Canadian telecom companies get cozy with Huawei
David Gray/ReutersTwo new cloud-based smartphones called 'Vision' made by Huawei Technologies Co Ltd, the world's No. 2 network equipment maker, can be seen during an official launch ceremony in Beijing August 3, 2011.
Canadian telecom operators are strengthening ties with Huawei Technologies Co. Ltd., the Chinese equipment vendor, at a time of fresh uncertainty over network security breaches from China.
Huawei and Telus Corp., Canada’s third-largest mobile carrier, announced last week a deal to install new components supplied by the Shenzhen-based giant into the carrier’s wireless network, deepening a relationship the two have held since 2008. BCE Inc. has also struck a new deal with the Chinese vendor.
The arrangements come as allegations surface about Chinese hackers breaking into the corporate systems of Nortel Networks Corp. over a span of nearly a decade. Nortel, once the largest phone and Internet gear-maker in North America, filed for creditor protection in January 2009 after losing ground to Huawei and Western firms such as Sweden’s Ericsson.
Nortel is the former network provider for Telus and BCE, with its equipment still used throughout the two Canadian companies’ systems. This week, a former Nortel IT security executive claimed that digital spyware had infiltrated the company’s internal systems and sent sensitive data back to computer addresses in Shanghai, Beijing and other locations in China over a period of many years. The story was reported by theWall Street Journal on Tuesday.
A top U.S. intelligence official told the newspaper that Nortel’s hacking experience is, “consistent with what we’ve seen in long-term, multipronged attacks. If I’m looking to get a jump on my R&D, that’s a good way to do it.”
Through the past decade, Huawei has risen from an obscure offshore manufacturer to become a dominant player in the global telecom market. Analysts say the privately owned company will overtake Ericsson as the biggest vendor in the world when the organization reports annual numbers this spring.
“It continues to throw fuel on the fire of suspicion as it pertains to security within telecommunications and China,” said Jennifer Pigg, telecom security analyst for Yankee Group. “What are you gaining from the attack on the intellectual property of Nortel? Unless you’re a telecommunications company, not a whole heck of a lot.
“The ultimate irony would be that Nortel went bankrupt and now Telus and Bell are buying its IP, but it is coming from China,” she said.
The analyst, like others, is quick to point out no explicit connection has been established between Huawei and the Nortel allegations, which were made by Brian Shields, a 19-year IT employee for the now defunct Canadian company.
But the Yankee analyst added, “The security concerns around China are not abating, and Huawei cannot help but experience some of that fallout.”
Despite a sustained attempt to pacify anxiety over a perceived security threat in recent years, Huawei has faced fierce scrutiny from some U.S. lawmakers, leading to a number of bids for acquisitions and network contracts in the lucrative market either dropped or blocked.
In contrast, similar reservations appear non-existent in Canada. In 2008, as Nortel lurched toward a creditor-protection filing, BCE and Telus retained Huawei as the network supplier for their joint third-generation wireless system. The partnerships have bloomed since, with Huawei opening offices in Ottawa and Toronto and pumping money into domestic R&D ventures. On Feb. 9, Bell and Telus announced Huawei would provide radio gear for each provider’s next-generation mobile networks being deployed now.
Some analysts say one outcome of Huawei’s growing presence in Canada is the potential to dispel reservations in the United States.
A Telus spokesperson said it expects any vendor it works with to act in a “ethical and compliant” manner. A Bell spokesman said by e-mail the company was “satisfied with the security provisions we have in place with infrastructure suppliers such as Huawei.”
A spokesperson for Huawei said the allegations in no way implicated the company.
Mark Goldberg, principal at Thornhill,Ont.-based telecom consultant Mark H. Goldberg & Associates, cautioned against connecting the Chinese vendor to the hacking of Nortel’s data. He says it could have come from any number of sources, including government and or investors attempting to glean insider information.
“Was the target Nortel or Nortel’s customers?” the analyst said.
Mr. Goldberg said the Wall Street Journal revelation this week, however, should “give pause” for operators. “It would be worthwhile to get more information, and I think everyone should hopefully undertake at least an internal audit of their own systems, and seek assurances from their suppliers that they’re working with the same cautious framework.”
[Correction, Feb. 16, 9:27 a.m.: Jennifer Pigg was incorrectly named in a previous version of this story. She is the president and founder of Battle Green Research, an affiliate of Yankee Group.]
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