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Why a China ban ‘cure’ for security fears may be worse than the disease it addresses

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Governments planning to prevent companies like Huawei from bidding for telecoms infrastructure contracts need to look more carefully at the implications for global standards.

The increasing volume of advanced 3G, 4G and and now 5G cellular communication equipment being supplied around the world by Chinese technology companies is causing concern in several countries, some of which are considering bans on equipment made by Chinese vendors.

In Germany, for example, the ruling Christian Democrats have recently approved a motion that calls on the government to restrict Huawei Technologies from participating in the country’s planned 5G network, declaring: “Suppliers that are trustworthy are those not under the influence of undemocratic states.”

The Chinese judiciary is subservient to the Communist party, and it’s realistic to assume that if Chinese businesses receive instructions from the Party they will try to carry them out. But while the suggestion that genuinely democratic nations should exclude them from supplying network equipment may be politically attractive, it’s a very bad idea.

The potential risks that need to be addressed around 5G equipment are that it could be used to spy on users, to defraud them, or to deny service. Also, badly engineered equipment could allow third parties to mount their own security attacks.

Starting with security, users of cellular networks have been spied on and compromised in the past, without the intervention of undemocratic forces. Since the advent of 2G digital cellular technology, however, illicit eavesdropping has become extremely difficult and requires significant technical resources.

Fraud has to be guarded against, but its risk does not depend on whether a supplier comes from a democratic or undemocratic country. The third potential line of attack – denial of service – could involve a signal being sent to all network equipment to stop it operating. Although some manufacturers do have access through maintenance contracts to the intimate knowledge of the network structure required to do this, a successful attack would be very noticeable and would destroy the commercial reputation of the equipment supplier.

Finally, poor engineering may make a system vulnerable – and a recent UK government report on Huawei is critical of the company’s engineering quality – but is hardly a function of democratic provenance.

Over the years, rigorous system design has been successful in addressing all these issues. The 5G mobile standard is produced and maintained by the Third Generation Partnership Project (3GPP), a collaboration between international standards development organisations to which hundreds of companies from all over the world contribute.

Participants contribute ideas and engineering resources at their own expense and make the results public. At first sight this may seem economically unsustainable: how can companies afford to make this effort when competitors who do not contribute are able to use the results?

The answer is that they can protect their work with a patent. Patents used in a standard become ‘standard-essential’ and the companies that own them charge royalties for their use, licensing them under ‘fair, reasonable and non-discriminatory’ (FRAND) terms and conditions, which ensure they are rewarded while limiting the amount they can charge.

Assuming that the worldwide distribution of patents for 3GPP cellular specifications is similar to that for all patents published annually by the IP5 club of major international patent offices, a significant proportion belong to Chinese companies. So, it’s probably not possible to make equipment conforming with 3GPP 5G specifications without using inventions of Chinese patent holders.

Were Huawei to be banned from European countries, for example, it is highly likely that it would no longer be bound by its FRAND agreement in that market, which is based on an assumption of reciprocity. It would be free to either charge punitive licensing fees or simply to rescind permission for other companies to use its patents.

One solution that can be immediately dismissed is the idea of re-engineering the 4G and 5G standards to exclude Chinese patents. This enormous undertaking would imply a lower quality of the standard and immediately fragment the worldwide market. Of course, legal proceedings might be brought to compel Huawei to license its patents, but the outcome would be subject to considerable uncertainty.

Two economies might think they could get away with having region-specific mobile systems: China, with its enormous economy and powerful technology base, and the USA, which would expect to dominate the Americas. This would take us back to the 1980s with global fragmentation and higher costs, and different countries using rival systems.

Today, 3GPP is probably the only technical body in the world producing technical specifications by achieving consensus between several major nations. Excluding companies like Huawei would sooner or later strengthen unilateral leanings in China. Those leading the drum beat, especially in European countries, should be careful what they wish for; this cure is probably much worse than the disease.

David Cooper & Hans Hauser are with Hillebrand Consulting Engineers and consult widely on mobile cellular intellectual property.

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