ABU SATTAR | LEGAL JARGON WRITER
The US – China relationship has progressively gotten worse and 2020 has only seen the relationship deteriorate further (A timeline of the US – China trade war), with many other countries getting involved. A recent casualty of rising tensions between the West and China has been China’s tech abroad. The US, Australia and the UK are just some countries that have imposed bans and restrictions on the use of Chinese tech and social media. Just under a month ago Trump signed executive orders that banned WeChat and TikTok. You can read more about the sale of TikTok here. The focus of this article though, is on the measures employed against Chinese company Huawei and the impact of measures introduced by the UK.
What is the situation?
Huawei and fellow Chinese communications company ZTE, have found themselves getting banned in Australia, the US and the UK. Australia has outright banned the two companies, whilst the US locked them out of government contracts last year. The UK is the latest country to act by banning the purchase of Huawei 5G equipment and ordering UK telecommunication companies to remove all Huawei 5G equipment from their networks by 2027 to cut business ties with the Chinese company.
Many countries cite security concerns for the ban. They argue that Huawei could be used by China to conduct surveillance and spy on the citizens of other countries. Further concerns have been raised at the prospect of state sponsored hackers conducting cyber attacks against a country's 5G infrastructure through Huawei. Given the exponential growth of technology becoming connected to the internet this last concern is a significant one.
The commercial implications of the ban
There will be expensive commercial implications of the ban for the UK and potentially consumers. Currently, there are four 5G networks in the UK, run by: O2, Three, EE and Vodafone. The latter three will have to strip out their Huawei equipment and O2, who do not extensively use Huawei equipment, are in a network-sharing agreement with Vodafone and are equally affected. Undoubtably, such operations will be expensive for the telecommunication companies.
Not only will there be significant cost to remove the banned equipment, but the companies will have to look at the more expensive equipment supplied by Nokia and Ericsson or at US companies. Digital secretary Oliver Dowden has said the ban could cost an additional £2bn. Furthermore, the ban means that the rollout of 5G will be delayed, with Mr Dowden saying it could be delayed by “two to three years".
Telecommunication companies will definitely feel the effect of the ban, but so could customers. It may be too soon to say this but the cumulative cost of £2bn could be paid for by the consumer with increased phone bills to have access to 5G. Additionally, access to 5G will not be uniform across the country as some areas may have to wait longer than others.
The ban could send shockwaves that may be felt by other British companies outside of the tech sector as China has threatened to target British companies as punishment for the UK ban on Huawei. The UK could also suffer in future trade talks between themselves and China, whilst Chinese companies may limit investment into the UK in fear of future action against them.
There are some winners of the ban though. Finland’s Nokia and Sweden’s Ericsson, as well as the likes of Cisco in the US will benefit from the banning of Huawei. Nokia were quick to issue a statement highlighting their expertise and capacity to supply 5G equipment to the UK in order to fulfil the void left by Huawei, with Ericsson following suit. However, both companies manufacture some of their 5G equipment in China, something yet to be addressed by the UK.
Arguably, the ban on Huawei is one of the biggest disruptions to the telecommunications market, and tech industry, in recent times. The impact of the ban will be far reaching, as Openreach, the owners of the broadband infrastructure used by many internet service providers, will suffer as well.
There are a few legal questions raised by the ban and we may not get any answers anytime soon given the time period to phase out the banned equipment.
What will happen to the companies that fail to phase out Huawei equipment from their networks in time? Will they face fines and/or legal action from the government?
Given how prominent Huawei equipment is in UK infrastructure there is the possibility of Huawei equipment being found in Broadband and 5G infrastructure in 2027.
Similarly, what will happen to the companies that fail to cut business ties with Huawei? Will they also face fines and/or legal action from the government?
The ongoing tech war between the West and China does not seem to be slowing down and further bans against other Chinese companies could be brought in, especially in the US. In response, China could impose retaliatory bans on foreign tech companies to go alongside the bans of Facebook and Google. The tech sector is, therefore the one to watch as more market disruptions appear likely.
Abu is a law graduate with aspirations of becoming a commercial solicitor. His legal interests are in property, data protection and technology, but with enough information he can have an opinion on anything. He also wants to see and work towards greater diversification of the legal sector, particularly of more senior roles.
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