By Tim Biggs & Jennifer Duke
The federal government has banned Chinese telecommunication companies Huawei and ZTE from providing 5G technology to Australia, Fairfax Media understands, after laying out new rules in a security guidance statement to vendors and telcos building the next-generation mobile infrastructure.
A joint statement from Treasurer Scott Morrison and Communications Minister Mitch Fifield heavily implies that the involvement of Chinese companies would pose too high a security risk, although it does not single out any specific companies and does not name China.
Huawei, however, said via Twitter that the government had been in touch to explicitly ban it and ZTE from providing the technology to Australia. Fairfax Media has confirmed this is the case.
Huawei has been angling to build 5G infrastructure in Australia.Credit: AP
It comes after strong concerns from government that companies such as Huawei and ZTE may be compelled by the Chinese government to compromise the security of 5G infrastructure in Australia.
"The government considers that the involvement of vendors who are likely to be subject to extrajudicial directions from a foreign government that conflict with Australian law, may risk failure by the carrier to adequately protect a 5G network from unauthorised access or interference," the statement said.
"This applies equally to all carriers, consistent with government’s long‑standing commitment to a level playing field in the sector."
Huawei, which is the world's largest maker of telecommunications network equipment and provides equipment for current 4G networks, had expressed its interest in building Australia's 5G infrastructure. It promised that government would continue to have oversight and control since sensitive "core" network functions are typically segregated from the "edge" of the network.
In its statement, however, the government argues that new 5G networks will operate in a fundamentally different way to previous mobile infrastructure, making the two functions less distinct.
"Government has found no combination of technical security controls that sufficiently mitigate the risk," it said. "While we are protected as far as possible by current security controls, the new network, with its increased complexity, would render these current protections ineffective in 5G."
The move is unlikely to improve the already strained relations between Canberra and Beijing.
'Basically a ban'
Last year the government introduced the "Telecommunications Sector Security Reforms", which will come into effect next month. The reforms bind telcos and service providers to a set of obligations, including that they "protect their networks and facilities against threats to national security".
The government's statement makes it clear that it does not think Chinese service providers can live up to this obligation.
MPs from both major parties have previously raised concerns that China’s National Intelligence Law, passed last year, compels “all organisations and citizens” to help the country’s intelligence work. And article 38 of China’s cyber security law compels a telecommunications firm such as Huawei to alert the government of any vulnerabilities they identify.
But the chairman of Huawei Australia, John Lord, has said the firm has legal advice stating it is not subject to onerous Chinese laws that demand companies provide information to the government in Beijing.
The effective ban may leave the Finnish and Swedish multinationals Nokia and Ericsson as the most likely developers of 5G technologies adopted by Australian telcos, potentially raising concerns of higher costs and the pair's ability to satisfy demand.
The two companies also have ties to China, where much of their equipment is manufactured. It's unclear whether this will factor into their participation in Australia's 5G infrastructure.
"Security is paramount and everything we do is managed under a transparent global system of integrity," said Tim Marshall, Nokia's Oceania head of corporate affairs.
"We have strong relationships with all Australian carriers and will obviously be working closely with them to help understand how these new laws will be implemented."
Investment uncertainty
Optus, which is aiming to launch fixed-wireless 5G broadband services for both home and business users in Australia's capital cities in January 2019, welcomed the government's decision, with its vice president of regulatory and public affairs, Andrew Sheridan, saying the guidance provided "certainty" to the industry.
"Optus has a mix of vendors in its mobile network and we remain well positioned to lead in the delivery of 5G services," Mr Sheridan said. "Optus shares the government’s objectives of ensuring the security of Australia’s information, communications and critical infrastructure."
But Vodafone chief strategy officer Dan Lloyd said the decision raised other concerns.
"We have always said that national security is paramount. We always have and always will meet our obligations under Australian law. However, major decisions of this nature need to be made with rigour, accountability and careful consideration of the economic, productivity and social implications for the country," Mr Lloyd said.
"This decision, which has been dropped on the eve of the 5G auction, creates uncertainty for carriers’ investment plans. This decision is a significant change which fundamentally undermines Australia’s 5G future, and we will consider what it means for our business."
A telecommunications industry source said the government's statement "was basically a ban" on Chinese involvement, warning it could result in poor outcomes for customers as it lowered the competition between suppliers in the market and could result in more expensive costs for providers, which would be passed on to Australians.
"Historically, Huawei has been very competitive when it comes to pricing," the source said. "So when you don't have them there and other vendors feel they have a captive market; what will happen to prices?"
'Limits competition'
TPG Telecom chief operating officer Craig Levy shared this view.
"I don't think it's good for the industry as a whole, as it limits competition," he said. "This affects the entire industry, all the telcos, but we will respect whatever the law is."
A Telstra spokesman said: "We have seen the announcement and will comply with the government’s direction."