EXCLUSIVE
More than 1 million Australian homes and businesses have been connected to the National Broadband Network by components made in a Shanghai factory controlled by China's Communist Party.
The revelation comes at a time when China is suspected of mounting massive cyber-espionage attacks on Australia and after successive Labor and Coalition governments banned Chinese company Huawei from NBN involvement on security grounds.
Fairfax Media has confirmed that NBN contractor, France's Alcatel-Lucent, used its Shanghai-based subsidiary to make fibre optical and copper components used to link homes and businesses to the network.
Archived webpages of Alcatel-Lucent Shanghai Bell show the Chinese subsidiary to be part-owned by the Chinese government and clearly under the control of the country's Communist Party, despite the French holding a majority stake by one share.
To celebrate November 2012's 18th Chinese Communist Party National Congress, Alcatel-Lucent's Shanghai arm boasted it would "carry out the Party's mass line educational practice" and "ensure oversight party and state policies in the enterprise implementation execution".
"Shanghai Bell will … create a new situation in the socialist cause," the website declared. "The company will follow the higher deployment, under the leadership of party committees at all levels of the party syndicalist organisation."
Alcatel-Lucent won the $1.5 billion NBN supply contract in 2010. But the origin of its components has never been disclosed, with the NBN Co stating only that "the active equipment is manufactured in large-scale electronics facilities offshore".
China has been accused as the culprit for recent major cyber-attacks on Australian agencies, including the Bureau of Meteorology. To respond to this threat, the Turnbull government announced a $230 million national cyber security strategy in April.
The government declined to answer specific questions about the extent of the Chinese-made components in the NBN or whether Australia had security-tested products sourced from the Shanghai factory.
A spokeswoman for Communications Minister Mitch Fifield said the government was "confident that NBN Co has robust measures in place to identify and mitigate security threats, including potential supply chain risks".
The importance of security testing telecommunications components was highlighted in a recent private address by one America's top cyber security officials, National Security Agency deputy national manager Curtis Dukes.
Fairfax Media has obtained a transcript of Mr Dukes' remarks to the American Enterprise Institute last month in which he said all "foreign-developed kit" should be tested for spying implants.
Mr Dukes also said he did not support the ban on Huawei so long as it agreed for its products to be tested. However, Fairfax Media has confirmed that the federal government has no intention of reviewing its ban on Huawei.
The full story behind Australia's decision to block Huawei is not known. However, US embassy cables leaked by WikiLeaks show that as far back as 2008 Australian intelligence agencies were worried about Huawei and its links to China's military.
Huawei, which has gone to great lengths in recent years to alter this perception by appointing former senior Australian politicians such as Alexander Downer and John Brumby to its local boards, was founded by former People's Liberation Army engineer Ren Zhengfei.
The appointment of figures such as Mr Downer and Mr Brumby was intended to bolster the company's credentials here. Mr Downer's ties with the company ended when he became Australia's High Commissioner in London.
When the Coalition won office in 2013, Huawei held high hopes the Gillard government's NBN ban would be overturned. It had gone to great lengths to build relations with senior Coalition frontbenchers, including hosting Malcolm Turnbull, Julie Bishop and Andrew Robb on a tour of its Chinese headquarters.
As Tony Abbott's communications minister, Mr Turnbull in 2013 described Huawei as a "very credible business" and said he would review its NBN ban. The then trade minister, Mr Robb – whose new lobbying job with a major Chinese company created headlines last week – declared Huawei had a "big future in Australia".
But the security fears held by Australia's intelligence agencies held sway and Mr Abbott announced the ban on Huawei would remain.
At the heart of Australia's concern is the belief that the Chinese government could force Chinese companies to install backdoors or entry points into their components to aid spying efforts.
The US government has done the same thing with products made by American companies. One famous example involved photographs leaked by former NSA contractor Edward Snowden showing NSA operatives installing interception devices in routers made by California's Cisco Systems.
The UK has chosen Huawei to build its version of the NBN. However, British intelligence agencies were then reportedly required to run a costly auditing program to check the components.
Huawei's chiefs have repeatedly denied claims the company would assist Beijing in cyber-espionage. But leading China expert Paul Monk, a former head of China analysis at Australia's Defence Intelligence Organisation, told Fairfax Media that it would be naive to give Huawei the benefit of the doubt.
Finland's Nokia took over Alcatel-Lucent late last year, including its Shanghai factory and the NBN contracts.
Nokia issued a statement.
"Like all major technology suppliers, Nokia takes a global approach to manufacturing and sources from a network of design, component and manufacturing facilities around the world," it read. "Nokia maintains a best-practice approach to security and quality assurance across our entire operations globally."
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