Good 5G matters: Why banning Huawei could push up costs by 30%

An absolute ban on Huawei might stunt the next technological revolution. Shutterstock

By Christopher Findlay, Australian National University

Productivity growth matters. But in advanced economies, over the past 15 years, it has fallen by half.

Which is why it doesn’t make much sense to risk damaging one of the most important potential sources for future growth in productivity: the rollout of 5G.

5G is the next generation of wireless technology. Download speeds will be many times faster than what is possible under 4G.

And it’s not just speed. It’ll cut latency, which is the time it takes for signals to start travelling — something that will be critically important for the Internet of Things.

Nurtured well, 5G has the potential to become a ‘general-purpose technology’, analogous to electricity.

It holds open the possibility of creating new markets for goods and services that we can’t yet imagine.

The best suppliers of the gear required for 5G are in China, most notably Huawei, which has made the heaviest investments in the relevant technology. But the problem is that Huawei caught up in security concerns.

It has been banned from work on Australia’s national broadband network and from helping build Australia’s 5G networks.

In the US, the President issued an executive order last May prohibiting transactions with providers subject to direction by foreign adversaries.

Britain has the matter under consideration, although there are signs it might allow Huawei into some parts of the network.

Huawei is setting standards

Industry experts rank Huawei highly.

There are none yet from the United States, although reports say Apple will release 5G phones next year. Its competitors are China’s ZTE, the Swedish multinational Ericsson, Korea’s Samsung and Finland’s Nokia.

But the main issues are in the 5G infrastructure where Huawei holds more of the critical patents than others. Globally, it appears to be winning the most contracts.

There is a risk that the rejection of Huawei by some will end up, in the longer term, dividing the world into zones committed to different standards, limiting interconnection.

Standard-setting bodies have expressed concern.

Different standards could constrain the development of global supply chains, pushing up prices. They could impede the scale of application and diffusion of new technologies, limiting what 5G is capable of achieving.

One estimate suggests that banning Huawei could push up costs 30%.

Huawei poses risks …

In announcing what amounted to bans on Huawei (and also China’s ZTE), the Australian government said 5G required a change in the way the networks operate compared to previous mobile technologies.

“These changes will increase the potential for threats to our telecommunications networks, and these threats will increase over time as more services come online.”

The government had found “no combination of technical security controls that sufficiently mitigate the risks”.

Vendors likely to be subject to extrajudicial directions from foreign governments risked failure to adequately protect 5G networks from unauthorised access or interference.

Huawei said those security concerns could be managed, as do British cyber-security chiefs.

… which can be mitigated

Europe has noted the risks and is developing a risk mitigation strategy.

Southeast Asian economies are considering degrees of engagement with Huawei.

Worth continuing attention by Australia is what former US defence secretary Robert Gates calls the “small yard, high fence” approach.

It means defining exactly where the risks lie and intervening directly to manage them, something Europe is working on.

The US appeared to be struggling after Trump’s May order. The Commerce Department was given 150 days to come up with regulations to implement it. It released a draft only last week.

There were reports of tension in the US between those who would take the risk-based approach and others who would simply keep Huawei on the banned provider list.

Commerce has, finally, proposed a case by case approach, and has not named any particular provider. But the Federal Communications Commission has banned Huawei from access to its universal services subsidies.

International cooperation could give us room to solve the problem. It could include cooperation with China. China and Australia share concerns about cybersecurity and could together in the same way as we do over other standards to facilitate trade.

Attempting to completely eliminate risk could lumber us with big costs. Some would be financial, others might come from stunting the next technological revolution.The Conversation

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Colin Spencer
Colin Spencer
8 months ago

For all of the blustering and posturing about security concerns, especially in the US, make no mistake, American security issues are not the real concern. The US ban on Huawei is set to inhibit economic development in China on technology issue where, on this occasion, Huawei and China are leaders. Australia needs to go it alone with 5G and Huawei is key to getting the system to work effectively in the shortest possible time, and at the lowest cost option. America’s concerns are purely economic. And wrong.

Michael
Michael
8 months ago
Reply to  Colin Spencer

Absolute bollocks.

Anyone who trusts the CCP to do the right thing is incredibly naive. They brazenly lie, cheat and steal. They totally disregard our laws and international diplomacy. They do exactly what they want, when they want.

Even if there is the smallest possibility that a malevolent regime has access to, or control of, critical infrastructure it should not be allowed. How long must we kowtow to the CCP before someone says ENOUGH!? So far our politicians have been too weak-willed to do so. Let’s see if they now have the courage of their convictions to stand up to the bully that is the CCP.

Colin Spencer
Colin Spencer
8 months ago
Reply to  Michael

Educate yourself. China is no longer a locked up communist system. It is a modern capitalist society. The greatest fear people have of China is its growing superiority in technology, second greatest is its rapid economic growth and even faster growing middle class population. When you visit Shanghai, Donguan, Beijing, or any other major city you will see no sign of military uniforms. China has developed from third world to first world, in record time. There are over 1 million Australian citizens who are of Chinese origin, and they are the most peaceful segment of Australian society. Irrational fear of China is promoted by America, and weak minded people are sucked in easily.

Michael
Michael
8 months ago
Reply to  Colin Spencer

Are you truly ignorant or just plain stupid? Perhaps you have a vested interest and your comments are completely self-serving. You are trotting out the party line exactly like they want you to. I have in fact lived and worked there for several years. My comments come from engaging at the highest levels of commerce and government. So contrary to yours mine is not just ill informed opinion but the result of direct experience. I have witnessed the significant change in the control and demeanour of the CCP under Xi and it is getting worse by the day. Do yourself a favour, wind your neck in and educate yourself.