huawei had won two major UFB contracts – one to supply Enable (Crown Fibre Holdings’ chosen partner for the Christchurch leg of the build), the other to supply Ultrafast Fibre (the consortium chosen by Crown Fibre Holdings for areas including Hamilton, Tauranga, New Plymouth and Whanganui).

Crown Fibre Holdings (the state owned company that manages the Crown's $1.35 billion investment in the UFB, which is being at least matched by private partners), told NBR it set up the frame work for a preferred supplier panel. But the Crown Fibre Holdings co-investment partners (Chrous, Enable, Ultrafast Fibre and Northpower) chose the preferred supplier list (which also includes Sweden's Ericsson and Franco-American company Alcatel-Lucent).

Additionally, Huawei was chosen to supply componentry for a Chorus leg of the public-private $300 million Rural Broadband Initiative, being carried out by the spun-off Telecom network division in partnership with Vodafone.

Minister responds
This morning, ICT Minister Amy Adams was not keen to tackle the issue head on. She told NBR,  “The government doesn’t comment on specific vendors.

“Network security is an issue we take seriously. The government will work with all suppliers and operators to address any security concerns that may be identified, and is committed to working with operators and suppliers to protect the integrity and confidentiality of the UFB and RBI networks.”

Huawei NZ confident
Huawei NZ corporate affairs director Mark Champion told NBR, "I don't anticipate it will have any impact on our business." 

The company had won about around 30% of the the UFB, Mr Champion said, and its work with Enable and Ultrafast Fibre was already underway.

(Huawei Australia also sent a transcript of a TV interview over the weekend, during which its public affairs director defends the company).

Rising NZ profile
Huawei also has profile in New Zealand through being 2degrees main network infrastructure partner. The Chinese company recently extended 2degrees a $100 million credit line to bankroll further expansion.

The Chinese company has also been involved in upgrading the landline fibre backhaul for Vodafone NZ's so-called "Red Network" (that's "red" as in Vodafone's brand colour). 

Its various projects have seen Huawei's NZ office, in central Auckland, grow to more than 100 staff.

In October last year, as Huawei’s proposed transtasman fibre cable (a proposed joint venture with a second Chinese company, state-owned Axin) was criticised by anonymous sources in the NZ telco industry as a possible security risk, Huawei director of corporate and public affairs Jeremy Mitchell, Australia & New Zealand told NBR:

"Huawei's record speaks for itself. We are the global number two telecom equipment provider and we work with all the major telecom operators.

"Huawei is the number one builder of fibre broadband networks around the world with deployments in the UK, Singapore, Malaysia, the UAE and Brunei. You don’t achieve the success Huawei has had without being a trusted partner who delivers quality products and services."

Sydney-based telecommunications analyst Paul Budde, who has consulted to the Obama administration and the Australian government, among others, told NBR security concerns were a "reoccurring theme every time Huawei wins a project."

Mr Budde said a "real assessment" of perceived security risks was needed.

This would help the world to move past the issue.

"In a globalised world this is what happens and we need to build up trust," Mr Budde said.