Holland, Huawei and 5G: what next?

In my last blog post I already mentioned the parliamentary debate of February 6th, about the 5G rollout, Huawei and the danger of espionage and sabotage. During a foggyish debate, it remained unclear what the cabinet regards as the core and critical components of the network: for reasons of national security, the government cannot publicly identify those critical elements of the network to our parliament, according to the involved ministers (Economic Affairs & Climate, Justice and Security, Defense and Foreign Affairs). https://www.mijngroeve.nl/history/5g-usa-uk-europe-go-dutch/

AMvB

The Dutch parliament has been more or less sidelined in the discussion about (the control of) the 5G roll-out and the related issue of national security by the Order in Council (“AMvB”)/governmental administrative decree issued by the Rutte government in early December. This AMvB was the result of the procedure that the cabinet initiated at the beginning of 2019: an interdepartmental Economic Security Taskforce (“the Taskforce”) was set up on 21 February 2019 under the leadership of the National Coordinator for Counterterrorism and Security (NCTV) of the Ministry of Justice and Security: an interdepartmental cooperation with representatives from different ministries and the AIVD and MIVD, the Dutch intelligence services.

The Taskforce also collaborates with the three major telecom providers (KPN, T-Mobile, VodafoneZiggo). Together they had/have to identify all the risks of the 5G roll-out, culminating in the AmvB (Law on Security and Integrity of Dutch Telecommunications). This AMvB stipulates further measures may be issued by ministerial decree with regard to technical and organizational rules, requirements and regulations regarding the 5G rollout and national security.

The warnings of the intelligence and security services for infiltration by state actors and for espionage in the telecom sector drove this Dutch approach. China is among the top 5 hackers in the world. Abuse of products and services from suppliers in the telecom sector offers state actors espionage possibilities with regard to confidential company and government information, personal data and other sensitive information and can therefore jeopardize national security. In addition, it was found that there are several countries (f.e. China and the US) whose legislation can force service providers to cooperate with intelligence services.

Dynamic Evaluations

The Task Force came to the conclusion that the originally planned security measures that the mobile network providers had committed to in the context of the Telecommunications Act were insufficient, in view of “the current threat assessment.” In short, additional measures were / are required, both with regard to security measures and with regard to the products and services used by network providers. Furthermore, in order to “stay in tune with new threat and technology developments”, a structural review process would have to be set up in cooperation with the telecom providers. New threat information would have to be shared continuously between the parties involved, in order to constantly evaluate (“dynamic testing”) whether technological developments would entail new security measures if, for example, non-critical elements would turn out to be critical …

Additional security measures can be imposed by the Dutch government on those three telecom operators, which they must comply with. Without mentioning Huawei by name, the AMvB states that “unreliable suppliers” of 5G equipment must be excluded from the core of the network. The AmvB gives a definition of unreliable that would only apply to Huawei. What exactly the core or critical components are is described rather briefly: “these are the components for which the supplier has extensive access to sensitive locations, sensitive IT systems, vital infrastructure installations or works, where abuse can pose a national security risk.” It’s the duty of the task force and the minister to make this assessment, and the cabinet will use information from the intelligence and security services. To protect national security, the decisions are taken in consultation with the Minister of Justice and Security and are only shared with the telecom operators in confidentiality.

Motion of Green Left (Groen Links) Party

During the parliamentary debate on February 6th, Green Left MP Mrs Buitenweg specifically asked the government questions about the distinction between core and periphery and about the vital infrastructure. Are certain geographical locations (such as Schiphol, Rotterdam harbor, parliament building in The Hague) considered a vital part? The Cabinet did not want to make any statement, which made Buitenweg feel that this was a bizarre situation compared to the transparency that the British government has offered by its recent decision (see https://www.mijngroeve.nl/history/uks-huawei-decision-merkel-to-follow/

Buitenweg also highlighted another problem of the core-peripheral approach: “For many applications of 5G, speed of data traffic is crucial. Those data will be stored and processed closer to the source. This makes the distinction between core and periphery less and less relevant over the years. Does the government recognize this and also consider the RAN (radio access network) as a critical part of 5G? “

According to the risk analysis of the European Commission, RAN is a “high risk” but not critical: it is likely that the Dutch government takes the same view. The parliament subsequently adopted a motion from the VVD that gives the government the power and right to apply the AmvB to the antennas in the Radio Access Network. If the minister deems it necessary, Huawei could now also be excluded from the RAN, but whether this will happen is apparently state secret. Green Left wanted to go one step further with another motion that called on the government to at least force telecom providers to use only trusted suppliers in the Radio Access Network (i.e. exclude Huawei in advance) in geographical areas with vital infrastructure. That motion was discouraged by the ministers and ultimately voted down by the coalition parties in the House, making up the majority in Dutch Parliament.

A very select number of MPs will be confidentially informed about the findings, dynamic tests and additional security measures of the Task Force and our cabinet. The telecom operators as part of the Task Force will be regularly kept informed about any ministerial decisions. The Dutch citizen, however, remains in the dark.

Local Dutch politics

Though the 5G roll-out is decided and controlled at national level through the AMvB, it would be interesting to know what is being said about the Huawei issue at the local level. Will for example the hard, anti-Huawei attitude of Green Left in Dutch parliament have an effect on Amsterdam, where it is the largest party in the city council, the mayor of the capital being from that same party? In the Amsterdam smart city concept the Bijlmer / Johan Cruijff Arena and Huawei have occupied a central position: https://www.mijngroeve.nl/sport-en/ajax-huawei-contract-extension/ https://www.mijngroeve.nl/sport-en/ajax-huawei-break-up-the-contract/

Which view does the Amsterdam Green Left holds nowadays? Is the Arena a strategic location? What role does Huawei continue to play in the smart city concept? As also described in one of my last year’s posts, the city council of Rotterdam expressed its strong objections to the presence of Huawei in the port area. Will these and other municipalities make themselves more heard? https://www.mijngroeve.nl/history/city-council-of-rotterdam-would-like-to-ban-huawei-amsterdam-to-follow/

The Rutte cabinet remains “country-neutral” in all its communications on the 5G roll-out, in line with the approach proposed by the EU. Huawei is never mentioned by name as an unreliable supplier and is therefore not excluded from the network in advance. The coordination and monitoring of the rollout is in the hands of the Task Force. The auction of the frequencies is scheduled for June 2020.

Meanwhile Rutte is undoubtedly keeping a close watch on our eastern neighbors, where the CDU / CSU government parties are struggling with the 5G issue and Merkel has postponed a final decision on Huawei again …. Part of the Unions faction wants to completely ban Huawei, also to ensure the continuation of close security and intelligence relations with the US. Merkel does not share the same view. An internal compromise has been formulated, but a final decision / proposal has been delayed until further notice. The Chancellor wants to await the outcome of the EU summit with China in March (if it isn’t cancelled: corona virus!). The difference with the Netherlands is that the German parliament does have the final say over the 5G launch, the role of telecom operators, as well as equipment suppliers.

The US has once again increased the pressure on Europe, this time by mouth of its head of the cyber security department, who holds a view which the Green Left and part of the Dutch parliament might share. (See interview with Robert Strayer https://www.bbc.com/news/technology-51581095 …I wouldn’t be surprized if Strayer also recently had contact/ sought contact with the Dutch Task Force, but that is all state secret of course ….

What next?

The Dutch citizen isn’t supposed to hear about the findings of the Task Force. Huawei will continue to play a role in the Dutch network for the time being, while the government promises to manage and minimize the (security) risks. Dependency on one supplier by a telecom operator will be forbidden. The British approach, which excludes Huawei’s share in the core and limits it to a maximum of 35% in the periphery, seemed to appeal to a lot of MPs during the parliamentary debate. Such level of transparency won’t happen in the Netherlands nevertheless. But it does not seem unthinkable that in our country too, Huawei’s participation in the RAN will be limited, certainly if strong objections would be raised locally against the Chinese giant such as in Rotterdam and Amsterdam, although the government will again refrain from any public statements. The “dynamic testing” concept keeps the possibility of further reductions in the Huawei share in the Dutch network open. Yet we will probably never hear one of our related ministers publicly say that they consider Huawei an unreliable party.

Deep down all European government leaders would probably like to have more time to re-study alternatives to Huawei, which has gained a strong foothold in Europe (starting with 3G / 4G years ago). On the other hand, those same leaders want the launch of the 5G roll-out to go ahead no matter what: after all, Europe does not want to fall behind in the 5G race, the modern version of the 1960s race to the moon. Full exclusion from Huawei would complicate and delay the European rollout, and make it a lot more expensive ….

However, a gradual and ultimately complete phase-out / replacement of all Huawei equipment from the European 5G networks is not inconceivable, although it will cost the European governments and telecom operators time and money. In France, some operators are already quietly removing Huawei (4G) equipment not only from the core but also partially from the periphery of the networks in order to limit dependency on the Chinese telecom giant. Germany will probably also go in that direction, no matter how much Merkel tries her best not to offend the Chinese publicly.

Deutsche Telekom (DT)

Earlier this month the American authorities approved the merger of T-mobile US, the subsidiary of Deutsche Telekom (DT), and the American Sprint. DT acquires 42% of the shares of the new entity, which wants to play a major role in the 5G rollout in the US. In Germany, DT was / is a major buyer of equipment from Huawei, which is banned by the American government from playing any role in the US network. The new T-mobile in the US has a market value of $ 120 billion (versus $ 274 billion for AT&T and $ 242 billion for Verizon).

Has there perhaps also been some slight informal American pressure on the DT management to drop Huawei in Germany in exchange for acceptance of the merger, or would that be too crazy a thought? It is remarkable that DT CEO Hoettges said just a few days after the approved merger: “What is being discussed in Brussels and Germany has no impact on Deutsche Telekom: it seems that the German government is finding a solution that we can implement”, quickly adding that he did not expect the German government to limit the share of high risk suppliers (read Huawei) in the RAN to 35% like in the UK ….

Possibly in the longer term, part of the functions of custom-made hardware can be taken over by so-called open RAN software, reducing dependency on hardware suppliers . But the applicability and safety of such an open RAN system will also have to be tested and will take many, many years …

Behind the scenes

Behind the scenes there is probably close contact between the EU and the Americans, despite all the European skepticism towards the unreliable Trump, whose America’s first policy usually only trumpets American national interests. Various US government officials have already loudly called for more American-European technological cooperation in 5G, as a counter-offensive against the Chinese giant Huawei. No one knows exactly what shape this cooperation is supposed to take, the Trump government mainly excels in issuing conflicting, unclear messages. The US government has a serious credibility problem, hampering those behind- the- scenes initiatives.

Yet in particular the British could prove themselves to be very open to far-reaching technological cooperation with the US, also in the field of 5G. Would continental Europe prefer to follow such an example or (continue to) take its own path? Or is T-mobile’s merger with Sprint perhaps the prelude to more European-American telecom cooperation? The anti-Huawei and China attitude transcends Trump and is shared by the entire American Congress, let’s not forget …. The EU is working on big plans for digital sovereignty, but Europe still can not do without American technology and companies anytime soon. It is very doubtful whether Europe can sustain a position where no choice is made between America and China. This middle way will fall under more and more pressure in 2020, unless the two superpowers would settle their disputes and work in multilateral forums on universal standards for 5G, privacy, data protection and cyber security, IP protection, etc.

The relationship between America and China is currently extremely tense: whether the so-called phase 1 trade agreement will have a soothing effect is questionable, especially now the corona virus could get in the way of any succesful implementation. Moreover, the American campaign against Huawei and Chinese high-tech companies continues unabated. The goal of some within the US government seems merely to kill Huawei, a rather useless, short-term strategy as China’s technological advance will not stop. It is a reality which the Western world must face and find a way to deal with.

Export controls

Rumors that the US government wants to further restrict exports of sensitive, strategic technology and equipment with US content / IP to China keep floating around. It is important to understand that American export control laws are “extra territorial”. That is, the US tries to regulate exports from third countries to controlled destinations if those exports contain certain US content, i.e.> = 25% of the total product. There is a heated debate raging in American government circles as to whether that threshold should be lowered to 10% in the case of exports to China.

This discussion is extremely complex: the nature of modern warfare makes the US military more dependent on the newest generation of information and communication technology developed by the private sector. The health of the high-tech sector is crucial for a modern army. Military sales represent only a small part of the income of the high-tech companies: in order to stay healthy, those companies must export, because that is where most of their revenues are generated … Blocking export licenses could mean that the affected American and Western companies lose an important source of income, as a consequence of which less money could be spent on R&D for military purposes …

More severe US export control rules would not only have an impact on US chip suppliers but could also mean, for example, that TSMC, the Taiwanese foundry, could no longer supply wafers in <= 10nm technology to Huawei / Hi-Silicon, and ASML could forget about receiving an export license for its EUV machines, because > 10% of the know-how in that sort of advanced technology / equipment originates in the US. The Rutte cabinet showed itself to be sensitive to American pressure last year (though The Hague naturally stated that its decision stemmed from its own independent analysis) as it did not grant an export license previously promised to ASML. American pressure on the Netherlands in these types of issues is likely to increase in 2020, particularly if Trump would win the elections.

Impact of the geopolitical conflict

This reality has slowly descended upon Europe, the Dutch government and the MPs. We are in the midst of a geopolitical battle, with technological dominance at stake. Many Europeans are uncomfortable with economic and technological dependency on America, which does not shy away from bullying and using all kinds of pressure to get its ways. To make yourself economically or technologically dependent on communist China, an authoritarian state with a one-party system without any independent legal infrastructure, seems an even less attractive option. The EU, with leaders such as Merkel and Rutte at the forefront, has for years been avoiding a debate as to whether there are/should be limits in trading with a communist country led by an autocratic regime. This escapism is no longer possible: sadly a uniform European response or strategy seems to have been formulated (too) late, and has been mainly reactive rather than proactive in nature, the Huawei soap a case in point.

The German dependence on China (think of the car industry) has already gone to the wrong side of the balance, leaving Merkel with a big headache. It limits her room for manoeuvre in the Huawei question. Dutch prime minister Rutte cabinet’s members suddenly invoking national security arguments to hinder a public discussion about 5G rollout and security is quite silly knowing the prime minister has allowed (encouraged!) telecom operators and local municipalities for years to work with Huawei, without ever uttering one warning word about national security. The cabinet often has given the impression that it has been more concerned about the Chinese sensitivities than about Dutch national security.

Ericsson and Nokia

To now claim and hide behind the fact there are no alternatives to Huawei, over which in particular Boris Johnson is shedding his crocodile tears, is rather ludicrous. The EU leaders, including Johnson, have for years undermined those alternatives themselves by bringing in Huawei over-enthusiastically: the state-sponsored Chinese were first of all cheap and good. The red carpet was laid out for the Chinese company in the European urge to be the first in 5G at the lowest price, but was not really rolled out in the same way for the more expensive European competitors Nokia and Ericsson.

European free market thinking dominated and offered Huawei all sorts of opportunities: the fact that the Chinese government pumped billions into the company to make it a dominant player in 5G was taken for granted. A little more European interest in the position and importance of Nokia and Ericsson would have been appropriate. It shows that geopolitical and security thinking in Europe is still heavily underdeveloped, with a fairly naive view on the strategic moves of the Chinese communist regime. It illustrates that the Netherlands and Europe have not very consciously dealt with their dependencies ….https://www.politico.eu/article/huawei-dangles-investments-to-european-governments-for-grace/

China under the magnifying glass

China is meanwhile lying under the magnifying glass of the Western media: Huawei, the Chinese Communist Party and the European government leaders such as Rutte might not have foreseen this. The Chinese fight against the corana virus, extensively praised by the WHO and Trump, simultaneously highlights the price paid by the Chinese citizen for the virus combat by the Chinese government, at least for an observant Westerner: drones, surveillance cameras and facial recognition ensure % privacy in China, that much should be clear to everyone by now.

In addition, the virus problem was swept under the carpet by the central Chinese government for over a month, something about which the WHO has not said much. Because of that time loss, the spread of the virus was facilitated on the eve of the Chinese New Year’s holiday, neither Chinese citizens nor the rest of the world being aware of the seriousness of the situation till the start of a super busy holiday season in which millions of Chinese people are usually on the move ( incl. going abroad). If the news would have been made known by the end of December, countries and authorities around the world could have taken precautions far ahead of the Chinese New Year season.

The situation in Hong Kong remains tense. The virus causes further fear and anxiety among an already very dissatisfied population, facing a stagnating economy. To make matters worse, a Chinese court condemned Gui Minhai, the kidnapped Chinese bookstore owner from Hong Kong with a Swedish nationality (see https://www.mijngroeve.nl/history/another-virus-feverish-chinese-ambassadors/ ), up to 10 years in prison for “conspiracy with foreign powers and security services.” The case has been the source of a lingering diplomatic quarrel between Sweden and China, with EU heads of government preferring to remain silent. The European Parliament finally touched on this matter last year. I wonder if the Dutch parliament will let these kind of Chinese practices go unnoticed for much longer: the Chinese repression in Xinjiang can already count on the full attention of our MPs.

What has unfortunately been missing in the Netherlands for all these years is a really intensive and comprehensive debate on Holland, Europe and the strategy and position towards the People’s Republic of China, in full openness in parliament, in which the Dutch government does not invoke all kinds of national security arguments or Chinese sensitivities to avoid that discussion. What do the Netherlands and the EU as a whole want to maintain, promote and protect in their encounter / relationship with China, in terms of safety and trade, values, cultural traditions or otherwise?