Chinese eyes in your fridge

It may be harder without Huawei but we’ll be better off in the end.

A pedestrian talks on the phone while walking past a Huawei store in Beijing. Picture: Getty Images

The path to 5G mobile looks set to become increasingly complicated for the average consumer as the future of Chinese equipment giant Huawei in the market faces global scrutiny.

The noose tightening around Huawei, over its connections with the Chinese government and recen­t allegations of intellectual property theft, means telcos across the developed world, including Australia, will have to make the leap into the next mobile revolution without the help of its cheap equipment.

Providing low-cost 5G equipment is at the heart of Huawei’s global ambitions.

Building 5G networks is extreme­ly expensive for telcos. Deliv­ering the capabilities needs a denser network, with more towers and equipment closer to homes.

The fifth generation of mobile network technology promises a step change in how consumers will interact with the digital world.

Not only will mobile speeds increas­e but 5G technology will also deliver more reliable services and higher data allowances for a far greater number of simultan­eous users. On top of that, 5G will open the doors to a level of connectivity that will see a legion of devices — smart meters, thermostats, home appliances — talking to each other and to the consumer.

Huawei offers a cheaper road to this future for telcos. However, the cost benefit comes with perceived risks that are too profound to ignor­e, given China’s track record of cyber intrusions.

Just as 4G ushered in new application­s such as real-time video streaming via Facebook Live and Snapchat Stories, 5G is expected to bring with it new and unique use cases, many of which have not even been thought of yet.

One of the key assets of 5G beyon­d speed is lower latency — in other words, the amount of time it takes your phone to send and receiv­e information from the internet. Typical 4G latency is about 60 milliseconds, and it’s expected that 5G could deliver 1 millisecond latency, a crucial difference when talking about new technologies such as autonomous cars.

5G’s far superior capacity means all manner of devices can and will be connected online, and can be kept online simultaneously.

A woman browses on her smartphone outside a Huawei store in Beijing

Ours is a future in which if it exist­s, it can be connected to the internet. That’s why who is building the chips and towers that will power these devices is crucially important.

The technology is also set to play an important role in business, with numerous industrial applications, from automated driving to infrastructure management.

This space is shaping as a lucrative one for telcos, with Telstra boss Andrew Penn convinced it will be transformative. “5G is much more than just a faster smartphone, though it is certainly that too. It brings a quantum leap in network speed and capacity in an age where the demand for data is exploding,” he said in a speech in Melbourne yesterday.

Penn says 5G technology will be the glue that holds together the emerg­ing spheres of cloud computing, artificial intelligence and the ­internet of things. “Sensors will produce huge amounts of data able to be stored and processed in the cloud with incredib­le computing power, and where artificial intelligen­ce or machi­ne learning engines will turn it into insights to drive automation and power robotic­s,” he added.

Huawei offers a cheaper road to this future for telcos. It was poised to cut rivals such as Sweden’s Ericsson and Finland’s Nokia out of the 5G game.

It’s not just about cheaper kit eithe­r. Huawei is also setting the pace as far as 5G capabilities are concerned, recently launching chips designed to support 5G base stations and simplify large-scale 5G network deployment.

Australia led the way in bannin­g Huawei from the 5G rollout last August. The main source of anxiety for intelligence agencies is that Huawe­i, at the behest of the Chin­ese government, could gain access to the data-rich 5G networks through back doors in their equipment.

Our 4G networks, except for Telstra’s, already have a large amount of Huawei equipment strung across the radio access network­s, the architecture that allow­s telcos to provide mobile coverage.

However, in a 5G world Huawei­’s equipment could potent­ially be embedded closer to the heart of the mobile networks, the core architecture that custome­r data flows in and out of.

Nigel Phair had a 21-year ­career with the Australian Federal Police and headed investigations at the Australian High Tech Crime Centre for four years.

He tells The Australian that securit­y fears over the likes of Huawe­i are very real, and applaud­s the Australian government’s decision to block it from building the country’s 5G network.

“5G is a genuine game-changer and I think it’s great the Australian government has made this decis­ion,” he says. “And it’s great that they’ve come out and said it, rather than being underhanded about it.

“It’s definitely a risk to business­es who have intellectual property and trade secrets, and to our government, which obviously has secrets.”

Some have argued that the Australian government’s decision was pure politics and part of a broader trade war with China, but Phair says that the decision was much more pragmatic.

According to Phair, Telstra has a leg-up on its 5G infrastructure, given Vodafone and Optus had planned on using Huawei for their rollouts.

“Telstra is effectively ready to go,” he says, “whereas Vodafone and Optus will now have to go and find a new infrastructure partner.

“Consumers need to understand this is a national security decisio­n, and they don’t make these decisions lightly. Australia was the first to move on this, and it’s a good thing they’ve done the analysis and have made a strong policy position.”

Adam Ni, China researcher at Macquarie University in Sydney, says the nature of Huawei’s relations­hip with the Chinese government raises serious concerns for governments and companies.

“The risks of cyber-espionage should be taken seriously, given the Chinese government’s influence on Huawei and the leverages available to it to pressure Huawei into co-operating with Chinese intellige­nce,” he says.

“There will likely be an ­­econo­mic cost associated with banning Huawei and a real potential for retaliatio­n by the Chinese government.”

Technology has a tendency to feel futuristic and therefore far away, but the first 5G handsets will arrive this year.

Reports suggest that Apple won’t launch a 5G iPhone until 2020, but new devices are expected from most other major manufacturers, including Samsung and Oppo.

Telsyte analyst Foad Fadaghi says he expects that not long after the 5G networks are ready in Australia­, most manufacturers will stop producing 4G devices.

“In a very short period of time we anticipate 4G handsets will disappear from the market,” he tells The Australian. “The adoption of 5G will be fast.

“The other thing to keep in mind is that there is only a finite amount of spectrum. So as carriers move to 5G, they will repurpose spectrum away from 4G, and the impact of that is 4G services will not be the same as they are today, once we start moving to 5G.”

Every mass technology change represents a huge opportunity for both handset makers and the builders of the infrastructure, such as Huawei, Fadaghi adds.

“I expect carriers will push custome­rs as soon as they can over to 5G,” he says. “The potential for new business models for carriers and the attractiveness of this technology change is what’s going to drive 5G.”

There’s also the question of just how dominant 5G will be in Australi­a and the potential for the technology to replace the National Broadband Network for some households. Telstra and Optus have already declared they intend to sell 5G-powered home internet packages this year although, for most, 5G data costs are likely to make it too expensive for home use, at least initially.

Ultimately, the government’s decision to clamp down on China does have consequences, with TPG Telecom’s decision to stop rolling out its mobile network an example of what taking Huawei’s low-cost equipment out of the equation can mean to a telco.

But there are alternatives in the market. The likes of Ericsson, Nokia, Cisco and Samsung offer highly capable 5G technology. With sentiment continuing to sour towards the Chinese giant, its rivals will step in and bridge the gap.

Expulsion from the developed telco market doesn’t necessarily spell the end for Huawei, which makes more than half of its annual revenue of $127 billion outside of China. Europe is a core market for Huawei but it’s also a major player in the Middle East, Africa and the emerging telco markets in Asia.

Huawei is also the second-bigges­t maker of smartphones in the world, ahead of Apple and just behind Samsung, and this consume­r business remains largely unaffected.

US telcos Verizon and AT&T don’t offer Huawei phones to their customers, and nor does Telstra in Australia, but the smartphone business is booming for the Chin­ese company.

While Australian consumers may have to ultimately pay more for their 5G devices as a result of the Australian government’s move to ban Huawei, they will also know that it’s a decision that has been made to help protect one of the country’s most important strategi­c assets.