TR Daily Huawei Exec Expects Commerce to Delay Supply Chain Rules
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Wednesday, October 2, 2019

Huawei Exec Expects Commerce to Delay Supply Chain Rules

The Commerce Department may miss its mid-October deadline to issue regulations to implement an executive order that would restrict the deployment in U.S. networks of technology products and services from companies thought to be controlled by foreign adversaries, according to Tim Danks, vice president-risk management & partner relations for Huawei Technologies USA.

“Considering there’s been limited to no communication of what’s going on with this, we believe there may be an extension. That’s an understanding we’re making based on the fact that the deadline is so quickly approaching and yet there’s been no word amongst officials and outside stakeholders of what’s going to be contained in there,” Mr. Danks told TR Daily in an interview.

Executive Order 13873, “Securing the Information and Communications Technology and Services Supply Chain,” was issued by the White House on May 15 and published two days later in the “Federal Register” (TR Daily, May 15).

The EO gives the Commerce Department 150 days to publish regulations that could designate certain nations or companies as threats to U.S. national security and prohibit “any acquisition, importation, transfer, installation, dealing in, or use of any information and communications technology or service (transaction) by any person, or with respect to any property, subject to the jurisdiction of the United States.”

The EO itself did not direct the Commerce Department to seek comments on the development of the rules, but the department said the public was “invited to submit comments.” But the department’s lack of interaction with industry has led Mr. Danks to expect a delay in the issuance of the rules.

“We actually believe they may request an extension because we haven’t heard much development at all on that front through our contacts within the government,” he said. The department did not respond to a request for comment.

Although it doesn’t specifically mention Huawei or China, the supply chain executive order is one of several recent actions by the federal government that Mr. Danks and other Huawei executives are facing as the Chinese company and its U.S. affiliate push back against U.S. policy-makers’ insistence that the company is controlled by the Chinese government and can be forced to conduct surveillance or disrupt critical infrastructure in the U.S. and other nations.

At the same time, Huawei has become entangled in an ongoing trade war between the U.S. and China, Mr. Danks noted. “Huawei is not part of China. We are an international company. We don’t speak for the government. We’ve been caught in the middle of a trade war. But, essentially, we are an independent company that’s just trying to do global business,” he said.

Aside from the supply chain executive order, the FCC is considering whether to restrict recipients of universal service subsidies from using subsidy dollars to purchase Huawei products (TR Daily, April 17, 2018). Rural carriers, in particular, have gravitated toward Huawei because the company produces relatively inexpensive networking gear that is optimized for the rural environment.

Mr. Danks noted that Huawei’s original business was supplying components to rural telecom operators in China. “We spent the first 15 years of Huawei’s existence building out rural China,” he said, and he suggested that rural carriers in the U.S. really had few options other than Huawei.

“Our major competitors have made it very clear that they’re not interested in the smaller operators. They’re focused on tier 1 [carriers],” he said. If the FCC bars rural carriers in the U.S. from buying from Huawei, that will hurt efforts to deploy broadband and 5G networks in remote areas, he warned.

“What does that mean for the smaller operators? Does that mean they get the price they get and they have to try to make it work, which means they have less budget for cell sites, less budget for expansion?” he asked. “All of this affects these rural communities that are already underserved with broadband and mobile services.”

Mr. Danks said he was unsure of the outcome of the FCC’s supply chain proceeding or related efforts in Congress to provide funding for rural carriers to “rip and replace” Huawei equipment from their networks.

“We’ve put a fair amount of effort into petitioning the FCC. We’ve put in some ex parte filings,” he said. “Many of our customers have filed on their own behalf as well as our behalf. There’s certain things we believe are happening in the FCC related to this that we do believe are unfair to Huawei and actually are unfair to competition in general.”

“But at this point what we can do is wait for the outcome, [and] continue to petition the powers that be to make the proper, just, and lawful decision on how to proceed that doesn’t impede our ability to support our customer base here in the U.S.,” he added.

He said it would take more than just federal funding to help Huawei’s U.S. customers overhaul their networks to eliminate Huawei equipment. “Yes, funding is one aspect of it, and frankly the funding proposed is not nearly sufficient to cover all aspects of swapping out our gear because it’s more than just the capital expenditure of our equipment. It’s the integration with all of the third parties’ software and equipment,” he said.

“These rural operators, they don’t have the resources to do this kind of change-out in a short period of time. This could take seven years depending on who you talk to do these kinds of swaps. In the rural environment, you have conditions such as weather and terrain and all these things that affect how fast you can roll out. You combine that with the limited resources that these guys have and the fact that they’re trying to progress their networks at the same time and build out these networks. You have a confluence of all these issues,” he said.

Mr. Danks disputed assertions made by some cybersecurity experts that, although laboratory examinations of Huawei equipment didn’t reveal built-in vulnerabilities, spyware could be installed in the equipment through software updates.

“That’s fundamentally not how networks work in telecom. There isn’t such thing as an automatic update in the telecom operator environment. That may be true for phones – the devices themselves – but in the network infrastructure of an operator, things are very strictly controlled . . . to ensure security of the network,” he said.

“Updates don’t go out to these networks. They’re far too complex and there’s too many entanglements and prerequisites and interfaces with other different products. You couldn’t just send an update to a device without the risk of that device taking down a network,” he added.

“That’s why network operators typically don’t do automated updates of products or software from their vendors. What they do is take that software and put it through a very similar exercise of validating and testing that in a lab environment before they themselves do the actual deployment to get that fix or that patch out to the network. The vendor really has little to do with that once he’s produced the patch or the update,” he said.

“That’s why we believe in a trust-through-verification approach. Don’t trust it just because you know this vendor or you think the vendor comes from a reputable country, but trust by verifying every single vendor that’s in your supply chain,” he said.

“That trust through verification and continual verification of any updates – that’s the key here. And that’s what we at Huawei are advocating for because we believe that’s the most pragmatic approach,” he said.

U.S. officials are using “politically motivated” arguments to persuade allied nations to ban the deployment of Huawei equipment in their 5G networks, Mr. Danks said. “The challenge is not just with a country of origin. The challenge is having a full risk-based approach to look at the entire supply chain as it goes into a network and understanding what the risks are and addressing those risks in a pragmatic technological manner, not a political fashion,” he said.

But he said it appeared that other countries were not being swayed by U.S. arguments. He noted that the closest U.S. allies – the other “Five Eyes” nations of Canada, the United Kingdom, Australia, and New Zealand – had not decided to block Huawei.

“None of those Five Eyes countries have completely blocked Huawei,” he said. There’s a restriction in Australia on the 5G equipment, but if you look at the U.K. – if you look at Japan, Canada – Huawei’s infrastructure is still there, and we’re still in the process of developing and deploying 5G.”

“If there was hard evidence to support those allegations,” he said, “I would have expected by now we would have seen the Five Eyes countries say adamantly, we’re out.” —Tom Leithauser, [email protected]

MainStory: Cybersecurity FCC WirelessDeployment FederalNews

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