‘No American company provides this technology,’ Huawei says

Chinese telecommunications company Huawei Technologies Co., the target of spying allegations by a new U.S. House committee report, should be recognized for employing about 450 people in Canada and supplying “transformative” fourth-generation telecom equipment in Canadian rural areas that no American company provides, said Scott Bradley, vice-president of corporate and government affairs at Huawei Canada. “No American company provides this technology,” Bradley said in a brief phone interview, referring to Huawei's fourth-generation LTE equipment. “We're focused on bringing leading edge technologies to both urban and rural Canadians. We know there's a significant demand for broadband in rural Canada. Some of this technology that we're doing is the best in the world … It can be transformative in areas where you don't have high speed broadband,” Bradley said. Huawei and ZTE Corp., both telecom suppliers based in Shēnzhèn, China, defended themselves Tuesday following a report from the U.S. House of Representatives committee on intelligence that recommended American companies “consider the long-term security risks associated with doing business with either ZTE or Huawei for equipment or services.” The report said “U.S. network providers and systems developers are strongly encouraged to seek other vendors for their projects.” Huawei's main competing vendors for mobile wireless services, particularly fourth-generation network equipment, are Ericsson, based in Stockholm, Sweden, and Alcatel-Lucent SA, in Paris, France. Committee chair Mike Rogers, a Republican House Representative for Michigan, said in an interview with CBC News that he would extend the same committee recommendation to Canada, where Huawei supplies fourth-generation network equipment to BCE Inc., Telus Corp., and SaskTel. “I absolutely would not do it,” Rogers told CBC. “The key word there is new, secure network; I would not have the faith and confidence.” In May, Michelle K. Van Cleave, former head of the U.S. National Counterintelligence Executive, told CBC News that Canada’s relationship with Huawei put North American telecommunications systems at risk of Chinese spying. The committee report recommended that the U.S. government's Committee on Foreign Investment in the United States “block acquisitions, takeovers, or mergers involving Huawei and ZTE given the threat to U.S. national security interests.” It also recommended potential U.S. legislation to increase the transparency of purchasing agreements and the sharing of information between companies. Cyber threats extend to critical infrastructure such as “electric power grids; banking and finance systems; natural gas, oil, and water systems; and rail and shipping channels,” which operate on computer systems, the report said. “Recent cyber-attacks often emanate from China, and even though precise attribution is a perennial challenge, the volume, scale, and sophistication often indicate state involvement,” the report said, noting that Huawei and ZTE “are rapidly becoming dominant global players in the telecommunications market.” The report said computer network breaches have originated from China with the backing or direct involvement of the Chinese government and that “Chinese intelligence services, as well as private companies and other entities, often recruit those with direct access to corporate networks to steal trade secrets and other sensitive proprietary data.” Chinese state officials have opportunities to tamper with telecommunications components and systems throughout the companies' product development processes and could insert “malicious hardware or software implants into critical telecommunications components and systems,” the report said, leading to potential breaches of national security systems or corporate networks for “sensitive trade secrets, advanced research and development data, and negotiating or litigation positions.” The report said Huawei and ZTE failed to provide evidence satisfying the committee's year-long investigation, adding that, although “this alone does not prove wrongdoing,” it was enough to conclude that “the risks associated with Huawei’s and ZTE’s provision of equipment to U.S. critical infrastructure could undermine core U.S. national-security interests.” In an emailed statement to The Wire Report, Bradley said Huawei established a presence in Canada in 2008 and has succeeded to become an “important part of Canada's ICT ecosystem.” He said Canadian companies and consumers benefit directly from Huawei's LTE technology. The company has sold more than $32 billion worth of telecom equipment globally, he said. “We recognize, that as a Chinese-based telecommunications company, it is fair and reasonable to expect that we would be under some scrutiny from Government. For this reason, we have worked to conduct ourselves in a manner that positively reflects our contribution to Canada,” the statement said. He said Huawei's research and development facility in Ottawa employs more than 130 engineers and is on target for a total staff of 240 by 2014. The company's Markham head office employs a diverse staff of 300 people who speak more than 30 different languages, Bradley said. Huawei has procured more than $400 million from Canadian companies for its Canadian operations and global supply chain with “a number of Canadian firms” manufacturing equipment for Huawei, the email statement said. In Canada, Huawei has supplied equipment for a northern telecom project by Iristel Inc. The company is also providing equipment for SaskTel's fourth-generation fixed wireless service in Saskatchewan. In January, Telus and Huawei opened a new research centre at Carleton University. Huawei and Hibernia Atlantic have also partnered on a 100 Gbps cable link between Halifax, N.S. and Southport, England. Jacqueline Michelis, a spokeswoman for Bell Canada, said in an emailed statement that its networks are secure. “Indeed our high levels of security are a primary reason most Canadian governments and businesses choose to rely on Bell network services,” she said. “Bell has the scale to operate at a global level and we manage security appropriately with all our network suppliers, including Canadian, American and international partners such as Huawei, Cisco , Ericsson, Nokia Siemens and others … We are confident in our network suppliers, including of course Huawei.” Michelle Englot, a spokeswoman for SaskTel, said in emailed statement that the company takes network security "very seriously." She said Huawei is one of several suppliers supporting SaskTel's wireless networks and that SaskTel "manages security appropriately with all our network suppliers, which includes Huawei and other global suppliers such as Alcatel-Lucent, Cisco and Nokia Siemens." On Tuesday, Andrew MacDougall, a spokesman for Prime Minister Stephen Harper, told reporters that the government may block Huawei from bidding to be a supplier for a new, secure government telecom network in Ottawa. “The government is going to be choosing carefully in the construction of this network and it has invoked the national security exception for the building of this network,” MacDougall said. “I’ll leave it to you if you think that Huawei should be a part of Canadian government security system." In a statement issued Tuesday, Dai Shu, ZTE’s director of global public affairs, said that “after a year-long investigation, the Committee rests its conclusions on a finding that ZTE may not be ‘free of state influence.’ This finding would apply to any company operating in China. The Committee has not challenged ZTE’s fitness to serve the US market based on any pattern of unethical or illegal behavior.” Reuters reported Monday that Cisco, a San Jose, Calif.-based company, ended a commercial relationship with ZTE following investigations by the companies and the U.S. Commerce Department that looked into suggestions that the Chinese company sold Cisco's network equipment to Iran. On Tuesday, Reuters also reported that Shen Danyang, a spokesman for China’s Commerce Ministry, said in a statement on the ministry’s website that the House committee report had no solid foundation, was “based on subjective suspicions,” and “on the grounds of national security, has made groundless accusations against China.” Danyang added: “I hope the United States will abandon the practice of discrimination against Chinese companies, act on the open principles of cooperation to earnestly create a fair and equitable market environment for the businesses of the two countries, and promote the smooth development of Sino-U.S. bilateral economic and trade cooperation.” The Canadian Wireless Telecommunications Association, of which Huawei is a member, declined to comment for this story. Telus did not comment by deadline Tuesday. sdoyle@thewirereport.ca

‘No American company provides this technology,’ Huawei says

News | October 9, 2012

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