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Why a Canadian ban on Huawei 5G may come with a whimper, not a bang

South China Morning Post logo South China Morning Post 23/11/2021 Array
  • A ban is expected soon now that China has freed the 'two Michaels', but experts doubt serious retaliation from Beijing or a big impact on consumers
  • Canada's big telecoms have announced alternative 5G technology, and Huawei Canada has shifted focus

Wired internet never reached the village of Lac La Hache, in the remote eastern interior of British Columbia.

So when Chinese telecoms giant Huawei Technologies and local firm ABC Communications announced in 2019 that they were teaming up to provide a high-speed, hi-tech wireless solution, it was big news. And not just in the tiny retirement and recreational community, population 258, that is known for its trout fishing and takes its name from an axe dropped in its eponymous lake by a French Canadian furrier long ago.

Dissected in the Canadian national press and The New York Times, the project was seen as emblematic of what stood to be gained or lost as the government pondered whether to clamp down on Huawei's activities and ban it from 5G internet infrastructure on security grounds.

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But the collaboration has not yielded the blazing fast 100 megabit per second wireless speeds that Huawei and ABC suggested in their initial fanfare. That remains a pipe dream for customers of ABC in Lac La Hache, like Rob Fry, a truck driver turned DJ who had hoped Huawei's technology might let him run his entertainment business and online Cariboo Radio station from his home studio.

Fry did not even realise the project had been completed. He said he still had to drive to an office in the town of 100 Mile House, 25km away, to get streaming-speed internet.

"I haven't seen anyone set anything up, so I don't know if it even exists. I've never seen this thing transpire. Our internet is still so slow here it's ridiculous," he said last week, his assessment echoed by other customers.

Now, Lac La Hache's experience seems emblematic of Huawei's fate in a different way.

If Canada bans Huawei from 5G, the next generation of wireless internet tech, how much would it matter, more than three years since the federal government's review began in 2018?

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Canadian international relations experts say they doubt substantial retaliation from China, which may have already baked an expected ban into its strategic thinking.

Meanwhile, Canada's big three telecoms companies - Rogers, Telus and Bell Canada - have all pre-empted an official ban by announcing alternatives to Huawei's 5G technology, from providers including Ericsson and Nokia.

The potential impact of removing existing Huawei 4G and other hardware could be a fait accompli because of incompatibility with the next-generation European technology, regardless of the government's decision. And Huawei Canada says it has shifted its once overwhelming focus from selling network gear to consumer tech, and research and development.

The main effect of a Huawei 5G ban, then, would be to bring Canada into line with intelligence allies the United States, Britain and Australia, said Michael Byers, a University of British Columbia professor who holds the Canada research chair in global politics and international law.

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The other partner in the so-called Five Eyes intelligence alliance, New Zealand, has said it will not ban any provider, but has rejected a bid to use Huawei's 5G technology

"We're now years behind our main security allies on this issue," said Byers. "We were given a pass, I think, because the 'two Michaels' were detained in China, but now that has been resolved, the pressure from the US will be intense ... it's almost inevitable."

That was a reference to how the decision had been complicated by the arrest of Huawei chief financial officer Meng Wanzhou in Vancouver, and China's subsequent arrest of Canadians Michael Kovrig and Michael Spavor, in December 2018.

But Meng was allowed to return to China two months ago after cutting a deal with US prosecutors, and the two Michaels are now back in Canada, safe from potential Chinese retaliation.

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Canada's allies acted out of concern that Huawei gear could open the door to Chinese espionage.

But Byers said he was unconvinced that banning Huawei was necessary from a security or technological perspective.

"Our networks will be vulnerable to intrusion even if there's not Huawei technology; this is not a panacea for our cybersecurity concerns," he said. "But our political imperative to align ourselves with our intelligence partners, particularly the US, will be the overriding factor."

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The long-delayed decision is expected soon. Prime Minister Justin Trudeau said after securing re-election on September 20 that an announcement would come in a matter of weeks; on November 8, Industry Minister Francois-Philippe Champagne told the Canadian Press news agency that he expected the ruling within a couple of weeks of Monday's resumption of parliament.

The return of Spavor and Kovrig paved the way for Trudeau to announce a "full ban" on Huawei in Canadian 5G, said Charles Burton, a senior fellow at the Macdonald-Laurier Institute think tank and a former diplomat in Canada's Beijing embassy.

"The deferral of the decision may have used the matter of the hostage diplomacy [by China] to prevent the government from making a hard decision that significant business constituencies would be unhappy about," he said. "But that pretext is over. Ultimately they now have to decide."

Huawei shifts focus in Canada

Since Meng's arrest and China's seizure of the two Canadians, Huawei has not stepped backwards from the Canadian market; in fact, it has doubled staffing, to about 1,600 employees and full-time contractors, said Huawei Canada's vice-president for corporate affairs, Alykhan Velshi.

In the past three years, Huawei had sold several hundred million dollars worth of network gear to Canadian telecoms, said Velshi. But a formerly overwhelming emphasis on network gear had shifted as a possible 5G ban loomed.

"All the attention is going to 5G, but network equipment is only a portion of our business," he said. "Regardless of the government's decision, we remain committed to Canada and our workforce in Canada and our customers in Canada."

Network gear sales now represent a minority of Huawei's Canadian revenue, Velshi said, with the company switching to consumer tech like phones and earbuds. "Our business is now well diversified in Canada," he said. "We don't just sell network equipment to operators ... and the bulk of our workforce is in R and D."

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Velshi would not say whether Huawei had contingency plans for a 5G ban, other than to remark that the decision "should be based on technology, not politics".

"This is a time of real tensions between China and the US, China and Canada, and many companies are caught in the middle of it. We're alive to that fact, and that perceptions of Huawei tend to be downstream of perceptions of China," said Velshi. "We can't change global relations. That's beyond us as a company. But we can adapt to it as we continue running our business."

The shift in focus has partly been forced on the firm.

Velshi said Huawei gear had "at different points" been present in the networks of all three major telecoms. But Byers said the big three had insulated themselves by not investing too heavily in Huawei technology, particularly as expectations of a ban escalated.

In 2020, Telus and Bell announced they were partnering with Sweden's Ericsson and Finland's Nokia on their 5G networks. Rogers had committed to Ericsson in 2018, and in 2019 went a step further by publicly advocating that Huawei be banned from Canadian 5G on security grounds; then vice-chairman Philip Lind told Bloomberg that letting Huawei in would be "crazy".

There's no technological or security imperative any more. But the political imperative remains [and] China will understand this ... China knows a ban is coming, and it knows why
University of British Columbia Professor Michael Byers

A ban is "not going to be a big deal for consumers", said Byers.

"And it's not going to be a big deal in improving our security situation, since Huawei now is not significantly present in our 5G backbone," he added. "Where it matters is at the international politics level. This decision will be a signal to the US and our other security allies that we are back on board."

"There's no technological or security imperative any more. But the political imperative remains [and] China will understand this ... China knows a ban is coming, and it knows why."

Byers said that with the freeing of Meng, Kovrig and Spavor, both Beijing and Washington wanted to reset the West's relationship with China.

To be part of this, Canada had to move in lockstep with Washington or risk being left on the sidelines as a superpower relationship was forged, Byers said, "which ironically means that in the short term we will have to annoy China" by banning Huawei.

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But Byers said he expected "no severe consequences" beyond "the traditional condemnation" and perhaps "symbolic retaliation" from Beijing.

"There might be tariffs of some kind on some Canadian products, but this won't be a big dispute," he said. "China would have, in all likelihood, expected it as a consequence of their releasing the two Michaels."

The Macdonald-Laurier Institute's Burton, who has advocated a 5G ban on Huawei, also doubted a severe Chinese reaction. "This is a decision that has been made by other nations, so I frankly don't see much in it for China to announce specific retaliation," he said.

As for Canadian consumers, he discounted a backlash against a ban on the basis of possible higher costs, saying Canadians were now so sceptical of Huawei that any decision other than a ban "would lead to considerable public outcry".

Last month, a survey by Nanos, commissioned by The Globe and Mail newspaper, found more than three-quarters of Canadians supported a Huawei 5G ban.

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In 2019, before committing to Nokia and Ericsson, Telus had complained to the government about the costs of ripping out existing Huawei technology in the event of a 5G ban. "Of course, telecommunications companies will always try to come up with reasons to get a more generous government subsidy," said Burton, adding that although he did not think the government would require existing 4G Huawei technology to be removed, telecoms that had now committed to European 5G tech would likely have to do so anyway.

Overwhelming any commercial complaints was a far more "menacing prospect", said Burton - that Canada would lose access to the Five Eyes intelligence-gathering capabilities if it did not get in line with its partners.

"Canada is a net consumer of Five Eyes intelligence. So it would be quite problematic for us," he said.

Canada had once seemed to desire "some kind of middle path" between its US alliance and trade with China, said Burton. But now "the tide has turned".

Officially, the government remains coy about its thinking on Huawei.

"We will ensure that our networks are kept secure and will take the appropriate decisions in due course," Public Safety Canada said in a statement last week.

'It's slow, and it's gotten slower'

Neither Telus, Bell nor Rogers responded to requests for comment about the government's Huawei review, or how they might deal with a potential ban.

But Chris Allen, who was president of ABC Communications before it was bought by Telus in 2020 and is now an executive with the bigger firm, said the Huawei technology in Lac La Hache was "still the best 4G system we've had access to".

The technology known as Massive MIMO, which boosts wireless network capacity, had indeed been fully deployed, and has since been used in eight or nine other BC communities, said Allen.

However, he acknowledged its limitations.

"When it first launched: amazing, great speeds," said Allen. "But like every system it eventually got overloaded, to where its speeds aren't where they were when they started, because there are more people on the system," he said.

US instructs carriers on programme to remove Huawei and ZTE equipment

Despite being spurned by the big operators on 5G, Huawei has wooed other remote communities with the promise of high-speed 4G delivered via smaller providers using Huawei technology.

In 2019, for instance, the Nunavut provincial government signed on to a plan to improve internet speeds with a fibre-optic cable to Greenland, routed through Huawei gear.

But an alternative has recently emerged there too, with the announcement in January of a rival undersea cable by a new private operator, CanArctic Inuit Networks.

In Lac La Hache, locals still bemoan sluggish internet speeds, oblivious to the presence of Huawei's technology, let alone its benefits.

Rick Duncan, owner of the Red Crow Cafe, had been excited about the ABC-Huawei project back in 2019. But he said his internet was a slow as ever.

Yvette Betz, who owns the Lac La Hache bakery, said she was a customer of ABC but had no idea the Huawei technology had been deployed.

Fry, of Cariboo Radio, laughed at the notion of 100 Mbps internet in the village.

"If we had that, I'd know about it ... I've got a beautiful recording studio here at home that I can't use because the internet is not fast enough to stream," he said. "It's pretty slow, and it's gotten a lot slower."

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